China’s socioeconomic system: challenges ahead

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

China has managed a complex transition from centralized planned economy to some sort of open and dynamic economy with outstanding competence. China has exhibited an effective managerial style in adopting a series of realistic macroeconomic policies and foreign policies over the course of two decades. China’s governmental system has shown a quality for making quickly complex decisions in the context of globalization and when crises hit socioeconomic structure.

However it may be a question that China’s model a version for capitalism would be reliable and sustainable forever? Can it transplant in other part of the world with hopes to get the same outcomes?

It may be only a suitable model in regions inside East Asia where the Chinese cultural values are dominated. The model is strongly based on the Chinese political philosophy whose principle is embedded in government building and limited the people participation in macro decision making process.

The model cannot be sustainable in the long term. Neither export –driven growth nor the top-down approach to decision making will keep yielding positive and desirable results forever. By blocking open discussion about upcoming public policies, stopping any independent exploration and investigation on the failed public policies, in public, the socioeconomic system would not receive any feedbacks to rearrange itself. It translates that the entire socioeconomic system will lose its consistency and converges to its decay.

For more than 2000 years, China’s political and socioeconomic system has evolved around China’s chronic issue, lineage and kinship preference in social interactions. The Chinese moral philosophy had shaped around the objectives which could build, based upon a just, fair and quality government to address this issue. It was believed that then this government could guarantee a steady state for China’s socioeconomic system.  Now China is rapidly growing. The absence of public debate may be swept under carpet, power abuses committed in the middle and low level of the government’s hierarchy system. It can ignite the public anger which will cost the government. It should be kept in mind that the Communist Party has committed to equality with distribution of wealth over the society.

Economic growth will create middle class. If we assume the Chinese middle class, its number increasing, will behave in the way middle class do in other part of the world, this phenomenon will be another source of internal pressure. Middle class may not compromise social status and political participation with money.       

These arguments suggest that China’s model for socioeconomic system is not sustainable. It works in the time of crises, but not forever. It could survive, IF the export-based growth share lowers and replaced with more domestic consumption growth, however it puts the national security of China at stake (middle class pressure). Also China needs more cultural influences beyond its boarders. Besides being determined in foreign affair, a strong state should appear decisive and tough in collecting tax. In long term people will say “No Tax without participation”.