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Great China Opportunity

Chinas_Ambassador_to_UK_Liu_XiaomingRecent world headlines announced that China is officially the world’s second largest economy after the US. This has put China in the limelight once again and prompted many questions: What does China being the second largest economy tell us? How soon is China going to reach number one? Will China be able to sustain such rapid growth? What does China’s development mean to the world? Let me share my thoughts about these questions.

First of all, I think China’s rise to ‘number two’ tells a story of successful development, the secret to which is simple and open: China has found a development model well suited to its national conditions. How should we go about developing a country with 1.3 billion people and a history of some 5,000 years? Neither textbooks nor history provide us with a ready answer. As Chinese reformer, politician and diplomat Mr Deng Xiaoping put it, we managed to ‘cross the river by feeling for the stones’. We explored our way forward in a pioneering spirit by combining the useful experiences of other countries with the unique circumstances of China.

China’s success also lies in its commitment to reform and ‘opening up’. The latter term refers not only to embracing the global economy at every level and in every area, but also to freeing minds – thereby fostering a more open and diverse society – and nurturing a culture of open and transparent government. ‘Reform’, meanwhile, is about transforming our formerly planned economy into a vibrant socialist market economy; it is also about making comprehensive progress in the political, social and cultural spheres.

Some Westerners believe that China has only implemented economic reforms, leaving its political system untouched. But this is a misunderstanding of China’s comprehensive reform process: during the past three decades, economic growth has gone hand-in-hand with political progress. We have seen a growing role for the National People’s Congress as well as multi-party political consultation under the leadership of the Communist Party. Democratic decision-making processes and the legal system have both been strengthened; a millennia-old pattern of ‘rule by man’ is giving way to the rule of law. We have also seen significant progress with respect to human rights. The promotion and protection of human rights has been written into the Chinese Constitution, and all citizens now enjoy legally protected rights to equal participation and development; in addition, we have strengthened our international co-operation on human rights issues.

Not for lack of
trying did Western-style democracy fail to bring China the prosperity and strength it had wanted so badly throughout its modern history. Now that we have found our own road to success and a Chinese-style democracy, why should we waver or give these up?

We now come to the second key question: How soon is China going to overtake the US economically? Purely in terms of GDP, that day might arrive sooner than expected; however, deeper statistical and conceptual analysis produces more nuanced answers. China’s economic aggregates stood at $5.8 trillion in 2010, ranking it second in the world. But we must also remember that China is the world’s most populous nation; as a result, its per-capita GDP for the same period was merely $4,300 – lower than that of about 100 other countries and only one ninth of the UK’s and one tenth of the US’s. That is a gap not likely to be closed within just one or two decades.

Within China, too, there exist significant urban-rural/east-west wealth discrepancies that will take time to rectify. We have rich cities, concentrated in the coastal regions, but also poor, under-developed regions in the west of the country. The urbanisation rate is only 46 per cent, and the urban-rural income ratio is as high as 3.23:1. I served for two years as Assistant Governor in Gansu, one of the poorest provinces in northwest China. Gansu suffers from tough natural conditions: desertification threatens the livelihood of the local people and economic development is a huge challenge. Many of the children in the countryside do not have access to computers or the internet. Many boys and girls have to drop out of school because their families cannot afford their continued education.

For all its manufacturing strength, China is still at the lower end of the value chain. In many cases, only the labour-intensive parts of production, such as processing and packaging, are done in China – research and development, design, key components manufacturing and marketing tend to be carried out elsewhere. Of China’s export commodities, 90 per cent are original equipment manufacturer (OEM) products which are then incorporated into the products of overseas brands; as a consequence, 20 per cent of the retail value of every mobile phone, 30 per cent of that of computers and 20-40 per cent of that of Computer Numerical Control machine tools go to foreign patent owners. There is still a long way to go from ‘Made in China’ to ‘created in China’.

Statistics show that China’s energy intensity is three-to-four times that of the international average and eight times that of the UK. China accounts for eight per cent of the world’s GDP, yet it consumes 16 per cent of the world’s energy (along with 46 per cent of its iron and steel and 52 per cent of its cement). We still have a lot to do to raise the quality and efficiency of our economic growth.

So, although China is now the number two economy in the world, we still lag far behind developed countries in terms of per-capita income and the quality of our GDP. We acknowledge that China is still a developing country not because we are modest or hypocritical or wish to escape from our responsibilities, but rather because we recognise that development will remain a top priority for a long time to come.

Our next question is whether China, after three decades, can sustain its fast pattern of growth. The answer to this is positive. China is still in a phase of rapid industrialisation and urbanisation during which massive infrastructure investment is needed. Over the next 20 years, 300 million people are expected to move from the countryside to the cities. The Chinese people need to upgrade their consumption pattern, and the western regions need to catch up with their eastern counterparts. A driving force, then, is never lacking for the Chinese economy, and there is plenty of potential to be tapped. We have reasons to be optimistic about the future.

The National People’s Congress reviewed and approved China’s twelfth Five-Year Plan at its annual session in March. This is an important blueprint for China’s development over the next five years, outlining a number of significant government policies:

 We will carry out strategic economic restructuring to expand domestic demand and promote balanced growth driven by consumption, investment and exports. We will strengthen agriculture, increase the competitiveness of manufacturing and give priority to emerging industries and the services sector. The aim is to seek co-ordinated, balanced development across urban and rural as well as eastern and western areas of China.

 We will promote scientific and technological progress and innovation. We will speed up efforts to turn China into an innovation-driven country. As Mr Deng Xiaoping pointed out, ‘There is no other productive force more important than science and technology.’ Our future development must rely on scientific and technological progress, a higher quality labour force and innovative management techniques.

 We will continue to improve the lives of our people. Economic development is aimed at serving people’s interests. We will improve social security, increase job creation, promote equal access to public services and balance income distribution. This will ensure that the benefits of development are shared by all.

 We will build an energy-efficient and environmentally friendly society. We need to catch up with developed countries in terms of per-capita GDP, but not in terms of per-capita energy consumption, as this would be unsustainable for our planet. China cannot follow the traditional, Western path of industrialisation. We must raise energy efficiency, reduce emission intensity, develop a circular economy, extensively apply low-carbon technologies and actively address climate change. We must promote sustainable development, achieving an appropriate balance between economic growth and social progress and between population growth, resources conservation and environmental protection.

Finally, what does China’s development mean to the world? Is it a blessing or a catastrophe; does it bring opportunities or threats? Again, the answer – whether from perspective of world peace, the world economy or the international system – is overwhelmingly positive.

China follows an independent foreign policy of peace. We have solemnly pledged to the world that hegemony or expansion is never an option for China; China stands for non-interference in others’ internal affairs and negotiated solutions to international disputes. China believes that security should be based on mutual trust, mutual benefit, equality and co-ordination. China is the largest contributor of peacekeepers among the five permanent members of the UN Security Council, having so far lent 10,000 peacekeepers to 24 UN missions. It has sent escort ships to the waters off the Somali coast and worked with the navies of other countries to combat piracy and improve safety in international waters. It has actively worked to facilitate the Six-Party Talks to uphold peace and the stability of the Korean Peninsula and Northeast Asia. China is in every way an upholder of peace and a facilitator of stability.

Nor should China be considered a threat to the world economy. Quite the opposite, in fact – China has been a crucial support for global growth since the start of the financial crisis, driving global demand at a time when developed countries are suffering economic difficulties. So much was reflected in the 31.9-per-cent increase of EU exports and the 42-per-cent increase of UK exports to China in 2010. China maintained a double-digit growth rate last year, and contributed 20 per cent of global economic growth. China will continue to pursue a win-win strategy of opening-up over the next decade; its market will open wider, its share in international trade will increase and its imports will rise. These trends will no doubt create enormous economic opportunities for countries around the world.

China has been participating in and contributing to the current international system as a responsible major player. It has entered into extensive co-operation with its international partners, both developed and emerging, on the reform of global economic and financial governance, and has jointly advocated a greater role for the G20. It has strengthened traditional friendships with other developing countries and helped them grow their economies and reduce poverty. The loans it has provided to other developing countries in the past two years have surpassed those of the World Bank. China supports and practices multilateralism and stands for greater democracy in international relations; this can be seen by its active participation in regional co-operation, along with the support it gives to tackling global challenges such as climate change, the supply and conservation of energy and other resources, food security and terrorism.

China’s development is a blessing, not a catastrophe, for the world. It means opportunities, not threats; it is not to be worried about, still less feared. For as Franklin Roosevelt put it, ‘The only thing we have to fear is fear itself.’


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