Editor's Note: On June 7, the "China Political Economy Forty Forum·2025" was successfully held at Xiamen University. This forum was co-hosted by the Economics Department of Xiamen University School of Economics, Wang Yanan Institute for Studies in Economics, Choo Zhengyu Institute of Economic Research, and the China Political Economy Annual Conference. It was organized by the Department of Economics and the Institute of Economics of the School of Economics of Xiamen University, and co-sponsored by the editorial board of "Political Economy Journal" and the editorial board of "Chinese Economic Issues". This article is based on the author's speech at the "China Political Economy 40 Forum·2025", and has been reviewed and authorized by the author for publication on Observer Network.
【Written by Guancha.cn Columnist Lu Di】
Author speaking at the conference. Organizer of the "China Political Economy 40 Forum·2025".
The topic I want to discuss today is "The Characteristics of Chinese Socialist Political Economy in the Context of World History." The "theory of world history" is a basic principle and concept of Marxist research on the global historical process. In the evolution of modern history as part of this "world history," the capitalist world system is a universal presence globally.
The following discussion will attempt to examine Chinese modernization within the framework of "world history," emphasizing the subjectivity of China's economic system and the inevitable confrontation with the constraints of the world capital system during economic transformation. Only by explaining the characteristics, logic, and contradictions of these constraints can we guide practice beyond capitalism, which is the mission of Chinese socialist political economy.
Next, I hope to discuss from the following four themes:
(1) Backward Development in the World and the Logic of Capitalism;
(2) Current Economic Development and Escaping the Middle-Income Trap;
(3) Comparative Perspective — The Limitations of Capitalism and Chinese Practice;
(4) Systemic Perspective — Hegemonic Transition Beyond Capitalism.
I hope to explore multiple perspectives and delve deeper into the global characteristics, and how China can explore the construction of a socialist market economy and the exploration of the modernization path of the entire world.
Backward Development in the World and the Accumulation Logic of Capitalism
As mentioned earlier, modern history is considered "world history" in the basic categories of Marxism, and Chinese-style modernization also unfolds against this backdrop. Even the development strategies formulated during the first 30 years of the Republic were largely premised on responding to the encirclement and pressure of this system.
Let me share a very simple table. Table 1 shows the average annual actual growth rate of per capita GDP. From 1960-1980 to 1980-2023, there is a significant decline in the growth rate of OECD developed countries, dropping from 3.03% to 1.59%. Even so, compared to other countries outside China, the development of OECD developed countries still leads. Overall, it indicates that global economic development outside of China has fallen significantly.
Provided by the author
Why does such a decline and differentiation occur? This needs to be explained to better illustrate why China is an exception, leading to an extension of what makes the Chinese socialist market economy and Chinese-style modernization unique, enabling China to become an exceptional case in the systemic sense globally.
One possible explanation is that globalization worldwide is essentially an economic financialization process, particularly the widespread promotion of neoliberal reform ideologies globally: market liberalization, privatization of public assets and public services, and various forms of deregulation. Ultimately, it aims to maximize capital's freedom to pursue profits, leading to the financialization and speculation of the economy.
The resulting outcome is that, on one hand, investment deficiency occurs worldwide, compounded by income inequality suppressing consumption, making systemic demand deficiency the norm, which lays the foundation for crises. On the other hand, speculative activities are merely about redistributing profits rather than generating them. Under the squeeze on production, systemic crises often erupt first in the form of financial crises.
In this process, due to the expansion of the capital system across the global space, various productive resources are cheaply drawn in, especially cheap labor and natural environments. Capitalist countries gain "predatory accumulation," but they move polluting industries to developing countries, leading the developing world into a low-technology, low-labor-income development trap.
Thus, we must consider how China has overcome these constraints through its systems and policies up until now and whether it has sufficient conditions to address similar constraints in the future.
Economic Development in the Present Stage and Escaping the Middle-Income Trap
Relatedly, a topic discussed more frequently is whether China can escape the middle-income trap?
The World Bank's "2024 World Development Report," themed around the "middle-income trap," makes very pessimistic judgments on both reviewing the actual performance of world development during the era of globalization and looking ahead to future prospects. The list of countries facing daunting challenges includes China at the top.
The basis for their pessimism regarding China is that the proportion of high-income economies among the global population has consistently declined, dropping from 30% in 1960 to 17% in 2023.
Why does this situation arise? The mainstream explanation is that middle-income economies lack competitive advantages in the global market: they cannot compete with low-income economies in labor-intensive, low-value-added industries due to higher labor costs; and they cannot compete with high-income economies in capital-intensive, high-value-added industries due to lower technological levels.
Therefore, they believe China is facing such challenges. How to respond? The World Bank's report proposes a "3i" strategy, with its core being investment + importing foreign technology + innovation (investment+infusion+innovation). All these emphasize the building of capabilities, meaning fundamentally deviating from the dominant political tenets of the height of the free market era: neoliberal sayings like "establishing the correct relative prices" and "establishing the correct property rights arrangements." These emphasize that as long as the "incentives" determined by the market automatically bring competitiveness and naturally avoid traps while promoting development.
This shift in thinking has occurred elsewhere as well. The EU's industrial policy debates, America's "New Washington Consensus," or the OECD's "Mission-Oriented Innovation Policy" are all examples. These new ideas, as political tenets for developed countries to cope with today's real challenges, are highly anticipated. Their core idea emphasizes the importance of building "capabilities," and similarly judges that relying solely on the market is insufficient for success, requiring state intervention and playing a key role.
All these trends somewhat lean towards learning from China, believing that overcoming crises and future development depend on the combination of "effective markets" and "proactive governments."
However, note the "fallacy of composition": in a systemic downturn in world development, everyone improving competitiveness means mutual offsetting, thus not providing a correct orientation.
China's development goals or missions are far more systematic and profound than those of developing countries facing the threat of the "middle-income trap" and crisis-hit developed countries, manifested in the new development philosophy of innovation, coordination, greenness, openness, and shared prosperity, as well as the corresponding construction of a new development pattern. This implies a heavier task for development, stricter requirements for systems and policies, and a long way to go.
The Limitations of Capitalism and Chinese Practice
If we look at the challenges faced by China from a comparative perspective, do we have any lessons from worldwide experiences? According to the discourse in capitalist historical literature, the world capitalist system has undergone hegemonic transitions and cyclical cycles since its rise in the 16th century. Until now, the long cycle under American hegemony includes the "capitalist golden age" after WWII for nearly 30 years and the neoliberal globalization era since 1980.
From the perspective of the economic and social development of developed countries, the performance of the golden age is undoubtedly far superior: sustained economic growth, near full employment, equalized income distribution, basic living security for the underprivileged, universal healthcare and education, etc., all sharply contrast with the performance of the neoliberal era.
However, the golden age did not last, or in other words, within the limits of capitalism, the golden age model is inherently unsustainable.
Institutional arrangements such as welfare states, state-owned enterprises, industrial policies, development-oriented finance, and centralized labor-capital negotiations can violate profit logic at the micro level and overall profit logic in the short term, but they cannot violate the defining characteristic of capitalism—the overall profit logic in the long term.
Even in terms of economic development alone, China's socialist market economy is not only already surpassing neoliberalism but must continue to surpass the golden age model.
Returning to a superficial level, one direct reason for pessimism about world development is insufficient productive investment. Although China has long been an exception, in recent years it has increasingly shown signs of converging with the world's norm.
Provided by the author
As shown in the table above (as illustrated), the investment rates of developing countries outside China are either stagnant or declining. China is an exception, but this exception is not inevitable. We know that since entering the new normal, we have seen a downward trend in our productive investment rate, reflecting deficiencies in market effectiveness and government proactivity. Specifically, investment is restricted by speculative logic and profit logic at the market level; investment is insufficient at the government level due to fiscal limitations, i.e., the asymmetry between fiscal power and responsibility in socioeconomic contexts.
This might mean that among the many constraints currently facing China's economic development, there are simultaneously elements of economic financialization and elements of the golden age model's constraints represented by fiscal limitations.
In other words, the socialist market economy differs fundamentally from capitalism. If we experience speculation and financialization, it is not because they developed internally but because of constraints originating from capitalism.
To overcome these constraints, it is necessary to transcend the historical capitalist model, which is the overarching theme of China's modernization journey.
Hegemonic Transition Beyond Capitalism
Backward development on a global scale has been difficult to advance under the dominance of the capitalist system in its neoclassical form, and even met with obstruction and suppression. Therefore, seeking alternative orders and development paths becomes necessary.
The final direction lies in hoping for China.
China holds significant importance for world development. Chinese modernization and the Chinese socialist market economy are not built independently by ourselves: on one hand, the world looks to China for experience and learns from it; on the other hand, there is reliance on China to provide systematic influence in reshaping the world political and economic order, i.e., China as a force reshaping the world political and economic order, promoting productive investment, technological development in the global south, and freeing itself from financial hegemony manipulation.
Clearly, up to now, China mainly attempts to influence the systemic development direction worldwide in an economic sense. We primarily focus on constructing connectivity through "Belt and Road" initiatives, building transportation networks to connect dispersed economies of the global south spatially. This extends to infrastructure investment and construction, including electricity, telecommunications networks, transportation conditions, etc., all aimed at connecting these economies, establishing productive activities, and participating in professional division of labor facilitated by expanded demand due to this cooperation.
Thanks to "Belt and Road" projects, China Petroleum Engineering Construction Corporation has brought development opportunities to local workers in Iraq. Photo by People's Daily
"Belt and Road" provides a platform for related southern global countries. On this platform, China does not attempt to interfere with partners' intentions but believes that all decisions regarding socio-economic development depend on their internal political and economic characteristics. This is especially true in social development, where issues such as income distribution, social welfare, labor protection, and environmental protection are concerned, let alone respecting sovereignty and territorial integrity, which is the primary principle of the "non-interference" stance.
On this foundation, even if our activities are purely economic and promote equal, free market activities and connectivity, we are likely to fundamentally undermine the existing world political and economic order, especially for developed countries that rely on various monopolistic rents from globalization to maintain their current economic activities and social development levels.
In such a situation, our various economic activities abroad do not involve any appropriation or monopoly, yet developed countries inevitably need to make fundamental self-adjustments, especially abandoning their pursuit of hegemony. Only then can Chinese modernization be completed.
Conclusion
From a long-term, large-scale historical perspective, according to the research in "historical capitalism" literature, the norm of capitalism is monopolization, combining capital with state power to construct and enforce hegemony and extract monopoly rents. This norm runs through all long cycles or hegemonic systems of capitalism history since the 16th century, including systems dominated by Mediterranean city-states, the Netherlands, Britain, and the United States.
China's rise is an anomaly, its political and economic characteristics distant from transnational monopolies and hegemonies. It does not draw monopoly rents from the outside but promotes its own development and the world's development through productive activities and fair competition. The transcendence of historical capitalism's characteristics is embodied in Chinese-style modernization itself and China's systemic influence on world development, which should be the core subject of Chinese socialist political economy.
I hope the above relatively shallow discussions can provide meaningful references for the construction of Chinese socialist political economy. Thank you all!
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