Transcript: How Does China’s System Really Work? -w/ Chinese scholar Zhang Weiwei

And this is serious because China is a civilization state which means it’s amalgamation of hundreds of states into one over a long history. China was first unified in 221 BC, and since then, in most of time China was ruled by the unified ruling entity. Otherwise the country disintegrated.

Yet behind this unified humanity is a system of what you may call civil servant examination system which was created by the Chinese. So China’s today system is a continuation and evolution of that system. Communist Party of China is a holistic interest party and behind this is a vigorous process of what I call selection plus election – selected from Chinese own tradition. They have to pass all kinds of exam tests today, your work experience, your performance, election from the West.

As a result, China produced far more competent leaders than western models. If you look at China’s top leaders, the top seven standing committee members of CPC, most of them served three terms as number one province party secretary or governor. So they have literally governed over 100 million people before they came to current position. So this is important.

The Socialist Market Economy Model

Second, economically we call it socialist market economy. In fact it’s a kind of mixed economy. But many countries also have mixed economy. But Chinese one is unique. It means the state owns so many resources from minerals to land, everything. Yet the right to use the land is flexible. It’s very often shaped by market force.

A good example is why China can be so successful in Internet applications. Even for those apps used in United States, whether TikTok, Temu or Shein, they are Chinese inventions because they came from internal competitions within China and after this they become very competitive internationally.

So if you look at the Chinese Internet applications, the whole digital infrastructure is created by the state sector. Each every village must have 4G and 5G. I told my French friends, I said if you go to Tibet or Xinjiang, there you find the Internet connections are better than central Paris. Indeed, this is political task you have to fulfill that even village might have 4G if not 5G.

At the same time, the private sector like Alibaba made best use of this availability of top notch infrastructure and provide Internet service e-commerce to the best of their capability. And also as a civilization state, the huge size matters a lot which means sometimes maybe China is the only type of country that can practice real market economy, full competition. In China we see “Zhu Hen” which means competition, competition, competition. They have a hundred automobile plants producing EVs, so those who are successful are extremely competitive and then cost goes down.

Socially, rather than the Western model of pitting society against state, China is a state and society engaged in mutually positive reactions. You look at the Chinese state and the party is far more reactive to whatever events or incidents or earthquake, whatever that happens in China. This response is much faster in the Chinese model.

Differences Between US Capitalism and Chinese Socialism

BEN NORTON: Can you talk more about the differences between the US capitalist model and the Chinese socialist model? You mentioned that in China many of the leading industries are run by state owned enterprises, including the financial sector, telecommunications, certain industries, mining, energy, the land.

And another aspect of that is that in China there are very rich people, there are billionaires, but they have no political power. Whereas in the United States we can see very clearly that powerful billionaires have significant political influence through lobbying, through funding the campaigns of politicians. That would never happen in China. Can you talk about what you see as the differences between the US capitalist system and the Chinese socialist system?

ZHANG WEIWEI: The American model is known for so called separation of power: executive, judicial, legislative. And they are balanced or whatever. But from Chinese point of view, these three branches all belong to the political domain. So you have a balance power within the political domain.

The Chinese believe from my research we need to have something go way beyond political domain. We need to have an overall balance between political power, social power and power of capital in favor of the majority or vast majority of the Chinese population. So that’s the key difference.

So from Chinese point of view, the Chinese model, you have this kind of balance of three powers in favor of most Chinese people. United States is a balanced power in favor of the power of capital. That’s a problem.

And that problem many countries face. For instance, if U.S. company Microsoft or Apple invest in China, they make huge profits from China. We made a rough calculation. Chinese workers maybe get 5% of the total profits. 95% go to either Microsoft or Apple or other intermediaries of foreign companies, not Chinese companies. But it could be 5%, 10% Chinese gain. But even with that, we said we’ll create jobs, and then these workers can afford better life than before.

Of course, China also moves up in the value chain. You cannot always do manual labor and produce T-shirts. And Chinese have China’s civilization state – every year produce now more engineers and scientists than the Western countries combined. That’s what makes all the difference.

So this balance of power, three powers for the whole beyond the political domain – social power, power of capital and political power in favor of most of the population. That’s key. If the United States company have made huge profits in China, they are beneficial from globalization. But for some reason or another, their revenue, their income cannot be slightly more fairly distributed in the United States, and that’s probably the U.S. internal problem rather than problem for China.

Chinese Democracy: Whole Process People’s Democracy

BEN NORTON: And can we talk about the Chinese conception of democracy? Because a key part of what you call the Chinese model is a different conception of democracy. Now the very superficial understanding of democracy in the west essentially means that every four or five years people go and vote for a candidate who’s funded by big corporations. And that’s the limit of democracy. There’s no popular participation.

The Chinese understanding of democracy is much deeper. In China you have the idea of whole process people’s democracy, that democracy is a long process. And in the west they say China is authoritarian. But you would argue that actually China has a different kind of democratic system.

ZHANG WEIWEI: Many, many years ago, I challenged this whole paradigm, so called democracy versus autocracy, democracy versus authoritarianism, in the battle between democracy and autocracies, democracies are rising to the moment. The problem with that paradigm, or old fashioned paradigm, is that it’s defined by the West. It’s like, you know, the west, for one reason or another was registered this particular brand. So China, you can explain whatever it makes, not much difference. They’re always defensive.

So I said we need to have a paradigm shift. What I advocated is a paradigm of good governance versus bad governance. Then people challenged me, said, “Well, why you dare not discuss democracy?” I said, no problem, because we divide democracy into procedural democracy and substantive democracy.

So when you talk about regular election, multiparty system, one person, one vote, that’s procedural democracy or democracy in form. What we should discuss more is first of all, democracy in substance, the very purpose of democracy. In China we say “dao” and “shu.” “Dao” means overall purpose, “Shu” means specifics or procedures. So “dao” must be very clear. And good governance is a “dao” – is the very purpose of democracy.

So China first focuses on the “dao,” on the good purpose of good governance and how to achieve good governance. Then we try to work out what kind of procedures and democratic practice. You mentioned the whole process democracy.

A good example is how to make legislature to produce laws. In the United States, it’s really confined to small circles and lobby groups and lawyers. In the case of China, each and every major law must first go to the grassroots. Hundreds of what’s called the legal local contact centers from the People’s Congress.

I’ll give an example in Shanghai, where I visited one such center. The People’s Congress sent a first draft of its legislation on the law against family violence. And then they have organized this discussion of this draft with ordinary people. They have a kind of 300 connected households, other feedback.

So one feedback is in this draft we only mention husband violence against wife. Actually in Chinese, especially countryside, there are other problems like the young people, violence against the elderly. So this should be reflected in the law. In the end, this is reflected. So this is what we call the whole process democracy.

And then after that, it’s not just the legislature adopted, it’s about enforcement. There’ll be all kinds of groups from People’s Congress, from political consulting conference to examine to what extent the law has been implemented. So Chinese are much more serious about this. Of course we have our problems. Yet on the whole, this part of Chinese democracy is not well understood by the outside world.

Long-term Planning and Green Development

Another example is how we produce five year plans. If you look at China’s progress in EV, which is the leader in the world in EV industries, it’s the result of four five year plans in other 20 years. So why I consider Chinese model a better option than Western model.

For one thing, if you talk about green deal, green revolution, so much fanfare in the west, especially in Europe, but even up to today, not much achieved. In China, it’s completed, it’s done with Chinese model, 20 years of solid work from one five year plan, second five year plan, third five year plan, and then execute time. So to what extent the Western model can produce green transition and fighting climate change? Our model, we can do it. The Western model cannot.

Reflecting on the Fukuyama Debate

BEN NORTON: Professor Zhang, back in 2011, you participated in a debate with Francis Fukuyama, who was a defender of the Western capitalist system of a liberal democracy. He famously argued after the fall of the Soviet Union that that was the end of history and that all countries would eventually adopt this model of a liberal capitalist democracy.

He claimed that there would be an Arab Spring in China and you were skeptical. And you actually argue that the Chinese system would have lasted longer and that the US system faced many flaws, including the danger of what you called low minded populism. Here we are 14 years later, and I have to say it seems like you were the one who won that argument. Can you reflect on that debate and what you think about the situation today?

ZHANG WEIWEI: You know, when the debate occurred, that was in June 2011, that was kind of Egyptian Spring and Mubarak fell down from power. So Professor Fukuyama was convinced that China may also go through its own Arab Spring. And because from his “the end of history,” even Arab countries, people demand for freedom of speech, one person, one vote. So why not Chinese?

And I said, be cautious. I know the region. I’ve been to Egypt three or four times already. I said, Egyptian Arab Spring will become Arab Winter. I said, very firm. I said, no doubt it will occur. And in the end it occurred. If you tell this to the Arab people, you will see it’s true. It’s Arab winter. It’s far more complicated than this idealistic “end of history” advocates because that’s bound to fail.

Same with China. It’s much more complicated. It’s a civilization of thousands of years. You have to understand this. Otherwise whatever your prescriptions will not work.

And also my one debate with him is about his populism. He thinks, you know, with American media free media freedom of speech. He said, I remember, you know, the famous scene from Abraham Lincoln: “You can deceive some of people some of the time, but not all people all the time.” I said, this is a bit romantic. As we are in politics, we have to be very honest because there is a huge opportunity cost.

Professor Fukuyama had this problem. If you look at his forecast about the Ukrainian crisis, Ukrainian war, about COVID, about elections between the competition between Harris and Donald Trump, he made all wrong forecasts. You can check his record – it was not convincing. I think he should, you know, when they come to see the limitation of his approach.

The US Trade War: Why America Will Lose More

BEN NORTON: His thesis, I think in many ways he actually has recognized the limitations. Let’s talk briefly about the trade war that the US has been waging against China. It was started by Trump in 2018 in his first term, but it was continued by Joe Biden bipartisan and Trump in his second term expanded it again. It’s been going back and forth.

But you have been warning that in the US a lot of these officials are overestimating how powerful the US is. And you know, there’s this famous slogan, Trump says “we have all the cards” and China says “we made the cards.” You know, China manufactures everything. The US economy has de-industrialized. So you’ve warned that in reality the US economy is more dependent on Chinese production than China is dependent on exporting to the US market. How do you see the trade war and which side is losing? Maybe both sides are losing. But which side do you think will lose more?

ZHANG WEIWEI: United States will lose more for sure. And from day one. So seven years ago, when Donald Trump launched his first round of trade war, I said openly to the Chinese audience through TV that the United States will suffer more because we see that it depends far more on China.

Which means if you look at the manufactured goods used by the Americans, those imported from China are either China’s only exporter producer or at least 80, 90% of the components are produced in China. In other words, US can’t find alternatives in the foreseeable future, not in one or two or three years. And so this is the base. Whether we see an item as small as a screw, a toaster to as big as whatever the frame, whatever, all kinds of heavy machine equipment.

And then Trump’s idea that with this kind of tariff war, US will rebuild its manufacturing industry. It’s also naive. If you look at what we call in this region Shanghai, it’s called Yangtze River Delta. The same with the Pearl River Delta. A company like Apple or Microsoft or Tesla, they can find all the spare parts supplied by the whole ecosystem within a radius of 100 kilometers.

So this kind of ecosystem has been built by Chinese through both planning and also market Chinese model for decades. It’s a product of decades. So United States cannot reproduce. Impossible. You do have this kind of ecosystem. As a result, if you want to recreate it, you take decades and decades, if not more. So I think it’s very naive to make this kind of calculation. And this is one reason why we see United States will lose, miserably.

The Future of Global Finance: Moving Beyond Dollar Hegemony

BEN NORTON: And the final question I have today is about the financial system and the role of the US dollar. China gradually for the past decade has been reducing its holdings of U.S. government debt, U.S. treasury securities. And China is part of a global movement seeking alternatives to the dominance of the US dollar and US financial hegemony. China is part of BRICS and it is working with other countries to create alternatives.

So what do you see as the future of the global financial system? And how do you think that China can work with the rest of the global south and organizations like BRICS to create alternatives to US financial hegemony?

ZHANG WEIWEI: You know, when the Ukrainian war occurred and United States and West applied hugely primitive sanctions against Russia, yet ruble has survived because I summarize the Russian approach. I call, you know, the Chinese discuss the word currency or currency war. Currency in the Chinese language means with two words which means goods and money.

So Russia succeeded in turning this currency war into a war between goods and money. The west has money, United States has money. But Russia has goods. Same with China. China has manufactured goods, US has money. So over long term we believe definitely those with goods are in a more solid position, especially in times of crisis. This is a Chinese civilizing state. If you explain this, everyone understands.

And then United States has weaponized everything including dollars, including Swift. So as a result people look for alternatives and pace of this is faster and faster. If you look at the use of CIPS Chinese digital payment system, it’s already growing fast. I check the data for March of this year. The Chinese companies use Chinese currency to do business. It’s already 54% versus the US dollar 41%.

So in fact this CIPS vis-à-vis Swift, they represent highways. Swift is an old highway. It’s old fashioned, it’s based on telegram. It takes days, three days at least to have a deal. It charges a lot of fees. CIPS represents a brand new highway. No loopholes, high tech, blockchain technology. One deal takes one second or two seconds. Basically no charge.

Obviously more and more people will start to use CIPS. And this is very, you may say it’s a bit frightening to certain circles in their financial system. But it’s inevitable because again it’s presenting another type of technology, another type of idea. CIPS is far more socialist, no cost or very low cost, very efficient. Compared with Swift, which is monopoly, charges a lot. So two different approaches.

Of course if you look at the use of dollar in the world today, it’s still far more than Chinese yuan or currency. Yet if you look at trading goods, China has already moved faster. Of course for the capital markets, capital goods, for the financial market, that’s another story. China is always very cautious about that.

So eventually the system may be increasingly in goods, in trade of goods, more and more use of China currency. In trade of financial products, more and more US dollars. There could be different layers of operations. There could be another way out.

China’s Vision: Reform vs Revolution in the Global Order

BEN NORTON: So you would see this as part of China’s vision of a more multipolar world.

ZHANG WEIWEI: My vision because this is inevitable. Multiple polarities already there. But what we need is a multiple world order. This is still in the making. And hopefully this is. I always say that Russia is a revolutionary. It wants to overthrow the American dominant system. China is a reformer with the system that has both strengths and weaknesses. We should make best use of the strengths to reduce as much as possible defects. We try to reform it.

The difference is between China and Russia is revolutionary versus reformer. But the common ground between the countries is we all look into the future. We hope there’ll be something better than this system. The problem with Donald Trump is he did not want this system either. Unipolarity, United States economy is hollowing out. He’s not happy. He said we should abandon that. But he looks backward, we look forward. He said let’s go back to 19th century mercantilism, you know, that’s better. Of course, this is not good.

BEN NORTON: China is moving into the future.

ZHANG WEIWEI: In a way, in many ways, it’s true. Yeah.

BEN NORTON: Well, I think that’s a good note to end on.

ZHANG WEIWEI: Thank you very much.

BEN NORTON: I was speaking with the renowned Chinese professor, Zhang Weiwei. Thank you so much for joining me.

ZHANG WEIWEI: Thank you, Ben. Thank you very much.

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