At a time when U.S.-China relations are spiraling downward, a fracturing of global supply chains is underway, and countries are struggling to respond to the coronavirus pandemic, interest in the possible benefits of the \u201cChina model\u201d has grown. China\u2019s success in dealing with the 2008 financial crisis, its promising moves to become an innovative nation, and its ability to contain COVID-19 and restart its economy are achievements envied by many countries.\u00a0 Social and political stress in the U.S. has further pushed leaders worldwide to rethink their relationship with the U.S. and, inevitably, with China.<\/p>\n
At the same time, China\u2019s spectacular economic rise has an ominous side as it secures control over the South China Sea with a navy that increasingly rivals the U.S.\u00a0 China also has begun to behave in more belligerent ways toward its neighbors, for one thing by instigating skirmishes on the India-China border. And some of China\u2019s domestic policies, such as increased digital surveillance of citizens, treatment of the Uyghurs in Xinjiang, and rising nationalism, have led to wariness of China\u2019s authoritarianism.<\/p>\n
These developments beg the questions: How can we define the China model, and in what ways has it been successful or not? In this essay, I review three recently published books with these questions in mind:<\/p>\n
Dexter Roberts, The Myth of Chinese Capitalism: The worker, the factory, and the future of the world <\/em>(St. Martin\u2019s Press, 2020)<\/p>\n Scott Rozelle and Natalie Hell, Invisible China: How the urban-rural divide threatens China<\/em>\u2019<\/em>s rise<\/em> (The University of Chicago Press, 2020)<\/p>\n Thomas Orlik, China: The bubble that never pops<\/em> (Oxford UP, 2020)<\/p>\n The Migrant Dilemma<\/strong><\/p>\n In The Myth of Chinese Capitalism<\/em>, Dexter Roberts argues that rural migrant workers have been the bedrock of China\u2019s growth model since economic reforms began in 1978.\u00a0 Following Guizhou villagers who worked as migrants in Guangdong, Roberts provides personal examples of the challenging lives these migrants have faced.<\/p>\n One of the most serious challenges, and one Roberts spends a lot of time on, is the household registration system, or hukou<\/em>.\u00a0 Chinese citizens are assigned official residences tied to their rural or urban places of birth.\u00a0 Many aspects of a person’s life are then also tied to whether they have a rural or urban hukou<\/em>, such as access to education and health care, permission to marry and have children, and the right to purchase a home. This social structure prevents rural citizens from achieving a better urban life or even sending their children to urban schools while they live and work in the cities as migrant workers. Meanwhile, in the countryside, the lack of property rights over land stifles their options at home because they cannot sell land and use the profits for other pursuits. As Roberts describes it, the lack of reforms in the labor and land markets hits rural migrants the hardest. He sees capitalist market reforms as falling short of the rhetoric, and hence, the \u201cmyth.\u201d<\/p>\n From Roberts\u2019 perspective, the economic model’s fundamental characteristic is an urban bias created by state policies that systematically hurt, however inadvertently, non-urban hukou<\/em> holders. Roberts\u2019 analysis suggests that the development process has been extremely beneficial for urbanites, but that constraints on rural citizens will need to change for progress to keep spreading to the rest of society.<\/p>\n He acknowledges that some things have improved for rural migrants, such as wages. Still, he emphasizes that without reforms allowing land sales by individuals and freedom for rural people to live where they choose, China\u2019s development will not succeed because it will leave out too many people.<\/p>\n From an economic development perspective, China’s policymakers understand that moving up the value chain is the right way to go, even in rural villages, as Roberts describes. They promote innovation and entrepreneurship, using the state to push development goals through incentives and directives. However, leaving half of the population out could lead to failure.\u00a0 And although Roberts does not say so explicitly, if ending the hukou<\/em> system and state ownership of land would undermine Party control, these steps are not likely to be taken.\u00a0 In an optimistic sign, the latest National People\u2019s Congress in March 2021, approved some reforms of the hukou<\/em> rules.\u00a0\u00a0\u00a0<\/strong><\/p>\n Human Capital is Key<\/strong><\/p>\n Invisible China: How the urban-rural divide threatens China<\/em>\u2019<\/em>s rise,<\/em> by Scott Rozelle and Natalie Hell, makes the case even more forcefully that China must pay attention to the health and well-being of rural citizens, or its growth may well stagnate. The authors fully recognize the impressive progress that China has made, leaving most people much better off than before the reforms began in the late 1970s. Poverty reduction has been real and widespread. However, Rozelle and Hell argue that the lack of adequate education and health, which are the basics of investment in human capital, for 70 percent of the labor force could leave China in the dreaded “middle-income trap.” Their conclusions are based on thousands of interviews and surveys over several decades.<\/p>\n The middle-income trap refers to the process of industrializing based on low-skilled, labor-intensive manufacturing and exports. Once wages begin to rise, workers cannot move to higher value-added, relatively more skilled jobs. This problem emerges when the workforce lacks the needed higher level of skills. The result is economic stagnation and social challenges such as unemployment that arises from that stagnation.\u00a0 Mexico, Brazil, and Turkey are examples of initial development success stories that have failed to grow into high-income economies. In contrast, South Korea, Singapore, Taiwan, and Ireland were able to transition to higher-skilled manufacturing and services, and then on to innovation and become some of the world’s richest economies.<\/p>\n What makes the difference between countries that become high-income and those that do not?\u00a0 Rozelle and Hell argue that the percent of the population with a high school or greater education level is the critical factor. They point out that countries that have succeeded in moving from middle to high income had over 70 percent high school attainment for decades (p.25-26).\u00a0 And surprisingly, despite all of China\u2019s successes and focus on education, only 30 percent of China\u2019s labor force has a high school degree or higher today.<\/p>\n Many years of meticulous research led by Rozelle uncovered challenges such as myopia in elementary school children and poor nutrition affecting youth development, leading to large achievement gaps between rural and urban students. The result is a large, mostly rural, increasingly unemployed or underemployed population as the country moves to more sophisticated manufacturing and services as the drivers of growth.<\/p>\n Rozelle and Hell are hopeful that China can build an education system that will serve all citizens and match needed skills. They point out that China has been able to address seemingly intractable challenges over time. China’s focus on education has been extensive. The authors describe how investments in buildings, textbooks, teachers, and meals have greatly improved schools.<\/p>\n However, timing remains a problem. Since obtaining a proper education takes many years, rural youth are at least two decades away from achieving this, even if the existing challenges are solved now. There is also a matching problem.\u00a0 Although China\u2019s economy has been good at creating new jobs, Rozelle and Hell argue that there is a mismatch \u2014 skilled workers will find work, but unskilled workers may not. There simply are too many unskilled workers for the forecasted number of unskilled jobs. The authors estimate that perhaps between two and three million people may not be employable in formal jobs (p.48). If so, they argue, China will unlikely be able to move up the income ladder.<\/p>\n