Rapid Trans for mation

By Lan Xinzhen

On December 18， 1978， two days after China and the United States released a joint communiqué announcing the establishment of diplomatic relations， the Third Plenary Session of the 11th Central Committee of the Communist Party of China （CPC） was held in Beijing. Thirty-five years later， China and the United States have become increasingly involved at an economic level. Looking back at this process， one can clearly see that it was the strategic decision to implement the reform and opening up that made it possible for China to integrate itself into the global economy.

China has preformed a miracle within the past 35 years. While the average annual growth of the global economy is only 2.8 percent， China has achieved an average of 9.8 percent， making it a driving force internationally. On top of this， Chinas rapid development came following the near collapse of the nation in the wake of the“cultural revolution” （1966-76）. In 2012 alone， China contributed more than 20 percent of the worlds economic growth.

Fast-paced economic growth has also brought incredible social progress： Over the past 35 years， Chinese society has been transformed into a modern and prosperous society， peoples livelihoods have improved， democracy and the rule of law have been enhanced， and significant advances have been made regarding science and technology， as well as education and healthcare.

In 2013， many industries and institutions in China commemorated the 35th anniversary of the reform and opening up. By reflecting on the past 35 years， we can not only learn from Chinas achievements and experiences， but also set clear targets for the future.

Powerful Growth

According to figures from the National Bureau of Statistics （NBS）， in 1978 Chinas GDP was 364.5 billion yuan （$59.66 billion）， accounting for 1.8 percent of the world economy. In 2012 Chinas GDP reached 551.89 trillion yuan （$8.49 trillion）， becoming the second largest economy in the world and accounting for 11.5 percent of the global economic output.

What is behind Chinas rapid economic growth？ Many Chinese and foreign scholars have conducted research on the topic， but according to Sheng Laiyun， a spokesman for the NBS， the reform and opening up are the fundamental force that drives Chinas high-speed economic growth.

Taking the contracted responsibility system based on households in rural areas as its starting point， the Third Plenary Session of the 11th CPC Central Committee raised the curtain on Chinas reform and opening up. The success of the policy is reflected in the fact that China soon became self-sufficient in its food and clothing production and its supplies of produce quickly made the leap from shortage to surplus.

After the rural reforms were successful， China began its industrial reform in 1984， changing the planned economic pattern to one where the government managed enterprises and separated the functions of enterprises from those of the government. Remaining a state-owned economy， China also introduced market mechanisms and no longer restricted the migration of labor. Since then Chinese supplies of industrial products increased， and the rationing of commodities was abolished. During this period， rural enterprises developed rapidly and a large amount of surplus labor in rural areas flocked to the developed coastal regions in southeast China to man its industrial production boom.

Also during this period， there was a fierce argument in China on whether or not the reform and opening up was actually following the capitalist path and whether China should be adopting the reform and opening up at all. Some undesirable results and corruption cases relating to the contractual operations of factories also dampened support for the reform. People had serious doubts over the future. As a result， Chinas reform and opening-up process stagnated at the end of the 1980s.

In January and February 1992， then Chinese leader Deng Xiaoping paid a visit to south Chinas Shenzhen and Zhuhai as well as east Chinas Shanghai and delivered a number of important speeches on the way. The key point of these speeches was to “accelerate the reform and opening up，” reconfirming the marketoriented reform policy. Peoples doubts were dispelled and the reform and opening up was embraced.

Based on Dengs speeches， the CPC held the Third Plenary Session of its 14th Central Committee in November 1993 and made“building a socialist market economy with Chinese characteristics” the overall goal. After that， China implemented a series of important reform measures.

In 1994， many state-owned enterprises began to embark on setting up a modern corporate governance system，” and most of them transformed into joint stock companies as a result. In the meantime， China also started financial， tax， foreign trade and foreign exchange administration reforms and issued policies on the development of the private economy， breaking the stronghold of the planned economy and further expanding the reform and opening up.

All these reform measures have liberated the forces of production and encouraged people to be more innovative and competitive， reinvigorating the Chinese economy as a result.

Particularly， after China entered the WTO in 2001， the Chinese economy has become integrated into economic globalization. The strong competitiveness that China demonstrated was unexpected by even the Chinese themselves. GDP， trade surplus， science and technological development and urbanization have all witnessed explosive growth. In 1978， Chinas foreign exchange reserves only stood at$167 million， ranking 38th in the world. But in 2012， the figure reached $3.31 trillion， ranking first globally for seven consecutive years.

“The accession to the WTO was a milestone for Chinas reform and opening up，” said He Liping， a professor of economics with Beijing Normal University. “It also marks the beginning of a period of fast economic growth in China.”

Globalization

Thirty-five years ago， the Chinese economy and society were at least partially shut off from the rest of the world. Chinese citizens needed letters of reference for business trips to provinces other than their places of residence， never mind travelling to other countries.

Nowadays however， more and more Chinese are working， travelling， studying， shopping and making investments in foreign countries. The distance between China and the world has become little more than a plane ticket.

In the meantime， the Chinese market has become a favored destination for foreign investors. More and more foreigners are coming to China， doing business， studying， working and traveling.

Professor He says Chinas integration with the world started in the coastal areas in southeast China.

After the Third Plenary Session of the 11th CPC Central Committee in 1978， China set growth of foreign trade as one of the focal points of the reform and opening up. In 1979， China set up a special economic zone in Shenzhen， which is adjacent to Hong Kong， with the aim of attracting foreign investment and developing processing trade. In the early 1980s， China designated 14 coastal cities in the east as economic zones open to the outside world， adopting favorable policies to attract foreign investment and develop foreign trade.

These policies have also opened a new window for Chinese to learn about the outside world. Advanced management methods， technologies， products and the lifestyles of foreign countries have entered China， changing the Chinese economy and peoples lives.

When the reform and opening up first started， Chinas foreign economic exchanges were very limited. Foreign trade was limited to purchasing certain commodities in short sup- ply. According to the NBS， in 1978 the total volume of Chinas goods trade was only $20.6 billion， ranking 29th globally. The volume surpassed $100 billion in 1988 and exceeded $1 trillion in 2004. In 2012 Chinas trade reached$3.86 trillion， 187 times the figure in 1978 and pushing the country up to second place. The countrys exports and imports of goods accounted for 11.2 percent and 9.8 percent of the world total respectively.

Development of foreign trade has gradually alleviated the shortage of foreign exchange， management skills and market demand that seriously restricted Chinas economic development， and foreign trade has become one of the engines that drives its economic growth. A large number of international brands have entered China and are well accepted by consumers. Most of the cars running on Chinese roads are made by international brands.

Entry into the WTO acted as a catalyst for Chinas thorough integration with the world. Foreign capital streamed into China， and products made in China also made appearances in the global market， making China the “workshop of the world.” According to U.S. figures， among all household goods in the United States， nearly half are made in China.

According to figures from Chinas Ministry of Commerce， from 1979 to 2012 the capital inflow to China totaled $1.28 trillion， second only to the United States.

China not only attracts foreign investment， it also encourages Chinese companies to invest abroad. In 2012 Chinese companies made$87.8 billion in direct overseas investment， the third largest in the world. By the end of 2012 Chinas total overseas investment had totaled$531.9 billion.

Through attracting foreign investment， expanding foreign trade and making overseas investment， Chinas economic ties with the world are becoming deeper and deeper.

In September 2013 the China （Shanghai） Pilot Free Trade Zone was established， marking a deeper opening up for China. Its integration with the global market will be further expanded. Professor He commented that this is a demand of the present market-oriented reform， and also an imperative for integrating with international investment liberalization. Since China is the worlds second largest economy， every important economic policy it makes will influence the global economy.

Improving livelihoods

Today people can see wide roads， modern skyscrapers and beautiful communities everywhere in China. But 35 years ago， there were only narrow alleys， low buildings and farmland.

Song Ze， a researcher with the Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences （CASS）， said reform and opening up have lifted Chinese peoples living standards from shortages of basic needs like food and clothing to a moderately well-off level. Chinese people can share the achievements of economic development.

Thirty-five years ago it would have been a dream for most Chinese to have a color TV set， but now most Chinese families have not just that but refrigerators， air conditioners and telephones. Automobiles and other high-end products are within the reach of more and more families.

In the past 35 years the wealth owned by Chinese people has increased remarkably. According to figures from the Peoples Bank of China， the countrys central bank， at the end of 2012 the deposits of Chinese residents had increased by 1，896 folds compared to 1978. The NBS figures showed that the disposable income of Chinese urban residents in 2012 grew by 71 times from 1978， and the net income of rural residents was up by 58 times over the same period.

Song said during the process of economic development， the Chinese Government has tried hard to keep the growth of individual income in line with the pace of economic growth and ensure rapid growth of residents income and their wealth.

During the past 35 years， the number of people living in poverty dropped remarkably. When the reform and opening up first started， the population living in absolute poverty in Chinas rural areas was 250 million， accounting for one fourth of the countrys total population. At that time Chinas social security system was weak， and there was no system to guarantee the livelihood of poor people. After the reform and opening up， as the economy grows， China has been carrying out poverty reduction policies and has invested large amount of funds in improving infrastructure and peoples living standards in poor areas. In 2012 China only had 98.99 million people living in poverty， down from the 150 million people compared with 35 years ago， which is almost equal to the population of Pakistan or Bangladesh.

For those still living in poverty， the Chinese Government offers fiscal support every year.

Chinese social security has also been im-proved in the past 35 years. By establishing new endowment insurance for rural residents， basic endowment insurance for urban workers and social endowment insurance for non-working urban residents， China has established a complete pension network covering both its urban and rural areas.

Experience and lessons

While China has made remarkable progress in the past 35 years， wrong decisions and mistakes were hard to avoid.

What Chinese people are most dissatisfied with are environmental pollution and depletion of resources.

“The frequent haze in east China is the result of years of rapid economic growth，” according to Professor He. Chinas consistent economic growth has made huge contributions to the world economy， but has come at the cost of Chinas resources and its environment.

The excessive pursuit of rapid growth has also created structural imbalances and caused serious overcapacity. China has targeted the international market since the beginning of the reform and opening up， and has tried to develop rules to conform to international standards. However， China has not done enough to tap the potential of its own domestic market and has been excessively relying on investment to drive its economic growth. As a result， performance in expanding domestic consumption is not yet satisfactory.

Another problem is the growing wealth gap between urban and rural areas and between different regions. Urban residents are much richer than rural residents， and people in east Chinas coastal areas are much richer than those in the remote areas of the west.

According to the CASS figures， in 2012 the per-capita disposable income of urban residents was 3.1 times the per-capita net income of rural residents. The gaps have been expanding in the past decade， indicating that Chinas income distribution system urgently needs reform and social wealth needs to be more fairly distributed.

There are other problems in Chinas economic development， and the Chinese Government is aware and concerned by these problems. Five years ago， China began to restructure its economy and transform its economic growth model.

In November 2013， the Third Plenary Session of the 18th CPC Central Committee made the decision to comprehensively deepen reforms， aiming to solve these deep-seated development problems.

“Comprehensively deepening reforms in the future will， focusing on promoting social fairness and justice and improving peoples well-being， facilitate economic development in a more efficient， fair and sustainable way，” He said. “There are many things to expect in the future.”