BOOK REVIEW. What makes China tick?

This is the story of how an American businessman tries to “unmask” the dynamics that have unfolded in a country once considered hidden behind the “bamboo curtain”. Indeed, the rise of China in recent history has been the talk of many policy planners and mandarins across the globe irrespective of political divide or ideological moorings. It has surprised many observers to note that China, once considered an insular country, now stands undisputed as the biggest economic power after the US. Former US treasury secretary Henry M Paulson, Jr calls the Red giant a “land of superlatives”.

In the foreword to Dealing with China , Paulson notes that the tremendous changes China has undergone over these years has made the Americans wonder how the “world got turned upside down so fast”. He is right in observing that the phenomenon is a “source of concern as well as a source of awe”.

Keeping aside the political churnings that made what China is today, Paulson says Americans still wonder whether the Chinese are friends or foes; there are no easy answers on how they must deal with China.

Paulson, who considers himself a businessman, brings firsthand knowledge of China and its corporate and political leaders in the post-liberalisation of its own adopted political economy. He says he is deeply concerned about his country’s standing in the world vis-à-vis China’s rise to become an economic powerhouse.

Chinese lessons It is obvious that Paulson believes that making an attempt to understand China’s progress will eventually benefit every nation. Embarking on a journey to make sense of the new path opted for by China, Paulson observes that China has a long way to go as millions are still mired in poverty.

Allaying fears about China’s increasing militaristic tone, Paulson feels that the “key to avoiding a hostile relationship is to get tangible things done that benefit both of us”.

Going straight out to assess the progress and development of China post the adoption of centralised state capitalism, Paulson correctly points out that if Deng Xiaoping was the architect of reforms, Jiang Zemin “the general contractor” implemented Deng Xiaoping’s vision.

Observing the key players, Paulson thinks Zhu Rongji was the “hammer” in not only shaping the “take off stage” but also in maintaining guidelines stay on course to achieve a stature worth a thousand spectacles.

Dispassionately tracing the point of departure, Paulson observes that Jiang Zemin was already familiar with US companies such as General Electric, Boeing, and IBM when the Chinese began initiating economic reforms. He says Jiang Zemin sums up the entire western economic model in his conclusive remark “assets equal liabilities plus equity”.

Pragmatic approach Paulson seems to have observed closely how Jiang’s idea of “Chinese bodies, foreign technology” have turned into praxis. He traces the idea of Chinese reforms to Zhang Zhidong, a 19th century Qing dynasty official who advocated “Chinese learning as the base, Western learning for practical applications”. This, he says, more or less explains China’s rise over the past few decades and forms the essence of reform and “opening up.”

Paulson observes that the Chinese used all their brains and muscles and combined it with knowledge, innovation and best practices from what they have “begged, borrowed and stolen from the west”.

He says this has turned China into “an extraordinary colossus that boast the fastest-growing military among major powers and rapidly expanding GDP.”

His observation on how Mao Zedong founded the People’s Republic of China in 1949 charting a new course for a country out of a century of colonial oppression and internal rebellion seems to be based on indisputable historical facts.

However, what he has failed to realise is the fact that post-revolution, China’s engagement with its own economics had a distinct dynamics of its own.

Even if one considers the post-revolution period a fallout of “misguided and disastrous planning”, the rise of China as a world economic superpower is based on the dynamics taken together, irrespective of the temporal historical demarcations.

Socialism at the core Here, it is preposterous for him to bring in certain remarks like how the US between 1949 and 1976 surged in prosperity with its GDP growing almost sevenfold to $1.8 trillion while per capita income nearly quintupled. Since the dynamics of the two countries are so different and political economy so disparate, there is no way to compare the two countries, except for demonstrable data.

In 1978, Deng Xiaoping emerged as the paramount leader despite growing suspicion from Communists hardliners. It would be wrong to assume that Deng abandoned socialism even if he propagated adopting new market maxims — “socialism with Chinese characteristics”. And there is more to Deng’s remark: “It doesn’t matter whether the cat is black or white, as long as it catches mice.” Often, analysts have taken this as a euphemism for adopting the capitalist engine.

Paulson also observes that China’s economic boom had led to gaping disparities between rich and poor, urban and rural, eastern and western regions.

The way he has put it sounds as if disparities based on binary conception is unique to China. Many growing economies have experienced this. Paulson does not deny it when he says China’s rapid development mirrored in some respects the kind of wealth creation and income disparities that were seen in the US during the gilded age of the late 19th century.

Paulson notes that the country’s challenge was to maintain that progress without upsetting its domestic stability or causing a global calamity. Here, one should remember that when the Chinese Communist Party initiated the idea of socialism with Chinese characterises, it was based on the notion of bringing prosperity to all, at least in the party’s agenda.

The rise of China also became the biggest critique of the American model of wealth creation while the US itself was severely hit by a financial crisis. While the Americans were struggling to offset the crisis, the Chinese seemed to have learned bigger lessons.

Paulson also says the Chinese economy in the last few years has slowed down; he also indicates hope when he says the country wants to wean the economy off its “overreliance on exports and infrastructure driven government investment and shift instead towards increased domestic consumption and creation of a thriving service sector”.

Where does this strength to cope with difficulties draw sustenance from?

Paulson points to the importance of the leadership of the Chinese Communist Party. And he hits the bull’s eye when he observes that this is what makes China different from the US and other countries with regard to the multiparty system.

He even spells out President Xi Jinping’s three-task formula: self improvement, self-purification and self-regulation. He points to the Chinese leadership’s belief that a strong party is essential to China’s future.

The reviewer is the editor of the Imphal-based Hueiyen Lanpao English daily

MEET THE AUTHOR

Henry M Paulson Jr served as CEO of Goldman Sachs (1999-2006) and 74th secretary of the US Treasury (2006-09). Since leaving Washington, he has worked on bridging the gap between the US and China through the Paulson Institute.