BEIJING CONSENSUS (ENCYCLOPEDIA)

Abstract

It was in 2004 when the American economist Joshua Cooper Ramo, introduced for the first time ever in the political lexicon the term Beijing Consensus. It was the first attempt to reproduce China's attitude about economic development and the relations between the States. This term is used to underline some of the social economic doctrines that were born in China after 1978, as opposed to the neo-liberal development policies which are currently influencing the developing world.

 

These new views have questioned whether China would be or not be able to offer an original modernization model. Some economists, such as Scott Kennedy1, bring into question the legitimacy of the term Beijing Consensus. They argue that the Chinese economic policies are not innovative, on the contrary they are rather a selective assimilation altering some of the rules and schemes already existing in Western history.

The principal ideas of these doctrines are not based on the economic freedom and the market and politics just led by a liberal democracy, but rather on the conception of the Socialist Market Economy, the state planning and the authoritarianism.

The Beijing Consensus has some fundamental characteristics, such as a kind of development based on innovation, the economic success necessarily depending on Gross Domestic Product (GDP),  gradual reforms, state interventionism, self-determination and non-interference with another State's internal affairs.

The economic reforms, which have been gradually carried on, and the actions of the Chinese State, have been promoting a balance between a national market expansion and a new social division of labor. This is the opposite of the neo-liberal beliefs on benefits originating from shock therapies together with the non-intervention of the State in the market control.

Not only does the Beijing Consensus necessarily concern with economy, but, internationally speaking, it is also related to the politics and to the strengthening of the Chinese political clout . If in literature the economists try to emphasize the image of a rising China that stands opposite to other States, the Chinese institutions tend to dampen the image of an aggressive country in the international relations system. The Chinese Communist Party, as well as the institutions, put emphasis on a weak economic system mostly because China is still a developing country. They reject the vision of international aggressive politics resulting from the new rules of the Beijing Consensus.

In fact, the key points of the paradigm of the Beijing Consensus emphasize China's ability to exploit its economic strength in international relations with other countries. China offers to developing countries a model that guarantees financial integrity, rejecting at the same time, the pressure of the great powers and of the major financial institutions like the International Monetary Fund - IMF and the World Bank.
The concept of the Beijing Consensus was born, therefore, as opposed to the Washington Consensus2: the first embodies a model of authoritarianism and a strong state involvement in the economy;  the second one represents a neoliberal3 model of market-oriented doctrines.

In the nineties, the IMF and the WB adopted the Washington Consensus economic policies, being the United States their "major shareholder", quite necessary in any economic action.

Therefore, in that period, a set of prescriptions were then processed and spread: The ruling classes of every Country, especially those of the developing world, should have conformed to these prescriptions.

These points provided a reorganization of public spending, liberalization of interest rates, trade and Foreign Direct Investments – FDI, a competitive exchange rate, privatization, deregulation and strong protection of property rights. For this reason, the institutions which were born at Bretton Woods  have started "advising" the States about the doctrine of structural adjustment4 which stated that economic reforms and the elimination of State Interventionism would have liberated forces able to consequentially facilitate the development. These economic doctrines were based on the assumption that good economic performance required a liberalized trade, macroeconomic stability and the proper functioning of the Market Price,in contrast with those suggested by the Beijing Consensus.

This approach defined the position of the United States, together with the industrial Countries and the major international organizations; as a consequence the Washington Consensus became the main approach of developed countries towards  the less developed ones.

However, this set of development policies are currently at risk because of the gradual emergence of the Beijing Consensus that, promoting the search for a valid alternative to the neoliberal globalization, is playing a major role and it is consequentially raising interest especially across the Third World.

In fact, the failure of the shock therapy in post-Soviet Russia5,  in Argentina in 20016, and the emergence of Asian economies7, whose governments have played an important role in the economic development,  questioned the guidelines of the Washington Consensus. This weakening collides with the Chinese reality that in the last decades has been able to overcome serious global economic crises: the 1997 Asian crisis, the speculative bubble in early 2000, until the recent financial crisis.

In terms of diplomacy, the consensus promoted by the United States during the first decade of the twenty-first century, has been characterized by military interventionism and unilateralism, generating a strong anti-American sentiment in the developing countries.

China, on the contrary, with its growing economic potential, is effectively extending and consolidating its political influence worldwide. China's goal is a 'peaceful ascent'; for this reason its foreign policy includes cooperation and multilateralism to make sure that other countries are willing to create collaborative relationships of mutual interest.

The different view of China's international relations may not be extended to the rest of the world too. For instance, some of the developing countries have given a positive feedback to this view, however, the Chinese ideas have not been so successful either in the Middle East or in the West.

Some Countries in Asia, Latin America and Africa currently seem to be very interested in linking their economies with what appears to have the highest rate of irrepressible growth of the last twenty years. However, economic cooperation with these countries is also beneficial for the political field in the major international institutions. In the United Nation (UN) and the World Trade Organization (WTO), the presence of the African States, as well as of Latin America ones, is very numerous, and all of these States, together with China have a deep interest in creating a "block" of votes to safeguard their authoritarian regimes and escape the policies of Western "democratization".

The Chinese foreign policy and international relations have, therefore, contributed to the emergence of what is called Beijing Consensus, in opposition  to the western Washington Consensus, which is followed by the major international financial institutions. According to the Washington Consensus,  economic agreements are subject to ethical principles such as good governance, democracy, transparency, rule of law and human rights. The western democratization policy, therefore, threatens the authoritarian regimes that are becoming more willing to turn to Beijing, since the economic cooperation with China is not subject to conditions such as the respect for human rights and democracy. China, often driven more by economic and strategic interests rather than by ethical principles, has established friendly relations with many Countries without imposing certain conditions in the developing world. These kinds of relationships are quite useful to the authoritarian regimes in Africa, Latin America and Asia.

China provides the important role of "peacemaker" in Asia, and of "supplier" of energy resources in Africa.  The whole economic and diplomatic "System Asia" is defined by the interaction of four great powers: China, Japan, India and Russia. Asia is taking, over the years, an increasingly important role in the equilibrium of the world wide economy. Since the nineties, there has been an improvement in the relations between China and its neighbors Countries. Such improvements, in fact, are also evident especially in relation to Association of Southeast Asian Nations (ASEAN). In fact, the ASEAN has allowed China to develop relations with ten Countries. In November 2004, aiming to create a free trade area, it had signed an agreement with them in order to lower or eliminate tariffs on many products.

In Africa, on the contrary, to support its growing process of modernization, China needs more and more supplies from abroad because domestic production is not self-sufficient and needs to find direct and lasting energy sources. For this reason, China has made Africa its main reservoir of raw materials, in exchange for direct investment, development aids,  foreign debt cancellation together with alliances at the UN.

China is able to deploy a growing consensus and to exert a strong attraction, as bearer of a model of alternative development in the West. Today, as never before, it seems ages since when Europe and the U.S. were the only economic centers in the world able to dictate their own conditions.

The principles of the Beijing Consensus descend from Asian long tradition and experience in the direct control of the economy. The elements of this new consensus are based on trust and cooperation, as well as Asian and Confucian values. The result is a State entirely dedicated to the economic development where economic relations reflect an harmonious social order, in which producing is considered more important than consuming.
China is able to use its economic prestige, making its rapid growth the main instrument to attract - thanks to its aegis economies- countries of the developing world through a series of economic and diplomatic relations that constitute the paradigm of the Beijing Consensus.

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1In his book, The Myth of the Beijing Consensus, he defines the Chinese economic policy like a mere emulation and not innovation.
2The term Washington Consensus was coined in 1989 by economist John Williamson to describe a set of principles of economic policy for countries in the developing world. These principles include the opening to foreign investment, the market expansion and the macroeconomic stability.
3Set of economic, political doctrines that enhance the market and the absence of the State's role in the economy.
4Plans of economic policies implemented by the World Bank and IMF to reduce fiscal imbalances of those countries willing to receive funding.
5Set of economic reforms initiated in the nineties in Russia that had led the country to recession.
6Deep economic crisis in Argentina caused by the reduction of debt by the Government, inducing high inflation and unemployment levels.
7In the nineties, Taiwan, Singapore, Hong Kong and South Korea were nicknamed "Asian Tigers" because of the ten- year development of their economies.


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Editor: Giovanni AVERSA