Daily Times

This year marks the fortieth anniversary of Chinese reforms.  In the past four decades, the Chinese people and the world has witnessed momentous development that has led them from being a developing nation to an economic giant. Transforming the traditional operating system, opening up to the outside world, rural development and other reforms have contributed immensely towards overall productivity and governance.

The Chinese ascendency to the largest economy of the world has led to be a major player on the international scene; one of the most imperative steps that the Chinese took was their poverty alleviation program. More over public development has played an important role in establishing China as a major global economic power- as it has undergone the fastest sustained expansion in the history of the world, having lifted 800 million people out of abject poverty, according to the World Bank.

Undoubtedly, leadership plays a significant role in shaping the destiny of a country, and steering them to greater success. In the past forty years, leaders such as Mao, Deng Xiaoping and now President Xi Jinping have served as paramount leaders guiding their nation to greater prosperity.

For instance, their open trade policy has established China as an economic juggernaut in the global market with the world’s largest foreign reserves, second-largest gross domestic product (GDP), and third highest level of foreign direct investment.  Today, China’s world economy has reached a staggering 18.2 per cent from a mere 1.8 percent in 1978. China is now not merely an emerging world economy, it is infact a major economic power.

Forty years after Deng’s reforms, the world is now witnessing a more advanced trade policy under the leadership of China’s President Xi Jinping. However, unlike his predecessor, Xi is at a strong position to implement policy shifts that further boost the country’s economy as he holds the three most powerful offfices in China. Xi also aspires to increase the country’s economic growth. After the initial economic reforms and opening of Xiaoping, Xi’s target is to convert the world’s second largest economy into a global and manufacturing superpower.

Beijing’s efforts to expand its economic influence globally by financing infrastructure projects in Asia, Africa, and Europe under the BRI is causing anxiety amongst countries such as the US and India

To achieve this, Xi has initiated various domestic reforms to proliferate the “Chinese Dream”. This dream is to rejuvenate China through economic growth and modernization. As the chairman of the Central Military, Xi has shown commitment in continuing Xiaoping’s legacy of economic reforms, and opening up to the world especially at the G-20 Summit in 2016, the Davos Forum in 2017 and the Boao Forum in 2018.

Prior to Deng’s reforms, the Mao Zedong era was difficult for the Chinese economy. Mao maintained the traditional model which contributed to progress but was slow in its pace. The wisdom of Mao made China sustainable, and the nation that it is today. As a result, in 1978 nearly three-fourths of national industrial output was produced by state-owned enterprises.  Private companies and foreign investments were restricted and the major goal of the Chinese government was to make the economy self-sufficient.

Due to these centralized investment policies, the economy remained struggling however the era was enough to make the Chinese to realize their own powers and abilities. Missing market mechanism was another area that the centralized government economy was lacking.  Previously as most of the trade and economic affairs were managed by the centre, there was no mechanism for the allocation of resources or attracting foreign investors.

Hence the current boost to the Chinese economy and trade is a result of its regular economic reforms and removal of restrictions in trade. China’s Belt and Road Initiative (BRI) is proof of higher incentives and open market strategies for foreign investors.

This open market strategy has played a crucial role in transforming the Chinese economy. Today, China’s economy has been among the world’s fastest growing economies, with annual economic growth 9.5 per cent. It was China’s economic developments that, on average, doubled its annual growth rate and help the Chinese leadership since 1978 to bring an estimated 800 million people out of poverty and unemployment.

After Mao, under the leadership of President Deng, China initiated several economic reforms. The central government initiated price and ownership incentives for domestic farmers enabling them to sell a portion of their crops at the free market rate. Deng also established four special zones along the coast for attracting foreign investment, boosting exports, and importing technological products into the country, further helping Beijing in strengthening its economic position. Deng’s reforms of decentralized economic policy in various sectors, especially trade, further boosted the country economy.  He also handed over the economic control of various enterprises in the country to provincials and local governments.

This initiative gradually allowed both domestic and foreign investors to compete in the free market.  Thus, Deng’s trade liberalization policy set the country on its track for President Xi’s reforms.

President Xi has made innovation a top most priority in his economic planning. He took a great number of high-profile initiatives, such as “Made in China 2025,” a plan announced by Xi in 2015 to further upgrade and modernize China’s manufacturing industry. He also introduced extensive economic incentives in ten key sectors.  This reform process and economic liberation was encouraged and supported by all quarters. However, Beijing’s efforts to expand its economic influence globally by financing infrastructure projects in Asia, Africa, and Europe under the BRI  is causing anxiety amongst countries such as the US and India.

These countries oppose the BRI claim that China is using this initiative to boost its industries facing overcapacity and to gain new overseas markets which will influence nations to follow the Chinese economic model. Moreover tensions between Washington and Beijing have escalated over the past few days. It started with Donald Trump imposing tariffs on Chinese exports for the US, to which China responded with imposing tariffs on Chinese imports from the US. The stability in the Chinese economic growth is seriously under threat unless matters with the US can be resolved. US policymakers speculate that if Beijing imposes a tariff on LNG, it would be a serious setback for the US energy sector.

Hence Chinese leadership must be careful in taking its next steps- its seems as though on both the global and regional platform all eyes are on China and President Xi is must prepare himself for the challenges that lie ahead for his nation.

The writer is Director, Institute of Peace and Diplomatic Studies and Secretary General, Pakistan-Shanghai Cooperation Organization Friendship Forum

Published in Daily Times, August 29^th 2018.