A Third Way: The Origins of China’s Current Economic Development Strategy by Lawrence C. Reardon (review)

What is the best way for China to deal with the international economy? Is the global marketplace a source of danger that should be kept at arm’s length, or a dynamo that will stimulate China’s economic growth? Reardon’s A Third Way traces how three generations of Chinese Communist Party (CCP) leaders responded to and debated on these two questions. Building on a rich body of valuable sources, including internally circulated policy documents, the book delineates a complex elite learning process which culminated in a paradigm shift in China’s development strategy from semi-autarchy and self-reliance to active engagement in global trade and active use of international financial resources.

While a “third way” or “middle way” in the Western political discourse refers to policies that adjust the mechanisms of the free market to achieve the progressive goals of social equality and justice (p. 31), the Chinese third way, as Reardon defines it, has a different historical context and meaning. The first way refers to Mao Zedong’s revolutionary Stalinism, a development model that relied on normative tools, such as ideology and political campaigns, to promote rapid increase in agricultural and industrial outputs and achieve self-reliance in the short term. The second way refers to Zhou Enlai and Chen Yun’s bureaucratic Stalinism, a strategy that used remunerative tools to promote moderate growth and gradually achieve self-reliance through import substitution industrialization (ISI). In his first book, Reluctant Dragon: Crisis Cycles and Chinese Foreign Economic Policy (Seattle: University of Washington Press, 2002), Reardon has shown how these two inwardly oriented development strategies alternatively influenced the Chinese economy from the 1950s to the 1970s, as reflected in revolutionary Stalinist projects of the Great Leap Forward and the Third Front, and bureaucratic Stalinist projects such as the post Great Leap Forward recovery and Zhou Enlai’s proposal of Four Modernizations. As a sequel of Reluctant Dragon, A Third Way focuses on the emergence of an outward-looking, decentralized, consultative economic paradigm after Mao’s death in 1976 through conflicts between two elite groups—the moderate bureaucratic Stalinists led by Chen Yun and the international Leninists represented by Zhao Ziyang.

As Reardon puts it, “[T]he Chinese Third Way did not emerge out of the sea fully formed, as Botticelli depicted the birth of Venus” (p. 34). The book successfully demystifies the CCP official narratives which portray the third plenary session of the eleventh central committee as the watershed moment. Rather than a clear-cut departure from the Maoist past, Reardon convincingly shows that China’s eventual adoption of an outwardly oriented development strategy resulted from a convoluted process of selective adaptation of the pre-1979 policies, experimentation in the southeast coast, policy review and adjustment, and overcoming economic irregularities and political fissures.

One policy instrument that embodies the changes and continuities, path dependency, and historical contingencies across 1979 is Special Economic Zones (SEZs). Widely recognized as the hallmark of Deng Xiaoping’s economic statecraft, SEZs can trace their origin to the Export Commodity Processing Base (ECPB) first established in 1960. At the time, to alleviate the famine caused by the Great Leap Forward, Zhou Enlai implemented a combination of administrative measures and material incentives in the ECPBs to finance grain imports (p. 15). Originally part of the planned-oriented export promotion scheme, in the late 1970s the ECPB was transformed into SEZs, where foreign capital, managerial knowledge, and technology were utilized locally but insulated from the core of the socialist economy. Although this transformation coincided with the proliferation of export-processing zones (EPZs) among many newly industrialized countries, particularly the Asian Tigers, the Chinese SEZs were different from the EPZs abroad. Started as a strictly local experimentation, the Chinese SEZs initially suffered from severe criticism from the moderate bureaucratic Stalinists for corruption, smuggling, and profiteering. Despite their opponents’ efforts to contain the SEZs...