Mon, Jan 25, 2016 - Page 8 News List

Pushing against the Beijing model

By Francis Fukuyama

As this year begins, an historic contest is underway over competing development models — that is, strategies to promote economic growth — between China, on the one hand, and the US and other Western nations on the other. Although this contest has been largely hidden from public view, the outcome is likely to determine the fate of much of Eurasia for decades to come.

Most Westerners are aware that growth has slowed substantially in China, from more than 10 percent per year in recent decades to below 7 percent today (and possibly lower). The nation’s leaders have not been sitting still in response, seeking to accelerate the shift from an export-oriented, environmentally damaging growth model based on heavy manufacturing to one based on domestic consumption and services.

However, there is a large external dimension to China’s plans as well. In 2013, Chinese President Xi Jinping (習近平) announced a massive initiative called “One Belt, One Road,”which would transform the economic core of Eurasia. The “One Belt” component consists of rail links from western China through Central Asia and thence to Europe, the Middle East, and South Asia. The strangely named “One Road” component consists of ports and facilities to increase seaborne traffic from East Asia and connect these nations to the One Belt, giving them a way to move their goods overland, rather than across two oceans, as they currently do.

The China-led Asian Infrastructure Investment Bank (AIIB), which the US earlier this year refused to join, is designed, in part, to finance “One Belt, One Road,” but the project’s investment requirements dwarf the resources of the proposed new institution.

Indeed, “One Belt, One Road” represents a striking departure in Chinese policy. For the first time, China is seeking to export its development model to other nations. Chinese companies, of course, have been hugely active throughout Latin America and Sub-Saharan Africa in the past decade, investing in commodities and extractive industries and the infrastructure needed to move them to China.

However, “One Belt, One Road” is different: Its purpose is to develop industrial capacity and consumer demand in nations outside of China. Rather than extracting raw materials, China is seeking to shift its heavy industry to less developed nations, making them richer and encouraging demand for Chinese products.

China’s development model is different from the one currently fashionable in the West. It is based on massive state-led investments in infrastructure — roads, ports, electricity, railways and airports — that facilitate industrial development.

US economists abjure this build-it-and-they-will-come path, owing to concerns about corruption and self-dealing when the state is so heavily involved. In recent years, by contrast, US and European development strategy has focused on large investments in public health, women’s empowerment, support for international civil society and anti-corruption measures.

Laudable as these Western goals are, no nation has ever become rich by investing in them alone. Public health is an important background condition for sustained growth; but if a clinic lacks reliable electricity and clean water, or there are no good roads leading to it, it cannot do much good. China’s infrastructure-based strategy has worked remarkably well in China and was an important component of the strategies pursued by other East Asian nations, from Japan to South Korea to Singapore.

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