This week on Behavioural: China's Crisis Response, Nobel Ideas, Brain's Switchboard, and the Most Boring Game

China has a unique way of navigating challenges and uncertainties, influenced by its rich history and culture.

This week on Behavioural: China's Crisis Response, Nobel Ideas, Brain's Switchboard, and the Most Boring Game

Risk, and Uncertainty in China: From Taiping Rebellion To Falling Economy

In late 19th-century China, during the Taiping Rebellion, an insurgency that lasted for 14 years led to a new concept: commercial insurance. For this was one of the most important episodes that Chinese people now call “Century of Humiliation”. For the Qing Dynasty in the fight against the Taiping Heavenly Kingdom was joined by the French and the British.

This interaction between Western and Chinese perspectives on risk influences China's subsequent approach to dealing with crises and uncertainties.

Historical Influence and Change:

China's response to crises is heavily influenced by its unique historical, political, and cultural context. As discussed in Political Scientist Richard P. Suttmeier's paper "Risk in China: Comparative and historical perspectives on its social construction and management," it becomes evident that after 1949, with the consolidation of power under the Communist Party led by Mao Zedong, there was a significant shift towards centralisation in the government's approach to managing crises.

The public dining hall (canteen) of a people's commune. The slogan on the wall reads "No need to pay to eat, focus on producing". Image credit: People China

This centralised approach was exemplified during the Great Leap Forward (1958-1962), which despite later being recognised as a disastrous policy resulting in immense economic and humanitarian suffering, showcased China's ability to mobilise vast resources and human labour towards ambitious goals. Unfortunately, this centralisation also contributed to exacerbating issues such as famine through restructuring agricultural practices without considering potential consequences. However, this approach creates a tricky dynamic between collective societal interests, individual liberties, and transparency. The high value placed on maintaining collective interests and social stability has at times led to compromises on individual liberties and transparency. This fosters an environment of heavy reliance on government control.

Through the subsequent decades leading into the 21st century, China's crisis response evolved continually. For instance, during the 2003 SARS outbreak, China initially faced criticism for a lack of transparency but later adopted aggressive measures, such as strict quarantines and travel restrictions, to contain the virus. By the time of the COVID-19 pandemic in 2020, China was able to respond more swiftly and effectively, leveraging its centralised governance model and advanced technology for contact tracing, stringent lockdowns, and rapid healthcare infrastructure expansion.

This 1951 poster is titled “Celebrate the 30th Anniversary of the Birth of the Chinese Communist Party" Image credit: Courtesy East Asia Library, Stanford University

How Chinese Decision Makers Look At Problems?

Prof. Suttmeier's paper discusses the issue of overconfidence in China's approach, specifically regarding their reliance on technical judgments in policy-making. It suggests that the enhanced stature of the technical community, coupled with a strong belief in scientific knowledge, may bias Chinese thinking towards unrealistic confidence and cynical manipulations of "objective" risk analyses. This might already be evident in policy plans for major projects like the Three Gorges Dam, and the Belt and Road Initiative (BRI), potentially disregarding important social, economic, and environmental factors.

Panorama of the Three Gorges Dam Image credit: Wikipedia
A stretch of the 400-kilometre-long China-Laos railway in Vientiane, 29 July 2020. (Xinhua) Image credit: Think China

His analysis underscores China's risk management is hindered by certain factors, including a centralised approach, ambiguous property rights, limited insurance options, and the influence of the technical community. These predispositions reflect a cognitive bias deeply embedded in China's culture and history.

In response to recent economic crisis situation like this one shows that China has established the Central Finance Commission to strengthen financial oversight. Amid pressure from Western countries in the technology sector, China is increasingly focusing on self-reliance and initiatives like developing independent chips. This shift towards centralised control is evident through the establishment of institutions such as the National Data Bureau and the Central Finance Commission. As mentioned in a recent Financial Times article, China is currently undergoing a transition away from growth driven by property and local government, which has proven to be a challenging process. The cautious spending habits of consumers can be attributed to their lack of confidence in future pension and healthcare coverage. Additionally, low investor confidence in the private sector stems not only from economic weaknesses but also from concerns about unfair competition with state-owned enterprises and tighter regulations.

To gain a deeper understanding of China's strategies, it is valuable to analyse them through theories such as Path Dependence and Cultural-Cognition. The concept of Path Dependence highlights how decisions made in the past can constrain future options, shedding light on how China's historical path towards centralisation continues to influence its current actions. Additionally, the cultural cognition approach emphasizes that shared cultural values shape perceptions of risk. In the case of China, societal values like harmony, state control, and self-reliance are reflected in their efforts to manage risks arising from significant political and economic challenges. Lastly, the cushion hypothesis adds another layer of depth, suggesting collectivist societies like China may have a higher risk tolerance level due to their social safety nets. This concept may explain why China can embrace bold strategic manoeuvres during crises that would be classified as high-risk in more individualist societies.

Image credit: Reuters

In sum, As China continues to evolve its approach, the balance between traditional beliefs, modern solutions, internal and external influences, and adapting Western practices to a Chinese context remains a delicate challenge.

As the Chinese proverb so aptly puts it, 'One misstep could cause a thousand-year disaster.' The ability to navigate these competing forces will be key in shaping China's future strategies and responses to crisis.

The shrinking of the population, and ageing population means that time is running out.


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