By Reza Amouei 

40 years of China’s open-door economic policy and great changes

January 11, 2019

China held a grand gathering on December 18, 2018, to celebrate the 40th anniversary of the country's reform and opening-up in Beijing, a great revolution that has changed the destiny of the Chinese nation and the world that began in 1978.

he ensuing four decades has painted a completely different picture for China. The country maintained an average annual growth rate of more than 9 percent and became the world’s second-largest economy; China’s share in the world economy increased from 2.7 to 16 percent; and 800 million Chinese were lifted out of poverty.

How did China warm up to the intl. community?

The 11th Central Committee of the Communist Party of China held its third plenary session in Peking December 18- 22, 1978. It was attended by 169 Members and 112 Alternate Members of the Central Committee.
It was announced at the meeting that the party would focus on economic development and would use all available tools to achieve this goal.
In the winter of the same year, for the first time since the establishment of China’s communist system, the lands of the extremely poor Xiaogang Village in east China's Anhui Province were transferred to its residents and the government ordered the purchase of their products.

A year later Xiaogang Village, which was already suffering from poverty and famine, was the pioneer in selling private agricultural products in China, and the same pattern of privatization of China's rural areas expanded.
Also, the legal amendments related to recognition of the right to land for peasants paved the way for membership of the World Trade Organization (WTO) eight years from the date of privatizing agricultural land in 1978. China adopted the World Trade Organization (WTO/GATT) agreement in 2001.

The easing of restrictions on foreign direct investment (FDI) allowed foreign businesses easier entry to the marketplace than in the past, which made the switch for China easier in the 1980's.

China's has witnessed a queue for the entry of U.S. and European employers seeking both cheap labor and tax-free profits.

Deng was purged twice during the Cultural Revolution in the 1960s, but after Chairman Mao Zedong's death in 1976, Deng led China through far-reaching market-economy reforms.

In 1979, a year after he came to power, he established the export-processing zones for the first time in Guangzhou to show that China's doors were open for business to the world. The model of the Guangzhou Harbor was implemented in 1988 in at least in 14 other Chinese cities.

The secret behind China's reforms

Bert Huffman, the author of an article titled “Reflections on forty years of China's reforms”, cited four key features of the success of China's economic reforms: 

 Gradual reforms

Reforms in China developed only gradually, starting in the rural areas with the household responsibility system and township and village enterprises and some initial steps to open up the economy to foreign trade and investment, which only started to play a significant role in the 1990s.

Decentralization and incentives

Decentralization to local governments became a powerful tool for progress within the confines of central political guidance. The provinces and local governments received increasing authority over investment approvals, fiscal resources, and policies. Provinces, municipalities and even counties were allowed, even encouraged, to experiment with reforms in specific areas, and successful experiments then became official policy and were quickly adopted throughout the country. In a way, by decentralizing, China turned the country into a laboratory for reforms. Within the party, the personnel promotion system was largely based on the achievement of growth. Experience in the regions also counted heavily in the promotion to higher?level party posts, which provided the most talented with the incentives to gain that experience, and to demonstrate their capacity to reform and spur growth. 

Pragmatism and transitional institutions

China’s approach to reforms provided the room for the country’s own particular institutions to emerge, which suited the country’s purposes well at any given point on its reform path. It allowed a continuation of the planning system at planned prices, which avoided the collapse of production, but at the margin the system allowed a non-planned economy to emerge.

China's effort to promote intl. political standing

Four decades after the start of its reforms, China has seized the Western liberal market, and since 2016 it has become the world's second-largest economy after the U.S.
According to statistics, the past decade, from 2008 to this year, has been the decade of China's economic peak since its foreign investment in the country, which was $55 billion in 2008, reached $196.2 billion in 2018.
All these statistics threaten the position of powerful economies, especially the U.S., to the extent that China's global positioning is improving.
Indeed, China, despite its undeniable economic status, has faced challenges from Western rivals in the international political arena, and the Chinese have not stopped working in this area, seeking to promote their political status.

Institutionalization of reforms

 China began the movement in the political context of the international system less than 15 years after the start of its economic reforms, and, following the establishment of the Shanghai Cooperation Organization in 2001, it sought to establish an international and non-international institution.

In fact, the Shanghai Cooperation Organization, as an international organization in the field of security and economic affairs with Russia and Asian countries, has more than anything else a political function against Western political and security institutions, including the G7. Its future vision is to develop partnership in security spheres. And the military can be seen as an eastern alternative to NATO, although it has a long way to go.

China’s hands-off policy system 

Unlike Western leaders, China's leaders have never claimed to impose their political norms on their political and even strategic partners. Unlike Western leaders in Washington, London or Paris, who have always been criticizing other countries for alleged human rights issues, China has never emphasized political norms in deepening ties with its partners.

Perhaps the best description of this feature is the Chinese President's remarks on the occasion of the 40th anniversary of reforms when he said China will “never seek hegemony no matter how developed it becomes one day.”

Indeed, China is trying to show non-interference from its political behavior, and this is contrary to the Western-style approach to foreign policy, which seems to have a mania for interventionist policies.

Deepening political influence in light of China's global market

According to United Nations statistics released by Bloomberg, in 2015, America had $502.6 billion worth of imports from China and $116.2 billion worth of exports to the country. In the Trump era some change has been apparent, of late related to the tariffs and trade war started by Trump.

Chinese President Xi Jinping offered another $60 billion in financing to Africa in September 2018. China is also investing heavily in the South Asian region, both in Pakistan and simultaneously in Afghanistan, and is now becoming the economic partners of these countries. China's presence in other regions, including the Arab states of the southern Persian Gulf, is rapidly expanding.

Based on this, now 40 years after the start of China's open economic reforms, the country has been able to deepen its political influence in different regions by developing its economic ties in world markets, even if Chinese political development is not welcomed by the West.

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