After the ‘Beijing consensus’

China’s development model has often been positioned as an alternative to the long-dominant ‘Washington consensus’.

For four decades, ‘made in China’ has been a defining feature of global capitalism. China has manufactured a majority of global exports since 2010 and many countries are emulating its development paradigm.

But a wave of disappointing economic news from China has given rise to increasingly gloomy forecasts, with some going so far as to argue that decline is imminent. There has been much speculation about this reversal’s implications for the global economy, but what does it mean for development theory?

Poster-child

China has been the poster-child for successful economic development ever since the reform and opening up launched in 1978 under its then paramount leader, Deng Xiaoping. This unleashed unprecedented economic growth, which persisted for so long it appeared immune to business cycles.

In just a few decades, China’s per capita income increased 25-fold, lifting 800 million people out of poverty, and its landscape was transformed by massive infrastructure investments, including highways, airports and the world’s largest network of high-speed trains. By 2010, China had become the world’s second-largest economy, pulling ahead of France, Germany, Japan and the United Kingdom to nip at the heels of the United States, which some predict it will overtake by 2030.

China did not achieve this by implementing the ‘Washington consensus’, according to which liberal capitalism—democratic governance plus ‘free’ markets—was the only possible path to prosperity. Instead, China’s authoritarian regime implemented a state-capitalist system which, in contrast to the radical, one-size-fits-all ‘shock therapy’ adopted in much of the post-Soviet bloc, embraced an incremental approach based on experimentation and adaptation.

The Chinese approach has been characterised in a range of ways, from the modest ‘China case’ to the somewhat bolder ‘China model’. Bolder still, some call it the ‘Beijing consensus’, thereby positioning it as an alternative—even challenger—to its neoliberal counterpart. In development circles, China’s experience became the ‘dragon in the room,’ especially as a growing number of countries—including Bolivia, Ethiopia, Kazakhstan and Rwanda—committed themselves to emulating it. Even China’s rival, India, ‘borrowed’ the idea of special economic zones.

Losing its lustre

In 2002, the Financial Times described the ‘Washington consensus’ as a ‘damaged brand’. Today, the ‘Beijing consensus’—or whatever one prefers to call it—may also be losing its lustre. On the surface, China’s economy seems to be suffering from ‘economic long COVID’, legacy of the draconian and prolonged ‘zero-COVID’ policy of the president, Xi Jinping, which severely disrupted global supply chains and led to a sharp drop in exports.

But China’s problems run much deeper. Crippling debt, record youth unemployment, plummeting consumer confidence (apparent in declining household spending and a savings glut) and turmoil in the property sector have put a brake on growth and driven the country to the brink of deflation. A broader backlash against globalisation, including efforts by major economies to shift their supply chains away from China, has further dimmed the country’s prospects.

One might take this as evidence that the Chinese development model is flawed. But we should start with an even more fundamental question: how distinctive was China’s path in the first place? In fact, for all its novel aspects, China’s experience has not significantly widened the development canon. On the contrary, China adhered to several—by some counts eight—of the ‘ten commandments’ of the ‘Washington consensus’.

Ultimately, China achieved its ‘economic miracle’ by playing the humble role of ‘factory of the world’, not by acting as a global laboratory or boardroom. Like developing countries before it, policy-makers adopted an export-oriented growth strategy, which required attracting massive inflows of foreign direct investment. With its vast reserves of cheap labour for foreign firms seeking a low-cost production base, China elbowed its way ahead of other developing countries. In this sense, the miracle was a race to the bottom China won.

Yes, this is beginning to change. But the fact remains that China integrated itself into global production networks, or supply chains, by manufacturing and assembling products invented and designed in developed countries. So, the developed world retained its role as the engine of global capitalism, while the developing world, led by China, served as its wheels.

Radical rethink

With the benefit of hindsight, the ‘Beijing consensus’ may simply have been the ‘Washington consensus’ with more state intervention and less preachiness. (China is known to be less moralistic vis-à-vis the recipients of its loans and investments than the west is toward beneficiaries of its development aid.) It is worth noting that China’s growth miracle also brought rising inequality, a patchy welfare system, suicide-inducing working conditions (such as in Foxconn’s iPhone city) and environmental devastation.

So, a quarter of the way into the much-anticipated ‘Chinese century’ the Chinese economy is sputtering and the global mood is souring. But the demise of the ‘Beijing consensus’ might have a silver lining if it serves as a cautionary tale to the developing world. As with the ‘Washington consensus’, the wellbeing of today’s citizens must not be wagered on an economic future that may never arrive.

A more radical rethink of development is needed, with countries seeking to show that they can produce new ideas—in particular, ideas that complement and advance a sustainable, egalitarian economic paradigm—rather than just manufacturing low-cost goods made to developed-world specifications. As the Made in China label fades, developing countries should seek to use the tabula rasa for more than merely inscribing their own names.

Republication forbidden—copyright Project Syndicate 2023, ‘After the Beijing Consensus‘