Chinese Economic Expansion
Introduction
This lecture discusses China's economic growth, its expansion, and the One Belt One Road initiative.
It also covers how the COVID-19 pandemic affected China's economy.
Since China opened up its economy in 1978, its GDP has grown by an average of over 9% each year.
This growth has helped lift about 800 million people out of poverty.
There have also been significant improvements in healthcare, education, and other important services.
Lecture Objectives
To give an overview of China's economic rise, focusing on the economic and political factors driving it since the 1970s.
To explain the contrast between China's economic and geopolitical rise and discuss what the future holds after COVID-19.
To discuss the challenges facing the Chinese economy, such as its large population, geopolitical relationships, trade issues, and the housing crisis.
To provide a critical analysis of the Belt and Road Initiative (BRI), including its progress, challenges, and implications in the post-COVID-19 world.
Political History and Economic Rise
The lecture will explore the changes from capitalism, socialism, and communism.
It will discuss the power dynamics between China, the second-largest economy, and the US, the largest economy.
The impact of the COVID-19 pandemic, which started in China, will be examined.
The Belt and Road Initiative will be critically evaluated, looking at its progress, challenges, and impact in light of the pandemic.
China's Economic Narratives
Currently, there are two main views on China's economy:
Some believe it is in decline.
Others see it as a growing economic and technological power.
China's economy has slowed down, and local governments are dealing with debt.
China at a Glance
Has the second-largest population in the world: 1.42 billion people.
Is the third-largest country by area.
Has the second-largest economy.
Shifted from a planned economy to 'Socialism with Chinese Characteristics' and then to a 'Socialist market economy' after the 1970s.
Implemented a strict ZERO Covid Policy for 3 years.
Achieved the most significant poverty reduction in 30 years and had the highest economic GDP growth.
Achievements and Human Rights
Significant wage increases (400-500% compared to 10-20% in the USA).
Improvements in production, real wages, living conditions, and how long people live.
China plans housing in advance, which is different from what is often portrayed in the West.
Successfully managed the shift of people from rural to urban areas.
There are concerns about human rights issues.
Housing Market Issues
The property market has been a drag on economic growth, making up about one-quarter of China's economy.
In 2020, Beijing introduced rules to limit excessive borrowing by real estate developers, fearing a housing bubble.
Developers have struggled to repay loans and finish properties that were sold before they were built, which has stalled the property sector.
Perspectives on China's Rise
There are conflicting views:
Some predict an imminent collapse.
Others emphasize its strength and ability to bounce back.
Limited resources could lead to a hidden decline.
Some analysts have been predicting China's collapse for years (e.g., Gordon Chang in 2001).
Beijing's strength is often credited to its 'effective authoritarianism' (Blanchette, 2023).
Economic Structure
Includes planned state-owned enterprises.
And private capitalist enterprises.
The split in the 1960s between China and the USSR had major consequences for both countries.
Mao and the Great Leap Forward
Mao Zedong was the leader of China and the Chinese Communist Party.
He is seen as the founder of modern China.
He is also criticized for the policies he implemented during the Great Leap Forward and the Cultural Revolution.
There were similarities between the government's evolution in China in 1949 and the Soviet Union in the 1970s.
Similarities exist between the Soviet Union and China, especially in their approach to state capitalism.
China allows the private sector to be much larger than the Russians ever did.
A large part of China's economy consists of private capitalist enterprises, owned and run by both Chinese citizens and foreigners.
Maoism
Maoism is a set of ideas developed by Mao Zedong, tailored for the Chinese people, drawing from Marxist, Leninist, and Stalinist principles.
It differs from Marxism in its view of peasants, seeing them as a source of revolutionary power.
It has unique ideas about contradictions and continuous revolution.
Although it is sometimes seen as outdated, it has inspired revolutionary movements.
Mao's Rule in China
In 1949, the Chinese Communist Party won the Chinese Civil War.
Mao Zedong became the leader of China.
Mao's Great Leap Forward led to devastation and the Great Chinese Famine (1958-62).
His policies used food as a way to pay off debts to the Soviet Union.
At least 3 million people died of starvation and disease.
The government set up re-education camps.
Legacy of Mao
Mao is considered the founder of modern China, despite facing strong criticism.
His 40th death anniversary was widely commemorated in China.
There is a lack of transparency in Chinese historical records, especially regarding the famine that caused tens of millions of deaths.
Mao was a dedicated Marxist who wanted to modernize Chinese industry and agriculture at the same time.
Steel production increased significantly, but millions of people disappeared from population records.
The Great Leap Forward resulted in one of the worst famines of the 20th century.
China still faces fears from the past, environmental disasters, and struggles to address political injustices.
The economy was severely damaged, and it is estimated that up to 45 million people died in the Great Famine.
Up to two million more people died in the Cultural Revolution.
The Communist Party acknowledges that Mao's rule caused “grave disorder, damage, and retrogression” in the country.
Great Leap Forward (1958-1962)
Between 1959 and 1961, 30 to 40 million people died because of Mao Zedong's failed attempt at industrialization.
The goal was to quickly turn China into an industrialized communist society through collectivization and forced industrialization.
Industries were taken over by the state, and farmers were organized into collectives.
Opposition was suppressed.
China initially received support from the Soviet Union, but relations later worsened.
In 1966, Mao launched the 'Cultural Revolution' to eliminate 'impure' elements and revive revolutionary spirit; 1.5 million people died, and much of China's cultural heritage was destroyed.
In September 1967, the army was sent in to restore order.
Chinese Political Economy
The Communist Party under Mao Zedong had two main goals:
To maintain power and control.
To maximize economic growth.
The strong economy contradicted the Leninist state but allowed for inclusive growth.
Taiwan and Hong Kong influenced the retention of their distinct cultures while still growing economically.
Deng Xiaoping
He oversaw economic transformation, lifting millions out of poverty and turning a totalitarian country into a global superpower.
His legacy focuses on creating higher living standards, increased literacy, better health, and personal security.
He modernized China and introduced significant economic reforms.
Brief Overview of Chinese Economy
Understanding the institutions that remained after the Cultural Revolution is important for creating an environment for economic growth.
In 1976, Deng Xiaoping shifted away from previous development ideas and introduced ‘Socialism with Chinese Characteristics’ and opened some sectors to the international economy.
The Deng Reforms included changes in Industry, Education, Agriculture, and Defense.
China learned from wealthier countries and allowed workers and peasants to improve their lives, which motivated others to work harder.
Provinces and enterprises were given the authority to make decisions to encourage innovation and enterprise.
How China Grew Economically
Post-1980s growth followed the East Asian Development state model (similar to Japan).
Heavily relied on FDI (Foreign Direct Investment) and SOE (State Owned Enterprises).
China is the most successful post-communist ‘transition economy’.
Gradually shifting resources from the State to the Private sector increased productivity.
Emphasizing centralized competition rather than privatization created a unique formal centralization and effective decentralization.
Benefited from both a command economy and a competitive economy.
The influx of FDI was significant and focused on coastal SEZs (Special Economic Zones) in 1979.
Later expanded ETDZs (Economic and Technological Zones), initially on the coast and then in the poorer agricultural west and along major routes like the Yangtze River.
Initially, joint ventures were allowed, giving China access to foreign expertise without giving up control of strategic sectors of the economy (e.g., automobile manufacturing, telecoms).
One Child Policy (1979 – 2015)
The goal was to limit population growth by restricting many families to only one child; it ended in July 2021.
It helped control population growth, boost economic growth, and improve the health of women and children.
Negative effects included demographic and sex imbalances and psychological effects on a generation of only children in cities.
It is estimated to have prevented about 400 million births.
It was introduced because, in the late 1970s, China's population was approaching one billion, and the government was concerned about how this would affect its economic growth plans.
Political Reality and Economic Policy Choices
The decision to open up and encourage foreign direct investment.
Maintaining centralized control—'Authoritarian Capitalism' and state-controlled investment banks.
In 2000, the 'Going out' Policy was introduced.
WTO membership in 2001 increased pressure on SOEs (State Owned Enterprises) as competition increased.
Continued growth of outsourced manufacturing FDI looking for cost advantages, particularly in Africa, which is rich in natural resources and labor.
Driving Force and Resultant Ideology
Driven by '100 years of humiliation by the West'.
Shift from communism to socialism.
Socialism with 'Chinese characteristics' - becoming the manufacturing center of the world.
The Relationship Between the United States and China
Obama stated in 2009 that “The relationship between the United States and China is the most important bilateral relationship of the 21st century.”
Criticisms of the pivot to Asia after the 2007/8 financial crisis--G20 Summit in Hangzhou 2016 – nationalism.
Chimerica
“Chimerica” was described as a ‘marriage made in heaven’ by President Bush.
'Chimerica' referred to economic cooperation and a connection between the two economies through trade and a shared dislike of the Soviet Union in the early years of the US-China relationship.
After China joined the World Trade Organization in 2001, it saw a surge of US investment in Chinese factories and container shipping, which linked the world's two largest economies.
Trump and the ‘Chimerica’ Crisis
The idea of Chimerica was meant to represent a new global economic order, based on Chinese export-led growth and American overconsumption. However, today, the two countries are often in conflict. There is no international economic integration or expansion; instead, it is reversing.
Trump’s statements on the BRICS group pose a threat to the Dollar’s global dominance. The BRICS are an informal group that includes Brazil, Russia, India, China, and South Africa, with recent additions like Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE). They aim to create an alternative to what they see as Western control of international institutions.
Belt and Road Initiative (BRI)
The Belt and Road Initiative (BRI) is an ambitious project to increase regional cooperation and improve connectivity across continents.
Six economic corridors have been identified to connect other countries to the Belt and Road.
President Jinping's approach to the BRI suggests that China is becoming stronger.