This essay joins in the international controversy about the nature and sustainability of the economic system in China. While official ideology continues to stick to the concept of ‘socialist market economy,’ albeit with changing contents, international observers are split. One group considers China as a de facto market economy, which is in line with the top-down tradition of ruling in the region. Others consider it as a sui generis system. And a third line takes it as yet another case of hybrid regime which proliferated globally in the new millennium. I try to create a link between these readings and the empirics of Chinese growth. This may help interpret the slowdown, exacerbated by the COVID-19 epidemics on Chinese output.
The paper examines the importance of the ‘Chinese factor’ in today's world from the perspective of current phenomena such as particular political and economic uncertainty and also examines them against the background of processes of global cooperation and parallel unprecedented competition at the same level. Complex phenomena occurring in this area have recently been additionally disrupted by the outbreak of the COVID-19 pandemic. Will the world be different?
Globalization processes have taken place over the centuries but have gained particular importance in our present times, because we left ‘the golden age’ of globalization (1990–2010) already behind us. China, ever louder, talks about the need for a ‘new’ globalization, in line with its new aspirations as a pretender to the leadership position in the global economy. The Belt and Road Initiative, launched in 2013, has been in the centre of its vision. It has become the foundation for China's foreign policy in the horizon of at least the middle of XXI century. It was designed to re-confirm China's unprecedented economic success of the past four decades, which to a great extent could be derived from a skilful use of the ‘traditional’ mechanisms of globalization.
After the collapse of the Berlin Wall it was conceivable that China would follow the path towards the cessation of communism, as it happened in the successor states of the USSR, Yugoslavia and the East European satellite states of the Soviet Union. But the Communist Party of China (CPC) managed to retain control and avoided the Russian and East European collapse, a full-fledged transition to capitalism and liberal democracy. For a while, China was on its way to market capitalism with the possible outcome to turn eventually into a liberal democracy. This was a rocky road, with backs-and-forth. But the shift to liberal democracy did not happen. The massacre at Tiananmen Square in 1989, approved by Deng Xiaoping, was a more alarming setback than the contemporary Western observers were willing to realize. This paper presents an interpretation of the changes under present Chinese leader, Xi Jinping in a post-communist comparative perspective.
Why did China grow so fast in the past four decades? What were the main factors? Important ones were: attitude of government; opening to the world; role of culture; exploitation of technological gap; role of foreign trained students; and role of government in the creation of modern infrastructure. These factors are likely to play a much smaller role in the future while several negative factors –populism, trade wars, environmental obstacles, aging of the population, authoritarianism and others are likely to lead to significantly lower growth rates.
The recent successes of the Chinese modernisation strategy are substantiated by an array of indicators showing an impressive improvement. Irrespective of China's current growth deceleration, these indicators suggest a highly effective implementation of an ambitious roadmap that can ultimately help China to catch up and achieve a global technological leadership. Still, some scholars point to deep structural deficiencies, and maintain that these indicators – however impressive they are – merely scratch the surface, while much deeper change is required in order to maintain economic growth. Therefore, the purpose of this paper (finalized before the ongoing COVID-19 crisis) is to contribute to this burgeoning literature – documenting the outcome and analysing the implications of China's efforts to embrace a new growth model – and analyse the chances of the Chinese digital great leap forward, that is the radical transformation of its prior modernisation trajectory. Drawing on a systematic review of the literature, the author maps, presents and analyses existing indicators quantifying China's progress in shifting to this new development trajectory, identifying also the gaps in the conventional measurement approaches. According to the findings of this paper, there are several easy-to-measure indicators, often used in international comparisons, that indeed confirm the optimistic scenario of China's development prospects in the near future. On the other hand, some hard-to-quantify factors, such as the localization of knowledge and the spreading of innovation, need to be also considered. These latter show a closer association with countries' development level as well as development potential. With regards to these latter particularities, China still has a long way to go.
In the era of irreversible globalisation, the worldwide economic and political rules of play must take into account of the growing importance of China. Rather than fight the country, one should pragmatically cooperate on solving the mounting global problems. Contemporarily, both China should adapt to the external world and the world itself should adapt to China. There is no possibility of imposing on it a model developed elsewhere, especially that these days liberal democracy is experiencing a systemic crisis in many countries. Neither is there a chance to impose the Chinese model on others, though it seems tempting to a country; it is not an exportable ‘commodity,’ but its elements may prove useful elsewhere. China is not aiming for global domination; instead, it is consistently integrating with the world to maintain its own development. The only reasonable way forward is thorough observation, mutual learning and pragmatic collaboration based on the non-orthodox economic thought.
In the 1990s and early 2000s, comparison of transition strategies of China versus those in Central and Eastern Europe raised controversies in the economic and political science literature. However, differences between China and the countries of the former Soviet bloc in their transition strategies resulted not necessarily from a deliberate political choice but from different initial conditions. Low-income and largely rural China, after its first radical step (de-collectivisation of agriculture in 1978), could move more gradually due to its under-industrialisation and retaining administrative control over the economy. The over-industrialised Central and Eastern Europe (CEE) and former Soviet Union (FSU) countries where the previous command system of economic management spontaneously collapsed at the end of 1980s, did not have such an option. They had to conduct market-oriented reforms as quickly as they could, with all the associated economic and social pain. Regardless of speed and strategy of transition, almost all previously centrally-planned economies, including China, completed building basic foundations of a market system by the early 2000s although the quality of economic and political institutions and policies differ between the sub-regional groups and individual countries.
Recently, the middle-income trap (MIT) has gained considerable attention – besides European countries, several African, Asian, and Latin-American developing countries are also affected. Many countries have remained in the middle-income bracket for decades, whilst only a few have advanced to high-income status. Felipe et al. in 2012 showed that an annual growth rate of at least 3.5 and 4.7% sustained for a period of 14 and 28 years is required respectively for upper-middle-income and lower-middle-income countries to escape the MIT. Economic growth is influenced by several factors including foreign aid received. Thus, in this study, we aim to answer the question of how aid affects economic growth in middle-income countries and whether aid may contribute to escaping the MIT. Focusing on the countries that have remained in the middle-income group between 1990 and 2017, our analysis confirms that aid contributes to economic growth; however, the impact is positive in the upper-middle-income countries and negative in the lower-middle-income countries. Aid is therefore, likely to be more effective in helping the upper-middle income countries to escape the MIT but not the lower-middle income countries.
There is a sharp contradiction between the economic performance of the Hungarian government of Victor Orbán and the institutional framework (toolkit) by which the seemingly stellar performance of the Hungarian economy has been achieved. It looks like as if the economic playground of the government (disciplined fiscal policy, unorthodox monetary policy and contradictory institutional system) and political-institutional order built by the same government during the last ten years, represent two different worlds. This paper provides a possible explanation to resolve this contradiction by identifying reversed relationship between tools and goals of economic policies. The genuine, hidden but most important goal of the present Hungarian government is to make Orbán and his political family wealthy and make their enrichment legitimate. In disguise of a public policy to achieve this (private, personal) goal, this government needs absolute and uncontrolled power certified by the scenery of the parliamentarian democracy. This private effort should be falsified, which could be achieved if his government pretends that it wants to pursue a disciplined economic policy.
This paper is aimed at investigating determinants of recent flows of foreign direct investment (FDI) into advanced business services (ABS) in the European Union with the distinction between “old” (till 2004) and “new” member states (after 2004 extension). Special attention is put on the Visegrád countries. The factors affecting location decisions of multinational corporations were analysed at the national and regional level. The latter approach proved to be very effective due to the fact that foreign companies operating in ABS are highly unequally distributed across economies. Indeed, there are only few regions in economies attracting bulk of the operations in ABS.
The research method applied in the paper is negative binomial regression, which measures the probability of occurrence of an ABS foreign firm in an economy or a region taking into consideration its characteristics. This research combines macroeconomic, regional and firm-level data. The explanatory variables are divided into two groups: demand and supply. The main conclusion is the high significance of the supply factors. In other words, foreign companies focus on locations offering large number of skilled workers at reasonable prices. The key recommendation for governments interested in attracting ABS type of investment is to focus on the quality of human capital.