China’s False Miracle: Why Crony Comprador Capitalism Threatens Global Order

As China’s development model falters, its systemic contradictions demand urgent scrutiny—not only to explain Beijing’s behavior, but also to guide how the world navigates the turbulence its decline may unleash.

For decades, China’s rise was celebrated as an alternative to Western liberal capitalism. Observers coined labels such as “state capitalism,” “market Leninism,” and “authoritarian modernization” to capture how an autocratic regime sustained rapid growth. Yet these labels obscure the deeper institutional logic behind both China’s ascent and its looming stagnation.

In my 2024 book, Crony Comprador Capitalism: The Institutional Origins of China’s Rise and Decline, I argue that China’s model is neither a coherent blend of state planning and market dynamism, nor a durable synthesis of authoritarianism and capitalism. Instead, it is a fragile hybrid: cronyism, whereby elites exploit state power for personal enrichment, fused with compradorism, whereby those same elites align structurally with foreign capital, trading away national autonomy for short-term gain.

The result is not autonomous modernization but semi-peripheral dependency—an institutional trap I call crony comprador capitalism. This system now fuels China’s domestic malaise and increasingly acts as a structural driver of global disorder.

The Origins of China’s Crony Comprador Capitalism

The roots of China’s current model lie in the lessons Deng Xiaoping extracted from two existential shocks: the 1989 Tiananmen crackdown and the Soviet collapse. From these crises emerged a doctrine with three cardinal rules: no political reform, no appeasing the people, and appeasing the West—a posture designed to secure foreign market access, capital inflows, and technology transfer.

This post-Tiananmen strategy—radical domestic marketization fused with deep global integration—shifted China from market socialism to what might be called market Leninism: capitalist growth under the command of a one-party state, increasingly aligned with the Washington Consensus, but under ever tighter authoritarian control.

Freed from political constraints and awash with Western capital, China’s ruling elites—princelings and entrenched bureaucrats above all—converted reform into an instrument of personal enrichment. The imperatives of “forced growth” spurred officials to enlarge the economic pie, not to share it more equitably, but to extract larger slices for themselves. Nomenklatura privatization produced a new plutocracy, while rent-seeking metastasized into the system’s DNA.

As inequality deepened and domestic consumption stagnated, China’s growth became outwardly oriented—reliant on external demand to offset internal exclusion. Thus were laid the foundations of crony comprador capitalism.

Western governments—especially the United States—played a pivotal role in enabling China’s transition to capitalism. Throughout the 1990s, Washington lifted sanctions, opened its markets, and ushered China into the WTO—but only on exacting terms: indiscriminate market access, requiring Beijing to dismantle protective barriers wholesale. The strategic wager was clear: integration would transform Beijing into a “status quo power” aligned with liberal international norms.

Beijing, for its part, embraced globalization with unguarded enthusiasm. By the decade’s end, Chinese leaders even entertained fantasies of a Western-led infusion. What materialized instead was access to foreign markets and technology—secured only by dismantling economic nationalism through sweeping trade-and-investment liberalization at home. Coupled with entrenched cronyism, this external dependence deepened structural distortions—above all, a chronic shortfall in domestic demand. Premature liberalization was therefore not just a risky strategic choice, but a systemic compulsion—the most definitive marker of China’s comprador turn.

Not a Developmental State—And Never Was

China has never followed the path of East Asia’s developmental states. Juxtaposing it with South Korea or Taiwan is fundamentally flawed. The late-industrializers of the 1960s–1980s—South Korea and Taiwan—combined export promotion with strategic protection, nurturing domestic champions behind guarded markets. China, by contrast, pursued export promotion alongside unprecedented market opening—in the 1990s and well into the early 2000s—effectively dismantling economic nationalism in favor of foreign dependence.

Equally decisive was institutional design. The East Asian developmental states relied on what Peter Evans termed embedded autonomy: competent bureaucracies insulated from rent-seeking yet embedded enough to coordinate industrial transformation. China has never demonstrated such capacity. Its state is “strong” in coercion and extraction but, in Gunnar Myrdal’s words, “soft” in redistribution, justice, and innovation.

These structural weaknesses—concentrated power, exclusionary institutions, and technological dependence—set the stage for both domestic stagnation and assertive, unpredictable foreign behavior.

Lacking a genuine national innovation system, China’s technological progress has lagged far behind its political ambitions, leaving it tethered to the global innovation ecosystem. The much-vaunted Made in China 2025 initiative, launched in 2015, revealed dependence, not autonomy—showing continued reliance on Western intellectual property and core components.

Xi Jinping’s hostility to welfarism has compounded these failures. By rejecting redistribution, the regime locked in chronic underconsumption and reinforced reliance on external demand—the very dependency it once pledged to overcome. His campaign for high-tech autarky has fared no better. Institutions that reward loyalty over merit and rent-seeking over creativity systematically suffocate technological advance.

The results speak for themselves. Despite lavish state spending, China has not produced Nobel-caliber breakthroughs in the natural sciences—falling behind not only Germany or Japan, but even the Soviet Union, which staged its Sputnik moment in the 1950s. The gap underscores the limits of a system adept at reverse engineering but barren in original discovery.

Far from being the industrial powerhouse of Western imagination, China has faced premature deindustrialization since the mid-2000s, with factories relocating abroad, foreign investment draining away, and unemployment swelling among working-age cohorts. The popular narrative of a “scientific superpower” is not simply premature—it is fundamentally misleading.

In short, China has achieved growth without inclusive development and modernization without institutional transformation. Its ascent is real, but its foundations are brittle—and they foreclose the developmental trajectory to which it is so often, and so wrongly, compared.

A Source of Instability, Not Peace

China’s ruling elite may trumpet “national rejuvenation,” but this is no return to economic nationalism. Xi Jinping has declared repeatedly, “the doors to opening will only open wider,” signaling not confidence but structural dependence. From unchecked free-trade zones to financial liberalization, Beijing treats globalization as a political absolute, reflecting its own entrapment in crony comprador capitalism.

This dependency stems from China’s semi-peripheral rise (China’s structurally dependent position in global value chains), a trajectory shaped by crony comprador capitalism that institutionalized chronic domestic underconsumption and overreliance on external markets. Trapped in the lower tiers of global value chains, China has depleted domestic resources while failing to generate internal demand. The imbalance drives relentless pursuit of overseas markets and strategic assets—many already strained or geopolitically contested—producing not just economic distortion but rising global imbalances and intensified geostrategic competition.

Externally, these structural vulnerabilities translate into strategic insecurity. Domestic stagnation and institutional fragility heighten sensitivity to shocks, yet external cues amplify hubris. The rise of Donald Trump, coupled with the erosion of democratic norms in the West, reinforced Beijing’s confidence, enabling it to project assertiveness abroad while masking weakness at home.

The result is a dual impulse—insecurity and hubris—manifesting in “wolf warrior” diplomacy, military escalation, and information warfare. China is no longer a stabilizing force; its dependence on external markets and concentrated, exclusionary domestic institutions make it a structural source of global disorder.

What Comes Next

China’s crony comprador capitalism is not only the engine of its rise—it is the root of its inevitable decline. Built on elite capture at home and dependency abroad, the model generates GDP while eroding development, legitimacy, and institutional resilience. Caught in a Tocquevillian moment of concentrated power and social tension, Xi Jinping seeks to mitigate the dire consequences of China’s crony comprador capitalism—its most pernicious form—yet refuses to overhaul the ancien régime that created it. The structural reality is inescapable: China’s institutions lock it into decline. Without systemic reform, China faces not mere stagnation, but potential collapse.

COVID-19 did not create this crisis; it merely exposed and exacerbated a deeper rot: distorted incentives, brittle institutions, and a regime unwilling to change course.

The world now enters a new era—not of capitalism versus communism, but democratic versus authoritarian capitalism. China’s model, once viewed as a viable alternative, is increasingly recognized as a cautionary colossus: politically brittle, economically constrained, and strategically overextended.

The stakes are high. Engaging China under the assumption that it will evolve into a responsible stakeholder repeats the error of post-Tiananmen appeasement. Without reform, implosion is not merely possible—it is increasingly probable.

To mitigate this risk, the global system must adapt. Selective decoupling—in technology, capital, and data—is essential. Equally vital is rethinking globalization itself: prioritizing resilience over scale, sovereignty over speed, and democracy over dependence.

Only by reshaping engagement can the world prepare for the realities of China’s faltering model. This uncertain shift aligns with Dani Rodrik’s “Capitalism 3.0 — a post-neoliberal order grounded in institutional integrity and social balance. Only then can we move beyond illusions of convergence and build a post-China strategy—not rooted in fear, but in foresight.

Jianyong Yue previously taught Chinese politics and development at King’s College London and the London School of Economics. He is currently a visiting fellow at the London School of Economics and the author of China’s Rise in the Age of Globalization: Myth or Reality (Palgrave Macmillan, 2018) and Crony Comprador Capitalism: The Institutional Origins of China’s Rise and Decline (Palgrave Macmillan, 2024).