The China Model and Its Application and Development in Ethiopia

In the context of globalization and industrial modernization, China’s rapid economic growth over the past forty years of reform and opening up is a special case, and meanwhile it provides a model for some developing countries to follow. China has risen from a backward economy and emerged from what was asserted to be a collapse. In early 1992, following Deng Xiaoping’s Southern Tour Speech and the official proposal of the 14th Communist Party Congress to “establishing a socialist market economy”, scholars and the media began to focus on China's reform and development strategy. The terms “Beijing Consensus”, “China’s economic development path”, “China’s experience” and “China model” began to appear in academic circles. In May 2004, the American scholar Joshua Cooper Ramo published the Beijing Consensus. In this paper, Ramo provides a comprehensive analysis of China’s economic reform achievements and its experience based on the Washington Consensus (Ramo, 2004).

The argument of the “Beijing Consensus” has sparked a debate about whether China can offer a new model. Proponents praise it for explaining that since decolonization, the South has been able to follow its own political direction and find partners, countries, and businesses that do not fit the western vision (Gresh, 2008). Critics may question the validity and authenticity of the Beijing Consensus (Zhao, 2010). While the exact character of China’s development model remains debatable, the “China model” is often highlighted for its strategy of rapid economic reform while maintaining China’s previous political system (Kennedy, 2010). Many scholars attribute China’s economic success to its unconventional approach to economic policy, namely mixed ownership, basic property rights, and government intervention. In fact, however, for the past four decades, “China has been ruled by a disinterested government that takes a neutral position when conflicts of interest arise between different social and political groups. This is a reason why the Chinese government is more likely than other authoritarian regimes to adopt pro-growth policies. China’s integration into the world economy is a good example of this” (Yao, 2010). As we all know, China’s development is “state-driven development”, where the strongest impetus for development comes from the state, not from the market or society. The state’s commitment to development allows it to mobilize national efforts to correct all concepts, policies and initiatives that are not conducive to development. There is also the argument that the “China model” is really just a modification of the East Asian model. China’s market economy is in many respects similar to that of the newly industrialized economies of East Asia, such as Singapore and South Korea, in the 1970s and 1980s. Neoliberal economic policies and political authoritarianism at the time coincided with the timing of export-oriented development, which led to rapid modernization (Zhao, 2010).

What is even more troubling is that even in Chinese academia, there is no consensus on the concept of the “China model”. In particular, it is considered to be unpredictable as it does not specify China’s future political, economic and social long-term macro-strategic goals. Professor Qin from Tsinghua University, also stated his concern about the China model, arguing that unfettered state authority has driven China’s rapid economic growth (Qin, 2010). The concept of the so-called “China model” is therefore full of ambiguous and hard-to-define features. Even more puzzling is the fact that Chinese government has no official definition of the existence and conceptualization of the China model (Hodzi, 2020). Within China, this “China model” is more often referred to as “socialism with Chinese characteristics”, but this ambiguity does not seem to prevent Beijing from seeking to export its own development model to other countries. None has received more attention in recent years than Xi Jinping’s 2013 development strategy and framework for the “Belt and Road Initiative”, an international trade network linking Asia, Europe, and Africa (The World Bank, 2018). Indeed, the Belt and Road initiative will transform the economic core of the Eurasian continent, and it marks a significant change in China’s policy, signaling its quest for a greater leadership role in global affairs in line with its rising power and status.

China has made significant progress in Africa under the Belt and Road Initiative. Established back in 2000, the Forum on China-Africa Cooperation provides a platform for consultation and cooperation mechanisms to intensify diplomatic, security, trade and investment relations between China and Africa, according to an official statement. Through the BRI, Africa has received Chinese investment in infrastructure projects, while attracting Chinese companies to invest in economic and trade cooperation zones and build ports, railroads and other infrastructure. Now, China has signed more than 200 BRI cooperation documents with more than 170 countries and international organizations, including 53 African countries. In fact, Africa has been an important diplomatic step in breaking through China’s international isolation for nearly 70 years, from the establishment of diplomatic relations with Egypt, the first African country, in 1956, to the crucial one-third vote of support for China’s entry into the United Nations in 1971. Since Deng Xiaoping led China’s economic reform and opening up in the late 1970s, China has gradually moved away from unpaid aid to Africa and started economic and trade relations with Africa. In the process of China’s rapid economic development, African countries have both the resources China needs and a huge market, providing a vast place for Chinese capital and technology to be used. China has kept its position as Africa’s top trading partner for several years and is also the largest debtor country.

Despite the ambiguity of the definition of the “China model” and the concerns and doubts about China’s involvement, it has played an important role in China’s relations with African countries. China insists that its large-scale engagement on the continent is an excellent example of “South-South cooperation” that can help Africa unlock its development potential and that its economic engagement is more cooperative and responsive to local needs than that of the “North”. In June 2006, at the World Economic Forum Africa Summit in Cape Town, South Africa, the Zimbabwean government spearheaded a “Look East policy”, seeking to strengthen political and trade ties with China, Malaysia and Singapore.

At the beginning of the 21st century, the theory of “developmental state” was reintroduced. African governments and scholars have been actively studying the development experiences of East Asian countries and exploring and practicing them in the context of Africa’s local conditions, creating a boom in the developmental state. But can the Chinese development model really inspire African countries? In the following, I will use Ethiopia as a case study to examine the application and development of the China model here.

For the first decade or so of this century, Ethiopia has been presented to the world as a positive image of rapid economic growth, a model of “Africa rising”, and even called “the African version of China”. But in fact, as the only country in Africa that has not been colonized, Ethiopia has a large population but lacks natural resources such as minerals, and agriculture has always been its mainstay industry. In terms of political environment, there are some similarities between China and Ethiopia. In contemporary times, both countries are one-party states. In Ethiopia, the Ethiopian People’s Revolutionary Democratic Front (EPRDF) has been in power since 1991 until the political shift in 2018 (Ziso, 2020). This has all provided a relatively stable political environment for achieving industrialization and modernization, as well as structural transformation. China and Ethiopia have actually had a fairly long history of commercial relations, with bilateral trade between the two countries beginning in the 1950s. Ethiopia has been committed to a developmental state model and has been restructuring since 1991 when the EPRDF came to power, and China was seen as a potential source of experience. The relationship between the two countries became stronger as Ethiopia sought to replicate the experience of China’s accelerated economic development and replicate the development path (Nicolas, 2017). In the early 21st century, Ethiopia adopted an industrialization policy strategy with the goal of transforming the agricultural economy into an industrial economy. In it, the government made a major nation-building effort while characterized by rapid growth and economic development, with infrastructure becoming a national priority, and after 2010, rapid manufacturing growth and structural transformation of the economy were the central objectives. During this period were influenced by East Asian economic growth and development practices, with industrial development strategies focusing on labor-intensive, export-oriented sectors (Oqubay, 2015).

The China’s development model approach is based on significant investments in infrastructure and the public sector. In China, the strategy of “infrastructure-led economic growth” has been a driving influence, but the same strategy seems to be showing great limitations in Africa and Ethiopia. Over the past two decades, China has been the largest foreign investor in Ethiopia, playing a major role in both energy and major infrastructure projects such as Addis Ababa airport, roads, railways, terminals, and gas pipelines. One of the major projects is the Addis Ababa-Djibouti railroad, completed in 2018, provides a link between Ethiopia’s interior and the seaport. The completion of the railroad reduced a week-long trip to 12 hours, boosting 90 percent of Ethiopia’s foreign trade and reducing the cost of transporting goods. Although the railroad is on schedule, it still faces many issues and challenges. The first problem is the shortage of electricity, which makes the installation and maintenance of railroad facilities and equipment difficult and prevents the railroad from operating efficiently. Second, there was a shortage of passengers and cargo, and the capacity was not fully utilized. Thus, profitability and returns are also greatly affected, which creates debt pressure and the Ethiopian government is under pressure to repay the commercial loan from China (Weng et al., 2021). Another huge operational hurdle is the local ethnic conflict. There are about 80 ethnic groups in Ethiopia, and the main ethnic groups, Oromo and Amhara, are competing with each other for influence, and this ethnic and territorial disputes have made the railroad project an “impact target” (Cheru, 2016). At the same time, the majority of the labor force employed in the construction of the railroad is Ethiopian, but they often work in low-skilled jobs, which hinders the transfer of expertise and causes resentment.

Another successful point of China’s development model is the establishment of special economic zones (SEZs) and industrial zones, which can be understood as a general term used to describe various economic initiatives, including free trade zones, industrial zones, and free ports, among others (Tiefenbrun, 2012). Such SEZs with favorable investment conditions and credible policy environment have played an important role in attracting foreign direct investments (FDI). Ethiopia’s industrial development model relies heavily on such industrial zones. Currently, the country has over 20 industrial zones, at least partially operational, with many more under construction (EIC, 2021). Some were built by the government through the Industrial Park Development Corporation, while others were established by private sectors. The Eastern Industrial Zone (EIZ) was Ethiopia’s first industrial park, and it was once considered one of the country’s economic success stories. Initially planned in 2007 and later launched in 2009, the Eastern Industrial Zone was planned to attract 80 separate investment projects and create 20,000 jobs within five years (Brautigam and Tang, 2011). However, the vision of a mixed-use industrial zone housing clusters of manufacturers has not really been realized. The experience of China’s economic development shows that the government has adopted a number of innovative policies and systems, with flexible management and transformative policy experimentation by local governments being key to its success (Zheng and Tang, 2017). Although China is also a unified and centralized state, this is more constitutional and political, while economically and fiscally it allows local governments to play a greater role in promoting economic development. Within the framework of regional decentralization (Xu, 2011), local governments are autonomous in managing business activities within their jurisdictions. The central government uses appointments and promotions as the greatest incentive for local governments and to create a policy environment conducive to investment. On the other hand, in Ethiopia, the industrial zones are mainly centrally managed. It has less coordination with local governments, lack of coordination and cooperation between central and local governments, and sometimes even local governments feel reluctant to foreign investment, which is a great obstacle to industrialization development.

China’s rapid industrialization can be attributed to two major strengths: a large manufacturing sector and a large amout of cheap labor. Like China, Ethiopia has a large young population when it comes to manufacturing. The country’s manufacturing industry has experienced strong growth in the past few years and it is one of the leading performing economies in Africa (The World Bank, 2020). People are both hoping that manufacturing will provide more employment and even improve the standard of living there. But the realization of this ambition remains ambiguous, and despite strong economic growth, manufacturing has not really played a huge role in its economic growth. It is not actually creating enough jobs in this labor-intensive manufacturing sector, while the majority of the workforce in manufacturing remains largely concentrated in low-skilled, low-paid jobs (Giannecchini and Taylor, 2017). Labor relation is one of the key factors that pose serious challenges, with low labor productivity, frequent absences, and high work capacity and separation rates in Ethiopia relative to other sites of low-cost manufacturing such as Southeast Asia (Zheng and Tang, 2017). The renaissance of industrialization and modernization is a major dilemma in Ethiopia as well as in Africa. The relative lack of formal jobs and the fact that much of the growth in manufacturing employment has come from small, informal enterprises is in stark contrast to the rapid industrialization experience of East Asian countries. Some studies have shown that while large firms have shown strong productivity performance, they have not expanded employment, with a high proportion of mechanization and high-tech applications, which is not conducive to labor-intensive manufacturing; while small firms have absorbed labor but have not contributed much productivity growth. The result is that industrialization, although occurring in Ethiopia, replicating the model of labor-intensive manufacturing in other countries is difficult to achieve (Diao et al., 2020).

With a more stable political environment, Ethiopia’s strategy to become a “developmental state” has been progressing solidly, but the sudden death of Prime Minister Meles Zenawi in 2012 changed that. By late 2015, industrial expansion in the capital Addis Ababa sparked discontent and protests over unfair compensation for demolitions in the Oromia Region. As events unfolded, Oromos and Amharas began to express their dissatisfaction with being marginalized in the political and economic process. Protests spread within Ethiopia, from initial protests against the government and soon expanded to accountability for lack of employment and inequality. In the absence of channels for constructive dialogue with the government, when people’s demands were not met, they were forced to express their dissatisfaction through violence, leading to political change. Ethiopia’s first Oromo prime minister, Abiy Ahmed, has been in power since April 2018. Hoping to make the economy more liberal, he has turned to Western donors and also to the United Arab Emirates in the Middle East. Since November 2020, wars or internal conflicts between the central government and the former power holders have put Ethiopia’s controllability and stability into question.

Ethiopia’s developmental state experience reflects a number of problems. First, the local community issues are complex and the population lacks understanding and consensus on the developmental state. Developmental policies require all classes to make short-term sacrifices for the long-term interest of development of the country. The general view in China and East Asian countries is that governments have a responsibility to promote economic development; the disagreement lies only in how governments promote economic development, but such a common understanding has not yet emerged in Ethiopia. However, the Ethiopian people have a weak identification with the government and have not formed a consensus to promote the country’s development. Second, the ruling party failed to solve the social conflicts caused by the high economic growth. At the beginning of the administration, the whole country was in absolute poverty and the people were more concerned about economic development, and the strategy of focusing on economic construction and relying on state power to promote industrialization did not cause much controversy. However, after years of rapid economic growth, Ethiopia’s demographics, such as a larger group of young laborers, who provide the motivation to fight for more democracy and rights; the majority of the people, who are still in poverty, do not think they are benefiting from the economic growth and want to express their interests through marches and protests. The entrenched conflict is manifested through ethnic conflict. Third, local governments are not competent enough, and it is difficult to achieve a positive interaction between the government and business. Local governments lack the governance capacity and the motivation to help industrial parks overcome specific difficulties in their development. Previously, the highly effective organizational control of the former ruling party was able to compensate for the lack of capacity of state institutions, and policy implementation relied more on party capacity than on administrative agencies. Its development capacity is now further weakened by the internal polarization of the EPRDF. Ethiopia’s political changes have put its strategic planning for a developmental state at great risk of damage. Prime Minister Ahmed’s embrace of free markets and proximity to Western aid agencies such as the IMF means that he has a different view of democracy, development, and the role of the state in development, as well as the prioritization of these three than Meles. In the foreseeable future, the strategy of a “democratic developmental state” may shift for the Ethiopian authorities, but in the short term, it will also be difficult for officials to find a real alternative to a democratic developmental state.

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