Technicians work on export orders on an intelligent production line in a company in Suqian, East China’s Jiangsu Province. Photo: VCG

Editor's Note: In 2024, China's economy has achieved a stable performance while at the same time securing progress, navigating mounting external pressures and domestic challenges. However, some voices in international discourse persist in disregarding these facts, continuing to foster skepticism about China's economic outlook. Daron Acemoglu, one of the three Nobel laureates in Economic Sciences in 2024, has claimed that China's economic growth cannot be sustainable due to the absence of "inclusive institutions." Some foreign media have seized on this assertion, using it to criticize China's economic system as "extractive" and reigniting the tired rhetoric of the "Peak China."

Zhang Xiaojing (Zhang), director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences, who has closely followed Acemoglu's work, addressed the critique in a recent interview with the Global Times (GT) reporters Zhao Juecheng and Ma Tong. While acknowledging Acemoglu's innovative contributions to institutional economics, Zhang emphasized that the theories are constrained by historical and institutional contexts, which can lead to misunderstandings and biases.

No one-size-fits-all theory

GT: The 2024 Nobel Prize in Economic Sciences was awarded Daron Acemoglu and two other economists for their research on "how institutions are formed and affect prosperity." How do you assess the innovations and limitations of their theories on "inclusive" and "extractive" institutions?

Zhang: Acemoglu's theories highlight the crucial role of institutions and history, the interplay between politics and economics, and the virtues of "inclusive economic institutions." He posits that institutions characterized by the rule of law, property rights protection, and high levels of competition are essential for fostering economic prosperity. These viewpoints hold validity from a general standpoint and possess both innovativeness and academic value, which is precisely why the Nobel Prize committee recognized his contributions.

However, applying general theories to specific countries or systems without accounting for their unique national contexts can lead to errors and biases. This suggests that the universality of these theories must be evaluated within the specific national conditions, as there is no one-size-fits-all approach.

In his seminal work, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Acemoglu's analysis of China, both historical and contemporary, contains many errors and biases. The simplistic application of "inclusive" and "extractive" economic institutions - concepts rooted in Western perspectives and case studies - fails to consider the unique realities and conditions of China's development. As a result, his analysis inevitably introduces inherent historical and institutional biases and becomes less applicable to different countries and societies.

GT: Acemoglu recently claimed that China has achieved considerable economic growth by investing in innovative sectors such as artificial intelligence, but this economic boom may lack the stability and sustainability of Western nations. How do you view China's capacity for scientific and technological innovation?

Zhang: China's growing technological innovation capabilities have captured global attention, leading some countries to view it as their foremost technological rival. In response, certain Western nations have resorted to aggressive measures to suppress Chinese companies, even pursuing "decoupling" from China. However, this hostile stance only highlights the undeniable rise of China's innovation strength on the global stage.

China has consistently advocated for global technological cooperation, yet it has faced significant barriers from the West. These obstacles have hindered the global adoption of Chinese innovations, such as 5G and the "new three" - electric vehicles, lithium batteries, and photovoltaic technologies and products.

This resistance has also impeded China's ability to contribute to global "inclusive" development through its technological advancements. In fact, Chinese technology is not only vital for the Global South but is becoming increasingly necessary for Western countries as well.

In the realm of technology, the West often applies a blatant double standard when assessing its own policies in comparison to China's. For example, China's efforts to regulate platform companies and tackle monopolies mirror the actions the US has taken against tech giants like Facebook and Google, both aimed at promoting fair competition and safeguarding consumer interests. Yet, China's approach is unfairly labeled as "non-inclusive behavior," despite its alignment with global standards.

GT: In the current context of China's development, how should we objectively evaluate the theories of scholars like Daron Acemoglu and their applicability to China?

Zhang: China's perspective on the Nobel Prize, especially in economics, has undergone a notable transformation over the years. In the past, we might have focused largely on the innovations of Nobel laureates and how their ideas could inform China's economic growth. Today, however, the emphasis has shifted toward critical engagement rather than blind adoption.

This change in attitude reflects China's growing confidence, driven by factors such as sustained economic growth, a strong belief in development paths and institutions with Chinese characteristics, and, most importantly, increasing confidence in its own theoretical frameworks. This self-assurance enables China to assess the applicability of Western theories with greater discernment, avoiding uncritical admiration.

Facts speak volumes

GT: Recently, some foreign media have attempted to apply Acemoglu's theory to criticize China's system and talk down on the prospects of the Chinese economy. How do you respond to this trend?

Zhang: The facts speak for themselves. Since the founding of the People's Republic of China, the improvement in the lives of its people has been remarkable. China's per capita GDP is approaching the threshold for high-income nations. The country has eradicated absolute poverty - an achievement that is more than just a statistic. It stands as irrefutable evidence of China's institutional effectiveness, serving as its "golden calling card" on the global stage.

Many foreign leaders and scholars, particularly from developing countries in the Global South, have expressed admiration for China's achievements and are keen to learn from its development model. In this case, practical outcomes speak louder than theoretical frameworks.

At the heart of China's modernization lies a people-centered philosophy that prioritizes the well-being of its citizens. Also, the concept of shared development forms a key aspect of the country's new development philosophy. China not only advocates for these principles but also actively puts them into practice.

GT: From your perspectives, what biases and misconceptions do some Westerners hold about China's system and development path?

Zhang: Many Western scholars harbor deep-seated biases against the leadership of the Communist Party of China (CPC). During my recent visits to several African countries, I found that local officials and citizens are deeply impressed by China's development model. These countries possess abundant resources and labor, yet they lack strong leadership, which undermines their ability to maintain economic autonomy and sustainable growth.

With strong leadership, the country can turn good ideas into concrete action, which is one of the key reasons the Chinese economy has achieved such transformative growth over the past four decades of reform and opening-up.

In the course of development, China has also faced issues such as widening income disparities, a common challenge for many rapidly developing nations. Under the leadership of the CPC, however, we have identified these problems and adjusted policies and development strategies accordingly, setting the goal of achieving common prosperity to tackle this issue. This reflects the high-level responsiveness and strengths of China's system.

People-centered growth

GT: China's Central Economic Work Conference was held in Beijing on December 11 to 12. The meeting reviewed the 2024 economic performance and outlined plans for 2025 to realize high-quality economic development. What aspects of this crucial meeting are you particularly focusing on?

Zhang: In the face of growing external pressures and mounting internal challenges, the Chinese government has shown strong resolve by intensifying its policy efforts to stabilize economic growth. For example, the conference proposed implementing a more proactive fiscal policy to ensure sustained and robust fiscal support. Additionally, a moderately loose monetary policy was introduced, along with a call to enrich and refine the policy toolbox, enhancing the forward-looking, targeted, and effective nature of macroeconomic regulation.

The meeting also placed greater emphasis on consumption and people's livelihoods. Outlining a number of key tasks for 2025, the meeting urged efforts to vigorously boost consumption, improve investment efficiency, and expand domestic demand on all fronts.

Other tasks include pursuing coordinated progress in new urbanization and all-around rural revitalization and promoting integrated urban-rural development, in a bid to strengthen efforts to protect and improve people's livelihoods. These priorities reflect the people-centered philosophy guiding China's economic development.

Before the Central Economic Work Conference, the Political Bureau of the CPC Central Committee held a meeting to plan for 2025. The meeting stressed the need to strengthen "unconventional counter-cyclical adjustments," intensify the coordination of various policies, and make the macro regulation more forward-looking, targeted, and effective. This sets the tone for future macroeconomic policies.