Chinese Youth and the Economic Crisis

Beijing, CHINA -- In the past few weeks, I have talked with a range of Chinese young people about the global economic crisis. What I've heard suggests that the economic developments of the past year have moderated, but certainly not destroyed, the enthusiasm for freer markets among the future economic leaders of China's so-called socialist system.

It's an obvious point that the economic crisis has affected more than just money. People around the world are evaluating in a different way everything from their habits to their country's economic system. A recent article in the New York Times about this week's G-20 summit was headlined "Anglo-American Capitalism on Trial," and this phrase does seem to capture part of the spirit of the moment. China is no exception to this phenomenon.

For some Chinese, despite the many economic problems that China is clearly facing, the crisis has strengthened their sense that China is basically on the right track and that the West is not. That's led to greater boldness in some government statements, like Premier Wen Jiabao's much-publicized comments in mid-March that China was "worried" about its holdings of U.S. government debt, and has motivated some intellectuals, like the authors of the recent bestseller Unhappy China, to aggressively criticize the West.

But to say that that China's confidence in its path has increased is more complicated than it may seem. It doesn't mean that China is on the right track as the socialist system that it officially claims to be, but on the right track in the sense of moving towards a free market system in its own particular way. Indeed, the Chinese are attempting to use this crisis as an opportunity to address a wide range of domestic problems that they have identified. This attitude makes linguistic sense, as the Chinese word for "crisis," weiji, contains characters from the words for both "danger" and "opportunity."

Since the transformative economic reforms initiated by Deng Xiaoping in 1978, China's economy has combined qualities of a socialist planned economy and a capitalist free market. Deng's pragmatic moniker for this system was "Socialism with Chinese Characteristics," which, along with "socialist free market," remains the official term for the economy today. While the day-to-day here in Beijing feels much like living in a capitalist society -- from the brazenly ambitious street vendors competing for customers to the overwhelming variety of businesses promoting their services -- the 2009 Index of Economic Freedom (created by the Heritage Foundation and the Wall Street Journal) ranks China in 132th place, out of the 179 countries studied.

There are certainly many ways, of which the Chinese students whom I spoke with seem very aware, in which China hardly resembles a free market society. For example, "When Wen Jiabao says we are going to have an 8% growth rate this year," a young woman attending college in Beijing told me, "we all know that, whatever the reality, officially we are going to achieve that 8%."

Comparing the American and Chinese systems illuminates an interesting difference in the way that the latter works. In the United States, a free market is the norm; as we have seen in recent weeks, government intervention must be vigorously justified. In China, the reverse is true. The recent Chinese stimulus bill allocated the large majority of its funds to China's state-owned enterprises. Smaller private companies have been hit particularly hard and, as explored by James T. Areddy of the Wall Street Journal, the "slowdown stunts entrepreneurs." Some Chinese students who will graduate in the next several years and hope to work at private companies complained that because of the lack of help for these businesses, it has become disproportionately difficult to get a job in the private sector.

In recent years, despite the U.S. and China's normative differences, the trend in China has been towards freer, so-called American-style markets. In a 2006 survey conducted by the University of Maryland and GlobeScan, people in 20 countries were polled on a range of economic questions, focusing on market systems. In China, a stunning 74% percent of respondents voiced support for the free enterprise system. This was, the authors report, the highest number of any of the countries surveyed (the United States registered 71% support).

Deng's "socialism" seems to be on the wane, then, and his "Chinese characteristics" on the rise. "China does not have a really strong ideology now," said Wang Jun, an international economics student. "Even most party members don't really believe in Marxism."

The survey's results align with what Wang told me about his own past views, too. "Previously, I felt that the freer the market, the better the results," he said, peppering his comments with references to Adam Smith, contemporary Chinese thinkers, and a range of statistics. But he also noted that his views have undergone a substantial change as he has watched and studied the economic crisis: "I'm now definitely on the side of more regulation and supervision . . . [Both are] needed to keep the market free."

Other young people with economics backgrounds shared similar views. "I used to be a real proponent of the idea that a freer market is synonymous with economic progress," said one college student with whom I spoke. "When I read the Wall Street Journal lately, it's hard for my views not to change -- but I don't know what I think is the best system now."

It's clear to me that, along with their government, these Chinese students are wrestling with the most essential economic questions that the crisis has posed. They are trying to understand how to draw lines between market and government and how to determine limitations on the free market, including what roles government regulation, subsidy and ownership should play. In our own way, the United States and the West, albeit from different starting points, are debating similar questions.

The economic crisis has certainly not yet stopped the progress of China's economy toward a freer and more liberal system. It does not appear to be a deathly knell for free markets. It has tempered the youthful enthusiasm of China's future leaders, making clear to them that, in their country and throughout the world, significant risks will always accompany this development.