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Challenging Global Neoliberalism? The global political economy of China's capital controls

2012; Taylor & Francis; Volume: 33; Issue: 9 Linguagem: Inglês

10.1080/01436597.2012.720841

1360-2241

Mattias Vermeiren, Sacha Dierckx,

State Capitalism and Financial Governance

Abstract Abstract This article engages with critical ipe scholars who have examined the rise of China and its impact on the neoliberal world order by analysing whether China poses a challenge to the neoliberal norm of free movement of capital. We argue that China's capital control regime is marked by a contradiction between its domestic social relations of production and its global geo-economic ambitions. On one hand, the key raison d'être of China's capital controls is to protect and consolidate an investment-led accumulation regime that redistributes income and wealth from Chinese workers to its state-owned enterprise sector. Dismantling these controls would result in changing social relations of production that would not necessarily benefit Chinese industrial and financial capital. On the other hand, China's accumulation regime has found itself increasingly constrained by the dynamics of US monetary hegemony, making the contestation of US structural monetary power a key global geo-economic ambition of China's ruling elites. In this regard, China would have to challenge the dominance of the US dollar by promoting the international role of the renminbi and developing liquid financial markets. Since it would have to abolish its capital controls in order to achieve this, there is a plain contradiction between its domestic and global objectives. A good understanding of this contradiction is necessary in order to be able to assess whether China will be capable of challenging the neoliberal world order in general and the norm of free movement of capital in particular. Notes 1 S Breslin, ‘The “China model” and the global crisis: from Friedrich List to a Chinese mode of governance?’, International Affairs, 87(6), 2011, pp 1323–1343; Y Huang, ‘Rethinking the Beijing Consensus’, Asia Policy, 11(1), 2011, pp 1–26; S Kennedy, ‘The myth of the Beijing Consensus’, Journal of Contemporary China, 19(65), 2010, pp 461–477; and B Naughton, ‘China's distinctive system: can it be a model for others?’, Journal of Contemporary China, 19(65), 2010, pp 437–460. 2 G Arrighi, Adam Smith in Beijing: Lineages of the Twenty-first Century, London: Verso, 2007. 3 M Hart-Landsberg & P Burkett, ‘China's rise to model status’, Monthly Review, 56(3), 2004, pp 13–25. 4 Arrighi, Adam Smith in Beijing, p 24. For similar arguments, see M Li, ‘The rise of the working class and the future of the Chinese revolution’, Monthly Review, 63(2), 2010, pp 38–51; and J Yang, ‘The historical significance of the combination of socialism and the market economy’, Science & Society, 73(2), 2009, pp 170–176. 5 S Breslin, ‘The “China Model”’; D Lo, ‘China's quest for alternatives to neo-liberalism: market reform, economic growth, and labor’, Kyoto Economic Review, 76(2), 2007, pp 193–210; D Lo & Y Zhang, ‘Making sense of China's economic transformation’, Review of Radical Political Economics, 43(1), 2011, pp 33–55; SM Rucki, ‘Global economic crisis and China's challenge to global hegemony: a neo-Gramscian approach’, New Political Science, 33(3), 2011, pp 335–355; and G Strange, ‘China's post-Listian rise: beyond radical globalization theory and the political economy of neoliberal hegemony’, New Political Economy, 16(5), 2011, pp 539–559. 6 Y Cheng, ‘The Chinese model of development: an international perspective’, Social Sciences in China, XXXI( 2), 2010, pp 44–59. 7 Arrighi, Adam Smith in Beijing, p 353. 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See also R McCauly, ‘Renminbi internationalisation and China's financial development’, bis Quarterly Review, December 2011. 79 Prasad & Ye, ‘The renminbi's role in the global monetary system’, p 14. See also Lardy & Douglass, Capital Account Liberalization and the Role of the Renminbi; and A Subramanian, Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition, Peterson Institute for International Economics, Working Paper 11–14, September 2011. 80 B Eichengreen, Exorbitant Privilege, Oxford: Oxford University Press, 2011, p 146. 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By permitting banks to set deposit rates 10% above the benchmark level, the Chinese authorities have proceeded with (very limited) interest rate liberalisation since June 2012. See S Rabinovitch, ‘Chinese banks ramp up fight for customers’, Financial Times, 13 June 2012. 90 See also Hung, ‘America's head servant?’. 91 M Pei, ‘China's politics of the economically impossible’, Project Syndicate, 16 March 2012. 92 V Shih, ‘High wealth concentration, porous exchange control, and shocks to relative return: the fragile state of China's foreign exchange reserve’, paper presented at the Institute of New Economic Thinking meeting, Bretton Woods, 9 April, 2011. 93 At the time of writing (July 2012), it seems that the Chinese state is still pursuing further liberalisation despite rising capital outflows. See, for instance, S Rabinovitch, ‘China opens door to foreign hedge funds’, Financial Times, 10 July 2012. According to the Hurun Report, which keeps track of China's capitalist elites and was published on 31 July 2012, more than 16% of China's rich have already migrated, while 44% intend to do so. Moreover, more than 85% are planning to send one-third of their assets overseas. See ‘BoP until you drop’, The Economist, 4 August 2012.