China, global capitalism and the quest for legitimacy

Abstract

The widely held view ascribes China’s remarkable economic growth in the 1990s to the communist regime’s gradualist reform policies and illiberal development strategy. This essay challenges that view. The author argues that economic growth became the most important source of legitimacy of the Chinese communist regime in the aftermath of the Global 1989. The Chinese regime adopted a radical efficiency-biased economic reform in the 1990s. Such radical reform regardless of social justice gave rise to rampant corruption and a huge income gap between the rich and poor. Meanwhile, misinterpreting the East Asian growth model, the Chinese regime, eager to drive the economy to grow faster, carried out an externally oriented development strategy that combined export promotion with import liberalization at the expense of autonomous national development. By the late 1990s, both the economic reform and industrial development were stuck in a quagmire, rendering the economic growth difficult to sustain. Its deep concern for legitimacy thus led the Chinese regime to accept harsh terms on economic liberalization in order to secure WTO membership, in the hope of increasing export and FDI on a larger scale to reverse the declining economic momentum.

Introduction

China’s reform and opening from the late 1970s is widely considered to be an irreversible process of the country’s integration into the capitalist world system. During this process, China incrementally transformed itself from a challenger of the international system of global capitalism into a stakeholder. This “Great Transformation” culminated in China’s accession to the World Trade Organization (WTO) in December 2001.

Despite the most enduring civilization in the world, China had declined in the age of imperialism, the golden age of the capitalist-imperialist globalization in the late 19th and early 20th centuries. It rose again not in the era of revolutionary extremism under Mao, but in the new age of capitalist liberal globalization after the end of the Cold War. In the past three decades, China has achieved spectacular economic growth. This is an amazing miracle in that sustained and rapid economic growth over such a lengthy period is arguably unprecedented in economic history.¹ It is especially impressive for such a populous developing country of continental size that carried out a radical external integration strategy while ideologically “upholding” socialism in a turbulent global environment: the end of the global Cold War, the collapse of Communism in Eastern Europe, and a series of ups and downs in Sino-U.S. relations. China managed to avoid the “transitional decline” that characterized the former socialist economies in Eastern Europe during their transition from planning to market in the 1990s. Its deeper integration into the global economy, epitomized by its accession to the WTO in 2001, subsequently drove even more rapid growth.

The dominant view nowadays is that China has benefited significantly from globalization, as evidenced by its high GDP growth. Chinese corporations are expanding and becoming stronger.² As a result, China is rapidly industrializing itself, and in due course will become an economic superpower. Economists, historians, and scholars of international relations have therefore proclaimed China to be the new world centre of gravity; the most famous advocate of this position is Danny Quah (Quah, 2011). They are predicting the emergence of a new hegemon and a radical shift in global power from the West to the Rest, and in particular from the United States to China. Michael Cox, professor of international relations at the London School of Economics, is among the few scholars sceptical about this power shift/transition thesis. He has contended that despite “short-term problems,” the U.S. still possesses enormous “fundamental structural strengths,”³ and while China is definitely rising economically, it has not risen in either hard power or soft power terms (Cox, 2012). Most Chinese economists, despite deep faith in the neoliberal logic of globalization, have acknowledged that China’s continued rise is unlikely unless the country achieves profound transition of the mode of development from extensive export-and-investment-driven growth to intensive consumption-and-innovation-driven growth. And huge differences of opinion as to how to achieve such a transition remain.⁴

As far as this essay is concerned, a more relevant issue is that the economic rise of China per se is not beyond doubt. Contrary to the conventional wisdom that takes the rise of China as “given” (Buzan, 2010), on the ground that globalization has only produced positive effects on China’s economic development, the author will argue that globalization has had negative sides as well. Although deepening integration into the world economy had stimulated swift export-driven GDP growth in the 1990s by exploiting China’s comparative advantage in cheap labor, it had hindered China’s industrialization in important ways. And accession to the WTO has made China’s technological catch-up even more difficult.

This essay will explain what motivated China to join the WTO in an extremely radical way. It is the political rationale of legitimation, the author argues, that had prompted the communist regime to seek radical neoliberal globalization as the way to reverse the declining economic momentum prior to the WTO accession.

What is the WTO Deal All About?

It took China 15 years to join the WTO after it had submitted its application in 1986 to resume its status as a founding member of the General Agreement on Tariffs and Trade (GATT), the precursor of the WTO. Joining the WTO was a momentous decision made by the top leadership. According to the WTO agreements, China gained wider access to foreign markets. As a quid pro quo, China opened its door wider by massively removing barriers to trade and investment. But China was to be identified as a non-market economy for 15 years. China also accepted two discriminatory special safeguard provisions that “no other WTO members had ever agreed to”: the product-specific transitional safeguard mechanism and the textile safeguard mechanism. Nicholas Lardy of the Brookings Institution argued that these three “WTO-plus” provisions specially designed by the United States to exclude Chinese products violated the “most basic principle of the WTO.”⁵ These special import-control measures made China’s labor-intensive products vulnerable to the arbitrary anti-dumping practices of its main trading partners.

Nevertheless, the WTO deal was more about the liberalization of investment, with a view to creating a global level playing field within China, than about the liberalization of trade. In the bilateral agreement on market access between China and the United States in November 1999, China agreed to immediately enforce the TRIMs (trade-related investment measures) and TRIPs (trade-related intellectual property) upon accession with no transition period as had been allowed for all existing member-states, including the Global North countries.⁶ China agreed to not impose local contents, export performance, foreign exchange balancing, and technology transfer requirements upon foreign investors.⁷ These used to be the effective industrial policy instruments that successful late-industrializers in East Asia had employed to generate backward linkages, whereby they achieved technological independence in their early stage of national development. China’s commitment to renouncing technology transfer requirements was particularly startling in that imposing such a requirement was the legitimate sovereign right of other WTO members, as established by the TRIMs (Shadlen, 2005). Moreover, in the final Accession Protocol at the time of its WTO accession in December 2001, China committed to ‘initiate negotiations’ for joining the GPA (Agreement on Government Procurement) ‘as soon as possible.’⁸

In the name of non-discrimination and reciprocity, the three capstone agreements of the WTO, namely, the TRIMs, TRIPs, and GATS (General Agreement in Trade of Services) institutionalized “protectionism of the strong at the expense of the poor nations” (Nolan, 2001; Wade, 2004). China’s radical liberalization commitments are worded far more elaborately and stipulated much more than those made by India, making China one of the most open economies in the world.⁹ More importantly, to make its commitments credible and irreversible, even before it joined the WTO, China had set out to revise or repeal domestic laws and administrative regulations so as to ensure their full compliance with the WTO rules. This is so-called ‘globalisation plus.’ These two defining features of China’s WTO accession, radical commitments abroad and legal compliance at home, are the clearest evidence of China’s conversion to neo-liberalism in foreign economic relations.

“Lock in” the Economic Reform?

The WTO deal was a big gamble for the Chinese enterprises, because China was imposed harsher terms on market access by its major adversaries even though the Chinese government had massively liberalized trade and investment prior to the accession. In addition, compared with Western global firms, the Chinese enterprises were extremely weak in every measure at the time of the WTO entry (Nolan, 2002). Yet, they were neither consulted nor included in the negotiations by the Chinese government.

Peter Nolan viewed China’s WTO entry an event of historic significance, comparable to the country’s opening up after the Opium Wars (Nolan, 2002). The comparison makes enormous economic sense. But the two ‘open-doors’ are different in political terms. The twentieth century after World War Two is no longer the age of imperialism, while China, at the turn of the twenty-first century, is a nuclearized great power and a permanent member of the United Nations Security Council. It is out of the question that China would be easily subjugated so long as it stood firm in the accession talks. Therefore, joining the WTO at dreadful cost is not so much the result of foreign coercion as China’s own choice.

There is little doubt that once China embarked on reform and opening up, joining the WTO was of economic necessity. The question is not why China joined the WTO, but why China, as a low-income late-industrializing country, desperately sought membership when conditions for development under the WTO had become remarkably less favorable than those under the GATT. Was this sort of radical deep integration inevitable? Where did Chinese leaders’ confidence come from when deciding to gamble the country in such a way?

The dominant views then and even today interpreted China’s quest for the WTO membership as the reformers’ attempt to “lock China on to the path of deepening economic reform” (Woo, 2001). Political economy analyst Laurence Brahm, personal friend of then Premier Zhu Rongji, coined the market-driven reform in the 1990s under the auspices of Zhu as a sort of “managed marketization” (Brahm, 2002, p. 279). The reform, as he saw it, had achieved enormous success before China joined the WTO. He contended that Zhu’s “managed marketization” reform in the 1990s “had brought China to the brink of a full-blown market economy” (Brahm, 2002, p. 279). Competition was the only thing that was missing from the reform agenda and time had now ripened to make the “managed marketization” complete by means of fully integrating China into the global economy (Brahm, 2002, p. 279). In other words, it was the successful economic reform in the 1990s that naturally led to China’s deep external integration into the global economy.

Nevertheless, Brahm’s old friend Premier Zhu had a different view. Just 15 months after China joined the WTO, Zhu Rongji had a candid talk with another distinguished foreign guest Stephan Roach, chief economist of Morgan Stanley in March 2002, stating that: “If China did not join the WTO, it would be impossible to restructure and sustain economic growth.”¹⁰ Zhu’s honest words did not give the impression that the reform in the past decade had been successful. Had the reform been a success, why would China have had such a need for a WTO deal on such harsh terms just in order to lock in the reform? Wasn’t the price too high? Why did the sustained rapid economic growth not seem to have equipped China with increased bargaining power, but rather imposed on China an ‘unequal treaty’? If one acknowledged that the reform in the 1990s unleashed market forces to power high growth, wasn’t the same reform one of the sources of rampant corruption, enlarging income gap, and declining economic momentum prior to China’s WTO accession as well?

China’s Economic Reform in the 1990s

Thus, the key question has now been reduced to: what is the nature of China’s reform in the 1990s? Another issue of equal importance but which has long been under-researched is: what is the actual developmental performance of China during this period? These two issues are interlocked. Analyzing them in an integrated fashion will provide the essential clue to understanding the politics behind China’s peculiar method of accession to the WTO.

The Tiananmen Incident in the summer of 1989 and the ensuing collapse of Communism in the Soviet Bloc severely eroded the legitimacy of the Chinese Communist Party (CCP) regime. Deng Xiaoping’s reform and opening were both in tatters as a result of backlashes from the intra-party leftists at home and the US-led economic sanctions abroad. Yet 1989 is extremely important in modern Chinese history not merely because the CCP survived the domino effect of the collapse of Soviet Communism, but because it did not mean the end of China’s reform and opening up, all thanks to the crucial role Deng Xiaoping had played at the critical juncture of the Global 1989.¹¹

Deng was more clear-headed than anyone else about the discredit of Communism in the aftermath of the Global 1989. To him, Mikhail Gorbachev’s approach of glasnost (openness) was tantamount to political suicide. But pulling China back to Maoism was not politically feasible either as that would have invalidated his reform and opening up and disqualified him as the paramount leader. Also, regime changes in Erich Honecker’s East Germany and Nicolae Ceausescu’s Romania convinced him that sticking to the old socialist economic method was not the answer. Deng had to find a solution on his own.

1992 was a crucial year. After the end of the three-year ‘stabilization’ (1989–1992), the Conservatives, headed by Chen Yun, economic tsar and political counterweight to Deng, proved unable to provide an alternative approach promising sustained prosperity for China through recentralizing the economy (even if they had managed to bring down inflation). This gave Deng the chance to strike back. The huge impact of the Global 1989 enabled Deng to have a showdown with the intra-party leftists by imposing the marketization reform without further bargaining.

During his famous southern tour in the spring of 1992, Deng did not mention a single word about Communism. Admitting frankly that nobody within the Party, even including Mao and himself, could offer a clear-cut definition of “socialism, Marxism, and capitalism,”¹² Deng instead defined socialism in an opportunistic way by spelling out three criteria of what socialism was.¹³ Socialism, according to him, was such a thing as long as it “increases the productive force, improves people’s standard of living, and enhances China’s comprehensive national strength.”¹⁴ Meanwhile, Deng continued to repeat the old dogma that only socialism could save China and that only socialism could develop China.¹⁵ To reconcile his ideological insincerity and blatant pragmatism, Deng asserted that high economic growth was of absolute political necessity.¹⁶ Deng hereby based the legitimacy of the CCP on good economic performance. Thus, his words made sense of the reverse logic: only the development of the Chinese economy could keep the CCP in power and consolidate its rule, thereby saving Chinese ‘socialism.’ This was also linked with his personal need to please those liberal intellectuals through relaunching market reform as an indirect way to justify the 1989 crackdown.

However, the reform in the 1990s was a notable ‘breaking-off’ from the path of the 1980s. Former Premier Zhao Ziyang, the de facto ‘chief architect’ of China’s reform in the 1980s, attached considerable importance to social fairness to balance the market-oriented reform.¹⁷ In contrast, the reform in the 1990s was biased overwhelmingly towards efficiency regardless of the traditional socialist principle of egalitarianism. The path-breaking of market reform was nonetheless eclipsed by the political continuity that linked the two-stage reforms together, that is, the party’s absolute monopoly of power. The changing course of China’s economic reform is in large part to do with the particular way in which Deng Xiaoping drew on lessons from the Tiananmen crackdown against the global backdrop of the collapse of Communism in the Soviet Bloc.

The three big lessons were as follows: no political reform, no appeasing the people, and appeasing the West (Yue, 2011b, pp. 134–139). These produced profound implications for Deng’s reform policies and development strategy in the 1990s. Deng noted with displeasure the fact that the Chinese people were not grateful for his economic reform even though they had benefited so much from it in the 1980s and lived a much better life under him than under Mao. They wanted socialist spiritual egalitarianism and capitalist material gains at the same time. That seemed an impossible mission. As the reform had never been meant for ending the one-party dictatorship in the minds of all ruling elites, including the liberal-minded Hu Yaobang and Zhao Ziyang, the collapse of Communism in Eastern Europe and the disintegration of the Soviet Union as a nation state in particular led Deng to more firmly reject democracy. Deng concluded that the Leninist party-state must be preserved at all costs in the belief that the strong socialist state per se was functionally indispensible to achieving the modernization of China. The socialist regime needed to rebuild legitimacy for itself through an efficiency-biased reform to deliver prosperity in a sustainable way.

Therefore, close links were established between the reform, high growth rate, and the legitimacy of the regime. Yet reform was a necessary rather than a sufficient condition for economic growth. An appropriate development strategy is the most crucial of the variables in enabling economic growth (Rodrik, 2001). China’s uniqueness lies in the fact that it is not merely a late-industrializer. It is a continental-sized great power as well. This implies that there are more choices both theoretically and practically in terms of the pathway of development available to China than to many other developing countries. Deng seemed to believe that rapid economic growth would naturally lead to modernization. In addition to relaunching more radical market-driven reform at home, China needed to embrace global capitalism in an unprecedented way. In Deng’s mindset, the modernization of China could only be achieved not through a refreshingly self-reliant internal integration approach but through that of deep external integration into the capitalist world system, a radicalized liberal pathway of development by dint of fully exploiting the country’s comparative advantage in cheap labor.

In studying the East Asian development model, Robert Wade made an important distinction between internal integration and external integration. He argues that: “the development of a national economy is more about internal integration than about external integration” (Wade, 2004, intro., p. xlviii). The economy with a high internal integration entails “a dense set of links between sectors” (Wade, 2004, intro., p. xlviii). Meanwhile, robust political coalitions between capitalists and workers become likely in that wages are not just the cost of production but also the source of consumption. Thus, in a high internal integration economy, “export demand is not the main source of economic growth.” In contrast, in an economy with a low internal integration, wages are “seen simply as a cost, not also source of demand.” Domestic sectors are loosely connected as economic growth relies on export, so that sectors producing for the foreign market are detached from the domestic market. Accordingly, a low internal integration economy “has no basis for class alliances and democratic regimes” (Wade, 2004, intro., p. xlviii). Wade contended that the two forms of integration are not mutually exclusive. He favored a national development strategy that would “operate in the zone where the two forms of integration reinforce rather than undermine each other.” As such, the best development strategy is to “combine the principle of comparative advantage and the principle of import replacement” (Wade, 2004, intro., p. l). That is exactly the characterization of the developmental states in East Asia in the 1970s and 1980s.

Deng Xiaoping was clearly inspired by the perceived East Asian model of development, particularly the Japanese miracle after World War Two (Wu, 2008).¹⁸ Yet, his perception of the East Asian model was deeply naïve. He was especially ignorant of the political economy of the Cold War. As he understood it, opening up as well as forging friendly ties with the U.S. was sufficient to achieve prosperity (Li, 2008, p. 58).¹⁹ Deng was unaware that it was the ad hoc U.S. Cold War policy that made the East Asian model work. Those favorable international conditions, namely U.S. economic and military sponsorship, global trade boom, and the pro-development Bretton Woods rules, enabling high growth and catch-up were unique to the East Asian newly industrializing economies (NIEs), particularly Taiwan and South Korea, and could not be replicated elsewhere during and after the Cold War. The U.S., however, had never had the intention to help transform Communist China into another industrial power of the German or Japanese kind, even if its strategic relationship based on security alliance with the People’s Republic remained firmly in place in the 1980s (Yue, 2011a). Deng, nonetheless, had a different vision. He was eager to reap instant benefits. Despite the fact that China had drawn considerable inspiration from the market socialism of Hungary and Poland in the 1980s, the economic methods of the capitalist West, particularly the neighboring Japan and the semi-peripheral East Asian NIEs in the late 1980s, and of the U.S. from the early 1990s onwards, became the new model for China to emulate after the fall of the Berlin Wall in 1989. For that purpose, China had to appease the West, first and foremost, restoring good relations with the United States. Therefore, he went even further than his former protégé, the deposed General Secretary Zhao Ziyang,²⁰ who articulated a parochial strategy of coastal development based on external integration in early 1988.²¹ Deng, in contrast, made it a national development strategy.

The sourcing of legitimacy based on sheer opportunistic pragmatism after 1992 presaged the changing nature of the Chinese Communist regime. This was substantiated by the rapid marginalization of economic and political status of the working class after 1992. To achieve a faster growth rate, radical marketization reform was initiated at the expense of social fairness. From the mid-1990s on wards, a huge number of workers in the SOEs were mercilessly laid off for the sake of efficiency without receiving proper compensation. Peasants in rural areas were no better. With the family contracting system having exhausted its potential in the mid-1990s, the rural economy began to decline when the central state carried out urban-biased policies at the expense of rural development. Meanwhile, to compensate for their revenue losses as a result of the tax reform in 1994, local administrations levied heavy taxes and fees on the peasants. These measures rapidly enlarged the income gap between the rural and the urban and led to widespread immiseration of the countryside (Cheng and He, 2001). Thus, the workers and peasants, the once-leading class in the PRC’s constitution, became the biggest losers of China’s marketization reform throughout the 1990s.

With Communism losing its appeal, the political driver for the marketization reform was no longer derived from the dysfunctioning state ideology but from institutionalized rent-seeking, a power-money-swapping regime. The party-state bureaucrats, now guided by “an ideology of no ideology” (Lin, 2008, p. 14), spared no effort in pushing for the creation of markets. In absence of checks and balances, the marketization reform gave rise to rampant corruption. The nomenclatura manipulated the process of marketization to benefit themselves first and foremost. Contrary to the widely held view that the Chinese state adopted a gradualist approach to enforcing an orderly market-oriented reform, or a “managed marketization” as Brahm coined it, the reform was undertaken in an extremely radical way. It was categorically aimed at privatizing public property into private hands (huagong weisi) through all sorts of means. On the one hand, relatives of the ruling elites, most notably the princelings, engaged in business on a much larger scale by dominating the hugely lucrative sectors, such as real estate, mineral resources and finance, to speedily enrich themselves. This was also motivated by their deep sense of insecurity with regard to the viability of the regime in the wake of the Global 1989.²² On the other hand, many of the party-appointed SOEs’ managers embezzled huge amounts of state assets through insider control in the name of “strategic corporate restructuring” and the building of “modern enterprise system” (He, 1998, Chap 3).

A handful of China’s liberal economists vigorously defended the unjust process of marketization reform, viewing corruption as the necessary price for achieving economic liberalization. They asserted that: “corruption is the lubricant of reform” (Zhang, 1997). They turned a blind eye to the much greater economic and social costs of corruption inflicted upon Chinese society (He, 1998, Chap 3). By the mid-1990s, an unholy alliance between the political elites and the cadre-transformed business elites was in the making. The intellectuals were not left out of this alliance. By the late 1990s, the intellectuals as a whole became the target of co-option of the party, a strategy designed to incorporate the intellectual elites into the ‘rich people’s club’ in exchange for their political compliance. The strategy, known as the “Three Represents Theory” proclaimed by General Secretary Jiang Zemin on July 1st, 2001, worked smoothly, as evidenced by many intellectual elites becoming collaborators of the regime. The formation of the elite coalition supported the Communist regime tremendously at the turn of the century. There is a classic phrase from a famous political novel, The Wrath of the Heaven (Tiannu), banned instantly after its publication in 1997, in which a corrupt senior party official cynically declares, “corruption makes our [regime’s] rule more solid.”²³

The successful regime consolidation of the CCP, however, created powerful enemies of the state in the long term, as evidenced by the revival of Maoism that recaptured the hearts and minds of the underclass in large parts of China from the late 1990s onwards. But the formation of the elite coalition had institutionally solidified an unfair pattern of wealth redistribution to the disadvantage of the working class and blocked upward social mobility, thereby making the Chinese political system increasingly closed and resistant to change. As such, socialism was betrayed and buried by a nominally Marxist party within which the nomenclatura elite captured the state to create a deeply entrenched crony capitalism. This unique state capitalism, or “Communist capitalism,” as Cheng conceptualized it (Cheng, 2016), thrived nonetheless not merely because of the hardening of authoritarianism in the aftermath of the Tiananmen, but far more importantly because of its allying with global capitalism, an unholy alliance ironically at the expense of China’s autonomous development (to be analyzed below). That was exactly what Deng Xiaoping’s and his successor’s new thinking on “opening-up” was destined for in the 1990s.

China’s Industrial Development in the 1990s

For late-industrializers, development entails internal integration under the sponsorship of a strong state (Wade, 2004, p. xlviii; Olsen, 1982, p. 175). This involves institutionalizing the protection of workers’ rights and domestic infant industries as well as redefining the central-local relationship so as to enable the economies of scale and scope to take place in a unified national market. Given China’s gigantic economic scale and market potential, the development of a high internal-integration economy would without doubt reduce the country’s dependence on foreign markets, thereby strengthening its bargaining position vis-à-vis the developed countries in terms of acquiring advanced technologies from the latter at relatively low cost. An autonomous national development founded on such a basis would at least in theory make the catch-up more efficient and effective.

With the Sino-Soviet split in the 1960s and the waning of the planning economy in the Soviet Bloc in the 1980s, market-based development became the only path to modernity. As development is quintessentially about internal integration, as Wade argued, which is particularly the case for large developing economies such as China, an autonomous national development (leaving aside the extreme cases such as the tiny city-state of Singapore) is possible only if it is embedded in an economy of internal integration. This has nonetheless become a salient issue of controversy in the post-Cold War era, when the neoliberal paradigm of deep integration overtook industrial policies to dominate the agenda of global development. Notwithstanding the sea change in the global political economy after the Cold War, China, in comparison with many other Third World countries, would have been better able to realize internal integration given its great power status and the size of an ‘empire.’ China had an additional advantage in this respect; that is, the traditional values of egalitarianism embodied by such socialist legacies as job security and a fairer distribution of social wealth that had already been deeply rooted in the Chinese society. These socialist legacies inherited from the pre-reform era, even if utopian in practical terms under Mao’s totalitarian rule, were directly correlated and entirely congruent with the presupposed internal integration approach in economic and political terms. However, the changing nature of the Chinese Communist regime after 1992 precluded the blending of the socialist principles with the market.

As mentioned earlier, Deng Xiaoping resolved to achieve high GDP growth through export promotion as of 1992. This has become the overarching principle of China’s development strategy ever since. It must be pointed out that China’s reform and opening up, from its very outset, was subjected to increasing systemic pressures for liberalization of trade and investment from the Western-dominated Bretton Woods institutions. The 1990s was the golden age of neoliberal globalisation. Eager to normalize relations with the West in the aftermath of Tiananmen, China struck a deal with the United States on market access in October 1992, according to which China agreed to massively remove trade barriers in exchange for the U.S. retaining China’s MFN (most-favored-nation) trading status. China made an additional concession which was crucial to its long-term development; it agreed “not [to] enforce import substitution of any product” (Yue, 2011a).

Import substitution is what national industrialization is predicated upon. China’s commitment to give up import substitution implies that its national autonomy was to be impaired by external economic forces. To compensate for this undermined national economic sovereignty, China zealously anticipated acquiring technology transfer from foreign investors, especially the multinational companies (MNCs) from the industrial West. This is the real origin of so-called “exchange market access for technology” (EMAT) strategy, meaning “I give you market, you give me technology.”²⁴ To this end, China amended the law on foreign direct investment (FDI), and relaxed limitations on the equity share of foreign capital and the geographic scope for investment. The new law allowed foreign partners to fill up the position of director chairman in joint-ventures (JVs). More importantly, it allowed foreign firms to set up wholly owned subsidiaries in China.

China’s EMAT-centred development strategy of external integration was to promote exportation while opening up the domestic market to foreign investors. This is a fairly strange development strategy in that a typical export-oriented industrialization (EOI) approach is to combine export promotion with import substitution (Amsden, 2004, pp. 136–138). In other words, late-industrializers adopting the EOI approach will make every effort to nurture the independent technological capabilities of the local firms through encouraging exportation and protecting the domestic market. The EMAT strategy suggests that the Chinese state bet the country’s industrialization on technology transfer from foreign investors. Wan-wen Chu speculated that the EMAT was essentially China’s unique approach to implementing import substitution in a flexible way, which might be true. But would such an approach work?

FDI soared from 1992 onwards as a result of the EMAT (Table 1). Unlike the HKMT (Hong Kong-Macau-Taiwan) investors that did not compete with domestic firms, this round of FDI came mainly from the West. The chief motivation of these Western global firms was market seeking rather than helping to boost China’s exports. They targeted domestic firms, particularly the SOEs as their main rivals (Yue, 2001). Contrary to the expectation of Chinese officials, these global firms did not transfer the needed technologies to the Chinese partners because they were reluctant to cultivate competitors of their own. Instead, they made every effort to prevent leakage of technological know-how so as to maintain a large technological advantage over Chinese enterprises. Meanwhile, thanks to the investment liberalization from 1992, the wholly owned subsidiaries of Western global firms increased substantially in number and swiftly overtook the JVs to become the dominant form of FDI in China. The Chinese firms found it increasingly difficult to acquire advanced technologies from the global firms. What the Chinese firms could obtain through such arrangements as the technology licensing agreement were ‘suitable technologies’ that had nonetheless been outmoded in the global firms’ home countries (Chen, 2001; Chen and Yue, 2002).

Table 1 FDI 1992–2000 (unit: US$100 million)

Preserving technological secrets is the normal practice of firms all over the world. What was to blame was not just the Chinese state’s psychological dependence on and wishful thinking regarding technology transfer from foreign competitors, but more crucially its failure to devise an appropriate national development strategy to facilitate the absorption, assimilation and upgrading of the imported technologies by the nationally owned enterprises (NOEs), either the SOEs or the private firms. The inadequateness of such myopic development strategy was further exacerbated by the institutional deficiencies of the party-state, which led to the eventual failure of the EMAT by the late 1990s.

Kornai argued that forced growth is what characterized the socialist system (Kornai, 1992, p. 107). The acute anxiety of the Chinese leadership for legitimacy of the regime after the Tiananmen further politicized the pressure for forced growth. In China’s ad hoc political setting, achieving ‘forced growth’ through the EMAT against the backdrop of renouncing import substitution suggests that it was institutionally unlikely to have the kind of industrial policies characterizing the East Asian developmental states to be in place in China. As a matter of fact, the Chinese state had never set forth a whole package of mutually reinforcing and well coordinated Listian-type trade, industrial and technology policies to direct the country’s industrialisation. The only industrial policy promulgated in 1994 was sectorally confined within the auto industry, known as the Automotive Industrial Policy (AIP). Yet even this sole industrial policy did not encourage the efforts of autonomous innovation of the domestic firms. Rather, the AIP placed heavy emphasis on technology imports and placed high hopes of industrial upgrading on entering into JVs with the global firms. This contrasted sharply with the practice of the East Asian developmental states that stiffly resisted being brought into partnership with the global firms, while sparing no effort to foster the independent innovation capabilities of their indigenous firms (Chu, 2009).

Excessive dependence on technology imports is not a phenomenon unique to China’s auto industry. As the main carrier of technology imports, China’s medium- and large-sized SOEs across the country’s industrial sectors attached little importance to the assimilation and absorption of imported technologies. As late as 2003, for instance, the ratio of funds invested by China’s medium- and large-sized industrial enterprises in technology imports and those invested in assimilation/absorption was just 1:0.07. In contrast, the ratios of both Japan’s and South Korea’s enterprises were kept around 1:10.’²⁵ This significantly impaired Chinese firms’ innovation capability, rendering them inextricably dependent on technology imports from the advanced economies.

The strange blending of export promotion with investment liberalization signifies that China was not implementing the typical EOI strategy in spite of its external orientation in developmental terms. Empirical evidence shows that the influx of FDI, though having driven the Chinese economy to grow rapidly, did not lead to substantial technological progress of the SOEs (Cheng, 2000). Rather, the enormous competitive pressures stemming from soaring FDI influx placed the SOEs at risk. Yet, the ‘political correctness’ of the Chinese regime’s logic of ‘opening-up’ and the institutionalized evaluation system linking officials’ chances of promotion to growth performance prompted all levels of sub-national administrations to scramble for FDI. Numerous policy preferences, such as arbitrary tax concessions and free use of land, were accorded by local governments to foreign investors even at the expense of the NOEs, including the SOEs. The institutionalized nation-wide discriminations against the NOEs added to the predicament of the SOEs. What’s more, the restructuring of the SOEs, the core of China’s economic reform under the scenario of “grasp the big and let go of the small” (zhuada fangxiao) that began in 1995, further weakened the SOEs in their entirety.

The so-called ‘zhuada fangxiao’ was in large part a hidden Washington Consensus approach to reforming the ailing SOEs in the mid-1990s. The idea was to reinvigorate a small number of extra large-sized SOEs through entrusting them with monopolistic or oligopolistic power at the upper-stream of economic activities and at the same time to withdraw state sponsorship of the large number of loss-making small- and medium-sized SOEs. Such a reform scenario highlighted the compromise between the regime’s political rationale and its economic needs. Rescuing the SOEs in their entirety was financially unviable, whereas the large-sized SOEs located in key industrial sectors needed to be preserved at all costs as they controlled the key economic resources crucial to the survival of the regime. The small- and medium-sized SOEs were in contrast much less important economically and politically. Restructuring them to offload the fiscal burden without using the name of privatization was feasible given the ‘shock and awe’ effect after the Tiananmen crackdown in 1989 and the mystifying of reform as ‘political correctness’ after Deng’s southern tour in 1992. The concomitance of removing state sponsorship of the bulk of the SOEs and liberalizing trade and investment led China’s reform and opening to interact under the worst conditions to the detriment of the NOEs, resulting in the SOEs being driven out of the market in huge numbers.

The extra large-sized SOEs kept expanding in size under massive state sponsorship. Nonetheless, under the institutional constraints of ‘forced growth’ and the selection of senior managers of the SOEs based on a political criterion (dang guan rencai, or ‘party controls talents’) rather than the candidates’ professional expertise, the SOEs had very little incentive to innovate. Meanwhile, the intensifying market segmentation and resultant inter-regional industrial isomorphism generated by China’s de facto economic federalism (Balkanisation) gave rise to severe overcapacity of the SOEs. Two-thirds of industrial capacity was under-utilized, and 37.2 % of the SOEs’ utility ratio was less than 50 %. Their return on equity declined drastically.²⁶ As a result, those SOEs under state sponsorship, though becoming larger in size, remained uncompetitive as a whole (Yue, 2011a).

The FIEs in contrast achieved an overwhelming advantage over the NOEs. By the late 1990s, they had become the market leaders by dominating China’s high-tech sectors and international trade (Yue, 2004). The privately owned enterprises (POEs), though more dynamic than the SOEs, were largely backward technologically and poorly managed in relative terms. Most of their industrial operations could not be classified as regular manufacturing (Cheng, 2003). Thus, the SOEs, despite their inherent inefficiencies caused by the Communist authoritarian institutions, made up the backbone of China’s regular manufacturing. Their relative decline throughout the 1990s paradoxically eroded the country’s foundation of autonomous national development.

1996 was a turning point. The SOEs across all industries for the first time posted net losses and thus were forced to lay off workers in huge numbers. Meanwhile, the non-performing loans (NPLs) of the four big state banks accumulated by the loss-making SOEs were so great as to place the nation’s financial system at stake. Therefore, the Chinese regime had no other choice but to acquiesce in massive spontaneous privatization of the SOEs in the localities. China’s Communist authoritarian system, which by definition was no different from Mao’s totalitarianism in the sense of seeking absolute monopoly of power, were uncompromisingly intolerant of free association, particularly the independent unionization reminiscent of the 1970–80s’ Solidarity Movement in Poland. In such an institutional and political setting, the spontaneous privatization naturally evolved into the sort of nomenclatura privatization benefiting only the insiders of the SOEs with whom corrupt local officials conspired. Some economists at the World Bank made in-depth investigations into China’s privatization process, and came to the conclusion that China’s state-driven privatization campaign had failed to significantly improve the country’s economic efficiency at both macro- and micro-levels (Yusuf et al, 2007, pp. 41–43, 115).

A massive lay-off of SOEs’ workers and rampant corruption contributed to the quickly enlarging income gap between the rich and poor. By 1999, the Gini Coefficient reached 0.457, ranking China among the most unequal societies in the world (Sun, 2004, p. 272). The unbridled crony capitalism institutionalized unfair wealth redistribution to the disadvantage of the great majority of people, whose interest the party proclaimed to represent. Such an endgame significantly dampened domestic demand and further evoked an enduring challenge to China’s economic development well into the twenty-first century: under-consumption. The institutionalized demand shortfall has led to an export-dependent economy ever since. What’s more, the displacement effect of FDI on the SOEs led to a deterioration of China’s industrial and employment structure, a result of which was the reinforcement of its dependence on FDI. The double dependence on export and FDI highlighted not the strength but rather the substantial structural weakness of the Chinese economy. Peter Nolan contended that it was the remarkable industrial progress the SOEs achieved in the 1990s that made China the second largest recipient of FDI in the world (Nolan, 2001). That was partly true. The whole economic truth is: although the total output of the SOEs kept increasing rapidly throughout the 1990s, their industrial value added as a percentage of GDP kept declining. This was also compounded by the fact that a great number of the SOEs continued to build up unwanted products of low quality despite the heavy-handed state-led industrial restructuring.²⁷ In contrast, the share of industrial value added of the FIEs rose swiftly during the same period. The relative decline of the SOEs, therefore, caused China’s industrialization to essentially stagnate (Table 2) (Cheng, 2003). By 1998 and 1999, devastated by underconsumption and floods at home and the financial crisis in East Asia, the Chinese economy was sliding rapidly to the verge of recession. FDI, for the first time since China’s opening up in 1978, declined drastically given the country’s gloomy economic prospects (Table 3).

Table 2 China’s industrial value-added by ownership and Industrialization Rate in the 1990s: (unit: per cent %)

Table 3 GDP growth rate, FDI, and Capital Flight (unit: US$100 million)

The Chinese government was extremely sensitive to the FDI shrinkage, and was more or less aware of the necessity of an economic transition. A great deal of effort had been made to boost consumption but to no avail. The Keynesian approach under Chinese institutions only led to the crowding out of POEs’ investment (Yue, 2001, p. 74), more corruption and wasteful investments.²⁸ To the pragmatic Chinese leadership, the only way out was increasing exports and attracting as much FDI as possible for China through joining the WTO. But gaining wider access to foreign markets and restoring foreign investors’ confidence were not costless. After the Uruguay Round negotiations of GATT were completed in 1994: “the globalisation plus paradigm, which treats all countries as having the same rights and obligations in the international economy, is now institutionalized in the WTO agreements” (Wade, 2004, intro., p. xliv). China had to massively liberalize trade and investment in terms of offering greater market access to foreign goods, services and capital as a quid pro quo. Such an exchange was necessitated both by post-Cold War international politics, particularly U.S. grand strategy of fully integrating China into the rule-based international system of global capitalism²⁹ and China’s domestic politics. After all, it was overwhelmingly the imperative of China’s domestic politics − sustaining high GDP growth − that prompted China to strike the WTO deal.

The Chinese leadership did have good reason to believe in the neoliberal logic of globalisation, as it was paradoxically the export boom and huge influx of FDI from the early 1990s onwards that had kept the Chinese economy growing fast under the shadow of deflation and massive capital flight (Table 3). These positive effects of globalisation spurred on the opportunistic Chinese leadership to deepen the country’s integration into the global economy as the only way to resume the economic momentum, thereby addressing their overriding concern for legitimacy. That was the political rationale of China’s WTO accession. In other words, it was not economic success in the 1990s that naturally led to China’s deep integration, but the predicament in the country’s reform and industrialization that forced China to join the WTO at the earliest possible time to keep the economy growing.

Conclusion

Sustaining economic growth at all cost became the biggest political decision in China after the Tiananmen Incident in 1989. The way in which Deng Xiaoping drew lessons from the Tiananmen Incident played a key role in shaping the new path-dependence of China’s zero-sum marketization reform in the 1990s. Meanwhile, Deng’s eagerness to achieve instant economic gains, his misperception of the East Asian model and the Chinese leadership’s lack of will in autonomous national development, all led to a myopic development strategy based on external integration. Entry to the WTO on harsh terms highlights the country’s dilemma of national development in the 1990s and the leadership’s overriding concern for legitimation of the CCP regime.

Assisted by China’s growth-forcing institutions of the market Leninist regime, the WTO entry enabled the Ricardian growth miracle to take place. Rapid economic growth consolidated the regime and its unholy alliance with global capitalism. Contrary to the “neutral-state thesis” (Yao, 2010) claiming that the dedication of China’s “disinterested government” to redistributive justice led to the economic miracle, the Chinese “strong state” became far more predatory after the WTO accession. Income disparity continued to rise sharply. According to more reliable independent research, in 2010 China’s income Gini coefficient reached 0.61, well above the World Bank’s all-country average of 0.44.³⁰ It was only exceeded by South Africa³¹ and remained high in the years that followed. China’s family net wealth Gini coefficient, a more accurate measurement including all forms of gray incomes, was even higher. The top 1 % of families have seized control of more than a third of the national wealth.³² Not coincidentally, newly adjusted figure for China’s actual population living in extreme poverty was recently acknowledged to be in excess of 200 million at or below the World Bank standard of $1.25 per day.³³ Severe social polarization prompted country-wide disturbances and brought the country to the brink of “revolutionary turmoil.”³⁴

The increasing wealth gap significantly eroded internal integration in socio-economic terms and solidified an already abnormal economic structure excessively dependent on exports. As a late late-industrializer, China strictly confined the role of the state within the WTO’s anti-developmental legal framework. Concomitant to the shrinking of policy space after WTO accession, the continual softening of the “strong state” embodied by institutionalized pervasive corruption and bureaucratic incompetence further exacerbated the country’s developmental quandary. Therefore, although quite a number of the Chinese firms, particularly large monopolistic and oligopolistic SOEs have thus far achieved significant expansion in size, their autonomous capacity of science and technology innovation is still very much in question. None of the Chinese firms was ranked among the 2015 Top 100 Global Innovators, amongst which 40 were from Japan, 35 from the U.S., 3 from South Korea, and 1 from Taiwan.³⁵ The official Economic Blue Paper 2014 issued by the Chinese Academy of Social Sciences (CASS) admitted, “the high-end chains of many Chinese industrial sectors are heavily dependent on import. For instance, 90 % of chips are imported from foreign manufacturers, the total cost of which has exceeded that of oil. China today still falls short of core technologies in those key parts and components such as engine, hydraulic devices, transmission devices, control technologies, etc., which are critically dependent on imports; 70–80 % of expensive high-end medical equipments have to be imported from abroad or sourced from the MNCs in China”.³⁶ China’s technology dependency ratio did not even drop slightly from the 2006 level but remains above 50 %, much higher than that of the U.S. and Japan, which remain below 5 %.³⁷

“Growth without development” or dependent development distinguishes China from most of the developing nations in the post-Cold War era of globalization. However, significantly China may matter in economic and strategic terms, given its “empire’s” size, its acute innovation shortfall by no means testifies to the economic rise of China. The globalizing of the Chinese economy has not pushed China any closer to being an emerging industrial power comparable to Germany or Japan after World War Two, nor has it made the nominally Communist regime more democratic as both market liberals and Marxists have predicted. The illusion of a power shift from the U.S. to China is however creating a self-fulfilling prophecy of a so-called “Thucydides Trap” in great power relations. This, along with a “volcanic stability” (He, 2011) at home, has justified the communist regime’s resort to totalitarianism with Legalist characteristics and political-ideological repression. What the hybrid of economic colossal with feet of clay and a political leviathan means for China and the world remains an open question.

Notes

• 1 From the beginning of the 2000s, there have been some serious doubts expressed on the real figure of China’s GDP growth rate. Thomas G. Rawski, “What’s Happening to China’s GDP Statistics?”, September 12, 2001. http://www.pitt.edu/~tgrawski/papers2001/gdp912f.pdf; Lester Thurow, “A Chinese Century? Maybe It’s the Next One.” New York Times, August 19, 2007. http://www.nytimes.com/2007/08/19/business/yourmoney/19view.html. Harry Wu, China Center Special Briefing Paper: Re-Estimating Chinese Growth, updated version as of 20 June 2014. https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=2780; “China May Not Be History’s Economic Growth Champ After All, Report Says,” The Wall Street Journal, June 18, 2014. http://blogs.wsj.com/chinarealtime/2014/06/18/china-may-not-be-historys-economic-growth-champ-after-all-report-says/.

• 2 In 1995, there were only 3 Chinese firms ranking among the Fortune 500 (People’s Daily, 12/07/2002). In 2002, about one year after China joined the WTO, the figure rose to 13 including one Taiwanese firm. http://www.mofcom.gov.cn/xglj/500e2002/500e2002.shtml. In 2016, Fortune 500 recorded 134 U.S. firms ranking No. 1 followed by 110 Chinese firms, including 7 from Taiwan, 6 from Hong Kong, and 97 from the Mainland. http://www.fortunechina.com/fortune500/c/2016-07/20/content_266975.htm.

• 3 “America’s future is secure: Professor Cox,” Australian Broadcasting Corporation, 30/08/2011. http://www.abc.net.au/lateline/content/2011/s3306142.htm.

• 4 Summer Davos Tianjin 2012: ‘Zhang Weiying, Justin Yifu Lin, and Li Daokui hotly Debate on China’s Future Economic Trends,’ http://www.022net.com/2012/9-11/503256213025531.html; Yu Chunhui, ‘China’s Economic Transition and Industrial Upgrading,’ Wenhui Daily, November 26th, 2011; Wu Jinglian, ‘The Economic Challenges Confronting China in World Economic Change,’ Caijing online, December 15th, 2012, http://economy.caijing.com.cn/2012-12-15/112365258.html.

• 5 “WTO Accords not without Dangers,” South China Morning Post, May 22nd, 2002.

• 6 Grace period of TRIMs allowed for developed, developing and least-developed countries: 2 years, 5 years, and 7 years respectively. Grace period of TRIPs allowed for developed, developing and least-developed countries: 1 year, 5 years, and 11 years respectively.

• 7 Full Text of Agreement on Market Access between the People’s Republic of China and the United States of America: Protocol Language. https://ia700306.us.archive.org/21/items/AgreementOnMarketAccess/Us-chinaBilateralAgreementProtocols.pdf.

• 8 Report of the WTO Working Party on the Accession of China (1 October 2001), WT/ACC/CGN/49, at para. pp. 341–342. http://www.cecc.gov/pages/selectLaws/WTOimpact/wkptrptPRCWTO.php. Signing up to the GPA, one of the WTO’s Issue-based plurilateral agreements, is not the statutory requirement for the WTO membership. Thus, China’s principled commitment to join the GPA in two years had no legal binding on China. In was after 2006 that China was subjected to increasing pressures from the U.S. and the EU for acceding to the GPA.

• 9 According to Deloitte (UK) 2005, major powers that had lower market openness than that of China were: Japan (24), India (23), U.S. (22), France (19), Germany (15), UK (12).

• 10 Stephen Roach (at China Development Forum in Beijing): “China: Straight Talk from Zhu,” March 27th, 2002. www.morganstanley.com/GEFdata/digests/20020327-wed.html (original link, now disappeared; last visit: 01/03/2003).

• 11 Global 1989 is symbolized as the fall of the Berlin Wall and the end of the Cold War.

• 12 “Deng Xiaoping’s Southern Tour Remarks [Original], zhongwaiguanli, 19/07/2016. http://cj.sina.com.cn/article/detail/1790671321/31346?column=china&ch=9.

• 13 In the 1980s, Deng did not even hide his suspicion of socialism. He frankly told a visiting African leader, “I would suggest you not to enforce socialism right now, but focus your attention on economic construction. So long as the economy is developed, the people’s livelihood is improved, they will feel satisfied, then you can call your practice whatever ‘ism’ as you wish.” For understandable reasons, these sensitive words were not included into the Selected Works of Deng Xiaoping. Du Daozheng, “How to Look on Deng Xiaoping Today?” Caijing, 05/12/2008.

• 14 Selected Works of Deng Xiaoping, Vol. 3, p. 372, Beijing: renmin chubanshe, 1993.

• 15 Selected Works of Deng Xiaoping, Vol. 3, p. 311, Beijing: renmin chubanshe, 1993.

• 16 Selected Works of Deng Xiaoping, Vol. 3, p. 375, Beijing: renmin chubanshe, 1993.

• 17 Zhao, Ziyang (2009): The Secret Journal, p. 124., Hong Kong: New Century Press

• 18 Wu Guangxiang, “Journey of Peace to Japan, Deng Xiaoping Made up His Mind to Launch Reform and Opening,” dangshi zongheng, No.8, 2008.

• 19 Zhao Kejin, ‘The Fact is the US is No Worse than Other Great Powers,’ Global Times, 18/01/2012. http://world.huanqiu.com/roll/2012-01/2367088.html.

• 20 Zhao’s Premiership was taken over by Li Peng at the 13th National Party’s Congress in November 1987.

• 21 Zhao, Ziyang (2009): The Secret Journey, Hong Kong: New Century Press, 163-168.

• 22 Chinese economist Luo Xiaopeng recalled in 2012 that Deng Zhifang, the younger son of Deng Xiaoping told his inner-circle friends immediately after the Tiananmen crackdown, “Previously, we never thought of making big money (gaoqian) for ourselves. Now we have to think about it very seriously.” Luo Xiaopeng, ‘The Premier’s Dilemma under the Party’s Heaven,’ Century China, August 24th, 2012. http://www.chinainperspective.com/ArtShow.aspx?AID=17301.

• 23 Chen, F (1997): The Wrath of Heaven, Hohhot: yuanfang chubanshe, Chap. 17: 283.

• 24 The EMAT as a tentative economic policy was first applied in the auto industry in the mid-1980s when the state was running short of foreign currency reserve to be used to import technologies from the West on a large scale. Thus, China’s economic leaders decided to set up JVs in anticipation of acquiring technologies from foreign partners. ChinaAuto.Net article: http://www.chinaauto.net/huiyi/200621510456/news/2006215182938.htm.

• 25 ‘The EMAT in China’ Auto Industry,’ ChinaAuto.Net article: http://www.chinaauto.net/huiyi/200621510456/news/2006215182938.htm.

• 26 The People’s Daily, Jan 23, 1997.

• 27 Zhu Rongji in the capacity of Vice-Premier in charge of restructuring and development complained repeatedly about the inefficiency of the SOEs in his numerous internal speeches. See Zhu Rongji (2011): Zhu Ronngji jianghua shilu (A Record of Zhu Rongji’s Speeches), Vol. 1–3, Beijing: renmin chubanshe.

• 28 Southern Weekend, March 8, 2003. http://news.eastday.com/epublish/gb/paper148/20030308/class014800018/hwz899803.htm.

• 29 Robert B. Zoellick (Deputy Secretary of State): “Whither China: From Membership to Responsibility?” Remarks to National Committee on U.S.-China Relations, September 21, 2005. http://2001-2009.state.gov/s/d/former/zoellick/rem/53682.htm.

• 30 “China’s Gini Index at 0.61, University Report Says,” Caixin, 10/12/2012, http://english.caixin.com/2012-12-10/100470648.html.

• 31 http://data.worldbank.org/indicator/SI.POV.GINI.

• 32 It rose from 0.45 in 1999, and 0.55 in 2002, to 0.73 in 2012. See Chinese People’s Livelihood Development Report 2014, released by the Center for Chinese Social Science Survey, Peking University. Renminwang, 25/07/2014, http://society.people.com.cn/n/2014/0725/c1008-25345140.html.

• 33 http://www.scio.gov.cn/zhzc/8/4/Document/1383409/1383409.htm.

• 34 “China insider sees revolution brewing,” The Sydney Morning Herald, 27/02/2010, http://www.smh.com.au/world/china-insider-sees-revolution-brewing-20100226-p92d.html.

• 35 Thomson Reuters 2015 Top 100 Global Innovators − Honoring the World Leaders in Innovation, Findings and Methodology November 2015. China joined the ranks in 2014, for the first time “via Huawei,” but was absent in 2015 mainly because “most of its innovation is domestic and therefore is not realized outside of its borders.” http://images.info.science.thomsonreuters.biz/Web/ThomsonReutersScience/%7Beb621c66-e238-4994-b1b5-9f5f9f897a75%7D_Thomson_Reuters_Top100_Global_Innovators_final.pdf.

• 36 Xinhuawang, Beijing, 10/12/2013. http://news.xinhuanet.com/world/2013-12/11/c_125838153.htm.

• 37 Wang Bao’an (PRC’s Deputy Minister of Finance): “How to Forge an Upgrading of the Chinese Economy?” Qiushi (Seeking Truth,one of the most authoritative mouthpieces of the CCP), 1 Jan, 2014. http://www.qstheory.cn/zxdk/2014/201401/201312/t20131230_307459.htm.