As China shows, liberal capitalism is not the only path

The Western debate about China often begins with an oversimplified view, treating "communism" as synonymous with a rigid, command economy and bureaucratic control over commercial decisions. However, modern China operates under a mixed system, where private enterprise, foreign investment, and competitive markets coexist alongside public ownership and state control in key sectors.

This nuanced approach is more than just semantics; it demonstrates that the state and market are not mutually exclusive. While the state does not aim to replace markets, it does allow for competition and entrepreneurship within defined political boundaries. It maintains control over strategic assets and directs capital towards long-term goals like infrastructure, technology, employment, and social stability.

This combination may seem contradictory to those who believe capitalism and public purpose must be in opposition, but China's experience suggests a more complex reality.

Throughout decades of development, China has built large private companies and globally competitive industries without assuming that private wealth should dictate the national interest. For many years, Western commentary viewed this situation as temporary, anticipating that market reforms, WTO membership, and a prosperous middle class would eventually steer China towards an American-style political and economic system.

However, China chose a different path. It permitted markets and entrepreneurs to operate freely, but never surrendered the state's control over the primary levers of economic power, such as credit, land, infrastructure, regulation, and strategic industries. Markets were encouraged, but only where they advanced China's industrial objectives.

Beijing retained a firm grip on the essential mechanisms of economic power, allowing it to channel investment, accelerate construction, and rein in entities that posed threats to financial stability, technological security, or political control. This is not the market replacing the state; rather, it is the state learning to harness the market for national development.

This unique approach to economic development has been highly effective, as evidenced by China's remarkable reduction in poverty over four decades. The country lifted nearly 800 million people out of extreme poverty, a reduction unmatched in history. This achievement was not solely due to export-led growth, mass urbanization, investment in education and healthcare, land reform, infrastructure, targeted poverty programs, or an industrial strategy.

It was also a result of a state with sufficient authority to plan over long periods. The tangible outcomes are evident in China's extensive high-speed rail network, its growing influence in electric vehicles, batteries, solar manufacturing, robotics, and, increasingly, artificial intelligence (AI). While Western critics often point to subsidies, overcapacity, and unfair competition, these concerns do not negate the fact that China has developed the industrial depth, engineering capability, and commercial intensity needed to compete at the technological frontier.

China's electric vehicle sector serves as a prime example, where a large and competitive market compelled companies to innovate, reduce costs, and improve rapidly. Similarly, China views artificial intelligence as essential infrastructure, aiming to integrate it into various sectors such as manufacturing, logistics, healthcare, education, and public services.

It is crucial to acknowledge that China's development has not been without its challenges. Slower growth, local government debt, a property downturn, demographic decline, and youth employment pressures are significant issues that require attention. However, a comprehensive evaluation must recognize that China has faced formidable challenges and achieved a developmental transformation that the world cannot simply dismiss.

The tendency to reduce China to "communism" is not a form of analysis but a convenient substitute for it. This matters because the contrast with the United States is becoming increasingly difficult to ignore. The U.S. remains rich, inventive, and powerful, yet it has allowed private power to become dangerously concentrated, with large technology platforms shaping public discourse and billionaires asserting political influence.

China's response has been different. It has accommodated private wealth while retaining state boundaries to ensure the national interest remains paramount. The government in China ensures that policy serves the best interests of 1.4 billion people.

The broader question for the West is: who is responsible for long-term stability when politics, markets, and capital move so rapidly? In China, the answer is clear: the state. In much of the West, the answer has become less clear, as public responsibility has been outsourced to markets, and political power has grown alongside wealth.

China's system, while emerging from its history, scale, administrative tradition, and political institutions, has disproven one of the most confident assumptions of the post-Cold War era: that the American combination of liberal politics and market capitalism is the only viable route to modernity. China did not follow the Western path; instead, it forged its own, demonstrating that liberal capitalism is not the sole path to success.