From total poverty to the world's first economy



On December 18, 1978, a historic Plenum of the Central Committee of the Chinese Communist Party took place, which made decisions that ushered in a completely new era of China’s development. At that time (according to Russian diplomats) even the Soviet embassy in Beijing did not immediately realize the significance of what had happened. It was only after a special request from the Foreign Ministry that they began to look into what had happened in detail. It turned out that in order to save the country, which was in ruins after the «Great Leap Forward» and the «Cultural Revolution», the PRC leadership decided to take unprecedented steps — the introduction of elements of a market (capitalist) economy and the opening of the country to foreign investors. This was a truly revolutionary step on the part of the Chinese leadership, given the dogmatic socialism and isolation from the outside world that prevailed in China then. At that time, 80% of the population lived on less than a dollar a day, two-thirds of Chinese adults could neither read nor write, and industry was in deep decline.

In the USSR, the actions of the Chinese authorities were immediately labeled revisionism, a crime against Marxism-Leninism, which worsened the already strained relations with the PRC. No one in Russia was going to seriously analyze the situation in China, much less learn from it. Just to understand, one small touch. In 1982, when the non-trivial results of the decisions taken in China were already visible, the leadership of the Institute of Asian and African Countries at Lomonosov Moscow State University, where the author of this article studied, prevented in every possible way the diploma defense on the topic «Mixed Enterprises and Free Trade Zones in China». They demanded to condemn the actions of the Chinese leadership and to write that they would lead to the restoration of capitalism and the collapse of China. And the information for this thesis was collected in the so-called special storage funds, that is, closed sections of libraries, where there were foreign newspapers and magazines.

But the creation of free economic zones with special taxation regimes and changes in the attitude toward foreign investors, which resulted in a flood of investment into China, were only one of the reforms. The so-called «Four Modernizations» included reform of agriculture, industry, defense, and science. The main changes concerned the system of management in the countryside, which made it possible to feed the starving country within a few years. It was not necessary to make large-scale investments in agriculture, people began to work themselves, having received economic freedom.

The main thing in the reforms (unlike the USSR) was that China decided not to touch the foundations of the state, the system of state administration, headed by the Communist Party. In the language of scientific communism, they planned to modernize the base without changing the superstructure. It was explained to the people that Marx did not reject market methods of economy, and that practice is the criterion of truth and it does not matter what color the cat is, the main thing is that it catches mice. That is, no reforms are harmful if they contribute to the development of the country and increase the welfare of the population.

There is another important point here. This is the very case when the «architect of reforms», the leader of the CCP and China, Deng Xiaoping, played a decisive role in history. He went through all the hardships of the Chinese experiments, was repressed and returned to power as an elderly man solely to set the country on the right path and make life easier for the people. He and his associates developed a detailed strategy of several stages of reforms and their plan covered 70 years.

By the beginning of «Perestroika», experts had already realized China’s impressive success on the road to reform. The country was surging upward, GDP was growing by 10 percent and more annually.

But all this was ignored in Moscow. After the restoration of capitalism in Russia, domestic liberals cultivated the myth that it was no longer possible to reform the economy in the country, but only to destroy it. There is still an opinion that the Chinese experience is not applicable to Russia. They say that we have our own way.

However, China demonstrates the opposite. All reforms there were carried out extremely cautiously, gradually, after studying the experience of the world. By the way, Deng Xiaoping, who studied in the USSR, used Lenin’s ideas about the new economic policy. After all, literally before his eyes in a few years the Bolsheviks won the war, pulled the country out of ruin and created the USSR. In China, before introducing any innovation, it was tested in a separate region or even in a separate district. Decisions were always made after consultation with specialists and after discussion in collegial party and state bodies.

We can see the result with our own eyes. According to Deng Xiaoping’s plan, China’s GDP was to quadruple in 40 years. But the reforms have surpassed even the foresight of their «architect». Only in the last 30 years, China’s gross national product has grown 22 times (Russia — 2 times). By the way, the GDP of Vietnam, which in many respects copies Chinese reforms, grew 10 times during the same time. China has become the world’s first economy in purchasing power parity and will soon overtake the US in terms of nominal GDP. The PRC has created the world’s largest middle class — over 450 million affluent citizens. The average salary in China already in 2016 exceeded the same indicator in Russia. There are no poor people in China according to UN standards, and the PRC’s contribution to the elimination of poverty in the world amounted to over 30 percent. China has become a powerful industrial power with a modern economy, competing for leadership in technological development. The lives of the people have changed radically. Today, China’s average life expectancy is 77.3 years, and the Engel coefficient (the share of people’s spending on food in total consumer spending) has fallen to 30 percent. The world’s largest social security system has been established, including basic medical insurance covering 1.3 billion people and basic pension insurance covering nearly 1 billion people.

China’s economy now accounts for almost one-fifth of the world’s economy, and China is the world’s leader in foreign trade turnover. In fact, Deng Xiaoping’s plan has long been fulfilled, and the country is developing in a new paradigm, based on Xi Jinping’s ideas about socialism with Chinese characteristics. So what’s next?

The Western mainstream is trying to insinuate that the Chinese miracle is over, that China is going through difficulties and is about to face a severe crisis. However, this is said with regular frequency, but the forecasts do not come true. It is true that China’s GDP is not growing as fast as it was in the first periods of Deng Xiaoping’s reforms. But this has not been the goal for a long time. China has shifted to high-quality development driven by innovations and state-of-the-art technologies. This paradigm is enshrined in the fundamental documents of the party and the state. A visible reflection of this policy is China’s leadership in many industries, particularly in the production of electric cars, solar and wind power plants. More attention is now being paid to maintaining stability in the country and ensuring good external conditions for further reforms.

China has also shifted to a «double-circulation» policy, which means emphasizing domestic market development and consumption while maintaining a leading position in global trade. For many years now, China has been increasing imports and redistributing income in favor of the less well-off to boost domestic demand.

The PRC leadership is successfully responding to emerging challenges inside and outside the country. In doing so, they rely on scientific expertise, on the opinions of scientists, and not only those working in specialized state scientific centers. In addition to Western approaches, Chinese socialist methodology is used in the analysis. For example, for many years Western experts predicted a severe crisis in China’s housing market. But recently this country has shown how it can cope with emerging problems. This is done using command and control methods. The same methods are used to regulate the largest businesses, as was the case with Alibaba. The market is a market, but nobody canceled socialism. Such methods of regulation are possible because in China the Communist Party is the leading force and the state occupies commanding heights in the economy. We can assume that as internal contradictions and external threats increase, there will be more and more socialism. After all, we should not forget that the country develops on the basis of Xi Jinping’s ideas of «socialism with Chinese specificity».

And the goals and objectives are clearly defined and included in the fundamental documents. Now China is working on the realization of the first stage of China’s transformation into a «great socialist power of innovative type». This goal was outlined back in October 2017 at the 19th National Congress of the Chinese Communist Party. During the first stage (from 2020 to 2035), socialist modernization will be carried out, the country’s economic and technical-scientific potential will be strengthened. China will become one of the «innovative» leaders of the world. The second stage (from 2035 to 2049) will continue the course of general strengthening and renewal of the country with a focus on improving the welfare of the population, quality of life, building a «beautiful China» (i.e. ecology), civility and culture. China’s second «centennial» goal — building a “human community with a shared future” by 2049 (the PRC’s 100th anniversary) — means ensuring that all PRC citizens enjoy a standard of living comparable to that of the world’s most developed Western countries and that the country is a world leader in all key aspects. In a broader sense, it is called «the dream of the revival of the Chinese nation». And this task will undoubtedly be realized. The key to this is the appropriate state structure, adequate level of governance, consolidation of society united by the desire to achieve this goal, as well as a high level of development of economic sectors. All this is the result of the reforms initiated 45 years ago.