TODAY marks the 40th anniversary of the “reform and opening up” of communist China to outside economic forces.
President Xi Jinping honoured the occasion with a 90-minute address to Communist Party leaders at the Great Hall of the People in Beijing. Xi used his time to shore up confidence in his leadership and aggressively warn other countries that no one can “dictate” China’s economic development path.
His warning comes amid a mounting trade war between Beijing and Washington that is spooking investors and rattling stock markets. But this uncertainty hasn’t changed the fact that China remains an economic powerhouse and the world’s second-biggest economy. At the rate they’re going, it likely won’t take them long to knock the United States off the top spot.
But it wasn’t always like this.
Less than 60 years ago, China was in the grip of a famine that would kill over 15 million people and put an end to Chairman Mao Zedong’s Great Leap Forward.
The landmark social and economic reform led by Mao’s communist party left China crippled.
Struggling to feed its people and with economic development slowing, the turnaround only came when Deng Xiaoping took over in 1978 following the death of Mao two years earlier.
With over 60 percent of the population living in abject poverty, Deng was acutely aware the planned economy imposed under Mao wasn’t working. Starting with agricultural reform, Deng immediately set about launching a series of measures that would bolster private enterprise and open up the economy to foreign trade and investment.
Deng’s policies gave China a lifeline that has taken it from closed-off communist to successful capitalist in just a few decades. Not only giving its international image a dramatic facelift, but changing the mindset of the Chinese people.
And the change has been radical.
China’s Gross Domestic Product (GDP) today is more than 80 times bigger than it was at the end of 1978. The poverty rate among the rural population dropped to 3.1 percent last year from 97.5 percent 40 years ago. And the country now boasts the most dollar billionaires in the world with 620.
It is now the only real challenger to the supremacy of the United States (US$20.4 trillion GDP), clocking in a GDP of over US$14 trillion in 2018. That’s US$9 trillion more than Japan in third place with US$5 trillion nominal GDP.
Its success has made it a superpower on the world stage and given it powerful leverage in negotiations.
Political analysts have raised concern Beijing is using its economic clout to wield power and gain influence across the globe; pouring money into developing countries to shore up loyalty and secure votes in international forums.
It’s hard to find a country these days that hasn’t been touched by Chinese investment on some level.
Money has become the superpower’s primary means of diplomacy, spending US$48 billion on countries in Asia Pacific between 2000 and 2016.
This year, Beijing announced it has doubled its financial aid and investment pledges to Africa and promised to waive the debt of the continent’s least-developed nations.
The investment only looks set to grow under the Belt and Road Initiative (BRI), a flagship of Xi’s administration.
But while China has become a more prominent player politically, access to Chinese markets and the double standards imposed on outsiders have some questioning just how “open” its economy really is.
Foreign businesses are losing patience with the discrimination and barriers to competition they continue to face, and the US and other developed nations fear China’s growth is happening at their expense.
This is one of the pillars of US President Donald Trump’s complaints as he forges ahead with threats of tariff hikes if things don’t change.
The US and China have agreed on a truce to the trade war and imposed a 90-day period to come to an agreement. Trump has made it clear, however, that should they fail to reach a solution, he won’t hesitate to impose the planned 25 percent tariff on US$200 billion of Chinese goods.
The uncertainty has people worried and the effects of the trade war are predicted to show a slump in China’s growth in 2019. But China’s economy has proven its resilience and it will take a lot more than that to topple this behemoth.