FRUITFUL EXPLORATION

Summing up China’s success over 40 years of reform and opening up

FThe author is dean of the Beijing Normal University Emerging Markets Institute and a professor of economics orty years ago, China entered a new development stage when the country launched the reform and opening-up drive. Since then, it has made tremendous achievements and gained valuable experience, a review of which will illuminate the future.

Important experience

The impressive achievements can be attributed mainly to the following factors.

First, there is the influence of historical and cultural factors. The term “path dependence” suggests that certain cultures and histories lead to certain development outcomes despite twists and turns along the way. For instance, for a fairly long period before the Opium Wars of the mid-19th century, China’s economic development was at the forefront of the world. In terms of comparable GDP, it ranked first in the world, with a peak level accounting for more than 30 percent of the global GDP. Shortly before the founding of the People’s Republic of China in 1949, its share of the global GDP plummeted to only about 4 percent, while now the share has risen to about 15 percent. China is blessed with a rich historical and cultural heritage, most of which has played a positive role in promoting its development.

Second, China has created a unique development path suited to its national conditions. Although China has learned a great deal from the West, it has not completely imitated a Western development model, rather, it has chosen a socialist path with Chinese characteristics. It has not adopted the checkand-balance model that divides government into legislative, executive and judiciary branches. Instead it follows a model under which the leadership of the Communist Party of China is upheld, the people are the masters of the country and the country is ruled by law.

Third, China has implemented marketoriented reform. From its inception, China’s reform has given full play to the role of the market. Adhering to market orientation was crucial for the success of reform.

Fourth, the opening-up process has promoted integration with the rest of the world. In the past four decades, China has participated in the globalization process. So far, its opening up has gone through four stages. The first stage started in 1979 when special economic zones were built to attract foreign direct investment. Jobs were created and the products made in these zones were mainly for export to bring in foreign currency.

The second stage was the period from China’s accession to the World Trade Organization in 2001 to 2012. During this period it accomplished two missions: bringing its foreign trade and investment into compliance with international rules, primarily those of developed Western countries, and splicing itself with the international value chain. The first enabled the nation to be more accepted by the world at large, and the second made it an indispensable part of the global industrial and value chains.

The third stage arrived with the vigorous development of pilot free trade zones (FTZS). Such areas were built in Shanghai in 2013; Guangdong, Tianjin and Fujian in 2015; Zhejiang, Henan, Sichuan, Shaanxi, Hubei, Chongqing and Liaoning in 2017; and Hainan in 2018. So far, China has established 12 FTZS, creating a favorable business environment in terms of tariffs, regulatory supervision and other aspects, and promoting international trade and investment.

China’s opening up entered the fourth stage in 2013, marked by the nation’s proposal to jointly build a Silk Road Economic Belt and a 21st-century Maritime Silk Road. Through the Belt and Road Initiative, China hopes to bring into full play its advantages in terms of funds, certain technologies and human resources to advance the interconnectivity of facilities, trade, investment and finance and people-to-people exchanges for a community with a shared future for humanity.

Fifth, the country has given top priority to economic work. Since 1978, the focus of the Party and government’s work has shifted from politics to developing the economy. Party organizations and governments at all levels as well as the general public have placed great importance on economic work.

Sixth, China has maintained political and social stability. The Chinese people firmly believe that nothing can be accomplished without a stable society. So the country has given great attention to political stability. My studies on the economic development of countries along the Belt and Road found that political turbulence has been a direct cause of economic backwardness in some of these countries.

Seventh, the government has encouraged market competition. Without competition, there will be no prosperity. China has a competitive environment. At the individual level, competition for university admission, business opportunities or civil service jobs is fierce. At the collective level, enterprises are competing against each other and so are local governments. Some institutional arrangements have been born out of competition.

Eighth, China has given priority to education, a traditional value. Education bolsters China’s development. Basic education in China is doing well, and higher education has also developed rapidly.

Ninth, China has formulated and implemented development plans. Planning is a Chinese tradition and strength. The work of the Party and government is planned, and so is the work of various other social sectors. Planning with Chinese characteristics has been institutionalized. On the basis of careful research, planning and implementation can foster consensus and pool social efforts to eventually reach goals.

Tenth, the Chinese people are extremely diligent. I think this is the most important factor because without hard work and dedication, all the planning and policies are empty talk.

Step-by-step approach

The success of reform and opening up also lies in the step-by-step approach. At the inception,