Can China Sustain its Economic Growth?

06.17.18
Xinhua
World News /17 Jun 2018
06.17.18

Can China Sustain its Economic Growth?

China will sustain its economic growth based on its economic and political strategies. China has been undergoing a period of rejuvenation to become what it once was – a superpower. During the 11th and 19th centuries, China played a pivotal role in the world economy. In 1078, China was the biggest producer of steel in the world. In 1820, China was the largest economy in the world. Then, China fought two Opium Wars against Great Britain, and after that, China entered its period of national humiliation and began to decline. Napoleon Bonaparte had once said, “Let China sleep, for when China wakes, she will shake the world.” Today, the country has the largest population in the world and the second largest economy. Napoleon’s quip proved accurate. Since the 1970’s, more than 700 million Chinese have worked their way above the poverty line. China’s outstanding growth and development are unprecedented in the world’s history. Despite this remarkable growth, Chinese has kept the same essential values – they are kind and hardworking people. The country wants to get the economy growing faster to raise the country’s living standards.

Changes in China began with Mao Zedong, who united the country in the 1950’s. However, it was under Deng Xiaoping’s administration that China started to grow economically. In 1978, Deng Xiaoping took the control over China again, and he led the country into an era of unprecedented growth. “China’s economy has grown at an average of about 10 percent per annum in real terms.” The domestic transformation brought about an international transformation too. China surpassed the U.S. to become the world’s top destination for foreign direct investment in 2012.

Xiaoping’s focus on economic growth made China growth real and solid. Xiaoping opened China’s economy to the world. The reform program commenced in 1979 and focused on external trade, which helped China develop its economy. Xiaoping’s reforms began in the rural areas. Different from Mao Zedong, Xiaoping allowed the farmers to sell the excess products. In the same year, the United States and China officially established diplomatic relations. In that year, China’s global trade represented $2 billion. In terms of economic clout, China emerged as a major player in the global economy, after 1990, no other country has ever grown as much or as fast as China.

When China joined the World Trade Organization in 2001, it was the start of a new era of globalization. In 2005, the economic bloc of emerging economies was created – the BRICS (Brazil, Russia, India, China and South Africa). Since its inception, China has had a pivotal role in the bloc. By 2030, if China continues to grow rapidly, and the U.S. continues growing the way it is, China will catch up with the U.S. In 2017, China’s global trade was over $630 billion, 300% times bigger than the US ($2 billion from 1979.) “Foreign trade is an important part as well as a driving force of the national economy,” said the Chinese Premier Li Keqiang in 2014 when chairing a meeting at the State Council. Finally, China confirmed its success of continued reforms in foreign trade, and maintained its ability to sustain a healthy rate of export growth.

The Chinese government is astute because they do not, as they say, put all their eggs in the same basket. Although China considers its exports a way to leverage the economy, it also has a long-term vision, and it is investing in other areas – such as infrastructure in many African countries. China is the largest contributor of aid to sub-Saharan Africa. In contrast with other aid contributors, China’s aid targets infrastructure. Chinese foreign policy towards Africa underwent significant reforms in the 1990’s. China provides loans to Africa through an economic cooperation mechanism that helps African countries uplift their economies and boosts Chinese financial institutions such as China’s Development Bank, China Export-Import Bank, and China Agricultural Development Bank.

In addition, in 2013 China launched its ambitious strategy “Belt and Road Initiative,” which focuses on development and cooperation with Europe, Asia, and Africa. For some African states, China represents a new wave of emerging powers and the shift of power and resources in the age of globalization. China’s help comes with no strings attached. Notwithstanding, China can count on the African support when negotiating with international organizations such as the United Nations. Whether in the United Nations Security Council or in the United Nations General Assembly, China has successfully relied on Africa’s votes to get what it wants. Furthermore, China’s membership in the G77, gives it a unique position in the organization, because the group is the largest and strongest United Nations’ group that counts 134 members. China has proven it does not need to be a hegemon to grow its influence in world politics. China’s economic and political growth is steady, carefully thought out and constructed over the long term.

China’s Guizhou Province. (tsemdo.thar/Flickr)

China’s GDP PPP is higher than the United States’ for various reasons. Chinese living standards are lower than the United States, Chinese public transportation is excellent and effective. Food, clothing, and housing are cheaper compared to the U.S. In addition, China provides free education for nine years. The Chinese government assigns a high value to education. It holds the belief that education is the basis of national development and modernization. The Chinese government has invested highly in infrastructure boosting the GDP, especially in top-tier cities. China created the tier system to classify its cities, based on GDP, politics, and population. China has more than 600 tier cities, which are divided into four tiers. The investments in tier 1 cities are higher and controlled by the central government. Because China was able to move more than 700 million people above the poverty line, it has made its middle class larger than many developing and emerging countries. These new middle-class consumers are changing their consumption habits. For example, the consumption of pork has declined since 2014. The Chinese private sector is expanding to cater to the new middle class. China has been attracting more foreign investments due to its rapid and steady growth. The Chinese market is huge, around 1.39 billion consumers. If you have 5% of market share, you are selling your product to around 70 million people. In sum, China’s economic growth is sustainable and long-lasting.

The Chinese Communist Party’s domestic and foreign policies have evolved over the years. The moving of 700 plus million people above the poverty line in 50 years, it is the same as moving twice the population of the U.S. to another social class. If in 50 years, with socialist policies. China has achieved extraordinary economic growth. I do not believe that the government is a constraint. While in democratic countries, every four years government and its domestic and foreign policies change, in China the government and its policies do not change so often, they adapt according to the country’s needs. Although the Chinese Communist Party is a monopoly and has ruled the country since its foundation in 1921, the party is working top down to rejuvenate China in all aspects. What started with a group of friends meeting in Shanghai, changed the history of China, making one wonder how much was built and destroyed, how much dedication and hard work was expended until it reached the prominent place that it occupies today.

The country with the largest population also has the largest e-commerce firm in the world, Alibaba. A Chinese e-commerce conglomerate, founded in 1999, provides a large umbrella of services of different varieties to consumers and businesses. Alibaba is present in 217 countries. The biggest markets are China, the U.S., India, Canada, and Russia. Some of the Alibaba’s companies are: 1688 is the Alibaba in China, which is a business to business (B2B) e-commerce. Taobao is a consumer to consumer (C2C) e-commerce which sells more than 14,500 brands, from 63 countries. Tmall is a B2C e-commerce, bridging international brands to Chinese consumers. ANT is a financial service focused on small consumers. Alipay was founded in 2004. They operate in more than 27 currencies, more than 200 countries, and more than 60,000 stores accept Alipay. It is the most advanced payment solution in the world. Sesame and Zhina are financial services focused on credit, with more than 150 million people. About 55% of Alibaba’s clients are 5 men, the majority of the clients are in the age range between 26 and 30. Alibaba currently employs 60,000 employees around the globe. They are the 20th largest economy in the world, and aim to become the world’s fifth largest economy by 2036. They create 11 million indirect jobs. They have 515 million consumers annually. In China, anything can be purchased and delivered within 24 hours. The numbers are so impressive as to leave one awestruck. At every second, it is possible to know the number of buyers, sellers, best-selling products and the countries that buy the most, countries that import the most, and so on. It is fascinating.

Alibaba Group’s Jack Ma. (RIA Novosti)

In contrast, Alibaba uses all this data to control and ensure the success of the operation. For example, if Alibaba software identifies that I bought and did not honor my payments, my name automatically goes into the default list that circulates to more than 10 websites which are part of Alibaba’s conglomerate. In addition, the default list goes to the government that shares the list among the government entities such as public transportation. Being defaulter is not worth it. Alibaba controls the e-commerce retail in the same way that the Chinese Communist Party controls the country. If it is working in the public sector, it will work in the private sector too. Alibaba is working from the bottom up to help China enhance its economy.

Alibaba’s founder, Jack Ma, is obsessed with helping people. When he launched Taobao, the Chinese version of e-Bay – a live marketplace, Ma did not charge commissions from buyers and sellers. He believed that once the sellers made a profit, he would make a profit. For him, “social responsibility is the key. Whatever we do, we try to make sure that the society is good.” Moreover, Ma talks about three things you should not touch: money, power and glory. “If you keep the power in your office, you will be in trouble. If you keep the money in your own pocket, you will be in trouble. If you put the glory in your hand, you will be in trouble. So when you have the money, spend the money supporting more people. When you are in power, empower the others. When the glory, (make sure) the other people have that. Then you will be happy.”

According to the Chinese Communist Party, China has the goal to eradicate poverty by 2020. To help his country mitigate poverty, last year Ma launched a $1.5 billion poverty relief fund. In tandem with the Chinese Communist Party’s commitment, Ma said: “Without Deng Xiaoping, there would be no us.” Examples like Jack Ma are common in China, illustrating the strength of Chinese pride. The Chinese people will help boost Chinese economy. Thus, the domestic economy in China will see a continuous growth, although it will not grow as fast as its foreign economy.

The analysis of the public and private sectors confirms that today’s China is a renewed and better China. Maybe no one knows if the Chinese Communist regime will survive, it can persevere for a long time if it continues evolving. First, Chinese communism is not the same communism of Josef Stalin of the early 20th century. Although Mao Zedong based his regimes on Marxist-Leninism, the Communism preached in today’s China has evolved over the last 97 years. They have learned a great deal from the mistakes of the past, so they are looking for new alternatives for the future. In the period between 1958 to 1961, during the Great Chinese famine, more than 40 million people died of hunger and poor working conditions. The Chinese Communist Party learned a lot from its mistakes, and in response to that, they managed to put more than 700 million people above the poverty level in 40 years.

The Chinese Communist Party has more than 89 million representatives. Although this number represents only 7% of China’s population, the party has more members than Germany’s population. Furthermore, the Chinese Communist Party uses a meritocracy system, which aims to select political leaders with above-average ability to make morally informed political judgments.

Third, democracy, especially U.S. democracy has proven to be flawed. Unfortunately, not everyone knows what the best for them. In my home country, Brazil, we have had a democratic government since 1990’s. In less than 30 years, Brazil had two presidents impeached, one president imprisoned for corruption and two under investigation for corruption. In addition, democracy in Latin American, European and African countries led to a rise of populism. Populist governments are extremely radical, are against immigration, favor nationalism and work for the elite who controls the country. Populism can be either left or right wing, but both are a disease in the democratic system because of the lack of maturity and political knowledge of voters.

Last, the core values of socialism are present in all corners of China. The 12 values are prosperity, democracy, civility and harmony; the social values of freedom, equality, justice and the rule of law; and the individual values of patriotism, dedication, integrity and friendship. President Xi Jinping posited that “core socialist values are the soul of cultural soft power. Soft power of a nation depends on the vitality, cohesive force and charisma of its core values.” In China, there are many public museums, memorial halls, libraries that promote these core values. Under the instruction of the Chinese Communist Party, the core values of socialism are included in Chinese textbooks too. In tier cities, there are many billboards demonstrating the core values of socialism. In addition, in Beijing, the capital of China, along several main avenues, there are gardens decorating the same 12 core values.

In short, China’s development model does indeed offer a viable alternative to liberal democracy. There is no perfect political system, although the Chinese political system seems to be effective and long-lasting. Therefore, China’s ability to rise peacefully in a Western-democratic system, while the Chinese Communist Party remains in power, is a viable possibility. China is becoming the Middle Kingdom that it has always been.

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