China’s economic model – a socialist state controlled capitalism – with Chinese characteristics challenges Western assumptions, particularly the role of capital versus political authority. In China, politics is above capital. In the West, capital determines politics.
China has demonstrated remarkable success in poverty reduction, anti-corruption, and environmental improvement, defying many predictions of failure. Capital in China is subordinate to political authority. Wealthy individuals have no direct influence over political decisions, unlike in capitalist countries like the U.S.
The Chinese globalization model emphasizes respect for Chinese sovereignty, diversity, Chinese national pride, and rejected liberal democracy. Western globalism emphasizes lack of borders and little respect for national sovereignty, weak nation states that are controlled by a Western money elite, and low respect for diversity.
“Both China and the U.S. benefited significantly from globalization, but with very divergent outcomes: China’s GDP grew about 10 times, and median income grew approximately 8 times. U.S. GDP grew 4 to 5 times from a larger base, but median income has stagnated or declined.”
This says Dr. Eric Xun Li, a Chinese venture capitalist and political scientist who often criticizes Western liberal democracy, and praises the Chinese meritocratic system and political leadership. He is currently the chairman and managing partner of Chengwei Capital.
Dr. Li asks where the money went. The answer is that it went to the top 000.1 % Western elite billionaires, who benefitted from the outsourcing of labor to low income countries, while safely collecting the revenues in tax havens, bypassing the Western middle-class work force who lost their jobs. The needed redistribution of wealth, that Ray Dalio speaks about, never happened in the West. Western globalism became the rise of the billionaire class.
As the global order is shifting toward more competitive, multipolar dynamics, with declining faith in liberal internationalism and liberal democracy, the Chinese model versus the Western model is an interesting study.
The current global environment is marked by increased competition and diminishing faith in a liberal democratic order. Soft power has failed to deliver equitable outcomes. The U.S. pursues economic decoupling and tries to contain China, signalling a new era of “hard power” rivalry among major states, including Russia and Germany.
Europe faces a difficult position due to its historical reliance on soft power and integrated institutions, now challenged by resurgent nationalisms and competition.
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“China’s current push to raise the technology content in its economy is mostly if not completely driven by China’s own needs for the next stage of its development. It is being perceived as a rivalry with the U.S., but China has the largest economy in the world and we need to raise the per capita income of Chinese people by a notch or two in the Next Generation or two,” Dr. Li points out.
China’s unique experience with globalization, economic development, and political governance is a very different system than that of Western countries, particularly the United States and Europe. The West’s liberal variety is failing, says the Chinese venture investor, while China’s governance produces better outcomes. China’s way is a better choice, says Li.
“We see a a tremendous backlash in the West against the elites who led the wave of globalism. China has been the only exception among just about any other among all major countries in the world. China was the only one who benefited from globalization the most. Yet, it rejected (Western) globalism decisively. It said no to the political system of liberal democracy,” Li points out.
“Our capital income is still low relative to many other countries although our economy is huge. We simply cannot do that without substantially increasing the technological value ad in our economy. It’s just not possible. Let me give you an example. Our industrial capacity is the largest in the world, about 35% of the world’s industrial output. Our industrial capacity is larger than the U.S., Germany, Japan and India put together.”
China’s alternative model, namely a state-driven system in which political authority remains firmly above capital, is in stark contrast to Western capitalist democracies. China’s success stems not from conforming to the global liberal order but from rejecting it, thus offering a model of “globalization without globalism” – one that prizes national sovereignty, cultural integrity and infrastructure-led development.
China’s industrial capacity is immense, now estimated to exceed the combined capacity of the U.S., Japan, Germany, and India. However, the value-added margin is low (~12%) compared to historical U.S. industrial margins (35–40%).
China has navigated crises that were expected to derail its progress and is now transitioning toward higher-value industries amid structural challenges. These crises include the Belt and Road Initiative, anti-corruption campaigns, and poverty alleviation. Concurrently, Western nations — confronted with domestic disquiet and elite resistance — appear to be disassembling the very global institutions they formerly promoted.
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