Before the 18th Party Congress, many observers in the West saw China amidst two competing schools of socialism with Chinese characteristics. While the Guangdong model was portrayed as the driver of economic growth, and political reforms, the Chongqing model was represented as populist and neo-Maoist.
These observers pinned their hopes on Wang Yang, the party chief of Guangdong, and Li Yuanchao, leader of the party’s personnel department. The two were seen as most reform-minded among the candidates. Since neither made it to the policymaking standing committee, the perception was that the new leadership represented old-fashioned conservatives, who will shun reforms.
The perception is flawed. Due to their youthful age, Wang Yang and Li Yanchao may still join the standing committee in 2017. But the more serious fallacy involves China’s growth model.
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”
In the mid-1990s, several think-tanks in China began to conceptualize China’s peaceful rise, a term that Zheng Bijian, former Vice Principal of the Central Party School, used in 2003. The concept was soon reiterated by Premier Wen Jiabao in an ASEAN meeting and in the United States.
In the past, a rise of a new power has often resulted in drastic changes to global political structures, even war. Zheng believed that those historical powers – including Germany, Italy, and Japan - "chose the road of aggression and expansion, which will ultimately fail." In contrast, China would develop peaceably, and support a peaceful international environment.
Nonetheless, 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.
That’s how Beijing’s leadership saw their path to the future – but 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, published “The Beijing Consensus.” To Ramo, this consensus relied on economic development that rested on experimentation, sustainability, and self-determination. But soon the meaning of the concept shifted.
Instead of peaceful rise, the Beijing Consensus was seen as an alternative economic development model to the Washington Consensus; that is, market-friendly policies supported by multilateral international organizations, which remain dominated by advanced economies (IMF, World Bank, WTO), often for guiding reform in emerging and developing economies.
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 18th Party Congress, these old concerns were reincarnated in still another Manichean view of China.
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 past half a decade. Many of these policies were popularized (but not initiated) by Bo Xilai, who served as the city's Party chief in 2007-2012 until his prosecution, expulsion, and imprisonment.
Under Bo’s leadership, the Chongqing model came to reflect the renewed rise of state control, the resurgence of neo-leftist ideology, and a nostalgic “red culture” movement. It went hand in hand with a broad campaign against organized crime, which initially attracted popular support but also increased the security and police presence in the city.
The people of Chongqing were less excited about the ideological authoritarianism than the massive public works, subsidized housing for the poor, and social policies that made it easier for rural migrants to move to the city. While Chongqing focused on manufacturing for domestic consumption, it 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 associated with Guangdong's Party chief Wang Yang.
The Guangdong model emphasizes liberal policies and market forces. It allows for greater role for civil society, including NGOs and trade unions. Instead of equitable distribution of wealth, Guangdong promotes economic growth. Where Bo used state-owned enterprises for wealth creation, Wang paved way for small-and-medium size businesses, while seeking 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 opposite paths for one country. In reality, the two represent different sides of the same coin - a reform thrust for a country that features huge regional differences.
From Guangdong to Chongqing
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 the wealth from coastal regions would eventually shift to China’s inland and west.
Recently, China’s new leader Xi Jinping visited Shenzhen, focusing on private-sector companies and institutions. But the true meaning of the visit was symbolic. Beijing’s new leadership knows well that the coastal prosperity is now spreading elsewhere in China.
While the wealth is in the coastal regions, growth is migrating to inland and west. In the first three quarters of 2012, Guangdong’s growth was 7.9%. The trade powerhouse has been affected by the stagnating export destinations in North America, Western Europe and Japan. In contrast, growth is now exceeding 13% in Chongqing, which is benefiting from the catch-up growth that used to be the privilege of the coastal regions in the past.
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. The reality is more complex. In the coming years, China has only one model – economic 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.
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 difference of GDP per capita between the wealthiest and poorest province is almost tenfold. Today, U.S. GDP per capita exceeds $48,000, whereas that of Thailand is $4,900. Just as we would not promote an identical growth models in the U.S. and Thailand, a single growth model is not appropriate for many Chinas.
Western observers got it wrong. The true challenge is not between Guangdong and Chongqing. It is between China’s advanced and less advanced regions. The impending economic reforms are bound to challenge entrenched interests. Success requires a strong and united leadership – tough hands that enjoy the majority support of the Chinese party and people.
Dr. Dan Steinbock is Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore).