Economist in Pakistan calls for rethinking perceptions of China’s model — Dawn

In Pakistan, an economist questioned in a column the widespread perception of China’s economic model as a system of complete central government control over regions and enterprises. In his view, China’s development is largely linked to the powers of local authorities, competition, and private business participation.

As Dawn writes, the author referred to research by Fengming Lu and Xiao Ma on the development of China’s electric vehicle industry. According to his account, manufacturers BYD and NIO are private companies that did not receive state grants, while research funding in the electric vehicle sector was directed to state-owned enterprises.

The role of local authorities

The author claims that BYD and NIO developed in cities that the state apparatus initially did not identify as electric vehicle manufacturing centers. In his version, the mayors of such cities cooperated with entrepreneurs and had sufficient administrative freedom to support their projects. He also noted that the central authorities did not stop private manufacturers when they outpaced state-owned enterprises.

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According to the economist, competition in China’s electric vehicle sector led to price wars, and some companies may not withstand the struggle. As an example, he cited a district that, according to him, lost 6.6 billion yuan through supporting an automaker.

Planning and competition

The columnist also emphasized that China’s long-term plans, in his view, are formed after lengthy discussions among specialists. He cited as an example the 1991 debates on the reasons for the collapse of the Soviet economy and the risks for China. Their result was the party’s approval in November 1993 of a modern enterprise system with clear property rights, a separation of rights and responsibilities, the separation of the state from enterprises, and scientific management.

The economist believes that China combines a strong center with broad budgetary and administrative capabilities at the local level. He noted that more than 80% of public spending in China falls on the local level. The author contrasted this with Pakistan, where, in his assessment, the economy has been in stagflation since 2022, while a number of economic initiatives proposed by the authorities have yielded no results.