China’s global success story achieved through hard work

China’s global success story achieved through hard work

Business Monday, 27 January, 2020

The worst advertisement for communism, undoubtedly, was the Soviet Union’s dysfunctional economic system, which apart from offering the very basics for subsistence to its citizens merely reproduced poverty. The low standard of living of its population seemed to be a constant, improvements, if any, slow and barely discernible.

Compare this to the People’s Republic of China, which also introduced a communist system, on its establishment in 1949, which not only survived but now boasts the world’s second largest economy, after the US that it is forecast to overtake in the next couple of decades. It is still ruled by the communist party, does not embrace the political values of Western democracy but for the last 40 years has recorded growth rates that are unheard of in the developed world.

In the early years of the PRC, Mao Zedong adopted the Soviet economic model based on state ownership and centralised economic planning and although some progress was made it did not have the desired results. In 1978, with Mao having passed away, the Communist Party decided to reform its economic system, to make communism work better. With the visionary leadership of Deng Xiaoping, China embarked on what is described as “socialism with Chinese characteristics” by which the role of market mechanisms was increased while central government planning was scaled back, decision-making powers were given to managers of companies, China opened up to trade and huge investments were undertaken.

The objective was the gradual reform of the communist system and it worked spectacularly. From the end of the seventies until 2005 the average rate of growth in China was 10 per cent, since when it has been consistently above 6 per cent. In less than 40 years, an insular, impoverished country was transformed into an economic powerhouse, the backbone of the world economy. By 2018 GDP was 174 times the size of that in 1952, while per capita income was 70 times higher and the volume of trade in goods 2,380 times greater.

Socialism with Chinese characteristics – a market economy with some state intervention – has dramatically improved people’s lives and living standards have soared since the establishment of the People’s Republic. Life expectancy was 35 years in 1949 and in 2018 it was 77, the illiteracy rate was 80 per cent and it is now 9.7 per cent, infant mortality rate fell from 48 per cent in 1980 to 6.1 per cent now, while per capita disposable income stood at $4,095 in 2018, compared to $24 in 1978 when the introduction of economic reforms began.

Western economists when referring to data about the Chinese economy often note that figures are given by the government of China, the implication being they might not be reliable, but the huge strides and the growing affluence is evident to anyone visiting the world’s most populous country. It is not only Beijing and Shanghai that boast skyscrapers, hundreds of modern high-rise buildings, impressive examples of modern architecture, all top makes of cars on the roads, luxury hotels, big shopping malls and all the top designers’ shops. Chengdu, for example, the capital of Sichuan province and eighth largest Chinese city population-wise, could be compared with any major European or American city in terms of infrastructure, restaurants, designer shops, nightlife and visible affluence.

Chinese officials are the first to admit that there is still a long way to go for China. The Deputy President of the Chinese People’s Institute of Foreign Affairs Ambassador Ou Boqian, who I met as part of a press visit at the end of last year, pointed out that economic comparisons with the United States could be misleading. China may have the world’s second biggest economy but as she pointed out “we are still far behind in terms of income per capita.” It is a fair point. Of course with a population that reached 1.4 billion in 2019 it would be an impossible task for China’s income per capita to reach that of the US even when its GDP overtakes that of the US, which according to the latest IMF figures stands at $65,111 and is the seventh highest in the world. China, according to IMF, is in 65th place with $10,098.

The Chinese government has other priorities than overtaking the US, Boqian pointed out. It had set 2020 as the year for eliminating extreme poverty, which although drastically reduced over the years still existed in the rural areas. In 2012 the government launched a targeted poverty alleviation policy, which according to official figures reduced the poor of rural areas from 100 million to 16.6 million in 2018. In 2019 this number was expected to have been reduced by another 10 million, making the target of completely eliminating extreme poverty in 2020 quite realistic. The international poverty line drawn by the World Bank is at an income of $1.9 per day.

Chinese officials speak openly about the existence of poverty in rural China, perhaps to underline the big strides that have been made in reducing it and the belief that this year it will be eliminated. “Absolute poverty will disappear in 2020,” declared Han Feng, the Division Chief of the Sichuan Provincial Poverty Development Bureau. “For the first time in the history of Sichuan poverty will be alleviated,” he added. “All people want to live well, eat well and dress well, a simple wish not so hard to achieve,” Han Feng added.

Sichuan province has a large population, extensive countryside, mountain ranges and earthquakes are frequent. Poverty is spread in the remote mountain villages, cut off from the economic activity because of the difficult communications, but Sichuan has used different methods of tackling it. Some one million people were moved to areas where there is work, every year four million students from poor families will receive state assistance, “housing and protection” was provided to 300,000 and 5,000 public employees were hired to deal with tackling poverty, Han Feng said.

Poverty alleviation is mainly achieved by finding work for people. We were shown how this works in Huangjiayuan, a village in the mountains of northwestern Sichuan. The province has provided a whole mountainside to the villagers to cultivate honeysuckle flowers, which are bought by the state, thus offering them a steady, if small, income. Farming on a steep mountainside is hard toil but villagers we met were cheerful and very friendly. Their farming guaranteed them an income which meant they would not have to leave their village to climb out of poverty.

Eliminating extreme poverty is not the only nationwide objective set by the Chinese central government. Reducing pollution, caused by years of rapid industrialisation, is also a high priority. “While the economic progress we made was a big achievement, we devastated the environment, which we are now trying to recover,” said Yu Lifeng, an official at the Ministry of Ecology and Environment. The objectives were clean air, water and soil, blue and clear skies, said Lifeng, citing President Xi Jiping’s pledge for ‘ecological culture’ and ‘green growth’.

Environmental impact studies are now carried out before licences are given to factories, while existing factories that do not meet the new environment standards set were closed down. “If environmental impact assessment shows a proposed project will have negative effects on the environment it will not be given approval,” said Lifeng, pointing out that anti-pollution measures are also imposed before any construction begins. A system of ‘environmental monitoring’ to which people can contribute their views has also been put in place, while children in schools are being taught about environmental protection.

The green growth policy includes a gradual reduction in the use of coal for energy. It is being replaced by hydro-electric power and renewable energy such as wind and solar. There are incentives for using electric cars and restrictions placed on the emissions of heavy industry, such as steel manufacturing, which have to meet national targets or face closing down, said Lifeng. Factories are obliged to build water treatment facilities, because the water pollution by industry had affected rivers and underground reserves. There are also water purification plants while schemes for collecting waste water from urban areas and treating it are also in place.

In 2013 China’s Academy for Environmental Planning pledged $277 billion to combat urban air pollution and the results are showing. Beijing, which was notorious for its air pollution – PM2.5 was at hazardous level, which have now dropped to the moderate 60 to 70 range according to Lifeng – can credit several reasons for this dramatic improvement – millions of houses and businesses were switching from coal to natural gas, while there have been incentives for people to buy electric cars or cars with low emissions. You do not see many old cars on the roads of Beijing, which boasts the greatest growth in the use of electric cars. The use of electric motorcycles is also extensive, but it has some risks. Apart from not hearing them coming, many riders drive around at night without lights on to economise battery power.

Concern about the environment and improving the quality of urban life are signs of the growing affluence. One negative aspect of this growing affluence has been the declining birth-rate, which in 2019 was at its lowest since 1949 – 10.48 per 1,000 which is much lower than the replacement rate. Ironically, China had a much-criticised ‘one-child policy’ until 2015 when it was ended to allow couples to have two children. This failed to reverse the falling birth-rate, raising concerns that the working population will not be able to support a bigger retired population in the future. Perhaps this is just another consequence of economic success story of modern China.

How was such spectacular success achieved, in a country that has been run by a communist party for 70 years and still embraces central economic planning? A Chinese government briefing paper states “China’s successes have been achieved through hard work… The only option is hard work.” It also attributes the success to the Communist Party of China’s (CPC) leadership, which had to control a huge country with a diverse population. “Without centralised, unified and firm leadership, China would have tended towards division and disintegration and caused widespread chaos beyond its borders,” said the government briefing paper.

It is entirely possible that Western-style democracy would not have achieved what the one-party state has achieved in China in the last 70 years, turning an abjectly poor country in which millions were starving into an affluent, growing consumer society. It may have started out as the world’s factory, churning out competitively-priced products for all countries, but it is now the biggest market in the world thanks to a ‘middle income group’ numbering 400 million people. It now has more people in the world’s wealthiest people grouping than the US. Last year, according to the annual wealth survey by Credit Suisse there were 100 million Chinese people among the top 10% richest people compared to 99 million Americans. It is an astonishing achievement and proof that a Western-style democracy is not necessary for a market economy to grow and thrive.

The consistently, best-performing economy in the world has shown the truth of Deng Xiaoping’s words that “a basic contradiction between socialism and the market economy does not exist.”

Source: Cyprus Mail


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