Paul Tembe
In 1979, Deng Xiaoping emphasised the goal of “Four Modernisations” and further proposed the idea of “xiaokang”, or moderately prosperous society. The announcement and implementation of the “Four Modernisations” resulted in what has come to be known as China’s rapid economy based on export-dependent growth. In fact, policies introduced at the time marked a beginning of “China’s open market system with Chinese characteristics”. Changes taking place in China since 1979, be they economic, political and towards international community, were driven and implemented under the “Reform and Opening-Up” policies. These policies were aimed at establishing internal markets and opening up to foreign investments.
Prior to the Reform and Opening-Up policies, China’s real gross domestic product (GDP) per capita grew at a rate of 2.9% per year on average. However, since the beginning of the Reform and Opening-Up policies, China has come to experience growth that in 2010 saw it overtake Japan as the world’s second-largest economy by nominal GDP and in 2014 overtook the US by becoming the world's largest economy by GDP and purchasing power parity (PPP).
The unprecedented economic growth achieved by China in the last five decades came to be described as “China Magic”.
Since then, China has tended to move from export-dependent growth in order to focus on growth founded on domestic consumption. China continues to open new markets abroad, promoting and seeking further reach into foreign shores markets based on its technological and innovation achievements on the domestic front. However, in order for China to continue its prominence among other big economies it needs to establish a shift from being a factory of the world as it was referred to during the first three decades of the Reform and Opening-Up.
During the first decade of the 21st century China implemented the “Go Out policy” – “Zǒuchūqù Zhànlüè”.
The strategy encouraged China’s enterprises to invest overseas. Within the decade “Go Out policy” investments went up 53% in the first 10 months of the year. By 2015 the strategy saw an acceleration and massive growth in China’s outward direct investment (ODI). The strategy saw Chinese contractors secure a healthy number of construction contracts abroad. These expanded by over 11% in 2015, driven primarily by new projects from 61 countries along the One Belt One Road (OBOR) initiative, which saw a 31% increase in aggregate contract value. The going-out policy precedes current calls by President Xi to establish a “high-level opening-up”.
During the opening ceremony of the Fourth China International Import Expo in 2021, Xi gave a speech announcing the “advance high-level opening-up”. Xi pledged further efforts to shorten the negative list for foreign investment. The president said that China will expand the opening up of the service sectors, such as telecommunications and medical care.
Xi reiterated that “China will revise and broaden the catalogue of industries where foreign investment is encouraged, channelling more foreign investment into areas including advanced manufacturing, modern services, new and hi-tech, and energy conservation and environmental protection, and directing foreign investment to the central, western and north-eastern regions of China”.
The president also noted that China will be deeply engaged in international co-operation in areas including green and low-carbon development and digital economy, and actively promote the country's accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement.
How do we define and understand China’s high-level opening-up?
The 14th Five-year Plan period aims at China carrying out opening-up policies on a wider scope, in a wider range of areas, and at a deeper level. China aims to establish a new system for higher-level open economy and where nations across the globe can jointly implement reforms on global governance system. The strategy aims to advance notions of global common prosperity in co-operation with developing and developed nations. High-level opening-up will see strengthening of multilateralism that will in the long run boost economic co-operation around the world.
The Chinese leaders with Xi at the helm have stressed repeatedly that a new development pattern underlines domestic circulation and international circulation with higher levels of openness. The new development pattern is built not only for the need of development in China, but also for the benefit of all nations. With the improvement of residents’ living standards at home, demand for high-end consumer products, intermediate products, capital goods and services has increased over the years. The gap between demand and supply remains large. Thus it is necessary to expand opening-up and increase imports to fill the gap. A higher level of openness will in turn advance in-depth reforms, further facilitate supply chains and build an effective, standardised and open international market.
What can South Africa learn from China’s successive development strategies since the beginning of the “Reform and Opening-Up” in 1979 to today’s “High-Level Opening-Up”? The first lesson will be on the courage to make drastic changes in developmental policies. Second will be to strive for implementation of policy no matter how uncomfortable for the norm in the short term.
Third, focus ought to be on long-term plan strategies. Fourth, policies ought to aim at inclusive growth instead of the current belief that markets can be a solution to the delivery of public goods outside state control.
South Africa has had several economic strategies that aimed at balancing the economic interest of communities with those of industries and the corporate world. However, these strategies and policies aimed at greater social good tend to take a new turn and morph with the main interests of the corporate world. The pattern repeats itself every five years as one political term is replaced by the next one. The result of such short-termism tendencies is a vicious circle of poverty. The malady is not only the reserve for South Africa but it is customary in the region and on the entire continent. If political systems were to desist from short-termism and focus on long-term implementation of policies, an array of developmental problems on the continent would be mitigated.
Tembe is a Sinologist and founder of SELE Encounters.