China has achieved in three and a half decades what nations take nearly three hundred years to achieve. The Chinese have been very modest in acknowledging their own success.
Beijing does not seek the limelight, nor does it desire global leadership. But China’s success story should not be hidden from the international community because of geopolitical compulsions. The earlier this realisation sets in, the better it will be for the future of the world economy.
China utilised its inbuilt and acquired advantages in a methodical manner, to become the world’s largest workshop as global multinationals moved in to tap its market and supply chain.
China kept a tight control on population with the one-child policy, yet has a supply of 270 million migrant labourers from its rural areas, who continue to push forward its high growth trajectory. China has a worldwide presence, courtesy its rapidly changing, large economy impacting all of us as consumers, employees and citizens.
No other country has achieved the level of economic development, as has China, in such a short period of time. No country has a better idea of economic dynamics than China. No other country shocks global strategists like the Chinese do.
In the initial days of its economic reform and open-door policy in 1978, China was confronted with a horrible set of conditions. An estimated 70 percent of the population lived under the poverty line, with shortages and rationing of essential consumer items.
The State ideology of Marxism and Leninism was opposed to reforms for a market economy. The Chinese economy went through three mega-structural phases of reforms and many sub-structural phases.
The country transitioned from a predominantly agricultural economy to becoming the industry workshop of the world, from State ownership to private ownership, and from a subsistence economy to an open-door policy surfing the wave of globalisation.
The essential question remains why China succeeded while other developing countries could not. It is because in any socially unequal society, the privileged elite and select classes are favoured by the government due to exigencies and ground realities of electoral, dynastic, tribal, ethnic and regional politics
China’s development experience offers many lessons for countries with large populations such as Pakistan, still struggling for an economic take-off to eliminate poverty, underdevelopment, illiteracy and despondency.
In the domain of economic planning, both Pakistan and China follow different styles, nuances and parameters due to systemic organisation, ideological orientation and cultural values. Hence, it is difficult to easily pinpoint those factors that acted as the catalyst or the trigger for the chain reaction that enabled China to achieve an average 9-10 percent GDP growth rate for more than three decades since 1978.
The essential question remains why China succeeded while other developing countries could not. It is because in any socially unequal society, the privileged elite and select classes are favoured by the government due to exigencies and ground realities of electoral, dynastic, tribal, ethnic and regional politics.
This is referred to by economists as a system of ‘exclusive extractive economics.’ The government is of the elite, run by the elite and for the elite who are never more than one percent of the population.
China, on the other hand, is a socially equal society and has a neutral government that works for the welfare of all people. It did not take sides with social classes, even when the reforms were hurting certain sections.
China’s class war of the Cultural Revolution was buried in 1978. Successive generations of the reformist leadership have learnt the art of effective management of change for ensuring balance, harmony, stability and prosperity.
During the various phases of China’s reform programme, Western observers predicted that the growth would shortly run out of steam. Instead China’s economic boom has continued almost uninterrupted.
China has worked hard for its achievements which, in the words of the reformist leader Deng Xiaoping, was made possible by ‘crossing the river by feeling the stones.’ This meant that the process of crossing was gradual, exploratory, pragmatic, focused, and mission oriented.
For example, when one phase of economic life was reformed, the subsequent advantages triggered necessary reforms in related sectors, ranging from agricultural reforms to urban planning, financial and banking changes to embracing technology.
Since I happened to be a witness for a decade, both at the conceptualisation as well as implementation phase of this epic transformation, I can identify the following major factors for China’s spectacular rise.
Reformist leader Deng Xiaoping was a far-sighted man and a great team builder. The reformist leadership guided by him became the beacon of change.
He was respected not only by his friends but, more importantly, also by his foes. He valued merit, talent and efficiency and believed in consensus building, pragmatism, humility, moderation and practical results. He took keen interest in grooming successive generations of the future leadership for the continued implementation of his vision of reforms.
Development is a state of mind and has to develop as a culture for the transformation of a society. The development paradigm promoted by the new reformist leadership in China, in 1978, was in sharp contrast to the existing centrally-planned economic model which had laid to waste the country’s potential.
The reforms were painful as it required a mindset change encouraging individuals to start earning their living, allowing everyone the freedom to become rich by lawful means and hard work.
The principle of merit became sacrosanct in recruitments. Being a member of the Communist Party was no longer considered enough
The paradigm change was on the Communist Party’s ideological line from ‘reforming intellectuals to letting intellectuals reform the society.’
China realised that modernisation was courtesy higher education, innovation and reforms, and not just political rhetoric and inauguration of mega projects. Investment in higher education was made a key plank of the reforms and an open-door policy to the outside world. The teachings of great ancient philosophers like Confucius, Lao Tzu, Sun Tzu and Buddha were introduced again.
Agriculture household responsibility system
In 1978, in a village called Xiao Gang, in Anhui Province, 21 villagers took the law into their hands. They divided commune land into 21 plots. Soon the word spread and a political debate followed. Some saw it as a violation of the law and therefore a punishable offence.
Deng Xiaoping and other reformist leaders saw it as an opportunity to strike out the outdated Soviet commune system and replace it with what is known as the ‘agriculture household responsibility system.’ The peasants were allowed freedom to grow crops and vegetables and sell them in free markets after meeting the State quota.
The measure revolutionised agriculture production and transformed China’s countryside. This proved to be the bedrock of the economic reforms. The increased income set in motion the adoption of better technology, seeds and research extension techniques, thus increasing output.
Township village enterprises
The modernisation of the agriculture sector, however, rendered millions of farmers unemployed for most of the year.
The reformist leadership undertook the establishment of Township Enterprises for developing small and medium enterprises (SMEs) which produced toys, home appliances, embroidery, gifts and daily use articles mostly for foreign markets, becoming a global industrial workshop.
Investment in human capital
The transition from a centrally planned economy to a market economy in 1978 brought its demands for new subjects, new disciplines and new areas of specialisation.
During the initial years of China’s liberation, the government invested heavily in education and health, banishing mass illiteracy and infectious diseases. Minimum literacy, i.e. an ability to read newspapers, and basic health facilities were made available to the overwhelming majority of the population.
But these were only sufficient for subsistence living. China could not become a developed country with such rudimentary investment.
The reformist leadership promoted a mixed system of higher education with privatisation as a key policy initiative. The leadership switched gear by investing heavily in higher education, sending thousands of students every year to universities in Western Europe and Japan in the 1980s and subsequently to the United States, Canada and Australia.
More than four million students were sent from 1980-2015, out of which more than 60 percent have returned, contributing to China’s prosperity. Those who remained overseas act as intermediaries for market development of Chinese products; help upgrade higher education institutions and bring in endowed technology, skills and techniques.
Globalisation and higher education had a profound impact on Chinese universities, their curriculum, autonomy and management practices. Higher education played the critical role in the transformation of China from a ‘back water centrally planned economy in an egalitarian trap,’ to a modern vibrant economy powerhouse of the 21st century.
Public service and governance reforms
The reformist leadership realised that economic reforms and an open-door policy would be doomed if it was not preceded by reforming the civil service.
Deng Xiaoping once said that the gravity and size of the problems did not matter, what was important was the capacity, will and methodology to deal with them.
The Communist Party and the central government took momentous decisions on the devolution of power to the provinces, autonomous regions and municipalities; restructuring of ministries; separation of the regulatory and revenue functions in the ministries; rapid transfers and promotions to weed out deadwood and the rooting out of corruption and wastage by imposing stiff punishments, penalties and deterrence, ensuring capacity building across the board.
The principle of merit became sacrosanct in recruitments. Being a member of the Communist Party was no longer considered enough.
The employing authorities were given powers to hire and fire. Permanent tenures of public jobs were abolished. The civil service structure underwent a series of reforms, reducing the size of bureaucracy from 16 million in 1978 to four million in 2010. The size of the central ministries was reduced from 79 in 1978 to 28 in 2010 and red tape was minimised.
Simplification of rules and procedures
The centrally planned economy of China from 1949 to 1979 was a highly bureaucratised society. The bloated government, run by 16 million civil servants, was afloat in red tape or Guanliao Zhuyi.
Even simple work such as registration of a vehicle had more than 100 procedures requiring dozens of seals and signatures.
No wonder foreign investment was not only officially abhorred but also unheard of. The reformist leadership cut the size of the government to four million from 1979 to 2015. Rules and procedures were simplified and made available under ‘one window’ or ‘one roof.’
The reformist leadership believed that the complexity in rules and procedures not only obstructed development of the economy but also promoted corruption.
The streamlining of the complex government regulations which were the relics of the centralised planning era (1949-1979), helped the economy skyrocket. The centerpiece of the new economic development model was the ability to maintain investment at a stunning 35-40 percent of GDP for 25 years.
The reformist leadership promoted a mixed system of higher education with privatisation as a key policy initiative. The leadership switched gear by investing heavily in higher education, sending thousands of students every year to universities in the West
Special economic zones
When Deng Xiaoping visited Singapore in November 1978, he showed keen interest in the success of the island state.
Singapore statesman and Founder, Lee Kuan Yew, writes in his book From Third World to First: The Singapore Story, that he told Deng that “there was nothing that Singapore had achieved which China cannot do and do it even better.”
Deng got the message and on his return, worked hard for the historic Third Session of the 11th Party Congress in December 1978, to adopt economic reforms and open-door policy.
The greatest lesson that Deng set out to replicate was the concept of ‘special economic zones,’ four of which were initially established in the coastal areas of Shenzhen, Xiamen, Zhuhai and Shantou, followed by fourteen additional ones.
These zones acted as incubators and mediums for technology transfer, dissemination of best global corporate methods and adoption of internationally recognised management practices. In the first phase from 1980 to 2000, the government focused on the coastal areas and cities with the greatest potential for development instead of ‘spreading the butter too thin.’
The economic reforms programme was based on opening up China’s exports to the outside world, drawing on the examples of Hong Kong, Taiwan, Singapore, Malaysia and South Korea.
China began its export drive with labour intensive industries such as toys, textiles, home appliances, food processing, sports goods, gifts and souvenirs, embroidered clothes, carpets, furnishings and electrical goods among others.
Gradually, China moved into medium and high-tech products such as computers, machinery, equipment, plants, engines, aircrafts, automobiles and railways. The role of China’s special economic zones, to attract foreign investment and its entry in the World Trade Organisation in 2002, contributed greatly to the promotion of an export culture.
Investment in research and development
The truth is that in life, almost 90 percent of learning can be ensured by repeating, re-engineering and copying. This is how human civilisation has progressed from time immemorial.
The Chinese are keen observers with a brilliant heritage of inventing clocks, silk, paper and gunpowder. In the initial years of the modernisation phase, from 1980 to 2000, Chinese enterprises purchased the latest models of electronic gadgets, equipment and machines and re-engineered them wholesale.
They tested these prototypes again and again before commercialising them. The end products were not only cheaper, but better, with guaranteed after sales service. It is only recently that due to heavy investment in research and development, China is leading in patent applications with a global share of 65 percent as compared to 28 percent by the United States.
Harnessing social capital and soft power
The Chinese are inheritors of an unbroken cultural heritage of over five thousand years. The reformist leadership revived the teachings of Confucian, Taoist and Buddhist values, in order to complement the official Marxist, Leninist doctrines terming it ‘socialism with Chinese characteristics.’
The social capital transformation was ignited by a remarkable ‘evolution’ instead of ‘revolution’ in attitudes of the people.
Some of these are ‘thinking small’ rather than ‘thinking big;’ moving two steps ahead but only after reviewing one step; encouraging hard work rather than slogan mongering; keeping a low profile while making major achievements; thinking positive rather than focusing on sharpening contradictions; adopting moderation instead of extreme positions; looking for compromises rather than conflicts; promoting rational behavior instead of dogmatism and increasing the number of friends rather than enemies.
China’s spectacular rise to being a global power house can be emulated by countries like Pakistan, provided the leadership rises to the challenge and looks beyond its own interests to that of the country as a whole.