Why the Chinese Economic Model Outperforms Market Cycles—And Why Austerity Is a Lie

For decades, the West has championed free-market capitalism as the engine of prosperity. But with constant boom-and-bust cycles, financial crises, and short-term corporate thinking, it’s becoming clear that this model is fundamentally unstable.

Meanwhile, China’s state-planned economy has delivered consistent growth, long-term innovation, and strategic stability. If we set aside political concerns and look purely at economics, their system offers undeniable lessons the West can no longer afford to ignore.

Western economies are trapped in an endless cycle of growth, crisis, and recovery. Every few years, there’s a financial bubble, a crash, and then a painful period of austerity before growth resumes. The 2008 financial crisis, the COVID-19 recession, and ongoing inflation concerns all highlight the fundamental flaws of an economy that prioritises short-term profits over long-term stability.

Corporations in the West chase quarterly earnings rather than sustainable growth. Politicians, bound by election cycles, rarely plan beyond four or five years. The result? Infrastructure deteriorates, technological leadership erodes, and industries requiring long-term investment, such as semiconductors, AI, and robotics, are left to the whims of market forces.

China doesn’t have this problem. The government actively directs economic growth through strategic planning, ensuring that critical industries receive consistent investment. Their five-year plans and long term industrial policies allow them to develop cutting-edge technology, expand infrastructure, and dominate emerging industries like AI, electric vehicles, and 5G.

Unlike Western economies, which rely on private corporations to drive innovation, China’s state-backed investment ensures that key industries are not just profitable but also strategically essential. This is why China is rapidly catching up, or even surpassing, the U.S. and Europe in fields like quantum computing, renewable energy, and advanced robotics.

Additionally, China avoids unnecessary recessions by managing credit and investment centrally. The government can intervene to prevent financial crises rather than waiting for markets to "self-correct." While the West suffers from constant economic instability, China’s economy keeps expanding.

The real issue isn’t that the West lacks the ability to adopt a more stable, planned economic approach, it’s that neoliberal ideology refuses to let go of a failing system. The idea that "the market knows best" is nothing more than a convenient myth designed to protect corporate elites while the working class pays the price.

That doesn’t mean the West should abandon democracy or fully embrace state control. But the Overton window, what is considered an acceptable economic model, must shift closer to China’s approach.

We need to recognise that state intervention in key industries isn’t a radical idea; it’s an economic necessity. A more effective economic system would involve the state taking an active role in critical industries like energy, AI, and infrastructure, ensuring long-term funding instead of leaving these sectors vulnerable to market fluctuations.

Governments should be setting industrial goals for the next 20 to 30 years, focusing on economic stability rather than scrambling to react to crises. Instead of assuming private corporations will lead innovation, public and private sectors should work together, with governments guiding strategic industries rather than leaving them entirely to speculation.

Finally, financial markets should be regulated to prevent unnecessary recessions, rather than allowing speculative bubbles to form and burst, leading to economic chaos that disproportionately harms working class people.Instead of letting speculative bubbles form and burst, governments should actively manage economic cycles like China does.

The West’s current system is broken. The economy doesn’t need to be at the mercy of unpredictable market cycles, nor should innovation be driven solely by corporate profit.

The idea that "the market knows best" is nothing more than a convenient myth, a cover story designed to protect a small group of corporate elites while the working class bears the cost of economic instability. China’s model, despite its flaws, proves that long-term planning and state-backed investment can drive innovation and economic stability.

 Meanwhile, Western elites cling to their failing system, not out of necessity, but because of ideological dogma, self-interest, and because their wealth and power depend on keeping things exactly as they are. 

The truth is, recessions, austerity cuts, and economic crises aren’t inevitable, they’re political choices. We don’t need to “balance the books.” We need to rewrite the rule book entirely and start prioritising human need over corporate greed.