Dilemmas and Challenges of The Chinese Economy in the 21st Century: Economic Policy Effects of the Belt and Road Initiative
The Oriental Business and Innovation Center (OBIC) was set up by the Budapest Business School, University of Applied Sciences and the Central Bank of Hungary in 2016. One of the main goals of the initiative was to contribute to a better understanding of Asian cultures, economies, and languages in Hungary. OBIC’s activities aim to improve the improvement of our students’ language skills, enhancing academic mobility towards Asia, and support of Asia-related research. This collection book is the third in the OBIC Book Series and the second in the China-related issues. In recent years, the question has been fiercely debated whether China is following the path of the Asian developmental states, such as Japan, Korea, Singapore, etc. or China’s outstanding economic development is fundamentally different from the success stories of the Asian developmental states. The discussion was becoming more intensive when Chinese economic growth remained stable despite predictions forecasting a slow-down of Chinese economic growth or even the collapse of the economic giant after the financial meltdown of 2008-2009. Since the Great Recession (2008-2009), the pace of Chinese economic development earned the admiration of many countries trying to catch up with advanced states. It must be also added that not only developing countries, but also middle-income countries in Central Europe are experimenting with alternative economic development models to those suggested by the Washington-consensus in the early 90s.
This volume of the OBIC Book Series attempts to collect papers that focus on a very special aspect of the Chinese economic model with one fundamental question underlying these papers: what role is the Belt and Road Initiative (BRI) playing in Chinese economic policy. The book covers three main topics: the implementation of the BRI,
the interpretation of the BRI, and its effects and links to the Chinese economic policy.
In her paper, Judit Szilágyi gives a systematic overview on how the BRI is implemented in the Eurasian region, and Ma Junchi focuses on the China-Europe railway connections. These papers look at the implementation, while the interpretation of the BRI is covered by Pickus and Nicolea-Nicolea. David Pickus highlights the educational
12 elements and lessons from the BRI launch, while Nicolea-Nicolea make attempts to interpret the Belt and Road Initiative in a Romanian context. Szilárd Boros links the BRI to the broader goals of Chinese economic policy, while Karpov’s paper investigates the multi-track price systems of China. In his paper, Moldicz makes attempts to identify the elements the Chinese economy model shares with the so-called Asian developmental states. the Oriental Business and Innovation Center prepared this book with the goal to give an overview of the state of Chinese economic policy and how it ties to the Belt and Road Initiative.
We are thankful for the financial assistance of the Central Bank of Hungary, and the leadership of the Budapest Business School and all the people who supported our efforts in the making of this collection book.
The concept of “Chinese Miracle” comprises two dimensions. The first one is obvious and purely economic in nature: 9 percent annual GDP growth rate over quarter of a century. The second one is less obvious, but no less important and is institutional: the ruling Leninist one-party state not only survived apparently successful transition to the market economy, but even consolidated its institutional grip in the wake of this transition. This fact looks indeed extraordinary and even paradoxical in the light of the catastrophic fate of all other communist party-states in the former USSR and its East- Central European satellites, which—in different times and to different degrees - also initiated market reforms. The explanation of this paradox lies in the specific constellation of social, demographic and historic factors in China. The practical embodiment of this constellation was the unparalleled price reform, carried out in the 1980-90s. This reform transformed decentralized directive pricing, which existed between the 1950s and the 1980s, into a system of agreed pricing. However, party-state institutions remained the key players in defining the conditions of pricing agreements. Their positions of the biggest financial monopolist, lender of last resort as well as that of the sole macroeconomic controller also remained basically intact. The potential of the Chinese party-state to exhibit institutional resilience in the process of “market transition” turned out to be unexpectedly significant. However, the basic limitation of such resilience is that the principle of soft-budget constraint still dominates the behavior of key economic and administrative players, constantly invoking the specter of macroeconomic chaos with unpredictable institutional consequences.