
China’s liberalization and structural reform drives growth - hhs
https://www.project-syndicate.org/commentary/china-liberalization-structural-reform-drives-growth-by-zhang-jun-2019-08
======
INGELRII
(I'm just an interested amateur who reads a lot so take everything I say below
with a grain of salt. I also leave things out for brevity)

Deng Xiaoping (1904–1997) should still get credit for most of what is
happening now. China had multiple paths it could have followed when Deng took
over, but he was a clever fellow. He made several gradual alternations to
rigid socialist and Marxist doctrine and authoritarianism that separated
Chinese communism from all others others. He was able to keep hardliners at
bay.

1\. He declared that: "Socialism means eliminating poverty. Pauperism is not
socialism, still less communism." Before Deng all communist countries
justified poverty and suffering of the masses as necessary part of struggle
towards communist utopia. Deng threw this rationalization away. He essentially
adopted the same measure stick to success as capitalism.

2\. Deng recognized stuff that worked outside government. 18 households in
Xiaogang Village started land reform after a serious drought in secret in 1978
and it started to spread. It was against government rules and even against
party doctrine. Instead of prosecuting people Deng endorsed it. Successful
land reform has been the starting point for other successful Asian countries
as well (see Studwell's "How Asia Works").

3\. More meritocracy and checks and balances within the communist party.
Before Deng, China was always gravitating towards typical strong man communist
dictatorship. There was one dictator on the top and power and orders flowed
downwards. Deng adjusted the rules. Government officials were moved to work in
different regions from where their personal contacts were (and opportunities
to corruption were reduced). Princelings still got into powerful positions but
talented newcomers also had a change. There was clear movement towards
meritocracy and accountability within the communist party.

After Tiananmen Square protests of 1989 Deng's power started to wane and
hardliners gained more power. The momentum of his institutional reforms has
carried on but there is constant erosion. The current leader Xi seems to be a
typical strongman who tries to get more and more power to himself and his
inner circle and this may end all momentum for China that Deng Xiaoping
created.

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RavlaAlvar
Just in recent years China has decided to tighten its grip on private
corporation, it's clearly i the government doesn't have any Desire for
structural Reform and further economic liberalization.

------
roenxi
China has a population of more than a billion people, the 3rd largest landmass
controlled by a single sovereign entity. The only question is how they managed
to fall so low that they weren't a competitive superpower.

It is entirely possible that we don't know what the reason for China's rise is
over the short term. I wouldn't trust any article written in English to
understand the ins and outs of China's special economic zones, special
administrative regions and historical norms and customs.

It is very likely that governance is connected to their success and it is also
unlikely that the government is wholly responsible for their success. The
situation is complicated. Even deciding if they have achieved 'success' is
complicated; I'm not envious of the people who live there.

~~~
melling
“I wouldn’t trust any article written in English...”

What if the article was written by someone from China?

“Zhang Jun is Dean of the School of Economics at Fudan University and Director
of the China Center for Economic Studies, a Shanghai-based think-tank.”

~~~
07d046
It's funny. I'd generally be more skeptical of an essay coming out of China
because of China's ideological control. Few authors will argue contrary to the
official narrative.

That said, here's another perspective on China's recent rise, translated from
Chinese:

> The argument is simple: when China joined the world economy in the reform
> and opening era, capital flocked to China to take advantage of low-wage
> labor and what Qin calls China’s “low human rights advantage,” i.e., the
> state’s commitment to development at any cost (land-confiscation,
> suppression of workers’ rights, exploitation of migrant workers, etc.). Over
> time, China became the “world’s factory,” producing quality goods at low
> prices, at the expense of jobs and tax revenues in the developed world
> previously inhabited by the capital that had now fled to China. Despite a
> surplus of capital and increasingly frequent labor shortages, the naked
> power of the Chinese state keeps the machine running, lending the profits
> back to the developed economies so that the “exchange” can continue. Such
> debts only intensify the crisis of the developed world, as governments are
> already attempting to supply more “welfare” to increasing numbers of
> unemployed despite a fall in tax revenues.

[https://www.readingthechinadream.com/qin-hui-
dilemmas.html](https://www.readingthechinadream.com/qin-hui-dilemmas.html)

------
ztratar
"Yet this process of economic liberalization and structural reform is also
uniquely Chinese, insofar as it has emphasized local-level competition and
experimentation, which in turn have supported bottom-up institutional
innovation. The result is a kind of de facto fiscal federalism – and a
powerful driver of economic transformation."

I'm not entirely sure what this means. The article that is referenced by the
author is behind a pay-wall, and doesn't explain it in the top paragraphs.

 _How_ has the Government encouraged this local competition? By all means the
examples he gives are all technology companies that have primarily benefited
from 1) copying US tech companies strategies, 2) stealing their IP, and 3) not
having to substantially compete with US companies because of tech
restrictions, the Great Firewall, etc.

None of that is economic liberalization in the slightest.

~~~
adinobro
The article does not do a really good job at explaining what the government it
doing but basically it is:

1\. Creating competition between states/cities (Beijing vs Shanghai) which has
similar advantages to the free market EVEN if both groups are part of the
government. This tries to reduce waste and puts natural pressure on companies
(including ones that are state owned).

2\. Encouraging close proximity (like silicon valley) by using grants, lower
taxes, etc. This encourages lots of companies in the same industry to be close
together and often in the same building. This encourages transfer of ideas and
staff between companies. (economic development zones)

3\. Limiting the number of economic development zones so that they are not all
over the place.

To just ignore anything that Chinese companies have done and say it is all
stolen or copied is rather biased.

Alipay and WeChat are probably the easiest example to look at. They both
started very different (WeChat was just a copy of What's App, which is a copy
of MSN messenger, which is a copy of AOL messengers, which is a copy of IRC
which is a copy of netsend, which is a copy of telegrams, which is a copy of
smake signals, etc... - everything is based on what came before it)

Slowly based on competition with each other they have stolen each other
features and now do basically the same things. Forget about America (Facebook
keeps copying features from WeChat).

Hope this helps to explain what the article does not explain.

~~~
red_admiral
> To just ignore anything that Chinese companies have done and say it is all
> stolen or copied is rather biased.

Upvote.

From talking to Chinese students overseas, it seems to me like Weibo and the
like are actually ahead of FB/Twitter in many ways, including a functioning
and scalable micropayment system. Sure, government support might be helpful,
but you couldn't run anything of that kind and at that scale without some of
the best tech people in the world.

------
Merrill
I would have thought that that the "one child" policy played a large part,
since it allowed a larger investment in fewer children by parents and society.
This, coupled with an educational system that is able to spot talent and
develop talented children, has produced a dramatic increase in China's human
capital, without which liberalization would be ineffective. The US had a
similar emphasis on developing talent in the late '50s and '60s after the
Sputnik shock.

~~~
oska
Compare the crude birth rate since 1920 for Thailand and China on this
Gapminder chart [1]. You'll see that Thailand started with a birth rate
_higher_ than China's. In 1967 they were at around the same level at which
point they both simultaneously started trending down. Thailand maintained a
smooth curve down to its present level which is _lower_ than China's. China's
downward curve was interrupted in 1979 (introduction of the One Child Policy)
when it curved upward for a bit.

So, despite all the myth-making, China's One Child Policy was an authoritarian
disaster that _did not_ reduce births beyond their already downward trend. In
fact, it disrupted the already established trend.

[1]
[https://www.gapminder.org/tools/?from=world#$state$time$star...](https://www.gapminder.org/tools/?from=world#$state$time$startOrigin=1920&endOrigin=2018;&entities$show$country$/$in@=chn&=tha;;;;&entities_colorlegend$filter$;;&marker$axis_x$zoomedMin=1920;&axis_y$which=crude_birth_rate_births_per_1000_population&zoomedMin:0&zoomedMax:50&scaleType=linear&spaceRef:null;&color$which=country&spaceRef=entities;;;&chart-
type=linechart)

------
anonu
Western society rose to prominence because of a few values: respect for
property rights, intellectual property and personal freedom. America is far
from perfect but was based on these ideals.

It's maybe a simplistic view of the world and East vs West... But the recent
HK protests can be rationalized through this lens.

I think respect for intellectual property and human rights will determine
whether China continues it's march forward or not...

~~~
dragonsh
Western societies rise to prominence is due to acceptance of scientific
temperament with a balanced moral view looking beyond religion and tribal
mentality. They challenged the established religious groups and tribal rules.
Traveled across oceans and built global trade. Property rights and all you
described are just means which are just subservient not the main reason.

China is moving forward due to the same scientific temperament, may be need to
supplement more moral education to build a balance. But that's a normal
process given it took out 1.4 billion people out of poverty and making them
one of the largest middle income economy and slowly moving towards developed.

You can see an example in India where all values you described are part of its
constitution (probably the only nation where there is a chapter on human
rights in its Constitution) and government proclaim to protect it. Still has
one of the highest poverty levels in the world. India needs more scientific
temperament to come out of its religious tribal mentality and need more
science education.

The problem you described of Hong Kong is its own making where people accepted
living in prison cell size house and rely on get rich quick scheme when China
was closed which doesn't work anymore. So it's just paying the price of its
own choice.

------
baybal2
China has a cheap and easy, but hard politically recipe for growth: let loose
of some state companies, industries and instantly record a net benefit from
increased productivity.

And China still has lots and lots of state companies to put on the market, so
they are nowhere near the end of the runway. The problem is that all what is
left is so much entrenched with vested interests, touching them is a political
bloodbath.

------
40acres
Solid article, I’ve underestimated the liberalization of the Chinese economy,
especially in regards to technology and advanced manufacturing. Anyone know
what the proverb means?

~~~
ninju
> "On a journey of a hundred miles, 90 is but halfway"

The closest I could find (via googling) is this saying - "Walking 100 Miles:
Stopping at 90 miles, is the same as stopping half-way" which means being 90%
done with something is the same as being 50% done - you're not done!

[https://www.orientaloutpost.com/shufa.php?q=walking+100+mile...](https://www.orientaloutpost.com/shufa.php?q=walking+100+miles:+stopping+at+90+miles+is+the+same+as+stopping+half-
way).

------
Tigah_pawszzz
As someone from China I kinda feel like we are a developed country when I
learned I am making more than my peers in UK #GameIndustryPeasant

~~~
yocheckit
My experience with China is that certain parts are 100% first world, but other
parts are 100% 3rd world, with many places inbetween.

Whereas the difference between the poorest & richest Brit while significant is
nothing compared to the difference between the poorest & richest Chinese.

~~~
alienallys
Well it's because UK population is 66mn while China population is 1400mn.

UK was the oppressor and had all the riches in the world. Infact I feel so bad
w.r.t to UK despite conquering, looting so many countries some significant
percentage of population lives in poverty.

------
RavlaAlvar
Also, we shouldn't forget that since the economic reform of 1978, China has
adopted the policy of intentionally escalating wealth inequality.

Please do not forget billions of worker/farmer in China still live in a third
world condition, so that the upper 10% can live their bourgeois life.

~~~
cltsang
So are you challenging trickle down economics? That's debatable.

I believe at least at the early stage capitalism trickle down economics works.
However, without proper checks and balance system, corruption brought by power
and wealth does stop the trickle down effect.

Therefore in China where corruption is an accepted norm, it's doomed to fail.
That was not originally planned though.

Maybe that's also why recently the CCP has been trying so hard to abolish
religions, to keep the people's moral standard low.

~~~
newsgremlin
If the western economies were truly trickle down, the bucket at the top would
be empty by now. However, the source of the trickle has become more sealed
over time, and thus the inequality gap grows.

~~~
cltsang
Seems you are one of the few who understands what I'm trying to say. Over time
greed and corruption take over.

I live in Hong Kong, which is the most extreme example of this.

And I've also witnessed how this whole process is accelerated in China, since
greed and corruption are more prevalent.

------
dade_
Last year in Shenzhen, a young man walked up to me and excitedly said, "My
name is Will, lets get rich together!"

~~~
seanmcdirmid
And he wasn’t just scamming?

------
lkrubner
There is a simple counter-argument to this:

“ _It is telling, however, that China is using its long-term planning and
robust implementation capacity not to entrench state capitalism, but rather to
advance economic liberalization and structural reform._ ”

Right, but whatever the plan might be, it clearly isn’t working, since the
economy continues to slow. 50 years ago China clocked 8% to 10% growth a year,
now they feel very lucky if they can get 6%.

And this is a truly incredible thing for anyone to write:

“ _The fruits of this approach are irrefutable. In the last decade, a number
of Chinese private financial and tech giants have emerged that, unlike their
state-run counterparts, have managed to establish themselves as global leaders
in innovation._ ”

So, according to this, it is actually a sign of success that more and more
large Chinese firms feel they need to export capital because they no longer
see good investments at home. And that’s success?

~~~
WoodenChair
> Right, but whatever the plan might be, it clearly isn’t working, since the
> economy continues to slow. 50 years ago China clocked 8% to 10% growth a
> year, now they feel very lucky if they can get 6%.

I think your comment is quite incorrect, and shows a lack of knowledge of
Chinese history. 50 years ago (1969) China was going through the "cultural
revolution" under Mao which was absolutely devastating for its economy. In the
1980s China began economic liberalization under Deng Xiaoping and that was
when its economy began growing tremendously. So, there is a direct connection
between liberalization and growth. Of course no growth of 8-10% is sustainable
over many decades, and it's likely they are simply reaching a new equilibrium.

~~~
lkrubner
No, for God’s sake, no, the Cultural Revolution was not devestating to the
economy. Where did you read that? During the worst year of the Cultural
Revolution, China still managed to grow 8%.

Large scale civil rights violations are not automatically bad for the economy.
The German economy grew dramatically during the Holocaust and the best decades
for the USA overlap with the mass murder of the Indians and the savage
oppression of African-Americans. In China, the Cultural Revolution killed 30
million people, but it did not slow the economy.

~~~
WoodenChair
> No, for God’s sake, no, the Cultural Revolution was not devestating to the
> economy. Where did you read that? During the worst year of the Cultural
> Revolution, China still managed to grow 8%.

I'm afraid the data doesn't back you up at all. The Chinese cultural
revolution is considered the years 1966-1976. Here is the data for those years
in real per capita GDP growth[0]:

7.7, -8.1, -6.6, 13.7, 16.1, 4.2, 1.3, 5.4, 0.2, 6.8, -3.1

Average: 3.4%

Here are the numbers for the 1980s (1980-1990):

6.5, 3.8, 7.4, 9.2, 13.7, 11.9, 7.3, 9.9, 9.4, 2.6, 2.4

Average: 7.6%

7.6% is more than double 3.4%. So, as you can see, all of your assertions are
wrong.

[0][https://en.wikipedia.org/wiki/Historical_GDP_of_China](https://en.wikipedia.org/wiki/Historical_GDP_of_China)

~~~
lkrubner
The Wikipedia article that you link to says it includes PPP estimates and also
says this:

“ _The GDP also has been converted to U.S. dollar-based data by utilizing the
moving average exchange rate._ ”

I disregard PPP estimates since so many subjective and cultural decisions have
to go into PPP calculations, and during a civil war there is a wide space for
the PPP decisions to include the political factors that we should ignore when
discussing the real economy. Likewise, why would it be valid to convert to USA
currency? Why not measure year to year growth directly, from the perspective
of China? The variations in the currency exchange would again introduce those
political factors that a person would want to ignore if they were curious
about the real strength of the Chinese economy.

Back when I studied Chinese history it was well known that the Chinese economy
had done well during the Cultural Revolution. Now that reality is being re-
written to fit a political narrative that simply asserts that the economy did
not do well during the Cultural Revolution.

~~~
dpark
> _Likewise, why would it be valid to convert to USA currency? Why not measure
> year to year growth directly, from the perspective of China?_

So provide some data from that viewpoint. It seems that you’re just making
data up. e.g. What is your “During the worst year of the Cultural Revolution,
China still managed to grow 8%.” claim based on?

