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One Growth Model, Many Chinas: Guangdong, Chongqing, and China’s Regional Differences

After the 18th Party Congress, many observers in the West have been disillusioned by the Chinese leadership transition. Instead of the triumph of the Guangdong model, they believe Beijing will be ruled by conservative party elders who will shun reforms. They are wrong. China is moving toward reforms.

Before the Congress, many observers in the West saw China amidst two competing schools of socialism with Chinese characteristics. On the one hand, the Guangdong model was portrayed as the driver of economic growth, and political reforms. On the other hand, the Chongqing model was represented as a populist and neo-Maoist force.

Consequently, these observers pinned their hopes on Wang Yang, the party chief of Guangdong, and Li Yuanchao, leader of the party’s personnel department. While the former was seen as the pioneer of political reforms in the export powerhouse province, the latter was perceived as the enforcer of greater transparency to bridge the gap between the central leadership and the grassroots.

Since neither candidate made it to the policymaking standing committee, the perception was that the new leadership would represent “more of the same.”

Unfortunately, the assumptions are mistaken, while the conclusion is flawed. In effect, the past decade has witnessed several comparable fallacies. In each case, mistaken hopes in the West have resulted in flawed projections.

 

How “China’s peaceful rise” became the “Beijing Model”

Starting in the mid-1990s, several think-tanks in China began to conceptualize China’s peaceful rise as the mainland’s new security concept. In late 2003, Zheng Bijian, former Vice Principal of the Central Party School, used the term in the Boao Forum for Asia. The concept was soon reiterated by Premier Wen Jiabao in an ASEAN meeting and during a visit to the United States.

In the past, a rise of a new power has often resulted in drastic changes to global political structures, and even war, as deemed by the hegemonic stability theory in international relations. Zheng believed that those powers “chose the road of aggression and expansion, which will ultimately fail.” World War II and the fate of Germany, Italy, and Japan exemplify these failures. In contrast, China would develop peaceably, and support a peaceful international environment.

Nonetheless, in China, political leaders, policy authorities and intellectual thinkers have been far more cautious with their China assessments. A decade ago even the word “rise” felt controversial among Chinese leaders who thought it could fuel misperceptions that China is a threat to international status quo. In the 2004 session of the Boao Forum, President Hu Jintao spoke about China’s peaceful development, instead.

So that’s how Beijing’s leadership saw their path to the future. But it was not how Western observers saw it.

In the West, the first popular formulation evolved in 2004, when Joshua Cooper Ramo, a former editor of Time magazine and later a partner at Kissinger Associates, published a paper titled “The Beijing Consensus.” To Ramo, this consensus relied on economic development that rested on experimentation, sustainability, and self-determination. That’s not what the Beijing Consensus came to mean, however.

At the time, the West knew Ramo better as the author of the 1999 article “The Committee to Save the World”, which praised Alan Greenspan, Robert Rubin, and Lawrence Summers. The legacies of these highly influential policy authorities are under merciless scrutiny today, but they did a lot to promote Washington Consensus.

As a result, Beijing Consensus became to be seen as an alternative economic development model to the then-dominant Washington Consensus – or market-friendly policies supported by the multilateral international organizations, such as the International Monetary Fund (IMF), World Bank, and U.S. Treasury, often for guiding reform in emerging and developing economies

This perception was particularly typical to the major advanced economies in North America, Western Europe and Japan. Until the 1980s, these G7 nations drove the global economy, accounted for global growth, and dominated the international agendas. Despite diverse historical legacies, they represent similar economic development, political systems and military alignments. In contrast, China’s history was different, along with its level of economic development, politics and security policy.

What became known as the Beijing Consensus did not reflect Chinese ideas, agendas, or purposes, but the West’s fears over China’s rise. In the months preceding the Party Congress, these old concerns were reincarnated in still another Manichean view of China.

 

Not “Chongqing Versus Guangdong”…

In the West, the “Chongqing model” is typically seen as a slate of social and economic policies, which have been embraced in the Chinese megacity of Chongqing in the course of the past half a decade. These policies were popularized but not initiated by Bo Xilai, who served as the city’s Communist Party chief in 2007-2012.

In Bo’s hands, however, the Chongqing model came to reflect the renewed rise of increased state control and the resurgence of neo-leftist ideology. It was accompanied by a broad and tough campaign against organized crime, which initially attracted popular support but also increased the security and police presence in the city. It was then that Bo popularized a “red culture” movement.

The people of Chongqing were less excited about the ideological authoritarianism than the programs that Bo’s predecessors initiated, including massive public works, subsidized housing for the poor, and social policies that made it easier for rural migrants to move to the city. While Bo focused on manufacturing for domestic consumption, he did not oppose foreign investment that had driven development in the coastal regions, but actively courted it.

Except for the ideological pathos, even Keynes might have supported such policies.

In contrast, the Guangdong model refers to a slate of social, political, and economic policies adopted in the southern Chinese province of Guangdong. It is generally associated with Guangdong’s Communist Party secretary and politburo member Wang Yang.

Where Chongqing model stresses the role of the state and public investment, the Guangdong model emphasizes liberal policies and market forces. Unlike its nemesis, it also allows for greater role for civil society, including NGOs and trade unions, which Wang saw as advocates for workers’ rights and actors in collective bargaining. Where the Chongqing model emphasized the equitable distribution of wealth, Wang Yang promoted overall economic growth. Where Bo used state-owned enterprises as instruments of wealth creation, Wang paved way for private enterprises and small-and-medium size businesses, while implementing economic reforms to move the province up the “technology value chain.”

What the debate in the West has done is to polarize the “Chongqing model” and the “Guangdong model,” as if they represent two different models for one country. In reality, the two represent the different sides of one model for a country that features huge regional differences.

 

… but from “Guangdong to Chongqing”

Recently, China’s new leader Xi Jinping visited Shenzhen. But the true meaning of the visit was symbolic. Some three decades ago, Deng Xiaoping initiated economic reforms and opening-up in Shenzhen, close to Hong Kong. Two decades ago, Deng’s famous “Southern tour” was designed to create a new momentum for reforms. “Some areas must get rich before others,” he said, asserting that eventually the wealth from coastal regions will shift to China’s inland and west.

Starting in the 1980s, China’s reform and opening up were initiated by the creation of the coastal special economic zones, most of which were in Guangdong province, close to Hong Kong and Macao. Soon the reform extended from cities such as Shenzhen and Guangzhou to other primary cities, from Beijing to Shanghai. During the past decade, the economic ripple initiated by the success of these megacities has been washing into new generations of Chinese cities.

Even before the onset of the global financial crisis, second-tier cities – from Suzhou, Tianjin and Shenyang to Chengdu, Dalian and Chongqing – had already attracted significant attention with investments from global corporate giants. At the same time, third-tier cities, from Ningbo and Fuzhou to Wuxi and Harbin, were following in the footprints of first- and second-tier cities. Behind these three tiers of rapidly-growing urban agglomerations, there are still others such as Kunming and Hefei, seeking to take advantage of the urban growth trajectories.

In China, the expansion of old and rise of new cities have been driven by growing economic prosperity and dreams of a better quality of life. At the heart of this colossal transformation, it is the central cities that drive growth – not just within city borders, but regionally.

A decade ago, many observers in the West mistook China’s peaceful rise for a Beijing Consensus. Now the same observers believe that, in the 2010s, China is struggling between two conflicting models, Guangdong and Chongqing. And yet, the reality is far more complex and nuanced. In the coming years, China has only one model – reforms – but the latter must be enforced in a colossal nation in which growth has been “unsteady, unbalanced, uncoordinated and unsustainable,” as Wen Jiabao said in 2007.

It follows that growth models that work in the relatively more prosperous and advanced coastal regions are not appropriate in China’s relatively poorer and less industrialized inland and west. In China, the GDP per capita level is almost tenfold between the wealthiest and poorest province. Today, U.S. GDP per capita exceeds $48,000, whereas that of Thailand is about $4,900. Just as we would not advocate using similar growth models in America and Thailand, one growth model is not appropriate for many Chinas.

Western observers got it wrong. The true conflict is not between Guangdong and Chongqing. It is between advanced and less advanced Chinese regions that require different growth models. Enforcing such models requires economic reforms, which, in turn, are bound to challenge entrenched interests. Success requires a strong leadership that enjoys the majority support of the Chinese party and people.

Longer version of the author’s original “Guangdong and Chongqing: Two Sides of the Same Coin,” China-US Focus, Dec 11, 2012

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Emre Deliveli The Kapali Carsi

Emre Deliveli is a freelance consultant, part-time lecturer in economics and columnist. Previously, Emre worked as economist for Citi Istanbul, covering Turkey and the Balkans. He was previously Director of Economic Studies at the Economic Policy Research Foundation of Turkey in Ankara and has has also worked at the World Bank, OECD, McKinsey and the Central Bank of Turkey. Emre holds a B.A., summa cum laude, from Yale University and undertook his PhD studies at Harvard University, in Economics.

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