China and Neoliberalism
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By Tai Wei Lim

China and Neoliberalism

Apr. 27, 2018  |     |  0 comments

Protectionism, the backlash against globalization, and anti-immigration sentiments in the West have contrasted with the onset of economic neoliberalism in China. The promotion of connectivity through the Belt and Road Initiative, economic regionalism schemes, and Chinese infrastructure investments in the region, all appear to indicate that China is at the forefront of preserving the economic neoliberal agenda. But, in fact, a more sophisticated argument is that China is selectively adapting features of economic neoliberalism to fit into its own national interests and international economic diplomacy strategy. The rise of China is itself a product of neoliberalism as a politically centralized socialist system with a neoliberal economic system driven by market forces.

China’s rise from the backwaters of the global economy to a middle-income country that is also the world’s second largest economy in terms of sheer size is perhaps the greatest economic neoliberal experiment ever in human history. The process lifted millions of Chinese people from poverty and into the middle-class income bracket. The rise of China would simply not be possible without the country integrating into the world trading regime and steered into successful membership of the World Trade Organization by former Premier Zhu Rongji through an export-led economic development driven by its rationalized production facilities (nicknamed as “the World’s Factory”). The rationalization of China’s economy for neoliberal development came in the form of the systematic development of large industrial parks that first appeared in the test beds of the Special Economic Zones.

Historically, in the post-war era, China is not the first East Asian economy to have adjusted its centralized political structure to complement economic neoliberalism. In fact, Japan was the first East Asian economy to modify the features of economic neoliberalism to fit its political system, history, and culture. It created what would later be known as state-led capitalism, with its super-bureaucracy, the Ministry of International Trade and Industry, in the post-war years playing an important role in steering the economy. It was neither a command economy like the Soviet Union nor a laissez-faire capitalist system like the United States. The Japanese government played a big role in providing directions for the economy and the private sector, but it does not directly interfere with it. The companies are competitive with each other and are subject to market forces and global competition. It was in the political-economic climate of a complementary state-private sector relationship that the economy was steered to fast growth in the 1960s — its so-called income-doubling decade.

This system was quickly replicated by the four “Tiger” or “Dragon” economies: Hong Kong, Taiwan, South Korea, and Singapore. Each of these economies indigenized their own versions of the state-led economy. Another term in that era that was typically used to describe such economies was ‘Capitalist Developmental State.’ Hong Kong was a laissez-faire economy that did not really follow this model entirely. It then became a very important experimental test bed for neoliberal economic development for China to observe and selectively emulate. The other three tiger economies, Taiwan, South Korea and Singapore, had stronger governments, and applied Japan’s state-led developmental model and became very successful industrialized economies. Like Japan, they had vibrant manufacturing economies shaped by government directions but combined with local features. Taiwan became specialized in subcontracting industries and became very good at it. South Korea and Singapore developed large megaprojects in which the government played an important role. China also observed economic development amongst its neighbors.

Mass education augmentation was a major feature of the neoliberal agenda in Northeast Asia. Japan implemented skills training for its post-war workforce in order to bring about accelerated economic development. It was fortunate in this area. The physical production facilities in Japan were destroyed after WWII but its human resources remained intact. Thus, post-war skills and educational retraining and enhancing literacy did not start from zero but continued from its pre-war base. Similarly, the four Asian tiger economies which were later joined by China and other Southeast Asian economies instituted skills training, literacy, and tertiary education programs to train their workforces for industrialization, mass production, and an export-oriented economy. Educational policies and skills training were also carried out to attract foreign direct investment into their countries with their highly trained workforces. In this way, their workers can tap into the neoliberal global economy that encourages fair global competition, economic rationalization according to market conditions, and the freer flows of goods, trade and people.

China is pushing for the Regional Comprehensive Economic Partnership (RCEP) as part of regional efforts to keep the neoliberal feature of free trade going.

China needed an economic system that fit its political needs. It adopted an economic neoliberal outlook that encouraged exports and industrialization without interfering in its socialist political system. Like Japan and the four tiger economies, China and its education system trained, rationalized, and disciplined its workforce to attract foreign direct investment, especially to its Special Economic Zones. Guangzhou and Shenzhen were some of these pioneering southern Chinese cities that benefitted from the economic reforms similar to those found in Japan and the four tiger economies. Opening up and welcoming foreign direct investment facilitated China’s ability to tap into the global neoliberal economy.

Just as many Japanese, Hong Kong, Singaporean, South Korean and Taiwanese students travelled to the US and its top universities to study and conduct research before migrating back to their own countries to take up jobs and appointments, Chinese students travelled in large numbers to the US to do the same thing. When they went back to China in large numbers, they were known as haiguipai or returnees. Some of these returnees would set up China’s pioneering digital tech companies that would become world-class giants in the field of information communication technologies.

Critics of neoliberal regimes in East Asia argue that they are partial or selective. Some players from the West are welcomed to participate in East Asian economies while others are prevented from doing so. In other words, critics argue this is not a fully neoliberal region. Nevertheless, with the advent of Brexit in Europe and more careful measured attitudes (especially amongst conservatives) towards economic migration in the developed economics, Northeast Asian economies are once again seen as defenders and vanguards of a neoliberal global economy. When the US withdrew from the Trans Pacific Partnership (TPP), Australia and Japan kept the structure of the TPP minus the US intact and reconfigured it as the CPTPP (Comprehensive and Progressive Agreement for the Trans Pacific Partnership).

Like Australia and Japan, China is pushing for the Regional Comprehensive Economic Partnership (RCEP) as part of regional efforts to keep the neoliberal feature of free trade going. Beijing is also pushing for Belt and Road Initiative to encourage connectivity while funding such projects through the Asian Infrastructure Investment Bank (AIIB), BRICS Bank as well as the Silk Road Fund. In the Southeast Asian region, ASEAN quietly formed the ASEAN Economic Community (AEC) in end December 2015. ASEAN is now talking about the mutual recognition of educational qualifications by each other’s tertiary institutions.

Externally, Japan was also the first East Asian economy to set up production networks in East Asia, tapping into the region’s affordable and plentiful labor resources by setting up industrial parks next to those resources. Japan was able to tap into the region’s comparative advantages in various ways and assemble products that could be sold to its domestic market as well as be exported to other countries. When the Southeast Asian economies developed economically through these production networks, they too became valuable consumer markets for the products made by these same Japanese production networks. The coming years may see China playing the same role through its Belt and Road Initiative which is already building high speed railways in Indonesia, Thailand, and Laos.

Enhancing connectivity in these areas may eventually see Chinese businesses investing and making their presence known in the areas where the enhanced transportation and connectivity infrastructure are found. The impending globalization and liberalization of the Chinese renminbi is likely to be another major event pushing China towards the direction of neoliberalism.

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