Friedrich List in China’s Quest for Development

Carried in China Forum (U.S.A.), Winter 2014

By Mei Junjie


Friedrich List was a leading 19th-century German political economist who put forward a theory of “national economics” based on the development of “productive power”. He believed that a nation’s true wealth lay in the profound development of its productive power rather than its current exchange values. Strongly critical of the individual-centered, laissez-faire and cosmopolitan economics of Adam Smith, List opposed the absolute doctrine of free trade and systemized the “infant industry argument” that called for trade protection for catch-up industrialization. He gave prominence to the national idea and insisted on the special requirements of each nation according to its circumstances and especially the stage of its development. With his theoretical sympathy for backward countries, Friedrich List has been highly appealing to the Chinese elites even to this date. An overview of List’s influences on the modern evolution of China, while being intellectually enlightening, demonstrates what this great development strategist can now offer to the Chinese in their current phase of challenging transformation.


Early Introduction of List into China

When Friedrich List was born in 1789, China was at the zenith of its imperial prowess and complacent isolation. It is recorded that, as Lord Macartney journeyed to Beijing for business opportunities in 1793, Chinese Emperor Qianlong addressed through him to the English king, “Our Celestial Dynasty’s majestic virtue has penetrated onto distant lands under Heaven, and Kings of all nations have offered their costly tribute by land and sea…we possess all things. I set no value on objects strange or ingenious, and have no use for your country’s manufactures.” By 1846 when List passed away, the situation for China had become utterly different. With The Treaty of Nanjing signed in 1842 in the wake of the Opium War, China embarked upon a century-long road of peripheralization and resistance. Very precisely, the lifetime of List coincided with the swift decline of China.

While the door of China was being forcibly opened, western economics spread to China, first of all, thanks to a German missionary by the name of Karl Friedrich Gutzlaff (1803-1851), who published in Chinese two booklets respectively on political economy and on commerce around 1840. Friedrich List was understandably not introduced to the Chinese, as Gutzlaff believed that free markets and laissez-faire would lead to economic and social progress if organized under a system similar to the British.

The spread of western economic works into China did not accelerate until Chinese students returned from their overseas studies. In 1902, The Wealth of Nations was published in Chinese, its translator being a UK-returned Yan Fu, who followed Adam Smith in advocating unrestricted international trade. Yet, List was among the 20 or so economists mentioned in the preface to the Chinese version, and furthermore, other heavyweight Chinese intellectual leaders tilted towards the Listian position. Liang Qichao, for example, being knowledgeable of the German Historical School and List as well, resented the free trade imposed on China by western powers and urged China to follow a mercantilist policy.

Classroom notes taken in 1911 by Xiong brothers, two students at Peking Imperial Law School, indicate that List and his theory had been addressed in lectures. The anonymous lecturer apparently had sufficient knowledge of the major arguments of List. In 1914, Dang Bao, a marginal newspaper published by some political activists in Japan, carried an article by Xu Zhongying “On the Relationship between Protection Policy and National Economy”. Although the actual identity of the author remains obscure even today, Xu’s article gave a fairly detailed introduction to the key aspects of List’s doctrine, highlighting the strategic need to make short-term sacrifices for long-term development. Then in 1922, Ma Yinchu, a returned student from America, made a speech in Peking on “Doctrines of Marx and List: which is fit for China”. Ma’s conclusion was that China needed List more than Marx, as it suffered from very poor productivity rather than any conflict between capital and labor.

Following all this, a full account of List and his theory came into China largely owing to the efforts of the Chinese studying in Germany. In 1925, a biography of List first appeared in China. It was authored by Liu Binglin (1891-1956), who had studied economics at the University of Berlin and the University of London during 1920-1925. In the same year, Wang Kaihua (1893-1976), a Ph.D candidate at the University of Gottingen, translated The National System of Political Economy, which came out in Chinese as National Economics in 1927. It is known that Wang graduated from Gottingen in 1926 with his dissertation on The Theory of List and Its Relevance to China. These two returned scholars from Germany developed a strong appreciation of List and his arguments.


Appeal of List to the Chinese

The Chinese were attracted to Friedrich List primarily because of List’s emphasis on tariff protection for catch-up industrialization. As remarked by Wei Chenzu, the Chinese minister at the German legation who wrote a preface for the translated work of List, “China has been deprived of the right to set its tariff rates; on the other hand, the Chinese are becoming Europeanized in their consumption taste. As a result, foreign goods abound in our market, driving domestic industries to further declines. Given our weak productivity and heavy reliance on other countries for various needs, it is highly proper that List’s theory should be adopted in China.”

Those who introduced List into China were fully aware of the role that the Listian strategies had played in German history. It was recognized that Germany and America became able to rival Britain in their industrial competitiveness largely by drawing upon the propositions of List. List’s theory was therefore compared to “a good prescription for the current Chinese disease” meriting “research by patriots and political economists”. For these Chinese, as noted by Wang Kaihua in his own preface to the translation, “If our country hopes to seek wealth and power, industry and commerce must be developed, and to develop them, it is imperative to resist the foreign competition in our market, so that domestic products may prevail. Protective tariff is an effective strategy for curtailing foreign competition and a sharp weapon for nurturing our own business.”

List was appreciated by the Chinese also for his nationalist inclination. The Chinese economic community viewed western economics broadly in three schools: individualism represented by Adam Smith, nationalism represented by List, and socialism by Karl Marx. While each school of economic thought had its distinctive strengths, it was pointed out that the nationalist approach of List was especially applicable to China, since “our state does not yet function effectively and our market is not yet consolidated”. Specifically, the Chinese conceived of using List’s theory to offset the excessive liberalist influence of Adam Smith. As Liu Binglin, the Chinese biographer of List, wrote, “Those Chinese with inadequate knowledge of economics are often misled by works of the English into believing that economic undertakings have no national boundaries”, when economic cosmopolitanism is far from being an established existence in the real world.

On the whole, Friedrich List had ardent followers in China in the early 20th century. As assessed by Liu Binglin, “List should be considered No. 1 in terms of his contribution to the development of the German manufacturing”; and “List should also be considered No. 1 among all the German economists during and before his time”. The Chinese concluded that, with his outstanding achievements, List “occupies a status actually no lower than that of Adam Smith in the history of economic thought”.


Influences on the Chinese Economists

List and his theory were embraced by the Chinese just when China was grappling with the huge peril of colonization following the western intrusion. The replacement of the imperial system by a republic in the early 1910s was no immediate cure for the economic peripheralization and social decay. On the contrary, the setbacks in development and the consequent frustrations nurtured radicalization of the popular sentiments, leading to further chaos and disintegration of the nation. All this went far beyond what List’s theory could readily offer.

However, the key themes of the theory, notably industrialization, tariff protection and state intervention, cut to the very core of the challenges that China faced. Sun Yat-sen, the founding president of the Republican China, for example, asserted that “the life-or-death issue for China hereinafter boils down to one thing only, i.e., the development of its industry”. He proposed that “to advance industrialization, China should dispel foreign products and protect local products by following the protectionist policies of Germany and America”. Economists like Ma Yinchu felt that the strategies of List were among the most useful ones for China, since Chinese industries could never be developed without recovering the tariff right in the first place.

It is interesting to review in somewhat detail the thoughts of Chinese economists regarding tariff and related development issues, so as to discern the influence of List’s theory on the Chinese political economic thinking, and some of its adaptations to the Chinese context.

Firstly, Chinese economists focused more on “recovering the tariff right” than on enforcing strict trade protection. Partly due to the “reverse discrimination” against the Chinese businesses on the Chinese soil, and partly due to their conviction that Chinese businessmen were competitive enough to deal with their foreign counterparts on a level field, Chinese academics and industrialists in principle did not call for high import tariffs, and did not even believe them to be that necessary.

Secondly, Chinese economists realized in a balanced way that free trade and protection each had its application scope, with the former fit for advanced industrial powers and the latter fit for industrial latecomers. China as a latecomer should, of course, discourage imports and promote exports given the persistent trade deficits, and to promote industrialization, import rates should be set differently on different categories of products, inversely proportional to their extent of manufacturing.

Thirdly, considering the lack of inventive activities at home, Chinese economists knew well that imports were conducive to Chinese industrial improvement and even to social evolution, as already proven by the opening of the “treaty ports”, even though imperialist oppression was the other side of the story. For the purpose of industrialization, foreign trade should be encouraged, imports of capital goods should be greatly facilitated, and with it, export of primary products should not be restricted, at least not for the time being.

Fourthly, Chinese economists claimed that they were in theory also supporters of free trade and international cooperation, except that the practice of international trade presented all too sharp a contrast to the free trade doctrine. As argued, with the powers returning to protectionism, China could only resort to trade protection to survive. But in the long run, emphasis should be put on the growth of productive forces. With this aim in mind, reciprocal trade was believed a better option than restricted trade, and by the way, agriculture should not be protected.

Fifthly, Chinese economists noted that, given the incompleteness of the Chinese sovereignty, mass boycott of foreign goods would be a more practical and effective tool to protect the local industries. Indeed, many regarded this non-tariff means as the only feasible weapon for a weak country like China to cope with the unfair competition from the strong.

Sixthly, Chinese economists maintained that trade and economic development demanded, aside from some tariff protection, the removal of various other barriers in finance, transportation, business practices, internal governance, and so on. It was thus emphasized that any development strategy, be it trade protection, government intervention or economic planning, should not go to the extremes, particularly for a populous country like China.


Fruition Obstructed by Disruptions

The above overview shows that Chinese economists were obviously influenced by List on trade and development issues. Their closeness in position was surely no coincidence, since quite some Chinese held List in esteem rationally after having made comparisons between the doctrine of Adam Smith and that of List, and between the situations of China and other countries. It is undeniable that China was already well-equipped in the first half of the 20th century with the theoretical sophistication needed for industrial development, just as it is undeniable that the ruling Nationalist government had an impressive orientation towards modernization.

However, neither the theoretical sophistication of the academia nor the modernization orientation of the government led to solid outcomes in China’s economic and social progress. Indeed, the Nationalist government itself collapsed in the Communist takeover in 1949. The reasons for this abrupt turn were basically threefold: 1) the Nationalist government could never tame the armed opposition from other domestic forces, which constituted a perennial and mounting disturbance to national reconstruction; 2) the protracted Japanese invasion broke down fatally the hard-earned initiation of industrialization and modernization; and 3) the overall level of the national wealth and culture was far too low to create any immediate wonder.

What China had achieved by the mid-20th century was a type of “lop-sided development”, fairly typical of the early stage performance of countries under “prepheralization pressures”, but still appreciable enough. The development is regarded lopsided, because: 1) it was primarily driven by foreign capital that dominated China’s key sectors of steel and iron production, coal mining, power generation, foreign trade, banking, shipping, etc.; 2) the development was limited to the enclaves of “treaty port” cities, with the vast countryside undergoing painful transformation following the trickle-down erosion of the traditional economic and social fabric; and 3) the economic growth was based on the export of primary commodities, with light industries, textile in particular, seriously suppressed by the Japanese competition, and the heavy industry making only a modest start. On the whole, the Chinese manufacturing remained at a largely handcraft stage.

Both the achievements and difficulties of the Chinese initial development are readily seen from the statistics: in the early 1920s, modern industries and handcraft industries took up respectively 4.9% and 10.8% in the overall industrial and agricultural output, growing to10.8% and 20.5% respectively in 1936, more or less a pre-war peak year; the import of light industrial products decreased from 54.6% in 1912 to 14.3% in 1936, whereas the import of heavy industrial products increased from 13.7% to 47% during the same period; and the proportion of the urbanized population expanded slowly from 5.1% in 1843 to 10.6% in 1949, further testifying to the sluggish but undeniable advance of the modern Chinese development.


Crude Practice of Listian Strategies

The Communist takeover in 1949 altered the whole course of events. The radical regime change meant not only a breakdown of the incrementally progressing modernization, but also a total discard of the theoretical sophistication and development experience so far accumulated. It is therefore no surprise that the new leadership was basically ignorant, and perhaps disdainful, of the List’s theory or indeed any other theories labeled “bourgeois”, even though a new translation of The National System of Political Economy appeared in 1961. But ironically, due to the “delinking” from the capitalist world, the new regime quite unwittingly followed the Listian strategies of trade protection and state intervention for its catch-up industrialization.

If the previous approach to development harbored any risk of peripheralization, the Communists put an end to all this. In the meantime, their effective organization of the society gave observers an impression of a thorough clean-up in the national outlook. However, a radical revolution, though probably good at sweeping old barriers and creating new preconditions for modernization, cannot in itself create sustained modern economic growth. Development is understandably a comprehensive project of socioeconomic reengineering that demands more than what can be offered by class struggles, administrative orders or even sacrifices of the masses. The compulsory system of governance, the deprivation of the peasants, the assistance from the more developed Soviet Union, etc. could make up for gaps in development, even leading to impressive performance in low-tech areas like irrigation improvement, railway construction, industrial processing, etc, yet, they could hardly lift modernization to any substantially higher level. In fact, disasters were caused in economic and human terms when the leadership, with its power unchecked, engaged in wishful thinking as well as incessant infighting. This demonstrates, among others, that loss of sound development strategies represented by List’s theory could claim high prices.

For a fair assessment of the post-1949 performance, it should be acknowledged that China’s economy experienced massive accumulation and fast growth, led by an autonomous development of the heavy industries that formed backbones of the national economy. Breakthroughs were made in a handful of defense projects when treated as priorities, and the basic welfare of the people was to some extent improved on the basis of egalitarianism. But given the nature of the command (rather than planned) economy, the development witnessed huge fluctuations. Furthermore, those leverages, effective in pushing forward development within the socialist framework, have proven obstructive to the sustained economic growth and dynamic social progress in the long run. Some salient problems were: repeated political campaigns abused social resources and even the political legitimacy; tight control of economic activities by the political power diminished the economic efficiency; a bloated sector of heavy industries crowded out the consumption of the people; isolation from the developed world meant a lack of stimuli for progress; and underdevelopment of the agricultural sector hampered the growth of the domestic market. These problems, while common in the Stalinist model, became particularly acute in China.


Embracing List’s Far-sighted Aspirations

List once wrote that, no matter where and when, the welfare of a nation is directly proportional to the intelligence, morality and diligence of the people, with which wealth increases or decreases. He went on to stress that, the industriousness, thriftiness, inventiveness and enterprise of individuals, will never lead to any major achievements if divorced from liberty in the domestic politics, proper public institutions and laws, state administration and foreign policies, as well as the special support from the national solidarity and power. These words from List are sufficient reasons to explain why China embarked upon “reform and opening-up” shortly after the end of the Maoist era in the late 1970s. Deng Xiaoping provided to the Chinese people a liberal market, a basic order, administrative support and sensible diplomacy, thus creating a space for people to tap their intelligence, industriousness and entrepreneurship for individual and national prosperity.

Over the past several decades of transformation, the Chinese people successfully resolved such typical Stalinist problems as short supply of consumables, rigidity of the planned system, cutoff from the developed economies, lack of autonomy of enterprises, dearth of infrastructural facilities, stifling of the social vitality, etc. However, new tensions have now risen related to establishing the rule of law, expanding political participation, liberalizing the monopolized sectors, deepening the domestic market, rebalancing the resource distribution between the state and the society, transforming the extensive pattern of economic growth, reducing industrial overcapacity and overdependence on export, closing the gap in income distribution, modernizing agriculture, protecting the environment, and so on. How successfully China overcomes these problems will determine how well it can avoid the much feared “middle-income trap”.

There are heated discussions in China regarding the possibility of getting stranded in the “middle-income trap”, as the economic growth is slowing down and impediments have accumulated. It is interesting to see if the theory of List can in any way inspire the Chinese to break the bottleneck in their further development. List’s emphasis on the development of productive powers rather than on the current exchange value, his caution regarding excessive financial liberalization, his call for a balanced development of comprehensive sectors of the economy, his warning against an overzealous government in stimulating or regulating the economy, etc., all seem to be relevant to China today. In particular, the neo-Listian recommendations put forward by Professor Dieter Senghaas for a “broad distribution of export receipts”, a “broad-based economic growth”, “opening a broad domestic market”, “a shift towards decentralized administrative structures and increased political participation”, are especially pertinent to the current Chinese case if China is to evolve into a developed society.

Clearly, List is by no means fading away in the distance in China. In 1997, the Chinese version of The Natural System of Political Economy came out amidst China’s heightened efforts to join the World Trade Organization. And right at this moment, we are arranging for the translation and publication in Chinese of the List biography by Professor Eugen Wendler. Of course, when China at this stage renews its interest in List, it is advisable that a long-term perspective be adopted. As I see it, List had both short-term and long-term aspirations, which are rightly incarnated by his remark that “freedom is the daughter of industry and wealth”, or simply put, “To Freedom via Prosperity”. It is especially worthwhile for the Chinese today to remember that List stressed that although some government action was essential to stimulate the economy, an overzealous government might do more harm than good. “It is bad policy to regulate everything and to promote everything by employing social powers, where things might better regulate themselves and can be better promoted by private exertions.” If tariff protection is at the heart of List’s more short-term pursuit, his pursuit of free trade, cosmopolitanism, individual freedom, the rule of law, etc. constitute his long-term aspirations. It is high time that a rising China embraced the long-term aspirations of this far-sighted German economist and visionary.


(Dr. Mei Junjie, author of this paper, is senior fellow of international political economy at the Shanghai Academy of Social Sciences and director of the SASS Center for World Economic History, reachable at .)