China’s Reforms Will Never Stop

China's Reforms Will Never Stop

A revolution that transforms the world’s second biggest economy

“The world has seen China’s accelerating reform and opening up, and its determination to carry it forward. China’s reforms will never stop, and its doors will only open ever wider.” — China’s President Xi Jinping (in his New Year Speech)

China’s opening up and reforms do not have an extensive history. The journey towards economic prosperity and development started only forty years ago, i.e. in the late 1970s, with a vow to push for economic development in both urban and rural areas of the world’s most populous country.

This process started, primarily, through Deng Xiaoping’s opening-up-to-the-world policies and the Sino-Foreign Equity Joint Ventures, adopted on 1 July 1979 at the second session of the 5th National People’s Congress, under which they permitted, inter alia, foreign capital and allowed Western companies to enter China; thus, diverting the landscape from traditional to dynamic and modern.

Last forty years of China remain unprecedented in world history as no other country could achieve what China did in the form of maximum growth through establishment of Special Economic Zones (SEZs).

China’s reforms and opening up through its SEZs are indeed a revolution. According to the definition of SEZs, they are characterized by a defined geographical area, local management, unique benefits and separate customs and administrative procedures. In 1980, first four SEZs were created in southeastern coastal China and consisted of what were then the small cities of Shenzhen, Zhuhai and Shantou in Guangdong province, and Xiamen (Amoy) in Fujian province.

These SEZs worked on the basis of comprehensive design and planning. A particular region and the type of SEZs complemented each other. SEZs were adequately provided with preferential policy and supporting facilities so as to attract investment. In this regard, prolonged tariff exemptions, better roads, supply of electricity and water, and flexibility of policies were ensured.

Besides, local governments were allowed to offer tax incentives to foreign investors and to develop their own infrastructure for which they need not seek the approval of the central government. Business enterprises have made most of their own investment, production and marketing decisions, and foreign ownership of such ventures has been legalized.

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As a result of these policies, China has turned itself, during the past few years, into an industrial powerhouse. Its “Reform” and “Opening up” are indeed a revolution.

According to the World Bank data, “China’s economy was 81 times larger in 2017 than it was in 1978, growing in GDP terms from $149.5 billion to $12,240 billion.

As one can see easily, over the same period, China’s per capita GDP grew 55-fold, from $156 to $8,826. During the same period, US’ GDP increased only seven-fold and its per capita GDP 4.6-fold. As of 2017, China’s GDP is 63 percent of that of the United States, up from a mere 6.3 percent in 1978.

Another astonishing aspect of China’s growth and development is that it has lifted up nearly 740 million people out of poverty during the last few decades. The two driving forces for poverty reduction remained: (i) Sustainable high economic growth; and (ii) Agricultural development. The years between 1978 and 1987 remained significant wherein China maintained very high level of agricultural production. In 2016, China issued a White Paper on poverty reduction and human rights improvements which highlights that “poverty reduction is the most remarkable symbol of China’s human rights improvement.”

Under the incumbent president, Xi Jinping (now president for life), who has played up an image as an omnipotent, fight against poverty has become a national mantra. The state-run news media routinely shows President Xi visiting poor villages, sampling the food and water and checking on the health of residents. The evening news is filled with tales of rejuvenated communities, and villagers-turned-entrepreneurs heaping praise on their leader and the government for providing loans and new apartments.

According to recently published statistics, China lifted about 12.4 million people out of poverty in 2016 alone. The government has vowed to eradicate poverty in the country by 2020, when China is to become a ‘moderately prosperous society’. To meet this goal, China must lift 10 million people out of poverty each year at least till next year, i.e. 2020. By the end of 2016, there were 45 million Chinese living in poverty.

China’s idea of revolutionizing connectivity is another aspect of reforms which revolves around survival; sustained life and living. In this context, China’s Belt and Road Initiative (BRI) is a revolutionary step taken by the Chinese President wherein he wants to build (i) Silk Road Economic Belt; and (ii) 21st-Century Maritime Silk Road. The BRI was first propagated by President Xi in 2013, during his visit to Central and Southeast Asia in the months of September and October, where he raised the initiative with the forename of “The Silk Road Economic Belt and the 21st-Century Maritime Silk Road”.

The BRI framework revolves around the win-win concept, which would promote common development and prosperity and builds a road toward peace and friendship by enhancing mutual understanding and trust, and strengthening all-around exchanges.

The main idea of BRI is “Connectivity” and it is the main theme under which the BRI projects are initiated. In this context, Beijing has initiated six main corridors namely; (i) Bangladesh, China, India and Myanmar Economic Corridor (BCIM-EC), (ii) China-Indo-China Peninsula Economic Corridor (CICP-EC) (iii) China-Mongolia-Russia Economic Corridor (CMR-EC), (iv) China-Pakistan Economic Corridor (C-PEC), (v) China-Central and West Asia Economic Corridor (CCWA-EC), (vi) New Eurasian Land Bridge (NELB).

Regarding the future plans, Prime Minister Li Keqiang launched, in 2015, “Made in China 2025” (MIC 2025), an initiative which sets to modernize China’s industrial capability. This 10-year, comprehensive strategy focuses heavily on intelligent manufacturing in 10 strategic sectors namely: new information technology, numerical control tools, aerospace equipment, high-tech ships, railway equipment, energy saving, new materials, medical devices, agriculture machinery and power equipment, and has the aim of securing China’s position as a global powerhouse in high-tech industries such as robotics, aviation, and new energy vehicles such as electric and biogas.

The four main advantages of MIC 2025 will be, market, enterprises, strategy and talent. Therefore, the aim is to reduce China’s reliance on foreign technology imports and invest heavily in its own innovations in order to create Chinese companies that can compete both domestically and globally.

The above little story of China’s 40-year reform and opening up indeed tells of a revolution. It is a revolution in its impact, yet its process is evolutionary. Without a drop of blood, Reform & Opening-Up not only profoundly transformed China socially and economically, but would also reshape global order in a far-reaching way.”

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