What Is Wrong with Shanghai and with Its Model?

Chinese politics has been dominated by leaders hailing from Shanghai. Xi Jinping was its party secretary; so was Li Qiang, China’s current premier. After Tiananmen, Jiang Zemin and Zhu Rongji scaled the Shanghai Model to the whole of China. The Shanghai Model, the genesis of the China Model, was statist and extractive. An illustration was the development of Pudong, which relied on mass evictions of rural residents, offering low or no compensation, and auctioning off land to highest bidders. The huge spreads between acquisition costs and auction prices fueled Shanghai’s development but brought modest benefit to the average Shanghainese. The poorest segment of the Shanghai population lost relatively to other segments of the population but also lost absolutely to its former self. The income level of Shanghai’s individual proprietors was also low, relative both to rich provinces such as Zhejiang but to a poor province such as Yunnan. The statist Shanghai Model was not innovative. Shanghai lagged Zhejiang and Jiangsu in patents. By measures that track more closely the welfare of the individual citizens, the Shanghai Model is not a resounding success, and yet this is the model that has prevailed in China since 1989.