In this growth story, institutional changes were behind the unleashing of the productive forces.



Last year, while celebrating the 40th anniversary of the reform and opening up of China, Chinese President Xi Jinping said, “The Chinese nation ushered in a great leap from standing up, getting rich to becoming strong”. Essentially, President Xi was summing up the journey of China in the last 70 years, right from the inception of the People’s Republic of China to his own times pronounced as the New Era. It may be recalled that it was Mao Zedong, the helmsman of China, who declared from the ramparts of Tiananmen on 1 October 1949 that “the Chinese people, comprising one quarter of humanity, have now stood up”.

Mao’s declaration, on the one hand, revealed the fact that the “century of humiliation”, when China was weak and was bullied by the major powers and forced to cede territory and sign unequal treaties had come to an end. Henceforth, China will take its rightful place in the comity of nations and play constructive role in international affairs, thus restoring the self-esteem of the Chinese people and nation. On the other hand, since China had lost opportunities to rise and modernise in the course of this “century of humiliation”, the priority after the establishment of the People’s Republic was economic construction, abolition of illiteracy and poverty. Above all, it was an unprecedented unification of the Chinese nation never seen in the history of China. Notwithstanding the “leftist errors” and turbulent times in the form of “anti-rightist campaigns”, the “Great Leap Forward” and the “Cultural Revolution” that caused death and destruction, and brought untold sufferings to the Chinese people during the Mao era, China achieved various milestones in the fields of health and education, land reforms, science and technology, which laid a solid foundation for the ensuing economic reforms starting from 1978.

It was during the reform attributed to Deng Xiaoping, and deepened by successive Chinese leaderships that the growth story of China was made possible. In this growth story, institutional changes were behind the unleashing of the productive forces. For example, initially the thrust of the reforms was in the rural areas, where a “Contract Household Responsibility System” was implemented, which linked remuneration to output. Between 1982 and 2008, a series of administrative reforms were introduced to create a leaner government structure, and bureaucracy was downsized almost by 50% from a whopping 10 million people. During the third Plenary Session of the 12th Central Committee in 1984, reforms were taken to the urban areas, and various systems of ownership such as collectively owned enterprises, individual, private and foreign owned enterprises were introduced and encouraged. The Southeast Coastal Priority Development Strategy was unfolded that saw the establishment of special economic zones, the experimental zone, the free trade zone, and the free ports that enabled some people to get rich first. Secondly, as China created new institutions and institutionalised reforms, it drew long-term strategic goals for the country’s development. For example, during the 13th National Congress of the Communist Party of China, held in 1987, a three-stage modernisation formula for the next 62 years was rolled out. The goals included doubling the 1980 GDP to end shortages of food and clothing; quadrupling the 1980 GDP by the end of 20th century and achieving the level of a moderately prosperous society; and raising the per capita GDP to that of moderately developed countries. Though China witnessed bloodshed at Tiananmen in 1989, but to everyone’s surprise, China achieved the first stage by the end of the 1980s and the second stage in 1995, ahead of schedule.

In the post-Deng era, as China continued to sustain its breakneck economic growth, it became the largest country to have sustained the fastest ever economic growth from globalization in the shortest possible time in the history of mankind. The most striking change is the dramatic enhancement of China’s comprehensive national strength in terms of its $13 trillion GDP, making it the second largest economy in the world, which in turn translates into the strides it has made in building state of the art infrastructure including the world’s largest 25,000-kilometre-long high-speed rail network, 123,000 kilometres of expressways, non-existent in the pre-reform period; alleviating over 700 million people from poverty, and achieving an unprecedented 55:45 urban-rural ratio in a very short period of time; and spending over $150 billion on its defence, which has enabled it to inch towards information warfare and challenge US hegemony. The coordinated development of the Beijing-Tianjin-Hebei region, the development of the Yangtze River Economic Belt, and the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, establishment of Hainan as a free trade port, etc., are expected to unleash new productive forces and push China’s reforms, poverty alleviation and urbanisation to new heights. Linking internal development strategies with those of Belt and Road Initiative, which essentially is a pre-emptive surgical strike on de-globalisation, protectionism and nativism has worked well for China thus far, for China’s trade with the BRI countries has exceeded $6 trillion, irrespective of the fact that there have been lingering debates on neocolonialism and debt traps across the continents.

The strategy of drawing long-term blueprints for the Chinese economy continues in the “new era” under President Xi Jinping, which could also be seen in the “Two Step” formula for China’s development between 2020 and 2050. By 2035, China will basically realise socialist modernisation, and by middle of the 21st century, “China will develop into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious and beautiful”, to quote from Xi Jinping’s 19th Party Congress Report. Today, China has made huge strides in artificial intelligence and quantum computing, automated machine tools and robotics, aerospace and aeronautical equipment, maritime equipment and high-tech shipping, modern rail transport equipment, new-energy vehicles, power equipment, agricultural equipment, biopharma and advanced medical products. Enterprises such as Ali Baba, Tencent, and Huawei etc., are at the forefront of this new industrial revolution. China’s breakthroughs in new technologies have become new growth drivers, with China challenging Western dominance in these technologies. In fact, these are some of the achievements that have made the Western countries join hands and contain China from monopolising these. The ongoing trade war between China and the US must be seen in this light, albeit China shedding “bide your time and hide your capabilities” paradigm should also be held responsible.

Finally, the 70-year journey should be rightly attributed to the hard working people of China, those 300 million plus migrant workers, who were responsible for creating wonders across China such as Pudong in Shanghai. For the Communist Party of China, if the achievements attained in the last 70 years legitimise its rule, the ambitious goals set for making China into a developed country by 2049, in the wake of the ensuing cold war with the United States, domestic economic slowdown, gradual destruction of the small and medium enterprises that once turned China into the “factory of the world”, and ever increasing ideological stranglehold of the Party reminiscent of Mao era, will certainly raise more questions than answers on the longevity of the Party. However, politically, if China can avoid the Thucydides trap; economically, if it can avoid the middle-income and Kindleberger trap, as it still has a long way to go as far as assuming the leadership in offering global goods is concerned, the party-state will continue to surprise the world. Nonetheless, the question will remain: for how long?