Jay Tharappel, a PhD candidate at the University of Sydney discusses this paradox.
Jay starts off by explaining why, in his opinion, the Chinese people trust their government: "In China the State is powerful, and involves large sections of the economy. Banking is nationalized, meaning that investment can be married to policy, which is implemented by a political party; the Communist Party which has 90 million members. In contrast, western capitalist countries have spent the last few decades ceding more and more economic territory to the private sector. If you take your hands off the steering wheel of the car, then you can't control where it goes….In China, people have high expectations of the State to raise living standards through direct control over investment, trade and prices. In China, like in any other country, when house prices go up, people get disgruntled and angry, however the State in China finds it a lot easier to impose things like price controls on housing. They know that if asset bubbles are allowed to form, this will drive up wages and make more productive industries unviable."
Host John Harrison argues that house price inflation in places like Shanghai and Guangzhou has been completely out of control! There is also the whole issue of rogue banks which do not seem to be controlled by anybody. Jay answers: "The point I'm making is a relative one that compared to western capitalist countries, there's a role played by the Chinese State in at least trying to reduce house process. They do have housing price controls in Beijing and Shanghai. There is a limit to what they can do because ultimately a lot of the economy in China is in private hands; they do a lot more to stop housing prices getting out of control, and the global financial crisis is just an example of this."
The main argument leveraged at state capitalism by the West is that it reduces competition and the effectiveness of the economy. Jay replies: "Xi Jinping represents a stage in Chinese economic development where they no longer rely on foreign investment to the same extent as under the strategy employed by Deng Xiaoping. Now they have a lot of the cutting edge technology and the focus can be shifted towards exporting less and raising internal consumption. This means that it is a really exciting time to be Chinese. A lot of this has been made popular because of state capitalism, because it drew the boundaries around what it controls and the residual as left to the private sector. If you want to see the productive industries bloom then you have to make it possible for workers to find a place to live. State capitalism has been a massive part of that; you don't need competition in absolutely everything….Adam Smith was writing at a time when Britain had all of its colonies working in its interest. Capitalist countries throughout history have always been backed by strong states, they understand this, they have been a victim of that, and I think they are playing their cards accordingly."
In the second part of the program, discussion focuses around what the West sees as a power grab by Xi Jinping. "You have to look at what the average young Chinese sees", says Jay. "If you are in your 30s or even 20s, your living standards are significantly better than those of your parents, and what your parents experienced is significantly better than what your grandparents had. Then you definitely get the impression that things are getting better. Whereas if you live in the West, it's the baby boomers who are said to have had a really good time…"
Host John Harrison raises the subject of Xi Jinping consolidating his power base and enshrining his thoughts into the communist party's ideology, and that this rings certain alarm bells, as not everything about and connected with Mao Zedong can be considered positive for China. Jays argues that China understood early on that they had to sort out their agriculture and industrial production. In order to stimulate industrial production they had to make it cheaper, and when you compare the lot of the average Chinese and Indian, China looks like a pretty good place.
A discussion ensues about why Chinese and Russians like strong leaders. Jay comments: "Who wants a weak leader? Ultimately the desirability of a strong leader depends on where that strength comes from. To answer that you have to look at the internal and external factors which shaped their history. Both Russia and China have a history of losing tens of millions of lives fighting off external invasions… if they didn't have such a tradition of iron-willed leaders, WWII could have ended very differently… If you look at the reasons why China developed so quickly, they were basically able to take advantage of American capitalists who wished to invest in China because of cheap labor there. The US hostility towards China began when the US realized that China didn't want to continue to be just a sweatshop for the West, they wanted to diversify their investments, they wanted to play a role in the integration of Eurasia, they wanted to expand their science and development, things like that. When you look at it that way, you can understand that the rise of China is seen to the United States as a threat to the value of the US dollar."
Jay also provides an interesting explanation for the existence of China's current environmental policy, and also comments on what might happen in terms of the trust factor towards the Chinese leadership if income levels in China do not continue to rise. "Right now, China has one of the largest savings rates in the world, and they are behind all of the alternatives to the IMF and the World Bank in the form of the BRICS bank and things like that….I think it is quite possible to see a continuation of rising living standards in China for quite a considerable time into the future….In China people have a different understanding of what the state is supposed to be, because they have that socialist history, they understand that the role of the state is to not put private property first."
In short, the high levels of trust that Chinese are currently displaying towards their government could be because of factors which are not immediately apparent when looked at from the perspective of conventional western politics and economics.
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