Chinese economists blame ‘China model’ for US trade war

Two leading intellectuals argue state capitalism sparked western backlash.

Two prominent Chinese economists have broken with Communist party orthodoxy, arguing that the trade war with the US is the result of Beijing’s state-led development model rather than Donald Trump’s attempt to block China’s rise.  The criticisms highlight the split between the reform and statist-minded camps among Chinese policy intellectuals and bureaucrats, and depict US tariffs as an understandable response to Chinese policies rather than an unprovoked attack on Beijing.  Zhang Weiying, professor at Peking University’s National School of Development, argued in a recent speech that China’s economic ascendancy since 1978 is not the result of a distinctive “Chinese model” of development, adding that this incorrect interpretation has contributed to the current trade conflict by provoking alarm among western countries.

“From the western perspective, the ‘China model’ theory makes China into an alarming outlier, and must lead to conflict between China and the western world. The unfriendly international environment we face today is not unrelated to the mistaken interpretation of China’s achievements over the past 40 years by some,” Mr Zhang said in a speech whose transcript was removed from PKU’s website after it circulated widely online.

“In the eyes of westerners, the so-called ‘China model’ is ‘state capitalism’, which is incompatible with fair trade and world peace and must not be allowed to advance triumphantly without impediment,” he said. In 2002, an era when market reform was still in favour, state broadcaster China Central Television chose Mr Zhang as its “economist of the year”. He was appointed that year as PKU’s assistant president and in 2006 became dean of its prestigious Guanghua School of Management. But he was removed from those posts beginning in 2010 after critics on the faculty questioned his political loyalty and accused him of padding his CV — an accusation he vigorously denied.

In a commentary on similar themes, Sheng Hong, executive director of the Unirule Institute of Economics, a liberal think-tank, warned that China is at risk of abandoning Deng Xiaoping’s post-1978 “reform and opening up” policy of free markets and open trade, leading to conflict with the west. “China’s reform and opening up is . . . the guarantee of strategic co-operation between China and the US,” Mr Sheng wrote in an essay published on the Financial Times’ Chinese language website and in English translation on the Unirule’s website. “Without a doubt, reform and opening up eliminated the ideological conflict between China and the US, as well as the whole western world, and gradually brought convergence in terms of values.”

Founded in 1993, Unirule is known as a centre of liberal thinking, but the group has suffered as such ideas lost favour under President Xi Jinping.  Last October, the organisation was forced out of its headquarters in central Beijing and was temporarily evicted from its new headquarters in July. Earlier this month, a Beijing district government threatened to revoke the think-tank’s corporate registration because Unirule allegedly exceeded its approved business scope by offering training classes.

“It is not surprising to hear such statements from Sheng and Zhang, whose views are well established, and also far out of the mainstream of Chinese intellectual opinion,” wrote Andrew Batson, China research director for Gavekal Dragonomics, a macroeconomic research group based in Beijing.  “What is interesting is that these views are coming out at this moment — although since the comments of both authors are regularly scrubbed from the Chinese internet, it is hard to know how much impact they have.”

Source: Financial Times