Why China’s 45-Year Reform Anniversary Matters Globally – Analysis
At the 45-year anniversary of economic reforms and opening-up, China’s continental economy is driving global economic prospects and fostering inclusive global cooperation.
Starting from the late 1970s, when the Chinese reform and opening-up policy was launched, the Communist Party of China (CCP) has focused on the de-collectivization of agriculture, opening the country to foreign investment and advanced technology, and encouraging entrepreneurship – which was also the topic of the World Economic Forum’s “Summer Davos” in Tianjin, northern China.
With nationwide industrial takeoff, economic reforms broadened in the 1980s, as price controls and protectionist policies and regulations were lifted in many industries.
From Shenzhen to the Greater Bay Area
Nothing exemplifies the success of Chinese reforms more than Shenzhen in the southern Guangdong province. In 1979, it was still a poor fishing village with some 20,000 inhabitants struggling at a subsistence level. Today, it has an urban population of almost 18 million and its GDP per capita exceeds $27,000 (nominal), which is at par with Portugal and Bahrain. In this process, a special catalyst role belongs to the Special Economic Zones (SEZs), which were initiated in the big first-tier cities of coastal China.
In four decades, Shenzhen has moved from being a poor village to become one of the most advanced mega-metropolises. In 2018, economic development in Guangdong moved to a new stage with the launch of the Greater Bay Area (GBA); China’s Silicon Valley which comprises the provinces nine big cities, coupled with Hong Kong and Macao.
Initially. like Western Europe and Japan in the postwar era, Chinese companies used to imitate global technology leaders. Today, these innovators and high-tech companies, such as Huawei and ByteDance (TikTok’s parent company), are being imitated by global competitors and cooperators. Hence, perhaps the US efforts to contain Chinese innovators in the name of ” national security.”
Quest for foreign investment and opening-up
In the West, China’s reforms and opening-up are associated mainly with Deng Xiaoping’s reforms. What’s suppressed is the legacy of those six decades when Chinese efforts to attract foreign investment from the West were shunned.
In Chinese modern history, Sun Yat-sen is often seen as the founding father of the nation. In the 1920s, he implored Washington and the international community for foreign investment, but Western powers ignored his pleas. That, as Sun had warned, contributed to the onset of World War II.
In the early 1950s, Mao’s economic policies unleashed state-led industrialization, which started promisingly but stagnated amid the Cold War polarization. In historical view, Mao’s contribution was the establishment of Chinese sovereignty. But as historians have showed, Mao’s appeals to the White House for cooperation and foreign investment were ignored, too.
When China’s reform and opening-up were initiated in the late ‘70s, the standard Western reform packages were shaped by the “Washington Consensus,” which promoted disruptive liberalization, deregulation and privatization across the board. From Bolivia to post-Soviet Russia, the results were often chaotic and disastrous. Such “reforms” benefited primarily foreign investors, domestic oligarchs, and informal economy, even rising criminality – but not the ordinary people.
That was not the Chinese path, which favors stability, gradual advances and pragmatic experimentation.
Growth transitions, rising living standards
After Mao’s establishment of sovereignty, Deng and his reformers unleashed China’s pent-up growth potential and the Chinese “economic miracle.”.
As the CPC and former president Jiang Zemin as its core further developed socialism with Chinese characteristics – through his “Theory of Three Represents”; a broader view of advanced productive forces – premier Zhu Rongji launched a campaign against corruption in the 1990s. What paved the way to a decade of export-led double-digit growth was China’s membership of the World Trade Organization in 2001. Then-President Hu Jintao characterized the takeoff as “China’s peaceful development.”
These developments prepared the shift to post-industrialization processes, which have dramatically accelerated under President Xi Jinping’s leadership. Today China’s growth is slowing relative to its past performance. Historically, that is the norm with all industrializing economies. But even as growth rate decelerates, per capita incomes continue to rise rapidly.
In the Xi era, rebalancing builds on world-class innovation and thriving consumption. Moreover, the eradication of extreme poverty in a developing country of over 1.4 billion people is a world-historical achievement.
In the contemporary China, high-quality per capita growth supports the rise of the world’s largest emerging middle-income group. In 2017, a set of bold objectives for 2035 were adopted as staging posts to achieve the second centenary goal. The aim is to develop China into a great modern socialist country that is prosperous, strong, and culturally advanced” by 2049.
These goals include making China a global leader in science and technology, creating a green economy, reducing the urban-rural income gap, and raising per capita GDP to a level of a moderately developed country.
Eclipse of exclusive globalization
Through the 20th century, the major economies touted globalization that benefited mainly the West. Their exclusive globalization was supported by the World Bank, the International Monetary Fund, the World Trade Organization and other post-1945 multilateral institutions. This status quo prevailed until the 2000s; that is, as long as the West drove global growth.
Today, the West’s exclusive globalization is de-integrating, due to two decades of US post-9/11 wars and half a decade of trade wars, the pandemic-induced global depression, and the US/NATO-led proxy war against Russia in Ukraine. The US quest to contain China’s peaceful rise is a part of a broader effort to sustain Western supremacy in the 21st century when global economy no longer supports it.
As a percentage of world GDP, world trade is now roughly at the level where it was around 2006. World investment net inflows as percentage of world GDP are less than half of the level over two decades ago. Worse, the share of international migrants of world population is a third of what it was over a century ago. Alarmingly, as migration flows are being blocked, the number of forcibly displaced has soared to almost 110 million people; that’s nearly twice the level of 1945 after two world wars.
Such a state of affairs is inhuman, destructive, and untenable.
Toward inclusive globalization
As secular stagnation is spreading in the West, growth prospects rely increasingly on China and other large emerging economies, which have fueled global growth since the late 2000s.
In turn, these prospects are supported by the Asian Infrastructure Investment Bank (AIIB), the BRICS New Development Bank, the monumental Belt and Road Initiative (BRI), and de-dollarization in bilateral trade ties.
Today, the emerging world economy thrives on inclusive globalization, which seeks to lift all boats, not just a few. The future belongs to multipolar inclusion, not exclusion.
The original, abbreviated version of the commentary was released by China Daily on June 30. 2023, as part of China’s 45-year reform anniversary
