The West can learn from the Chinese model

    Thursday, 19 December 2019
    According to the World Bank, 40 years ago, China’s economic modernisation began, Chinas GDP per capita was one-tenth that of Latin America and a third of Sub Saharan Africa’s. Credit: Flickr/Roman Boed.

    With eyes of the world now posed over the events unfolding in Hong Kong and in the province of Xinjiang, it is worth taking an overall look at China.

    According to World Bank Data, forty years ago, when China’s economic modernisation began, its GDP per capita was one-tenth that of Latin America and a third of Sub Saharan Africa’s. Sixteen years later, China’s GDP per capita had caught up with Sub Saharan Africa’s and is today 6.2 times larger. It took China a bit longer, 30 years, to catch up with Latin America, but between 2017 and 2018 China’s per capita GDP surpassed that of Latin America. Based on the forecasted growth rates, it will quickly leave it behind.

    Another way to look at the Chinese Economic miracle is the weight of its economy relative to the rest of the world’s. Fifty years ago, China had 22% of the global population and produced 3% of the world’s goods and services. Today, with 4% less of the world’s population, it produces 16% of the global GDP. This is an increase of more than 500% in two generations.

    Using Latin America as a benchmark, in the same period of time, LA maintained its share of the world’s population (8%) and increased its overall weight in the world’s economy from 6 to 7%. That is 16% against 500%.

    As the data shows, an unlucky enough individual born in extreme poverty during the last couple of decades (as 800 million people are still today), would have had much higher chances of being better off now, had they been born in China than in any other developing country. Freedom of expression is surely not very high on your list of priorities if you’re going hungry every day.

    While the West has spent its time virtue signalling China, China has spent it’s time moving hundreds of millions of poor out of poverty. And on its way, raising out of poverty hundreds of millions in other developing nations. Whereas many countries in the developing world profited from China’s rise to decrease inequality, the righteous West used it to increase it.

    Some attribute China’s success to its sheer size. On the contrary, in recent history, size seems more of a handicap than an advantage. With the exception of South Korea, all other countries that have escaped from poverty after the end of World War II have small populations: Hong Kong, Singapore, Taiwan or Chile.

    If size was such an advantage, why haven’t India, Brazil, Indonesia, Nigeria or Pakistan performed better?

    The point is not to overlook the communist party’s abuses of human rights. The point is to not look only at that. Western civilisation needs to get rid once and for all of its centuries-old “superiority complex” and admit that other civilisations and cultures have lessons to teach. It should be asking itself how has China accomplished what it has accomplished, and which policies could be copied by other poor countries to boost their growth? The story is not only about size, unfair commercial practices and intellectual property theft, as many want us to believe.

    A good example of China’s more clever policies are in the management of its financial markets and foreign direct investment (FDI). During the late 1980s and all throughout the 1990s, the West’s financial institutions pushed developing nations to liberalise their financial markets. The Chinese instead were reluctant to open up their markets and instead adopted a policy of slowly letting investment in.

    The result was that the Chinese were barely exposed to the volatility of international capital markets during the global financial crisis of 1997–1998 that started in South East Asia, but that also ravaged developing economies like Brazil or Argentina, amongst others.

    By 2010, the World Bank was acknowledging “FDI policies in China have evolved alongside economic development and strengthened institutional capacity. A gradual and prudent approach has been taken in the process of liberalization. When market institutions were not fully in place in 1980s and 1990s, China experimented with opening up to foreign investment in selected coastal cities and in special economic zones/industrial parks with a focus on attracting export-oriented manufacturing FDI.”

    China’s ascent has no parallel in history. Western media should not only condemn its flaws but also recognise its shrewdness. The world would be better off if its virtues were as highlighted as well as its wrongdoings.

    David Abuchar Luna