Rajiv Kumar

Learning from Chinese capitalism

Rajiv Kumar | Updated on April 17, 2011

One of the features of China's high growth model is the seamless coming together of the private and public sectors. India, with its entrenched public-private divisions, has a long way to go in this regard.

A worldwide survey on popular support for capitalism reveals that 67 per cent of the Chinese strongly support their variety of capitalism. What a delicious irony that China has emerged as capitalism's saviour! Surprisingly, in the US, the holy land of free market capitalism, only 43 per cent are positive about capitalism; this segment has declined perceptibly in the last five years. Not surprisingly, in France, the support is the lowest, with a mere 37 per cent vouching for Adam Smith's construct.

It would be a good idea to conduct such a survey in India, 20 years after the 1991 reforms. Being an ardent supporter of reforms and one who thinks that we are doing ourselves a great disservice by not pushing the reform agenda more vigorously, I am sure that such a poll will unearth strong support for a more open and decontrolled economic system.


The reasons for the Chinese topping the list of capitalism's supporters were on display during the BRICS summit that concluded in Sanya on Thursday.

Sanya is a coastal town at the southern tip of Hainan, a part of China which until 1990 was backward, underdeveloped and in Chinese folklore, the end of the world.

There is some substance to the folklore because I am told that even until after 1949, Hainan was used as a place for exiling undesirable social elements just as the Andamans was used for kala paani by the British. Hainan, though, has been transformed in the last 20 years. Sanya is a bustling sea-side resort with broad, perfectly surfaced boulevards, a shore line that compares favourably with Mumbai's, gleaming silver beaches with manicured greens lining them, and perhaps more hotel rooms in all categories of hotels than Mumbai or Delhi, or even the two put together.

The piece de resistance is the 308 km Hainan East Ring high speed railway that opened on December 30, 2010, and covers the 210 km between Sanya and Boao in 45 minutes. The train ride is smoother, quieter and overall more comfortable than the TGV in France or the Shinkansen in Japan, something that I would otherwise have found hard to believe.

The Chinese Railway proudly tells us that up to 2015 the country will have 16,000 km of high speed railways, having started only in 2007. Since then, in about four years, these high speed trains have already carried more than 600 million passengers! And the Shanghai to Beijing line has not even started operating. When it commences operations in June 2011, this 1,318 km railway will have the capacity to carry 80 million passengers one way at 350 km per hour!


Chinese people support their form of capitalism simply because it has delivered, and promises to deliver in the foreseeable future as well. Its greatest achievement has been to lift more than 400 million people out of abject poverty in three decades, through economic growth at breakneck speed.

For me, the most remarkable feature of Chinese capitalism is the complete blurring of the distinction between the public and private sectors. The two work seamlessly under the overall regulatory gaze of the Chinese Communist Party. This can be seen in the case of companies such as Huawei and ZTE, which despite their public sector ownership operate truly like commercial, profit-maximising enterprises.

But the best micro-example is the Hainan COSCO Boao Co. Ltd, founded in 2006 as a subsidiary of China Ocean Shipping Company (COSCO), which is an undiluted state owned enterprise. COSCO Boao is like a private sector entity in all aspects. It owns the Soffitel Hotel and the International Convention Centre where the Boao Forum is held, and three other properties including a golf course. Its owner/executive greeted all participants with more enthusiasm than any proud hotel owner himself and, at the same time, showed due deference to the Party and government functionaries present.

In the case of COSCO Boao, which wants to “... turn itself into a leading comprehensive tourist enterprise group that is famous in the world and first-rate in China”, there is no telling where private sector ethos and practices end and public sector control and accountability begins. This is Chinese capitalism, which delivers!


In contrast, even in the case of a few designated PPP projects, Indian capitalism operates with strongly entrenched divisions between the public and private sector. There is still a relative lack of trust between them, and the perception is that only one side is acting in the national interest.

This attitude must change fast, if we have to fulfil our actual potential. Both sides are perhaps at fault. The government continues to believe that it is the sole repository of wisdom and protector of national interest, with blanket authority to ignore private sector views, chastise it occasionally and generally subject it to overt authority. Private business in turn oscillates between either being a meek supplicant or wrongly believing and proclaiming that the government simply does not matter, and that growth will happen despite it.

It is time that a more mature, trust-based and mutually accountable relationship is created between the two sides. Failure on this score will result in a disastrous retrogression.

(The author is Director-General, FICCI. The views are personal.)

Published on April 16, 2011

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