Is China still a developing country?
In 1978, China started economic reform and opening up to the outside world. With a national income per capita of $200, China was a typical low-income developing country at the time. After nearly 40 years of reform and opening up, the country has accomplished breathtaking progress in economic and social development. China is now the world’s second largest economy, with gross domestic product (GDP) of $12 trillion and per capita GDP of $8,600. China’s rapid economic growth and stable social development have not only won applause from around the globe, but also inspired questions as to whether China is still a developing country.
The term “developing country” was first introduced by the Group of 77, a coalition of 77 less-developed nations from Asia, Africa and Latin America at the first United Nations Conference on Trade and Development in Geneva, Switzerland in March 1964. The term was soon widely recognized after the meeting. The World Development Indicators (WDI) and the Human Development Index (HDI) released by the World Bank and the United Nations (UN) since 1970 and 1990, respectively, are commonly used to measure economic and social development of a country. Based on the annual gross national income (GNI) per capita in US dollars, the World Bank classifies world economies into four groups: high income, upper middle income, lower middle income and low income. Those in the top group are recognized as developed countries, while economies in the other three categories are considered developing countries. The HDI is used by the United Nations Development Programme (UNDP) to rank countries into four tiers of human development described as “very high,” “high,” “medium” and “low.” Nations categorized with “very high human development” are regarded as developed countries, and those in the other three tiers are developing countries.
According to the WDI issued by the World Bank, China was a low-income economy in 1990, with GNI per capita of $990. In 2001, China ranked in lower-middle-income economies, with a GNI per capita of $1,010. The number reached $8,690 in 2017, and China has thus joined the upper-middle-income economies. According to the UNDP’s HDI, China scored 0.499 and 0.583 in 1990 and 2001, respectively, making it a “middle human development” country. In 2017, China was classified as a “high human development” nation after the score climbed to 0.738. According to these numbers, China remains a developing country by international standards.
The UNDP website states that, “While initially founded as a socialist state with a centrally planned economy, China now has a mixed economy described by its government as ‘Socialism with Chinese characteristics’.” The site also highlights China’s impressive development over recent decades as successive rounds of reform have helped the country both improve its living standards and open up to more global engagement. The country has made remarkable progress toward the Millennium Development Goals, lifting 500 million people out of poverty. China is now classified as an upper-middle-income nation with an economy gradually transitioning away from an export-led model toward consumptionbased. The UNDP also notes that China’s rapid development has brought not only myriad of benefits but also significant new challenges such as environmental issues and income inequality. For example, China is still home to an estimated 157 million people living on less than $1.25 per day, mostly in rural western China.
In this regard, Chinese President Xi Jinping underlined in his report at the 19th National Congress of the Communist Party of China (CPC) that “the basic dimension of the Chinese context — that the country is still and will long remain in the primary stage of socialism — has not changed.” He elaborated, “We must show firm resolve in implementing the strategy to invigorate China through science and education as well as the strategy to develop a quality workforce, innovation-driven development strategy, the rural vitalization strategy, the coordinated regional development strategy and the sustainable development strategy. We must focus on priorities, address inadequacies and eliminate points of weakness. In this regard, I want to stress that we must take tough steps to forestall and defuse major risks, carry out targeted poverty alleviation and prevent and control pollution, so that the moderately prosperous society we build earns the people’s approval and stands the test of time.” In Chinese, the word “xiaokang” (moderately prosperous) is used to describe a standard of living somewhere between “having adequate food and clothing” and “being affluent.” A moderately prosperous society depicted by philosophers in ancient China illustrated people’s pursuit of having enough to eat and wear and leading a wealthy life through hard work. By the World Bank and the UNDP standards, China still falls in the category of developing countries even if it succeeds in building a moderately prosperous society. Compared with developed countries characterized by high incomes and high human development, China still has a long way to go.
Just as the UNDP noted, China was once a socialist state with a centrally planned economy, but thanks to the reform and opening up, it now has a mixed economy described as “Socialism with Chinese Characteristics.” A mixed economy is an economic system blending multiple forms of ownership, multiple economic actors, multiple resource allocation methods, multiple market structures and multiple distribution methods. The goal is to promote the rational allocation of scarce resources.
During the Great Depression from 1929 to 1933 characterized by high unemployment and financial collapse, British economist John Maynard Keynes proposed that during recessions, the government should step in and address insufficient demand through fiscal, monetary and income policies. His ideas became widely accepted after the Second World War and provided key inspiration for economic policy makers in capitalist countries. Several typical mixed economic systems were developed such as state demand management represented by the United States, welfare states represented by Britain and Nordic countries, Germany’s social market, France’s indicative planning and Japan’s national industrial policy-oriented economy.
Since the reform and opening up was launched in 1978, China has been exploring how to shift from a centrally planned economy to an economic system with effective market mechanisms, dynamic microeconomic actors and reasonable macro-control. During the process, China not only drew on the experience of the Soviet Union and Eastern European socialist countries in their economic reforms, but also introduced new macroeconomic policy management tools such as fiscal, monetary and income policies adopted from developed countries, especially the industrial policies carried out by Japan and South Korea. China also gave sufficient consideration to its status as the world’s largest developing country when making economic policies. After passing the stage of “a planned economy supplemented by elements of market economy” to reach “a planned socialist commodity economy,” China has finally committed to building a “socialist market economy with Chinese characteristics” that allows the market to play a decisive role in resource allocation.
China will remain the world’s largest developing country for the foreseeable future, and it will continue to learn from the experience of developed countries. It is determined to build a mixed economy while adhering to opening-up policies. A socialist market economy with Chinese characteristics will safeguard and promote the sustainable development of the country’s economy and society.
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