Blinken himself stated that private industry cannot invest in certain strategic departments, which highlights why there is a need to learn from the Chinese model. An important part of the Chinese model is that, as a professor pointed out, the state does not merely enable the market; with its unique system, the state also plays an active role within the market. On a macro level, this involves creating the necessary infrastructure and conditions for an effective market by establishing a law-based environment, training talent, and providing essential infrastructure.
There are several examples that illustrate this point. The bullet train, which has become a calling card of China since 2013-2014, serves as a prime example. The development of bullet trains would not have been possible without the former Ministry of Railways, a government ministry. This ministry formulated plans for the railway networks and subsequently transformed into the General Railways Corporation of China, which acts as a central coordinator and enabler. As a system integrator, it integrates construction, engineering, equipment manufacturing, communication equipment manufacturing, and deployment, serving as the central node of this bullet train system. It has also established stable relationships with both domestic and international suppliers. Some of the routes in the bullet trains are profit-making, while others are loss-making. However, central coordination is essential to ensure the system operates cohesively. As a natural monopoly and a central state-owned enterprise, it has integrated what were previously northern and southern branches of the train company into a single entity. This integrator encompasses equipment manufacturing, assembly, and operation. The presence of such a central coordinator guarantees service even if some routes are not yet profitable, with some expected to become profitable within 30 years. However, profit is not the sole objective; the primary goal is to ensure stability of supply, which the private sector often cannot accomplish. For example, in the United States, attempts to have the private sector operate the Caltrain for 20 years have not yielded successful results for bullet train development.
Let's also consider electric vehicles (EVs). To some, electric vehicles appear to have emerged suddenly in China, but this is not the case. Their development is the result of over 30 years of sustained effort. In 1992, a renowned scientist wrote a letter to the chief of the State Planning Commission, the predecessor of the National Development and Reform Commission (NDRC), proposing the exploration of power batteries. He had pointed out as early as 1982 that there was a need to move beyond internal combustion engine-powered vehicles and develop more eco-friendly electric vehicles. In the same year, the chief of the National Planning Commission acknowledged this suggestion, confirming its inclusion in a five-year plan more than three decades prior. More recently, around 2021-2022, a professor who had earned his PhD in Germany and worked for ten years at Audi, the German automaker, returned to China. He founded and chaired an Auto Research Institute at a prominent university, where his research project focused on developing systems for electric vehicles. This visionary planning, coupled with state involvement, began approximately 25 years ago.
However, state planning alone does not guarantee triumph for every proposed endeavor. For instance, there was a past attempt to access foreign electric vehicle technology by offering foreign brands access to the Chinese market. The second part of this bargain did not materialize; China did not gain access to foreign technology despite allowing foreign automakers into its market. Nevertheless, China eventually developed its own technologies, which proved to be even superior to those available from abroad. Consequently, many Chinese consumers are increasingly preferring locally made electric vehicles.
In China, we often say "crossing the river by feeling the stones," meaning we learn as we go. While state planning does not guarantee success, a lack of planning often leads to failure. This underscores the concept of a "constructive market," a hallmark of the Chinese market, where the government plays a highly visible and clearly defined role. This includes capital markets with Chinese characteristics and local markets with their own unique features.
Therefore, a crucial question for countries in the Global South is to determine the appropriate role for their governments. They must identify strategically important sectors for their economies and decide how to develop them, whether by relying on state-owned companies, private companies, public-private partnerships, or joint ventures between local and foreign entities. These are all critical considerations for the Global South. The Belt and Road Initiative (BRI) and Brazil, Russia, India, China, and South Africa (BRICS) also present significant opportunities provided by the Chinese government.
(Transcribed from recording and edited.)