Today's China Is Like America in 1900, Not Japan in the 1970s

On the evening of December 9, in the program "China Is Speaking" on Southeast TV, Chen Ping, a researcher at the China Academy at Fudan University, delivered a speech titled "Can the Chinese Path Surpass the Western Model?" Drawing on his interdisciplinary background in physics and economics and over 40 years of study and teaching in the West, he shared his insights. The following is the full text of his speech.

Where lies the secret of China's development?

I entered the Physics Department of the University of Science and Technology of China in 1962. During the late Cultural Revolution, I was assigned to the Meishan Telecommunications Section of the Chengdu-Kunming Railway, where I worked as a railway worker for five years. Later, I spent five years at the Chinese Academy of Sciences working on peaceful uses of hydrogen bombs. In the 1980s, I went to the United States to study economics, under the guidance of Nobel laureate in chemistry, Ilya Prigogine.

We discovered economic chaos and found that the path of civilizational development is one of competition among multiple civilizations, not convergence toward the Anglo-American model as mainstream Western economics claims. Economists from around the world invite me to speak, and increasingly they are not interested in our complex science but want me to explain why China has risen.

My first summary of the Chinese model was in Brazil, in 2009 after the financial crisis, at a conference titled "After the Crisis, Is China the Center of the World?" After my talk, Brazil's former finance minister strongly invited me to the Strategic Planning Ministry of the Presidency in the capital. I still remember it vividly. Their office didn't look like a government department but like a general staff operations room: on the left big screen was a map of China, marked with railways, high-speed rail, and highways in several horizontal and vertical lines; on the right big screen was a map of Brazil, also with several horizontal and vertical lines, clearly learning from China.

The experts at the planning ministry asked me a question that no Western economist had ever asked: "Every time Brazil proposes a development plan, before it is even implemented, Western media criticism pours in—environmental damage, government distortion of the market. But how is it that China can do whatever it wants? Where lies the secret of China's development?"

I said, based on a physicist's intuition rather than financial economists' dogma, why is China's financial policy more independent than Japan's, and its development policy more independent than Russia's or Germany's? Because during the Mao Zedong era, China established an independent scientific and technological system and an independent national defense. So China can have an independent development policy. Without an independent scientific and technological system, it would only develop a dependent economy of the East Asian model. They were very happy because they had never heard such an answer.

Three examples

Is China at an advantage or disadvantage in competition with other major Western powers? Let me give you three examples.

I once lived in Texas, the second-largest state in the U.S., larger than Sichuan. Because it had only freight rail and no passenger rail, they proposed building a light rail to connect major cities. How many years did citizens vote on it? Twenty years, and it's still on paper.

Why? Because under capitalism, there are too many conflicting interests. Who is unhappy about building a light rail? Airlines are unhappy because people would switch to rail, hurting their profits; hotels are unhappy because if you take the train, you get home the same day, reducing their revenue; residents along the line are unhappy because of increased noise and decreased property values; residents a bit farther away are happy because land values rise, but those even farther are unhappy: "What does this have to do with me? Why should I pay taxes?" So in the West, building railways or high-speed rail becomes a problem of route selection and station siting.

Only in China, during the financial crisis, did we invest four trillion yuan, and suddenly our high-speed rail length became the world's largest. So many countries, including the U.S. and the U.K., want to learn from China to build high-speed rail, but their systems become constraints. India wants to acquire land, but private ownership makes it impossible; the U.S. and Germany have to choose routes, leading to unequal benefits. So China's first advantage: socialist great cooperation. This cooperation model surpasses the Western system of division of labor plus market transactions.

A view inside an Apple assembly plant workshop

The second story comes from a New York Times investigation. The New York Times couldn't understand why, with America's advanced technology, China always develops faster than the U.S. They eventually uncovered a secret.

Steve Jobs put a newly developed iPhone and keys in the same pocket, and the keys scratched the plastic face. The phone was to launch the next month, so Jobs wanted to switch to a glass shell within a week. The vice president at the meeting immediately panicked and flew to Shenzhen before the meeting ended.

Why? In the U.S., just gathering workers would take nine months. Then American workers would want weekends off for vacations and ball games. But in China, when the executive calls, workers come to work within 24 hours. Needed parts, screws, resistors are all next door or across the street—Shenzhen is the world's strongest industrial cluster and processing base.

Apple takes more than 50% of profits for its shareholders, while Chinese workers earn less than 5% of the blood and sweat money.

But by Trump's logic today, did China win or the U.S.? China won, because China gained employment and development. The high-tech workers laid off by Apple in the U.S. are unemployed, and when they return, they can only test returned iPhones. Their wages dropped significantly. So in U.S.-led globalization, the original idea was that the U.S. would surely win, but it turned out China was the big winner, and the U.S. was the loser.

Kenichi Ohmae, a famous Japanese management scholar, economic commentator, and international corporate strategist

Third story: China's R&D is not as good as America's, so why does its economic development have such momentum? One Spring Festival, I met a Microsoft executive at a dinner, and he told me a figure never seen in economics literature. He said the U.S. maintains an R&D advantage, but from product development to investment, setting up factories, getting Congress to amend legal standards, marketing, and recouping money—how long does that cycle take? I said at least ten years. He said indeed, and Europe takes even longer than ten years. But in China, the average is 23 months. How can the U.S. compete with China?

Kenichi Ohmae, a very famous Japanese management scholar, wrote "United States of China" (i.e., "United States of China"), which was a bestseller. The United States of China refers to a big family where Northeast Asia and Southeast Asia, countries around China, join China's economic development. At that time, the West was talking about China's economic collapse, but he was optimistic about China's economy. Because he believed Chinese people learn too fast.

He said in the 1970s, Japanese were confident, saying, "What Americans can do, we can do it." They thought whatever Americans could do, Japanese could do. Now, Japanese say, "What Chinese can do, how can we do it?" How can we Japanese do what the Chinese do?

Ohmae said this before the financial crisis. After the crisis, in February 2010, Columbia University invited me to give a lecture on the financial crisis. The next day, George Soros invited me to lunch at his Quantum Fund headquarters. He asked me: "The decline of Western civilization seems to be the big picture. Will the future depend on whether China can lead the world?" Then he sighed and said, echoing Ohmae, "Chinese learn fast!"

I asked back, "Why do you think Chinese learn fast?" Soros is usually quick-witted, but he didn't answer that time. I said, "Because Chinese can learn comprehensively." Science and technology can be learned from the Soviet Union and the U.S.; industrial manufacturing from Germany; management from Japan; the separation of land use rights from Hong Kong; industrial parks from Singapore; agriculture from Israel. China has no ideological barriers; only China has this inclusive capacity. So I think discussing multicultural coexistence and development in China would be more welcomed than at the UN in New York.

Social great cooperation based on regional experiments and division of labor plus transactions

The impact of China's experience on the world was recognized earlier by people in other countries. Most Chinese economists still think China has its own problems and that all problems can be solved by copying the Western model. That's wrong. The world develops unevenly, and each country has different conditions, so each must follow its own development path.

We have two thousand years of unified history, a unified language, and strong government leadership, so in international competition, our system is superior to the Western "separation of powers." In this sense, the Chinese model is an innovative solution that combines division of labor, transactions, and social great cooperation.

Marx summarized the laws of historical materialism: from primitive communes to slave society, feudalism, capitalism, socialism, and communism. But do the development paths of Asian countries like India and China follow the same as Europe?

Marx only raised the question of the Asiatic mode of production but didn't provide an answer. The answer came from Lenin and Mao Zedong. Mao's understanding was innovative: because of the Industrial Revolution, Britain's enclosure movement sacrificed peasants; American urbanization sacrificed black slaves. Only in China were peasants not only the main force of revolution but also the driving force of reform and opening up. Who in the world has heard of township enterprises competing with state-owned enterprises and even multinational corporations? So China's development path is different from the West.

Why can China do this? Westerners are most curious. I say the Chinese reasoning comes from Laozi and Mao Zedong's dialectical thinking. Laozi said, "The Tao gives birth to one, one gives birth to two, two gives birth to three, three gives birth to all things." In chaos theory, with three, there is diversity. The West always talks about one, why? Because of monotheism, everything returns to one, leading to convergent thinking and one-size-fits-all. Latin American, East Asian, and Soviet/Eastern European countries have very different conditions, but they don't care; they apply shock therapy, one-size-fits-all, privatization, liberalization. China is different.

So one of China's experiences is the dual-track system, which balances social stability and innovation. Moreover, when China reformed and opened up, it didn't open unilaterally to the West like Latin American or Eastern European countries, but the West didn't open to them either.

China's approach is selective opening. The Shenzhen Special Economic Zone was controversial at first, and other places watched. So many of China's reforms, including household responsibility system, Shenzhen SEZ, economic zones, and SOE reforms, were decentralized experiments, not like Russia's closed-door planning of a century-long plan that collapsed before it was even completed. China's approach is ex-post recognition: if Anhui's rural reforms worked, other provinces automatically followed, then the central government summarized, and finally legislation codified the experience. So China's development path is far superior to the West's one-size-fits-all approach.

So I say, the achievements of China's reform are not only the success of export orientation and increased foreign exchange reserves, but also technological upgrading—these are paths Japan followed earlier. China's real success lies in finding a path that surpasses Adam Smith's division of labor plus market social coordination, and creating a new social decision-making model of regional experiments, which allows seeking truth from facts and adapting to local conditions.

China is like America in 1900

The rise of the Chinese path breaks the Western model. China's historical position today is not like mainstream economists say, that China is like Japan in the 1970s and must slow down. I believe China is like America in 1900, with huge space for rapid development ahead. More importantly, it must occupy the commanding heights of science, finance, and military.

Why? Because in 1900, America, like China today, was the world's largest industrial producer, but it didn't hold the commanding heights of science—that was in German hands; nor did it hold economic and military heights—that was in Britain. Strictly speaking, it wasn't until the 1960s, after the moon landing, that the U.S. fully mastered science, finance, and manufacturing. Taking America as a mirror, China's next goal is to truly occupy the commanding heights of science.

Because Adam Smith said division of labor is limited by the market, and the market is not a level playing field. Science and technology are the primary productive forces. Whoever holds the commanding heights of science and education holds the commanding heights of military and industry, and thus holds the pricing power in finance. If we don't seize this pricing power, it's impossible for China to truly solve its regional disparities.

Is it possible for China to occupy the commanding heights of technology, finance, and military in the next 10 to 20 years? I think it's very likely. The U.S. didn't sell China radar warning aircraft, so China built them; didn't sell aircraft carriers, so China built them. So China's technology is rising fast, but one point: China's technology is still catching up with the U.S.

Why can the U.S. occupy the commanding heights? Not because its education system is superior to China's, but because it can recruit scientific talent from around the world. Before World War II, America's science was far behind Europe; after WWII, hundreds of thousands of scientists were absorbed by the U.S. Why could the U.S. absorb them? At its founding, all state universities benefited from the land-grant university system, mostly located in rural areas and small towns. Land prices were much cheaper than in Europe and Asia, and scientists could concentrate on research in small towns, not seeking promotion or wealth, enabling the world's best research. Where is the university with the most Nobel laureates? Cambridge, with cows nearby. I went to see Newton's apple tree, and cows were mooing. Where did Germany's many scientists come from? Göttingen University, in a small town of maybe a few hundred thousand people, equivalent to a small county in China.

So to solve this problem, I think we should, like the revolutionary era when coastal youth went to Yan'an to establish revolutionary bases, systematically relocate research universities from large coastal cities to the interior, establish a dozen of the world's best comprehensive research centers, integrated with industry, finance, and marketing. We shouldn't do state-owned enterprise groups; we should learn from the U.S. and call them university foundations. Give me 10 or 20 years, and China will surely occupy the world's commanding heights. I have this confidence.

Let me summarize with three sentences.

First, from division to integration, from analytical science to complex science, China has an advantage in holistic thinking. Western analytical science, from Greece to Italy, reached its end by the 20th century. Now the world is moving toward complex science, which is the era of holism as the Chinese say, requiring "integration." In integration, Chinese holistic thinking has an advantage.

Second, the law of world development: temporally, the economic base determines the superstructure; spatially, the countryside surrounds the city, and the periphery challenges the core. So China is now rising from the periphery to challenge the core.

Third, Deng Xiaoping said science and technology are the primary productive forces. China's industrial technology metabolism is the fastest in the world, so China will lead future world development.

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