Back at Global Center Stage

It may be that China, and not the US, is the leader of the Fourth Industrial Revolution with its focus now on new technologies

Andrew Moody

Andrew Moody is senior correspondent of China Daily and has written extensively about China for a number of years. His particular focus has been on China's economy and China-Africa relations. He has also interviewed many of the world's leading China experts and political figures.

I recall having a discussion in the school library of my grammar school in the English North Midlands in the late 1970s with some fellow pupils about the rise of China. It was probably prompted by reading an article in The Economist or a similar publication after Deng Xiaoping had embarked on his reform and opening-up policy. It wasn't a topic that was high on the news agenda at the time, but it had entered a certain public discourse. Could it be that this country of then about a billion people — the “slumbering giant” of Napoleon's famous phrase —was to reawaken at last?

At the same time, however, there was also a sense the world had waited so long for this re-emergence that it was never actually going to happen. The West's Asian preoccupation then was more with Japan, already the world's second-largest economy, and increasingly dominant in many industrial sectors, particularly cars. In the geopolitical context, the Cold War still also rumbled on, although not with anything like the sense of danger of 15 or so years before.

When reform and opening-up,or gaige kaifang,was launched at the Third Plenary Session of the 11thCentral Committee of the Chinese Communist Party in December 1978, the UK itself was in the midst of its so-called Winter of Discontent when the whole country seemingly was on strike, including gravediggers, leaving the dead unburied. It was worth reflecting that no matter how grim pre-Thatcher Britain seemed, the annual per capita income of the average Briton was $5,976, nearly 40 times that of the $155 in China.

How has the landscape changed in 40 years? If we are still talking of the UK, it has managed to maintain its lead in terms of per capita income. It is now only four times greater (although the proportional difference is far less when compared to the income levels of China's more prosperous cities like Beijing, Shanghai and Shenzhen) but its overall economy is much smaller.

In this time, China has advanced to being the world's second-largest economy, almost five times bigger than that of the UK, which now vies for fifth place with France. By 2030, according to a recent report by HSBC, China is likely to overtake the US as the world's largest economy, a position it last held in 1820. In the process, more than 700 million people have been lifted out of poverty, the biggest number in the shortest time in human history.

China's rise has also transformed the global economy in many ways. At first, it was the “Made in China” revolution which saw China become the manufacturing workshop of the world. This transformed global supply chains with many major Western companies switching production to China.

Many people were not aware of what was happening at first. I first began to notice it visiting do-it-yourself stores at the turn of the century. You would see quite a sophisticated looking product and think it was £20 when it was actually only £5. One of the effects therefore was to slow global inflation.

China becoming the new hub of the global economy created a huge amount of wealth in China itself. And what we are seeing now is China moving from being the workshop to be the biggest retail market in the world.

The rise of the Chinese middle class will be — if it is not already — one of the biggest global mega-trends of the next few decades with the Chinese consuming public set to become double the total population of the United States.

All this stems directly or indirectly from 1978. The year, however, is not so etched in Western consciousness as it perhaps should be. This was something that former UK prime minister Tony Blair mused over in an interview I did with him at the headquarters of his new Institute for Global Change in London in January.

“It is a really significant event. If you were a Western student, you would study lots of things about the politics of the late 20th century. You would study the Soviet Union, the fall of the Berlin Wall and the end of apartheid. You wouldn't probably study in the same way, the opening up of China and yet it signaled that China was going on a new path of engagement with the world with the opening up of its economy. The results have been staggering.”

Martin Jacques, the journalist, academic and author of When China Rules the World,was unequivocal about the importance of reform and opening-up when he spoke at China Daily's Vision China event in London in September.

“China's reform and opening-up initiated in 1978 was one of the most important events in the 20thcentury, ” he said.

“It not only led to the transformation of China, but the beginning of the transformation of the world. No one could have imagined where China would be 40 years later, ” he said.

My own involvement with China has moved on since my school days when it seemed a very distant and remote place.

I first began reporting on China-related issues on a series of assignments to Hong Kong in the 1990s. I was interested then in how the banking and financial sector was to be affected by Hong Kong's return. I recall a conversation I had then with a senior executive in the life insurance sector who said I should go and look what was happening in Shanghai.

He was, of course, referring the development of Pudong on the east bank of the Huangpu River, which was seemingly being transformed overnight from farmland into something resembling Manhattan. This was the period when reform and opening-up really accelerated after Deng's famous Southern Tour in 1992 when he said, “to get rich is glorious”.

I made my first visit to the mainland in 1997 to Shenzhen and Guangzhou, both destinations on Deng's tour, which were then becoming a hive of activity, although nowhere near the futuristic 21stcentury cities they resemble today.

My main involvement with China has been over the past decade as a reporter based in Beijing. During this time I have interviewed and profiled many people in the business and financial community as well as China experts and academics based not just in China but around the world.

When I first arrived permanently after the Beijing Olympics and, more pertinently perhaps, the global financial crisis, the big question was how China's transformation over what was then 30 years would survive much darker economic times.

One of the first people I interviewed then was journalist Jonathan Fenby at Sanlitun in Beijing. He had just published his monumental Penguin History of Modern China, and he was concerned that the next 30 years for China would be more difficult to navigate than the preceding period.

“You have a got a sizeable middle class now to fit in somehow and there is still is a rural and urban disparity. Underlying this, there is a need to sustain growth. The leadership has to cushion the effects of the downturn, while at the same time deal with very long term fundamental challenges. It is a hell of a task, ” he said.

Although Fenby was clearly right to highlight these issues, China has got through the first 10 of those 30 years that he said would prove challenging in remarkably good shape.

China's initial response to the financial crisis was a 4 trillion yuan ($586 billion), stimulus package, the largest financial injection ever of its kind. Although this led to a considerable local government debt problem two or three years down the road, the economy was still able to grow strongly, despite the slump in global exports. In fact, there is little doubt that China has fared much better than the West in the aftermath of the crisis.

People's incomes have considerably risen in China, whereas those of a large part of the populations in the West have fallen, leading to the disaffection that has given rise to the election of Donald Trump in the US and also, to some extent, the Brexit vote in the UK.

There is a dynamism on the streets of Beijing, Shanghai, Guangzhou, Shenzhen and many other Chinese cities that you just do not see in the West. This brings us to another aspect of reform and opening-up and that is whether it is a blueprint for development for other developing economies.

One aspect of my reporting over the past decade has concerned the burgeoning China-Africa relationship, and I have undertaken a number of reporting assignments to the continent. One of my earliest interviews there was in 2012 with Ethiopian Prime Minister Meles Zenawi in his Menelik Palace residence in Addis Adaba just a few months before he died.

He was in no doubt that China's model of development was the right one for his country. He was scathing about the so-called Washington Consensus model for African development that had been espoused by the International Monetary Fund and the World Bank since the 1990s. According to the consensus, African economies could only develop by adopting free market policies.“Well, we have waited 30 years and nothing much has happened, ” he told me.

He firmly believed the state needed to play a role in development, as it had with Deng's opening-up in China. He was particularly interested in the special economic zone model that had kickstarted China's development in the early 1980s and he welcomed Chinese investment to build industrial parks.

The most famous of these is the Eastern Industrial Park just outside of Addis Ababa, which is now famously the home of Huajian, the Chinese shoe manufacturer, which makes shoes for top brands around the world from Africa.

The reform and opening-up of the future, however, might not just be the manufacturing model, and other African countries might want to take advantage of their young and increasingly educated populations and make strides in new and emerging industries.

For China, the big question that follows the success of reform and opening-up is what's next?

Chinese President Xi Jinping reaffirmed China's commitment to further reform and opening up at the Boao Forum in Hainan in April 2018. He announced a number of measures to open up new sectors of the economy to greater foreign investment, including automobiles and insurance.

“Over the last four decades, the Chinese people have embraced the world with open arms and actively contributed our share to the world, ” he said.

“Today, the Chinese people can say with great pride that reform and opening-up, China's second revolution if you like, has not only profoundly changed the country but also greatly influenced the whole world.”

It has, indeed, been an incredible journey. The challenges to come will be the opening-up of China's capital markets and also making the Chinese yuan fully convertible, without destabilizing the Chinese economy.

From being a backward agrarian society in the late 1970s, China has also now set itself the goal of becoming a global technology leader by 2035. It may be that China, and not the US, is the leader of the Fourth Industrial Revolution with its focus now on artificial intelligence and other new technologies.

One of the remarkable aspects of reform and opening-up is that China has achieved all this without compromising its government system. Xi's report speech to the 19thCPC National Congress in 2017 when he launched China's New Era was nothing if it was not a reaffirmation of the socialist system of government.

Jacques, who I interviewed shortly after the meeting, was also clear about this.

“Xi wanted to underscore the fact that the Chinese economy is not gravitating toward capitalism. It is not going to end up as a Western-style economy or a Western-style polity and that it is going to remain profoundly different. And, in that sense, it remains firmly in a socialist rather than a capitalist tradition.”

Forty years on from Deng's great initiative, China has more than awoken from its slumber but has taken center stage once more.