Cultural Roots Behind China’s Divergence from Soviet Path

In America’s Cold War Against China: Destined to Fail (2025), Peter Nolan argues that the West’s failure to recognize the profound historical and cultural differences between China and Russia—treating China merely as a “Soviet copy”—resulted in serious strategic miscalculations[1]. He contends that China’s rise should not be viewed as an anomaly within the modern international system, but rather as the reassertion of a civilizational model that long predates Western modernity.

Nolan contrasts China’s successful “Reform and Opening-Up” since 1978 with Russia’s troubled post-Soviet trajectory, attributing this divergence to China’s unique cultural and institutional foundations. These deeply rooted factors, he argues, have enabled China to pursue modernization without sacrificing political stability or cultural continuity—an achievement that the West has consistently misunderstood.

China’s Enduring Governance and Innovation Across Millennia

For over two millennia, China has cultivated a distinctive bureaucratic-meritocratic tradition rooted in Confucian principles of governance. From the Han and Tang dynasties onward, the empire developed a centralized, professional civil service recruited through competitive examinations. This system fostered institutional memory, administrative competence, and political legitimacy grounded in moral duty and performance. It also established a durable model of governance in which merit, order, and responsibility formed the core of statecraft.

Even as modern China underwent revolutionary transformation, this deep institutional legacy endured. The Communist Party of China (CPC), though ostensibly breaking from the past, embedded itself within this long civilizational tradition. By blending Marxist-Leninist ideology with indigenous norms of meritocratic governance and pragmatic statecraft, the CPC maintained continuity amid change. China’s reform era thus succeeded not by discarding history, but by leveraging it—drawing on cultural strengths such as social cohesion, long-term strategic thinking, and a performance-based conception of legitimacy. In contrast, post-Soviet Russia struggled with institutional amnesia and ideological disorientation, lacking comparable cultural templates for stable modernization.[1]

China’s modern trajectory has also been shaped by the collective memory of the “Century of Humiliation” (1839–1949), a period that instilled a shared national determination to restore sovereignty, self-reliance, and dignity through development. This trauma became a unifying moral and political force, reinforcing the state’s legitimacy and developmental focus.

China’s historical legacy of innovation—spanning achievements in paper, gunpowder, steel, and shipbuilding—nurtured a longstanding culture of applied, state-supported technological advancement. In the 21st century, this tradition evolved into a modern strategy of catch-up and leadership. Through massive investments in education, research, and infrastructure, China emerged as a global frontrunner in renewable energy, electric vehicles, 5G technology, and high-speed rail. The result is a civilization that has managed to modernize without severing its roots—adapting its ancient governance ethos to meet the demands of a new global era.

China’s Path to Economic Sovereignty and Sustainable Development

China’s approach to maintaining economic sovereignty rests on two fundamental pillars: an independent industrial system and autonomous financial policies. A self-sufficient industrial base ensures that the nation is not dependent on foreign imports or capital, thereby preserving control over its economic destiny. Similarly, control over the financial system—including regulation of foreign ownership and authority over the national currency—prevents external actors from dominating domestic economic outcomes. Together, these elements create the structural foundation for long-term, self-reliant development.

The “Chinese Path” to modernization builds upon these foundations through a combination of gradualism, dual-track reform, and centralized coordination. Unlike rapid liberalization, which can produce instability and oligarchy—as seen in post-Soviet transitions—or overreliance on pure planning, which breeds inefficiency, this approach balances flexibility and structure. It emphasizes pragmatism, adopting policies that work while avoiding rigid ideology; scale awareness, tailoring strategies to China’s vast population and territory; foundation-building, leveraging decades of investment in agriculture, science, and infrastructure; and adaptive governance, combining centralized coordination with local experimentation. This carefully calibrated model has allowed China to preserve sovereignty, foster development, and avoid the dependent-economy trap while navigating the complexities of rapid modernization.

China’s Experimental and Decentralized Approach to Economic Reform

China’s approach to economic reform has been characterized by a strong emphasis on local experimentation and pilot projects, in contrast to the top-down, centrally driven reforms of the Soviet Union and Eastern European countries. In China, local governments serve as testing grounds for new policies, allowing reforms to be piloted, refined, and adapted before nationwide implementation. This experimental approach has provided a low-risk environment for innovation, whereas reforms in the Soviet Union and Eastern Europe were largely theoretical, designed by national leadership without substantial local testing.

A key feature of China’s reform strategy has been its openness to diverse sources of knowledge. Policymakers have drawn not only on domestic insights but also on the expertise of the diaspora and foreign experiences, creating a more flexible and informed policy process. By contrast, reforms in the Soviet Union and Eastern Europe relied on a narrow set of centralized advisors or academics, with limited practical or external input, resulting in less adaptive and effective policies.

During the 1980s and early 1990s, China’s fiscal system further reinforced this decentralized, market-oriented approach. Before the 1994 Tax-Sharing Reform, the central government and provinces signed fiscal contracts specifying revenue retention and remittance. This arrangement allowed local governments to act almost like independent economic actors, competing to attract investment and develop industries. Economists describe this as “market-preserving federalism,” in which local authorities had both the autonomy and incentive to promote growth and protect markets. In this environment, Township and Village Enterprises (TVEs) flourished, becoming major engines of rural industrialization and export-led growth. Although China was formally a unitary state, its decentralized governance during this period functioned in many ways like a federalist system—a model that has been described as “Federalism, Chinese Style.”

Political Innovation: Beyond Separation of Powers

The Western model of governance, centered on the separation of powers among the executive, legislative, and judicial branches, has long been regarded as universal and superior. Its design emphasizes checks and balances, electoral accountability, and the diffusion of authority to prevent the concentration of power. This framework has often been presented as the benchmark for legitimate and effective political systems worldwide.

In contrast, the Chinese model presents an alternative paradigm. It is characterized by a Party-led system that emphasizes long-term strategic vision and institutional adaptability. The Party is not static; it continuously reforms and innovates, enabling the state to respond effectively to complex challenges such as technological revolutions, intricate division of labor, and crises. This coordination capacity allows for unified planning, while the combination of stable long-term leadership and intra-Party reforms provides both continuity and flexibility. China’s experience demonstrates that political legitimacy and effectiveness can be achieved through mechanisms other than electoral turnover or strict separation of powers, highlighting an alternative approach where stability, adaptability, and strategic foresight are prioritized.

Why Eastern Europe and the Soviet Union Should Have Outperformed China

On paper, the Eastern European and Soviet economies appeared far better positioned for a smooth transition to capitalism than China. From a classical economic perspective, these regions possessed abundant natural resources, including oil, gas, fertile land, and minerals. Their extensive industrialization provided a strong capital stock and well-developed infrastructure, which, according to neoclassical growth theory, should have supported rapid economic expansion. Moreover, high levels of human capital, advanced education systems, and a robust scientific and technological base, as emphasized by endogenous growth theory, further suggested a competitive advantage over China’s largely rural and underdeveloped economy in the late 1970s.

Structurally, Eastern Europe and the Soviet Union also had significant advantages. Their industrial sectors were more integrated, both vertically and horizontally, and their proximity to Western Europe provided natural connectivity that could facilitate trade, investment, and economic cooperation. Cultural and institutional factors also appeared favorable: legal systems influenced by Western traditions were arguably more compatible with market-oriented reforms. Furthermore, unlike China during its early reform period, Eastern European countries and the USSR received substantial foreign aid, investment, and political support from the West, creating an international environment conducive to economic transition.

Despite these apparent advantages, the outcomes of market liberalization diverged sharply. While China’s reforms produced remarkable growth, the post-communist transitions in Eastern Europe and the former Soviet Union were frequently chaotic, marked by sharp economic contractions, institutional instability, and social dislocation. The contrast highlights that formal preparedness on paper—whether in resources, infrastructure, human capital, or international support—does not automatically translate into successful economic transformation. Structural, institutional, and policy choices, as well as the sequencing of reforms, proved decisive in shaping the divergent trajectories of China and the post-Soviet states.

Historical Context: The Visible and Invisible Hands

Throughout history, economic development has often been shaped by the interplay of state-led and market-driven approaches, sometimes described as the “visible” and “invisible” hands. State-led development, exemplified by China’s Qin and Han dynasties, relied on large-scale infrastructure projects such as the Great Wall, extensive canal and road networks, and the standardization of writing, weights, and measures. These initiatives facilitated national cohesion, integrated markets, and promoted long-term industrial capacity, reflecting a central role for the state in guiding development. Similarly, the Soviet industrialization model demonstrated how a centrally planned economy could rapidly build heavy industry and military strength, enabling the USSR to resist imperialist pressures and later serve as an early industrial model for China. However, such state-led strategies often neglected agriculture and light industry, creating consumer shortages and inefficiencies.

In contrast, the market-led development model, rooted in Anglo-American economic thought, emphasizes competition, market allocation, and limited state intervention. Following the 1970s and particularly after the collapse of the Soviet Union, this approach became dominant globally, underpinned by the belief—famously articulated in Francis Fukuyama’s “end of history” thesis—that capitalism represents the ultimate system for national prosperity. Market-oriented development prioritizes efficiency, innovation, and integration into the global economy, often relying on flexible private enterprise rather than centralized planning.

China’s approach to economic development has been pragmatically adaptive, famously described as “crossing the river by feeling the stones.” Rather than adopting foreign models wholesale, China has emphasized gradual experimentation and learning from experience. During the 1950s to 1970s, China sought to catch up with the Soviet Union, building industrial capacity and defense infrastructure, but at the cost of neglecting agriculture and consumer goods, reflecting the shortcomings of the Soviet model. From the 1980s onward, China shifted its focus to catching up with the United States and advanced East Asian economies, selectively incorporating market mechanisms and pursuing export-oriented growth. This pragmatic strategy allowed China to enhance international competitiveness, improve living standards, and integrate effectively into the global economy while avoiding the social and economic disruptions experienced by countries that embraced abrupt “shock therapy” or blind Westernization.

Strategic Choices and Leadership in Post-Socialist Transformations

The collapse of the former Soviet Union and the post-socialist transitions in Eastern Europe highlight that historical outcomes are shaped as much by political decisions and human foresight as by economic systems. The Soviet Union overestimated the likelihood of a Western-initiated world war while underestimating socialist countries’ capacity for adaptation and competition. Its heavy defense spending crowded out consumer industries, and the political disintegration caused by ethnic conflicts did not make socialist economies inherently doomed. Had Eastern Europe selectively engaged with Western markets, as China later did, its industries could have emerged as competitive global players. Instead, the shock therapy policies implemented in the 1990s allowed Western multinationals to acquire or bankrupt core Eastern European industries, inadvertently paving the way for China’s rapid industrial upgrading.

China’s socialist development illustrates the power of strategic adaptation. During the Mao Zedong era, innovation lay in tailoring ideology to China’s realities rather than mimicking the Soviet model. Mao’s strategy—mobilizing peasants, conducting guerrilla warfare, and “surrounding cities from the countryside”—allowed China to build an independent scientific and industrial base under blockade and isolation, ensuring sovereignty in defense, heavy industry, and advanced technologies. In the subsequent Deng Xiaoping era, innovation shifted toward economic pragmatism. By introducing a mixed economy that allowed state, private, collective, and foreign capital to coexist under Party leadership, China fostered competition, diversity, and vitality while maintaining social stability. Unlike the Soviet Union, China integrated into global trade and technology networks while retaining control over strategic sectors, enabling record-speed industrialization and avoiding the fate of its northern neighbor.

The German reunification experience further underscores that access to capital and formal institutions alone does not guarantee development. East Germany initially appeared poised for rapid convergence with the West due to massive financial transfers, institutional transplantation, and macroeconomic stability. On paper, wages, productivity, and consumption should have aligned quickly with West German levels. Yet growth remained sluggish, unemployment rose, and capital largely bypassed the region. The sudden currency unification, with a 1:1 exchange rate far above the black market rate, provided East Germans a windfall but destroyed local industry, illustrating the limits of transplanting institutions without adapting to local conditions. Ultimately, both the Eastern European transitions and China’s experience highlight that history is shaped by visionary leadership, strategic adaptation, and the interplay of political and economic choices rather than by abstract economic laws alone.

Misinterpretation of China’s Reform Success

Western economists often attribute China’s economic success solely to marketization and the liberalization of property rights, finance, and foreign trade. From this perspective, the logic follows that deepening reforms should continue along the same market-oriented trajectory. However, this assumption oversimplifies the reality of China’s development and misinterprets the lessons of global economic reform.

If marketization alone were sufficient to drive rapid development, then the Soviet Union and Eastern European countries—many of which implemented extreme market reforms, fully privatized enterprises, liberalized trade and finance, and adopted Western property laws—should have surpassed China’s growth. Instead, the shock therapy policies promoted under the Washington Consensus, implemented by institutions such as the IMF, World Bank, and U.S. Treasury, led to the collapse of socialist industrial achievements, massive inflation, currency devaluation, and the erosion of personal savings and social security. These reforms resulted not in dynamic growth but in structural economic collapse and prolonged stagnation, highlighting that China’s success cannot be explained by marketization alone.

Underlying Principles of China’s Path

China’s development path has been defined by pragmatic adaptation, experimentation, and selective borrowing from global best practices. Rather than adhering to ideology, China has consistently evaluated foreign ideas based on utility and applicability to domestic conditions. This approach, described by Chen as “modular borrowing,” allowed the country to synthesize diverse models across multiple sectors. For example, China imported Soviet and German influences in science and education, modeled its financial system on U.S. institutions, adopted Japanese business management practices, and drew inspiration from Germany’s dual vocational training system. Agricultural technologies from Israel, the leasehold land system from Hong Kong, and lessons from Singapore’s state-owned enterprise reforms under Temasek all contributed to China’s tailored institutional architecture.

Central to China’s strategy has been the principle of “introduction, digestion, and improvement”—learning from foreign technologies, adapting them to local conditions, and innovating to create competitive advantages. Importantly, foreign assistance and ideas were complementary rather than substitutive, building on China’s own mobilization of labor, social resources, and domestic capabilities. The coexistence of state-owned enterprises, private firms, foreign investment, and non-profits created a resilient, diversified economy in which market forces and state intervention complemented rather than undermined one another.

China’s path illustrates that economic modernization does not require wholesale adoption of Western political or economic institutions. Success has relied on long-term vision, pragmatic governance, and strategic experimentation, enabling structural resilience, rapid adaptation, and coordinated development. By selectively integrating foreign practices, balancing state and market, and fostering experimentation over dogma, China has crafted a dynamic, socially sustainable economic system. Its experience underscores that modernization is most effective when global lessons are adapted to local realities, rather than blindly imitated.

The Soviet Union as a Case of Failed Learning

The Soviet Union provides a stark example of failed institutional learning. In agriculture, for instance, overwhelming evidence consistently showed that small private farms outperformed collective farms. Yet, Soviet leadership refused to abandon collectivization. This failure was not due to a lack of information—the data were clear—but rather to path dependence and ideological rigidity. Earlier choices, such as collectivization, centralized planning, and strict party control, created entrenched interests and mental models that resisted reform. By the late 1970s, when stagnation became undeniable, the system was effectively locked in. Attempts at reform under Gorbachev disrupted the political equilibrium without providing a viable economic alternative, contributing directly to the collapse of the state.

The limits of a purely planned economy are equally evident. While wartime planning can rapidly mobilize resources, prolonged peacetime over-centralization undermines innovation, reduces incentives, and fosters inefficiency. The experiences of Maoist China and the Stalinist USSR demonstrate that rigid state control, without mechanisms for adaptability and market dynamism, is unsustainable outside crises. China’s later reforms illustrate the importance of balancing state coordination with economic flexibility, enabling sustained growth without the stagnation observed in the Soviet model.

Openness and strategic management of human capital further distinguish the two cases. The Soviet Union restricted ordinary citizens’ travel while selectively allowing intellectuals to engage internationally. This partial openness fostered curiosity and resentment, leaving the population psychologically vulnerable to external influence. By contrast, post-reform China encouraged students to study abroad with the explicit expectation that they would return to contribute to national development. This approach, combined with deliberate absorption and adaptation of foreign technologies through returnees, joint ventures, and reverse engineering, strengthened China’s innovation capacity and mitigated the vulnerabilities seen in the Soviet system. The Soviet Union’s emphasis on secrecy and isolation prevented engagement with global knowledge networks, slowed technological adaptation, and ultimately ossified its bureaucratic system, demonstrating that mobilization under extreme conditions does not translate into sustainable development in peacetime.

Conclusion

China is distinct from the Soviet Union or Russia, differing culturally, historically, and economically. Its approach prioritizes pragmatism over rigid ideology: reforms are goal-oriented and adaptive rather than strictly doctrinaire, whether Marxist, Keynesian, or laissez-faire. The country continuously evaluates foreign experiences, selectively adopting, modifying, or rejecting them, and forges a unique path that blends state guidance with market mechanisms tailored to its national conditions.

References

[1] America’s Cold War against China:Destined to Fail. 2025. Peter Nolan

Cultural Roots Behind China’s Divergence from the Soviet Path