China's New Model session at 12th International Conference

1. Bertrand Russell and the Challenges of Contemporary
China
Tanweer Akram (Voya Investment Management)
12th International Post Keynesian Conference (Sep 25-Sep 27, 2014)
University of Missouri Kansas City (UMKC)
Kansas City, Missouri, USA

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3. Motivation
 More than 90 years ago Bertrand Russell
wrote The Problem of China (1922).
 This presentation will discuss some of the
key challenges of contemporary China in
light of Russell’s dated but insightful and
prescient analysis.
 Many of the issues that Russell identified still
apply to contemporary China but there are
other important issues crucial today that were
not topical 90 years ago!
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4. Russell in China
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5. Bertrand Russell and China
 Among the first major Western philosophers who visited
China
 Taught at Peking Government University
 Published The Problem of China (1922)
 Retained an interest in China throughout his life
 Corresponded with Chinese leaders, particularly during and
after the Sino-Indian war (1962)
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6. Russell appreciated the importance of China
“Chinese problems, even if they
affected no one outside China would
be of vast importance, … the entire
world will be vitally affected by the
development of Chinese affairs …
during the next two centuries. This
makes it important … that there
should be intelligent understanding
of the question raised by China, even
if, as yet, definitive answers are
difficult to give.” (The Problem of
China, 1922, p. 3).
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7. China today is a lot different than during Russell’s visit!
 The world’s second largest economy (measured in
purchasing-power parity terms)
 Important driver of global growth
 Vital role in international trade and global
manufacturing and supply chain
 Strong per capita real income growth and impressive
reduction of income poverty since 1980
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8. China is the world’s second largest economy
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9. Per capita real income in China has increased rapidly
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10. China’s challenges today
 Still a lower medium income country
 The standard of living remains low for the vast majority
of its people
 Problems of rebalancing aggregate demand,
environmental degradation, and widening social
disparities
 One party system
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11. The main problems that Russell identified in 1922
1. The establishment of a stable, orderly and sovereign
government
2. The industrialization and modernization of the
country’s economy with Chinese control
3. The spread of education
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12. Industrialization and economic transformation in China
 Russell understood that industrialization would be important for China. He
believed that Chinese industrialization would occur only under socialism.
Even though he thought industrialization is essential, he believed that China
would remain a predominantly agrarian country in the foreseeable future.
 Indeed, substantial industrialization and modernization did occur after the
establishment of the People’s Republic of China. But renewed impetus to
strong growth came after the post-Maoist reforms in both agriculture and
industry.
 China is a now a “mixed economy”, with substantial state ownership and
control of the means of production but also with private ownership of
capital.
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13. China has undergone rapid urbanization in recent years
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14. Challenges for contemporary China that are relevant today
but were not topics of the day during Russell’s times
 Structural composition of aggregate demand
 Aging population, low fertility rate, biased sex ratio and demographic
transition
 Environmental degradation
 Social disparities
 Health standards and food safety
 Banking and finance
 Elevated real estate prices
 Energy security
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15. Both consumption and investment underlie domestic demand
growth
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16. Consumerism and consumption in China
Consumption in China has risen
in conjunction with growth and
the rise of real income, even
though household consumption
as a share of national income
remains low and has declined
since the early 1990s.
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17. High investment, fixed asset and infrastructure Spending
 Investment has been important driver of growth. Construction of
industrial, commercial and residential real estate has boomed. Chinese
cities have changed dramatically since Russell’s times!
 By 2025, in China
 Urban population will grow to about 250 million
 More than 200 Chinese cities shall have more than one million residents,
compared to 35 such cities in Europe
 50,000 skyscrapers is expected to be constructed (= 10 Manhattans!)
 Beijing’s subway (underground metro) system will exceed 1,000 km and the
country will be building more subway lines that what the total of Europe’s
currently installed subway systems
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18. Impressive skyscrapers!

19. China’s population is expected to decline by mid-2030s.
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20. China is benefiting from demographic dividend
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21. Some indicators of human development in China
Indicator of Human Capital Development People’s Republic of China
(CHN)
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South Korea
(KOR)
Japan
(JPN)
Life expectancy at birth, years, 2012
73.7 80.7 83.6
Mean years of schooling, years, 2010 7.5 11.6 11.6
Expected years of schooling, years, 2011
11.7 17.2 15.3
Maternal mortality rate, death per 100,000
birth, 2010
37 16 5
Physicians, per 1,000 people, 2005-2010 1.4 2.0 2.1
Source: UNDP, Human Development Report 2013

22. Progress in health and life expectancy has not been
impressive since the beginning of economic reforms
 While China continues to make impressive progress in education,
scientific and technological capabilities, since the beginning of
economic reforms China’s life expectancy gains and health gains
have been less impressive.
 China will need to investment in public health infrastructure,
public health security and insurance, and improve food and water
safety standards to improve the health outcomes of its people
going forward.
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23. China’s total CO2 emissions exceeds that of the U.S.
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24. But China’s per capita CO2 emissions are still far below
that of advanced capitalist economies
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25. China’s oil consumption to GDP ratio is high
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26. The peaceful rise of China
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27. China’s dispute with Japan
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28. Disputes in South China Seas with its neighbors
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29. Border disputes with India
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30. Cooperation with Russia: Tactical or strategic?
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31. How to “recover” Taiwan?
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32. China 3.0

33. Major long term challenges for contemporary China
 Governance, regime stability, and human rights. Or how to
avoid an “Orange Revolution”!
 Industrialization and modernization of the economy
 Job growth and poverty reduction
 Inequality and social disparities
 Human capital development, education and health care
 Managing the demographic transition
 Improving the quality of the environment
 Ensuring energy security and access to resources
 Regulating of the financial sector, including shadow banking
 Ensuring the “peaceful rise” of its global power without
incurring the wrath of the Western countries!

34. Conclusions
 China’s challenges are still formidable but the country has made
impressive gains, particularly in real per capita income growth, in
recent decades. Russell realized the vital importance of
industrialization for China’s development and modernization, but
also the role of governance, regime stability, and human capital
development and scientific and technological capability.
 There are similarities between the problems that Russell identified
years ago and contemporary China’s challenges, as well as differences
and, of course, new problems.
 Russell hoped that China, unlike Western nations, could and would
develop without resorting to ultra nationalism, militarism, and crass
materialism. He was optimistic that China would be a progressive
force in the community of nations.
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