The Rise of the China Model
A widespread notion is that China’s impressive growth was because of “the China Model”—statist finance, massive infrastructural investments, and industrial policy. Yes, the China Model produced impressive GDP growth but in the 1980s, the growth model then—which I call “the directionally-liberal model”—produced equally robust GDP growth, plus comparable household income growth and an economy dependent on domestic consumption. Gini fell and it stayed at a level typical of other East Asian economies. A fundamental feature of this model is that it was pro-rural and because rural economy was more market-driven, a pro-rural orientation was also more pro-market, and pro-people when 70 to 80 percent of the population was rural.

In the 1990s, the leadership pivoted away from this model, to a more pro-urban China Model, which is familiar to observers of China. I would venture that the many have very little knowledge of: 1) that a directionally-liberal model ever existed, 2) that it produced the kind of benefits to the Chinese households proportional to the GDP growth, and 3) that there was this consequential pivot in the 1990s that fundamentally changed the nature of the Chinese growth.

The goal of my 2026 book is to set the record straight and since the publication of this book, I have now been working on a book project that will present even more detailed data and evidence about this consequential policy pivot and about the long-term economic consequences of this policy pivot. The topics that occupy the current narratives about China, overcapacity, across-the-board export surge, and anemic domestic consumption, can all be traced to their root—this shift in the 1990s from a pro-rural growth model to one that is more pro-urban. Stay tuned.

Below is Part 3 of Chapter 1 of my book, Statism with Chinese Characteristics. Part 1 and Part 2 were published in my previous Substack posts.
https://t.co/EfJ2DrvCua