How Long Will 'China Time' Last?
Yang Yudong
/SOURCE : yicai
How Long Will 'China Time' Last?

(Yicai Global) Dec. 18 -- China's 40 years of reform and opening-up will definitely make for a most magnificent view, if the entire economic history of the human race can be summed up in a scroll painting that unfolds through thousands of years.

The country's gross domestic product was just CNY367.9 billion (USD53.3 billion) in 1978. Last year it reached CNY82.7 trillion (USD12 trillion), reaching the CNY80 trillion milestone for the first time in history.

The food and clothing issues of a country that once had a quarter of the world's people have been resolved with its second-place ranking on the list of global economies. China's foreign exchange reserves have grown to more than USD3 trillion from USD167 million, while its gross domestic product per capita is up from USD220 to USD8,800.

Economic growth has averaged 9 percent a year over the past 40 years. As a result, we can call it a special 'China Time' in the entire economic history of the human race.

Continuous high-speed growth is quite rare even if one looks back on the economic history of nearly a thousand years. This is why Yicai Global has named today's special edition in celebration of the 40th anniversary of reform and opening-up as 'China Time.'

We also hope to closely compare and analyze the past 40 years over a larger space and longer time, not only for the great meaning such a period has for the country itself, but also for the profoundly positive influence this economic miracle created by more than one billion people has cast on global political and economic patterns during 40 years.

Freeing Productive Forces

Down the years any continuous high-speed economic growth has come about due to specific reasons, including a peaceful society, stable natural environment, increasing population, re-division of work in the global market and time windows for technical advancement, also including widespread crops and application of agricultural technologies, in addition to the industrial revolution.

Glancing backward at the 40 years of China Time, globalization, technical improvement and other opportunities of time and advantages of the situation have all contributed to the miracle, also counting the demographic dividend and special dual structure. Most studies and opinions show the more important driving force among these factors is generated from the liberation of productive forces that have been depressed for long and that of the unlimited potential possessed by over one billion people. The starting point of such a key route is the liberation of thinking, which promotes institutional reform that eventually frees productive forces.

Opening-Up

The other driving force that is equally significant is opening-up. Opening China's market to the world and exporting commodities globally have greatly fueled the growth of the domestic economy and its marketization process.

However, we must pay close attention to whether the conditions that decide the sustainability of 'China Time' will change or not, precisely due to such excellent achievements over the past 40 years.

Starting in 1978, China "pursued pragmatic reformism which was successful in sparking off growth much faster than in all other parts of the world economy," Angus Maddison, a world-leading British economist wrote in his book 'Chinese Economic Performance in the Long Run, 960-2030 AD.' "There were large, once-for-all, gains in efficiency in agriculture, an explosive expansion of foreign trade and accelerated absorption of foreign technology through large-scale foreign direct investment."

The conclusion of 'once-for-all gains' is biased and not precise, but we cannot be overcritical on the comprehensiveness of the studies done by Maddison, who is proficient at investigating economic growth through statistics. His perspective during the study was to find out the causal relationship in the process of development by means of angles from a longer run, which reminds us of how to reach the causes behind the so-called 'once-for-all gains,' and which variables among these causes can be transferred into the driving forces of sustainable development.

Tech Promise

The current consensus on China's future growth is that the demographic dividend and cheap resources can no longer power China's high-speed growth. Fortunately, the country's technical advancement still has a promising future and technology is still a key factor in the process of raising productivity. But against the backdrop of fierce global trade disputes, the traditional route of introducing, digesting and absorbing must stand aside to allow the strong capability of independent research and development to take control. That requires more time and long-term input.

We face more challenges, including energy depletion, environmental degradation, construction of legal systems and the growing gap between rich and poor.

Those institutions and pattern innovations stemming from the emancipation of the mind must keep pace with the times, too, because different levels of marketization require different levels of institutional design. The original pattern of success may not continue to be effective. The Chinese government must find a suitable governance structure.

Several challenges have emerged. We must insist on the long-term strategy of 'opening-up,' which is the trend of history and the will of the people. We should not only open up to the outside world, but also inside the country.

Resurrection, Not Miracle

Opening-up to the outside world is a basic national policy through which the country must reform its legal, business and innovation environment. Opening-up can further enhance business competitiveness and improve people's well being. While domestic opening-up is easy to ignore, we should 'unwaveringly' develop the non-public economy. We must also respect and protect property rights with mechanisms and legal tools, providing a long-term, stable and developing environment for the non-public economy.

"He demonstrates that Chinese per capita income was higher than that of Europe from the tenth to the early fifteenth century and it was the world's biggest economy for several centuries thereafter, before falling into decline," Javier Santiso, acting director at the Organization for Economic Co-operation and Development's Development Centre, wrote in the preface of Maddison's book. "Its extraordinary progress in the reform period since 1978 has been a resurrection, not a miracle."

Yes, it has been a resurrection, not a miracle. Deepening reform is the only way to achieve a resurrection.

(YangYudong, editor-in-chief of Yicai Media Group)

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Keywords: Reform and Opening-up