Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Chinese
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Many Western politicians and business executives believe that the new economic freedoms in China will be followed by political freedom, and that China's economic growth will require the same foundations as those of the West. However, these are widely shared misconceptions. The purpose of this article is to discuss three false assumptions or myths about modern China.
Myth 1: Economics and Democracy are Two Sides of the Same Coin
Many in the West assume that China's system will develop in a way similar to those of Japan, Britain, Germany, and France after World War II. The assumption is that the requirements for economic growth will cause China to move toward a more liberal model for both its economic and political systems. But China is unlike the countries mentioned above in that it does not include a pluralist democracy with an independent judiciary. China's growth under a stable communist rule supports the view that democracy and growth are not inevitably mutually dependent. Many Chinese believe that China's authoritarian form of government is the cause of its economic growth and its innovations in AI, biotech, and space exploration. China is not an authoritarian state seeking to become more liberal, but instead a authoritarian state seeking to become more successful, politically and economically. China is still reforming its system, but it's not liberal reform, but reforms like the Central Commission for Discipline Inspection that has reduced corruption.
Myth 2: Authoritarian Political Systems Can't Be Legitimate
Many Chinese believe that their form of government is legitimate and effective, and that the Chinese government's role as investor, regulator, and intellectual property owner is essential. The Chinese system is a Marxist-Leninist system concerned with economic outcomes (e.g., public ownership of assets to ensure an equal distribution of wealth) and gaining and maintaining control over the system itself. Selecting competent future leaders in the Chinese Communist Party (CCP) follows a Leninist approach where a prospect must successfully manage a town, and then a province, before serving in the Politburo. One key to the Chinese control system is the Chinese people's respect for an appropriate hierarchy. Other cultural differences (e.g., collectivist vs. individualist) are also important (See the Graham and Lam summary below).
Myth 3: The Chinese Live, Work, and Invest Like Westerners
The Chinese people and the state approach decisions very differently from Westerners. The Chinese people experienced a famine in the 1950's when 20 million Chinese starved to death, a re-education of the educated in the 1970s, the Tiananmen Square massacre in the 1980s, new economic freedom in the 1990s when they were allowed to purchase residential property, and a tightened censorship around 2010. All this has caused the Chinese people to feel a reduced sense of predictability in the future and what their government might do next. The result is that the Chinese people prefer short-term stock market gains rather than long-term savings opportunities, although their ownership of residential property increased from 14% of 25-69-year-olds in 1988 to 93% by 2008. In contrast, the Chinese government is explicitly focused on long-term returns built around solar energy technology, smart cities, and high-density, energy-efficient housing. This requires a considerable amount of state intervention. China's motivation (for both individuals and government) is to provide security and stability in an unstable world. China's policy makers view foreign engagement as more of a threat than an opportunity and look for ways to gain more control and sovereignty over the future. This explains the attractiveness of the Chinese authoritarian system where control is the central tenet.
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Related summaries:
Chow, C. W., F. J. Deng and J. L. Ho. 2000. The openness of knowledge sharing within organizations: A comparative study of the United States and The People's Republic of China. Journal of Management Accounting Research (12): 65-95. (Summary).
Cohen, J. R., L. W. Pant and D. J. Sharp. 1993. Culture-based ethical conflicts confronting multinational accounting firms. Accounting Horizons (September): 1-13. (Note).
Graham, J. L. and N. M. Lam. 2003. The Chinese negotiation. Harvard Business Review (October): 82-91. (How to deal with China. Understand the cultural context of Chinese business style). (Summary).
Ignatius, A. 2021. "Americans don't know how capitalist China is." Harvard Business Review (May/June): 61-63. (Summary).
Milanovic, B. 2019. Capitalism, Alone: The Future of the System That Rules the World. Harvard University Press. (Summary).
Thurow, L. C. 1996. The Future of Capitalism: How Today's Economic Forces Shape Tomorrow's World. Chapter 3: The End of Communism. William Morrow and Company. (Summary).