Why Ideology Is the Wrong Lens for Understanding China

China’s rise remains one of the greatest puzzles of our age.

For Europeans, the puzzle is especially acute. We watched the Soviet Union collapse under the weight of central planning. We saw the countries of Central and Eastern Europe abandon communist rule and successfully embrace liberal democracy, while Communist parties across Western Europe gradually faded into political irrelevance. By the beginning of the twenty-first century, history appeared to have settled the argument.

Yet, while European communism disappeared, the Chinese Communist Party presided over one of the most remarkable episodes of economic transformation ever recorded. Hundreds of millions escaped poverty. China became the world’s manufacturing center before emerging as a technological power in fields ranging from high-speed rail to artificial intelligence.

If the ideological categories inherited from the twentieth century fully explained political and economic outcomes, China’s trajectory would be difficult to understand.

The contradiction is usually resolved by forcing China into familiar categories. Admirers describe China as proof that socialism works. Critics insist it is capitalist in all but name. Others call it state capitalism, authoritarian capitalism, or market socialism. Each label captures part of reality, yet none adequately explains why China has consistently outperformed expectations for nearly half a century.

Perhaps the problem lies less with China than with the lens through which we observe it.

Western political thought remains deeply attached to ideological classifications. Countries are expected to belong neatly to one family or another: capitalist or socialist, liberal or authoritarian, free market or centrally planned. Reality, however, is rarely so accommodating. Societies prosper not because they conform to abstract ideological models but because their institutions perform certain essential functions.

From this perspective, the Chinese state appears less paradoxical.

Its first function is to reduce uncertainty. Families, entrepreneurs, and investors require a sufficiently predictable environment to make decisions whose rewards may lie years into the future. Rules matter, but so does confidence that strategic objectives will not be fundamentally rewritten every electoral cycle. Whatever one thinks of China’s political system, it has demonstrated an unusual capacity to sustain long-term industrial policy, infrastructure development, educational investment, and technological ambition.

Predictability, rather than ideology, becomes a productive asset. Modern institutional economics has repeatedly shown that stable rules and credible long-term expectations encourage investment and innovation regardless of the ideological character of the state.

Yet stability alone has never been enough. History offers countless examples of orderly societies that gradually became stagnant because they valued preservation more than experimentation. Excessive order eventually suffocates adaptation.

China largely avoided that trap. Under Deng Xiaoping, reform did not begin with a comprehensive national blueprint. Instead, Beijing encouraged controlled experimentation, captured by Deng’s famous metaphor of “crossing the river by feeling the stones.” Rather than attempting to redesign the entire economy overnight, reforms were introduced locally, observed carefully, and expanded only after demonstrating success.

Special Economic Zones became laboratories rather than templates. Shenzhen, once a fishing village bordering Hong Kong, received regulatory freedoms that would have been politically impossible to introduce across China as a whole. Successful policies spread gradually. Failures remained locally contained.

The process resembled evolution more than revolution. This decentralized experimentation is often overlooked because Western observers understandably focus on the central authority of the Communist Party. Yet much of China’s economic dynamism has emerged from competition among provinces, municipalities, and development zones.

Guangdong, Zhejiang, Jiangsu, Shanghai, and other regions have competed vigorously to attract investment, develop industrial clusters, improve logistics, nurture technological ecosystems, and attract highly skilled workers. Provincial governments have frequently experimented with different regulatory approaches before successful practices were adopted elsewhere. This competitive federalism—administrative rather than constitutional—has become one of the least appreciated features of China’s economic development. Regional authorities possess considerable discretion in implementing national objectives, producing remarkable institutional diversity beneath an apparently unified political structure.

Ironically, this arrangement resembles an insight more commonly associated with Friedrich Hayek than with Karl Marx.

Hayek admired medieval Europe not because it was politically unified but because it consisted of numerous competing jurisdictions. Cities, principalities, kingdoms, and free ports experimented with different legal arrangements, commercial institutions, and systems of governance. Competition among political units generated discovery. Successful institutions spread without requiring any single authority to design them. Much of Europe’s historical prosperity emerged from centuries of institutional rivalry rather than administrative uniformity.

What Hayek admired was not political fragmentation itself, but a civilization capable of generating institutional discovery through competition. Judged by that criterion, contemporary China appears considerably more Hayekian than many Europeans would comfortably admit.

China has recreated something functionally similar within a unified state. Its provinces do not enjoy sovereign independence, yet they frequently compete as though they were distinct economic ecosystems. Local innovation unfolds within an overarching national framework that provides strategic coherence while allowing considerable institutional variation.

The contrast with today’s European Union is striking.

European integration has delivered extraordinary achievements. Peace among historic rivals, the world’s largest single market, freedom of movement, and common standards have brought undeniable benefits to hundreds of millions of Europeans.

Yet integration also carries an inherent tendency towards harmonization. Uniform regulations facilitate trade, but they also reduce the space for institutional experimentation. Rules that become universal inevitably leave fewer opportunities to discover alternative solutions.

One may therefore ask an uncomfortable question. Could a Shenzhen emerge in twenty-first-century Europe?

Could one European region receive broad exemptions from labor regulation, taxation, planning law, environmental procedures, or administrative requirements to test an entirely different model of development? Could neighboring regions compete by adopting alternative institutional arrangements, allowing success to be imitated while failures remained geographically contained?

The question is not whether Europe should imitate China. Europe’s political traditions, constitutional heritage, and conception of liberty differ profoundly from those of China.

The more interesting question is whether Europe has gradually become so committed to institutional uniformity that it has unintentionally reduced one of the principal engines of its own historical success: competition among jurisdictions.

Perhaps China’s rise is not an ideological anomaly after all. Perhaps it simply reminds us that successful societies perform two essential functions simultaneously. They create sufficient order to make long-term planning worthwhile while preserving sufficient institutional diversity for adaptation and innovation to emerge. Different political systems may achieve that balance through different means.

Whether Europe chooses to learn from China is ultimately a political question.

Whether Europe is willing to understand why China succeeded should be an intellectual one.

The greatest obstacle has never been China’s political system itself. It has been our persistent habit of looking for ideological answers to what is, at heart, a functional problem.