PhD Candidate in Political Science and International Relations

Koç University, Department of International Relations

November 2014

From Washington Consensus to Beijing Consensus: Rise of China in the International Political Economy

“The rise of China” is an appealing topic for different social science fields. Generally we can make a distinction between two types of scholarship: one that focuses on the implications and possible consequences of the rise of China and the other one focusing on the reasons behind the Chinese rise.  In International Relations scholarship the main focus is on the former. Many neo-realist scholars see the rise of China as a threat. For these scholars, China as an emerging power will challenge the US hegemony and bring an end to the unipolar world order. For many liberal scholars, rise of China can be both a threat and an opportunity. For optimists, China offers an example to the developing countries that free trade, openness to the world economy and not challenging the international political and economic order are key ingredients on the path to prosperity. For pessimist scholars, China’s authoritarian political system will diminish the democratic values in the world and will open a new path to authoritarianism in other countries.

Many International Political Economy and Economic Development scholars try to analyze the rise of China by examining the reasons behind the Chinese economic rise. The term “Beijing Consensus” is coined to explain the economic rise of China by contrasting its economic policies to the prevalent economic policy doctrine in the 1990s, infamous “Washington Consensus”. Coined by Williamson (1990), Washington Consensus refers to a set of policy reforms that were widely agreed in Washington to be desirable in all the developing countries. These policies were also applied to other developing countries in structural adjustment programs by the leading international organizations of International Monetary Fund and the World Bank. Washington Consensus includes ten policy reforms:

– Fiscal policy discipline.

– Redirection of public spending from subsidies (‘especially in discriminate subsidies’) towards broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure.

– Tax reform – broadening the tax base and adopting moderate marginal tax rates.

– Interest rates that are market determined and positive (but moderate) in real terms.

– Competitive exchange rates.

– Trade liberalization – with particular emphasis on the elimination of quantitative restrictions.

– Liberalization of inward foreign direct investment.

– Privatization of state enterprises.

– Deregulation – abolishing regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions.

– Legal security for property rights.

Despite its prominence in the 1990s, Washington Consensus lost its relevance after many developing countries experienced sweeping economic and financial crisis after implementation of liberalization policies. Asian crisis in Thailand, Indonesia, South Korea, Malaysia, crises in Mexico, Russia, Argentina and Türkiye had devastating economic and political consequences.

In contrast to the orthodox neoliberal policies of the Washington Consensus, Beijing Consensus illustrates the crucial role of state and protectionist policies in economic development. The term “Beijing Consensus” was first coined by Ramo (2004). For Ramo, in contrast to the shock therapy, rapid liberalization doctrine of the Washington Consensus, Beijing Consensus is guided by the “groping for stones to cross the river” principle of Deng Xiaoping who initiated the economic reforms in China in late 1970s. Following Ramo, many other scholars tried to identify the principles of Beijing Consensus, reasons behind the Chinese economic rise in the last three decades. These debates proliferated after the Global Financial Crisis as this crisis is interpreted as the weakness of American and European economic models. Williamson (2012) identifies five main features of the Beijing Consensus:

– Incremental Reform (as opposed to a Big Bang approach)

– Innovation and Experimentation

– Export Led Growth

– State Capitalism (as opposed to Socialist Planning or Free Market Capitalism)

– Authoritarianism (as opposed to Democracy or Autocracy).

Policy experimentation, gradualism, openness to the international trade by prioritizing exports, importance of state intervention in the economy, the success of the State Owned Enterprises in China and the meritocratic political system led by the Chinese Communist Party were seen as the main features of the Chinese Model or the Beijing Consensus. However, the critical question is: can other developing countries implement similar policies China have utilized and achieve a similar success in economic development? Naughton (2010) questions the applicability of the Chinese Model in other countries and argues that China is unique in several dimensions. 1.3 billion population with healthy, well-trained labor abundance, big geographical size, hierarchical, centralized political system and highly protectionist financial policies are some of the important elements of Chinese uniqueness that will make very difficult for other countries to implement Chinese Model inspired policies.

There are also criticisms of the Chinese economic model. Acemoglu and Robinson (2012) argue that Chinese model is not sustainable because it lacks the “inclusive institutions” that will provide more political rights to the overall population. They argue that Soviet model in the 1960s was also seen as a success story in the developing world but later it was seen that their model was not sustainable due to lack of inclusive institutions in their political and economic system.

In conclusion, it is essential to characterize the main elements of Chinese economic rise in order to have a better understanding of a country that will have a significant impact in global political economy in the coming years. It is also crucial to realize that China is a country that is undergoing overarching transformations in the last three decades. In the last few years China is undergoing another transformation to leap to a higher level of economic development. Thus, Beijing Consensus is not an end for China, it is an ongoing process of economic, political and social transformations in different stages of development. A famous quote of Deng Xiaoping is that “It doesn’t matter whether a cat is white or black, as long as it catches mice.” Therefore, Beijing Consensus will evolve by adapting different policies in different stages of development. That is to me, the most important element of the Beijing Consensus.

References

Acemoğlu, D. and Robinson, J. A. 2012. Why Nations Fail, New York: Crown Publishers. Naughton, B. 2010. “China’s Distinctive System: can it be a model for others?” Journal of

Contemporary China, 19 (65): 437-460.

Ramo, J. 2004. The Beijing Consensus, London: The Foreign Policy Centre.

Williamson, J. 2012. “Is the “Beijing Consensus” Now Dominant?” Asia Policy, 13: 1-16.