The China Model

China, a country that hosts a larger population than any other, a country people have conflicting feelings about. Yes, everyone is obsessed with China. But why?

 

 

Many of us see China through the lens of Western media. Controversial opinions and negative perceptions are painting an unfortunate picture of what China really represents. The sovereignty and independence claims of regions in China including Tibet, Inner Mongolia, Taiwan, and Hong Kong, overlapping territorial claims of the South China Sea… It is politically incorrect for media to side with China on these issues and the list goes on and on. Historically and factually, accurate reportings are rarely seen in the mainstream media. It is easy to paint China as an undemocratic-authoritarian-dictatorship regime without actually taking the time to examine the issues on a case to case basis. Indeed, China’s political system is imperfect, but from what I along with millions of Australians witnessed in the past month, from Brexit to Donald Trump, it is safe to say that no system is perfect.

 

China is a socialist republic with a one-party system, often accused of brutally punishing citizens whose ideology differs from that of its ruling party. But democratic flaws aside, why the hell did the Chinese economy grow so rapidly in the past 40 years?

 

 

This year marks the 40th year of the Chinese Economic Reform, spearheaded by Deng Xiaoping, the Communist Party leader after Mao and one of three who has been in the leadership core. The concept of “market economy with Chinese characteristics” was first proposed in 1978, making China open to foreign investments like Australia whilst the government was keeping tight control over trade. As part of the effort in opening up the Chinese economy, a total of 6 coastal cities are designated as “special economic zones”, welcoming in foreign direct investment and the establishment of foreign subsidiaries. This is vastly different compared to the centralised, planned economy China had since the People’s Republic of China came to existence in 1949. Government decentralisation is considered by many scholars the most important factor of the economic growth and development China has had in the past decades. According to the World Bank, China’s poverty rate fell from 88% in 1979 to merely 3.1% in 2017, lifting more than 500 million people from poverty. Urban poverty has been almost completely wiped out. In 2017, China’s GDP totaled $14.092 trillion. To put things into perspective, Australia’s GDP last year was $1.69 trillion. Impressive, right? The correct set of policies, at the right time in history, resulted in the economic miracle that made China what it is today.

 

 

But would this have happened if China was a so-called “democratic state”? When people think of China we think of its population being so large that it had to literally ban people from having more than one baby (a.k.a One Child Policy); we think of its transformation from being plagued by poverty into the second largest economy in the world. Interestingly, India also had many of these similar traits, but why did India not take China’s place from an economic perspective on the world stage? After all, India is the world’s largest democracy. And we all know: democracy=good, autocracy=bad… But perhaps not if you want to become rich. Let’s put things into perspective. Here is a comparison of GDP per Capita between China and India:

 

 

We can see clearly that both countries have had similar growth rates for about 40 years, with India having a higher GDP per Capita for the majority of this period. What happened to India in the latter half of the 40-year span, you may ask? Here is what happened…

 

When India was busy discussing Religions, China was working on its economic policies; when India was busy producing Children, the Chinese established the One Child Policy; when India was struggling with instabilities of governments, China had the Communist party taking up decisions bluntly and paving way for development; when India was busy working for Americans and relying on outsourced jobs, China was committed to becoming the world’s Manufacturing Hub in the world. The Indian economy, in essence, is more than a decade behind when compared to China.

 

 

While the rest of the world continuously bashing China for not being “democratic”, the U.K. is busy leaving the European Union,  Americans are busy fighting about Trump, and Australia is changing its Prime Minister more times than I care to count. Considering this, has anyone ever stopped to think, just for a moment, about why an autocratic state is thriving in the 21st century? Inarguably, China still has a long way to go when it comes to human rights, voting rights, transparency, tackling corruption and many more pressing issues. But credit should be given when it’s due. For economic policies to be effective and show results, 4 or 8 years are far from enough. An authoritarian regime is better suited for economic development and the rest of the world should open its mind and give China credit for the good that it has done, rather than relentlessly bashing China for the ideological and philosophical differences of its ruling party.

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