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China economy
OpinionChina Opinion
Prof Zhang Jun
Prof Zhang Jun

Opinion | Why China’s diversified economy garners both praise and criticism

  • China has achieved economic success not just through repurposing Western technology but by rapidly upgrading and adapting it
  • Top-down management coexists with local autonomy and bottom-up innovation in the Chinese industrial ecosystem

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A worker is seen at the BYD electric vehicle factory in Changzhou, Jiangsu province, on November 14, 2023. Today, China stands at the forefront of sectors like EVs, lithium batteries and renewable energy. Photo: EPA-EFE
Prof Zhang Jun
Rarely do assessments of an economy’s performance and potential diverge as sharply as when it comes to China. Even as some economists laud China’s past achievements and future prospects, others fixate on presumed flaws in its development model and suggest that the middle-income trap awaits. But even more remarkable than the sharp divergence of opinions on China’s economy is the fact that both sides are able to marshal ample evidence to support their views.
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Few would dispute that China owes its past economic success largely to technological imitation, enabled and encouraged by trade with – and direct investment from – developed economies, especially during the 1990s and in the first decade of this century. But one cannot pretend that translating technological imitation into rapid economic growth is not an achievement. After all, most low-income countries have not been able to do it.

In this discussion, pointing out that China still lacks a few key technologies, or that it obtained most of the technologies it has thanks to the allure of its huge market, is nitpicking. The true measure of technological success is the ability to convert new technologies into profits, growth and engines of development. And China has done that not only by using Western technologies in their original form, but also by rapidly upgrading and adapting them.

Today, China stands at the forefront of sectors like 5G, renewable energy, lithium batteries and electric vehicles (EVs), and it is a world leader in artificial intelligence. The question we should be asking, as former US Treasury secretary Lawrence H. Summers once noted, is not whether China’s technological prowess began with imitation, but how a country with a quarter of America’s per capita income has managed to produce so many world-beating tech companies.

According to Keyu Jin of the London School of Economics, the answer is simple: China is a truly innovative country. Western observers struggle to recognise that, because their perspectives on China are so politicised. But MIT’s Yasheng Huang insists that all China has done is repurpose Western technology, because entrenched Chinese traditions constrain innovation. Unless it can break those traditions, he concludes, economic decline is all but inevitable.

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Both economists provide entire books’ worth of evidence for their analyses. How is this possible? One explanation might be that, in China’s highly complex political economy, many of the factors that can be regarded as incompatible with innovation are offset or complemented by innovation-enabling policies and structures.

People visit the green agriculture section at the China International Supply Chain Expo in Beijing on November 30, 2023. Photo: Xinhua
People visit the green agriculture section at the China International Supply Chain Expo in Beijing on November 30, 2023. Photo: Xinhua
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