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S3H Working Paper Series
Number CS-01: 2016
China’s Development Experience
Syed Hasan Javed
May 2016
School of Social Sciences and Humanities (S3H)
National University of Sciences and Technology (NUST)
Sector H-12, Islamabad, Pakistan
S3H Working Paper Series
Faculty Editorial Committee
Dr. Zafar Mahmood (Head)
Dr. Najma Sadiq
Dr. Sehar Un Nisa Hassan
Dr. Lubaba Sadaf
Dr. Samina Naveed
Ms. Nazia Malik
S3H Working Paper Series
Number CS-01: 2016
China’s Development Experience
Syed Hasan Javed
Director, Chinese Study Centre of Excellence
[email protected]
May 2016
School of Social Sciences and Humanities (S3H)
National University of Sciences and Technology (NUST)
Sector H-12, Islamabad, Pakistan
Contents
Abstract………………………………………………………………………………………...v
1 Introduction…………………………………………………….................................................1
2 Era of Centralized Planning in China (1949-1979)…………………………... ……………..2
2.1 Socialist Central Planning Model………………………………............................................3
2.2 Era of Economic Reforms and Open Door Policy (1979-2016)…………………............3
2.3 Results of Economic Reforms and Open Door Policy …………………………………4
3 Major Lessons from China’s Rise……………………………………………………............4
3.1 Leadership, Reforms and Values………………………………………………………5
3.2 Governance Reforms …………………………………………………………………..6
3.3 Economic Restructuring ………………………………………………... ……................6
3.4 Soft Power Revolution………………………………………………….............................7
4 Investment in Human Capital ………………………………………………………............7
4.1 Human Resource Development in China……………………………………………….8
4.2 R& D in Science and Technology………………………………………………………8
5 Foreign Relations…………………………………………………………………………..9
5.1 China’s Economic Diplomacy………………………………………………………….9
5.2 Second Phase of Economic Diplomacy………………………………………................10
5.3 Mobilization of Overseas Chinese………………………………………………............10
6 China Pakistan Economic Corridor (CPEC)……………………………………...................11
6.1 Challenges and Opportunities in CPEC………………………………... ………............11
6.2 China’s Commitments under CPEC…………………………………… ………............11
7 Conclusion…………………………………………………………………………............12
References…………………………………………………………………………………13
Appendices………………………………………………………………... …….................14
iii
Abstract
There are clear signs of the dawn of a Chinese propelled Asian century. China’s gross
national income alone in terms of Purchasing Power Parity exceeded US$17.9 trillion in 2014
making it the largest economy in the world. Because of its large population, Size, Economic
resources, Location, Active Diaspora, Large resource rich hinterland, Social capital and
Worldview of Positivism or Win-win (Shuang Yin), the Asian century looks more likely as the
century of the Chinese. The Chinese comprise a fifth of world’s population with pockets of
flourishing communities in Hong Kong, Taiwan, Singapore, Malaysia, Indonesia and Thailand.
The Chinese community also owns a fifth of the World’s GDP and sits on roughly US$ 4 trillion
of foreign exchange reserves. In 1980, China found itself at the 32nd position in the world
trading community with a per capita income of US$250 (less than the per capita income of
US$280 in Pakistan, in 1980). There were virtually no foreign exchange reserves. Stock market
was unheard of, just as imported goods. As per the World Bank estimates, China has now taken
out all but 11% of its population below poverty line of US$1.90 per day by the year 2014, the
largest number of people in human history in the shortest possible time. China has become
already the largest trading partner of more than 142 countries. According to Goldman Sachs
estimates in 2007, China’s economy is expected to be US$70 trillion, more than double of the US
economy by 2050 (Jacque, 2012). From the so-called Socialist Centrally Planning Economy Model
from 1949-1979 to Socialist Market Economy Model with Chinese characteristics from 1979-till
today, China indeed covered a long distance. For Pakistan, the rise of China given the strategic
all weather friendship, has brought the bonanza in the shape of ‘CPEC’ which aims to harness
Pakistan’s location advantage in order to transform its economy and power profile in the region,
like never before.
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1.
Introduction
With GNI (PPP) of US$17.9 trillion China’s rise as the world’s largest economy has been
the most spectacular in contemporary history (Appendix Table 1). It has converted its relative
national power profile of inferiority and vulnerability into one of opportunity and strength for
itself and others. It has lifted a billion people out of poverty in the shortest period of time of
three and half decades. It is rather difficult to imagine the transformation of China unless a
comparison of sorts is made with the situation that existed prior to 1978. The ravages of the
Centralized Planning and socialist experiments culminated in the class war driven so-called
Cultural Revolution, which turned the society upside dawn. Essential goods were in short supply,
famines were common, and rationing of necessities such as cooking oil, sugar, grain etc was no
exception. Three times food was a luxury, even in cities. Food queues were common. The
security paranoid made the ordinary Chinese, avoid the few Foreigners. Four Star hotels and
Cars were conspicuously absent. China was essentially ‘bicycle driven society’. The agriculture
sector was primitive, devastated by experiments of Communes mismanagement. Poverty,
miseries, deprivation and underdevelopment were visibly present. The industrial sector produced
low quality consumption goods, which were also in short supply. Poor quality hampered the
export of Soviet era machinery and equipment. Shortage of foreign exchange and sanctions
enforced by the West, did not let imports of modern technology or goods. China was truly a
Third world country which it also preferred to call itself.
The miracle change happened when the visionary leader Deng Xiaoping visited Singapore
in November 1978 and took the vow to turn around China, as was disclosed by the Singaporean
Founder of Nation Late Lee Kuan Yew in his Memoirs ‘From Third World to First’ Singapore
Story (1965-2000). Immediately on his return, Deng Xiaoping and his pro-reformist supporters
adopted the ‘Policy of Reforms and Open door to the outside world at the Third Plenum of the
11th Party Congress in December 1978. The Reforms though comprised of well researched,
broad based social and economic re-engineering recommendations with a clear target,
methodology and deadline for policy outcomes, it took however more than a decade for China
to see the real impact of the change, in its policy direction. What is however unfortunate is that
the impact of the new policies was devastating in the shape of ‘Tian Anmen Uprising in June
1989. The Western Sinologists predicted the end of Reforms and opening up. The Chinese
leadership though shaken by the turn of events, acted wisely by further opening up and adopting
more reforms. These were announced by Deng Xiaoping in his tour of Guangdong Province in
1992. This encouraged the entrepreneurial wealthy ‘Overseas Chinese’ who were so far sitting on
the fences to throw in the towel and take the bait offered by the Mainland China. Chinese
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abodes such as Hong Kong, Singapore, Taiwan and Overseas Chinese communities in Malaysia,
Indonesia, Thailand, Philippines, Japan, South Korea and elsewhere joined the bandwagon.
There has been no turning back, ever since.
‘With China’s rise, globalization has entered a new phase’
Hutton (2006) China’s exponential
rise brings opportunities for all Euro-Asiatic nations, particularly Pakistan, as both countries
have enjoyed an ‘all weather strategic Partnership’ over decades. With the announcement of
‘China Pakistan Economic Corridor’ (CPEC) or Zhong Ba Jingji Zuolang, as the first of the six
major Euro Asiatic Transcontinental Arteries of Roads, Railways, Energy Pipelines and
Industrial Zones, under the long term strategic vision of the Chinese government’s ‘One Belt,
One Road’ (OBOR), Pakistan China relations has been elevated to yet another higher level. For
Pakistan and the region, the CPEC is a ‘game changer’, which if properly planned, monitored
and implemented will enable Pakistan to join the ranks of the Top Ten largest Economies of the
world by 2050 AD. A noted Chinese scholar Professor Wang Jisi observes: ‘The strategy is to
stabilize China’s Western periphery but also countries surrounding it.’ Small (2015) In many
respects it resembles the ‘American Marshall Plan for Germany’ and other West European
countries at the end of the Second World War. The only difference is that China is rehabilitating
a devastated neighborhood, not of its making but which has been ‘superpowers’ playground’
causing havoc directly or through proxies in the region, for the past four decades. ‘Today, China
is almost the only country, and a foremost world power for that matter, that stands four squares
for the unity and the integrity of Pakistan’ Yunus (2015).
2.
Era of Centralized Planning in China (1949-1979)
The Socialist Central Planning Model diligently implemented through Five Year
Development Plans in China brought mixed results during the pre-Reform period from 19491979. While it contributed in lessening the income inequality, eradicating abject poverty and
achieving mass literacy, it impoverished China, by discouraging individual initiative,
entrepreneurship, innovation, wealth generation, foreign investment, etc. The economy as a
result developed a bloated and inefficient heavy industrial sector of Soviet era Plants, machinery
and equipments producing goods of inferior quality. Essential Consumer goods were in short
supply and rationed. Foreigners were looked with suspicion and the Overseas Chinese
compatriots were despised. There was a paranoiac obsession with state security and ideology.
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2.1 Socialist Central Planning Model
Like in the former Soviet Union and other Socialist countries, the Chinese State through
Collectivization system of Communes fixed quotas of production of finished goods in Industrial
Plants, and crops in agriculture units (organized in military style such as Brigades, Battalions and
Units). The Central and Provincial Authorities would determine what and how much to produce
and when to produce. Such a controlled management given the complexities of nature, human
organization and intra as well as inter relationships between the factors of production,
consumption and distribution, could not but make China a huge economic wasteland. Under the
guise of ‘Policy of Self –Reliance’ or ‘Zili gengsheng’ of failed socialist experiments of Great Leap
Forward, Cultural Revolution and a security paranoid set-up, it became the ‘biggest orphanage in
the world’ with colossal wastage of resources, state monopoly, human misery, shortages of
essential items, underutilized excess capacity and gross mismanagement. The harsh realities in
national economy called for a change/shift in ‘Paradigm’. The Chinese socialist system however
survived, courtesy the strength of its century old Chinese cultural values most commonly
referred to in contemporary political jargon, as the ‘Chinese characteristics’. It is therefore of
utmost important for all students of ‘Sinology’ or Chinese Studies to know the ‘Chinese Social
capital or Chinese soft power’ in order to fully comprehending China’s development experience.
However in comparison, the Centrally Planned development Model inflicted catastrophic results
in the other so called Socialist nations such as the former Soviet Union, Yugoslavia and Eastern
European nations.
2.2 Era of Economic Reforms and Open door Policy (1979-2016)
The Policy of Economic Reforms and Open door to the outside world was implemented
by Chinese leadership under Deng Xiaoping since the Third Plenum of the 11th Congress of the
Communist Party in December 1978. The Policy reversed some of the main aspects of the
Centrally Planned Economy of Chairman Mao Zedong’s days. The new changes introduced,
permeated all aspects of Chinese life, society, economy, politics, defence and diplomacy. On the
political level the main initiatives included Establishment of rule of law, Freedom, Grant of basic
individual rights, Investment in higher education, Avoidance of conflicts and disputes,
Improvement of relations with neighboring countries, Normalization of relations with the
Western nations, Japan, etc. On the economic level the new policies included implementing Four
Point Modernizations Program, Free enterprise, Hiring/firing practices, Incentives/bonuses,
Mobilization of Overseas Chinese, Incentives to foreigners, Establishment of Household
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Responsibility system, Relaxations on rural-urban migration, One Child family, the building of
Industrial townships, construction of Special Economic Zones, etc.
2.3 Results of Economic Reforms and Open door Policy
China had no stock market from 1949-1979 under the Centrally Planned Economy. The
Shanghai stock market was re-born in November 1990. ‘The Shanghai and Shenzhen stock
Market combined capitalization at US$ 14.2 trillion as of 15 June, 2015 is the second largest in
the world after the New York Stock Exchange’ (Appendix Table 2). Egan (2015) A ripple on the
two Chinese Stock Exchanges have a knock down effects on other stock exchanges because of
the sheer size of the Chinese economy. Prior to 1979, Foreign Direct Investment (FDI) was
unknown in China. The reforms carried out by China under Deng iaoping’s leadership took the
path of FDI, learning lessons from the other East and South East Asian nations. China made
stellar success in attracting FDI, mostly by the overseas Chinese. To- day, outbound investment
by the Chinese companies is competing with inward inflows. In 1979, when China embarked on
the journey of Economic reforms and Opening up, it had no foreign exchange. The shortage
was reflected in the difference between the Official and Market exchange rate. Travel was
restricted and so were the imports. Black market was rampant. With sustained growth of exports
and a positive balance of trade, China has built up large foreign exchange reserves which even
after recent declines amounted to ‘US$ 3.23 trillion as of 7 February 2016’ Xinhua (2016). This
has bestowed stability to Chinese currency Yuan, which continues to be envy of many developed
nations who feel that it is ‘undervalued’ making China’s exports competitive. The Success Stories
in Chinas’ Economic Reforms such as Poverty alleviation, Human resource development,
Agriculture modernization, Industrial Powerhouse, Science and Technology modernization and
Space exploration have very few parallels in contemporary history.
3. Major Lessons from China’s Rise
According to a little known Survey (Insider Communist Party Report) conducted by the
government, out of 16 million Civil servants in 1980, one third of civil servants did not want to
work, the other third wanted to work but lacked capacity, while the remaining one third did not
work themselves but also did not let others to work. Effective reforms were introduced to
improve the performance of the bureaucracy by reducing the size of the government servants to
4 million as of 2014. Those who did not want to work and had no capacity were given ‘double
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promotions’ to voluntarily march out with ‘golden handshake’. Those who wanted to work but
lacked capacity were provided education and training. Those who did not work themselves and
did not let others to work were not out rightly dismissed, but provided ‘corrective rehabilitation’
and alternate livelihoods in accordance with their preferences in the emerging private sector. Due
to these far reaching measures aimed at creating a small size of government, China’s GDP as a
result increased forty times from US$250 billion to US$ 10.3 trillion (at market exchange rate)
and its per capita income from US$ 250 to US$7,400 during the period December 1980-2014.
Other recent indicators of China’s progress as the world’s largest exporter, second largest stock
market and the largest GDP on the basis of more credible Purchasing Power Parity, showed how
much governance reforms, could trigger change. Most countries in East and South East Asia
such as South Korea, Singapore, Malaysia, etc also began their economic transformation with
‘Civil Service Reforms’.
3.1 Leadership, Reforms and Values
The Chinese leadership which toppled the ‘Gang of Four’ and assumed power after the
death of Chairman Mao Zedong in 1976, decided on a wholesale transformation of China, by
adopting a gradual Policy of Reforms and Open door, at the Third Plenum of the 11th Party
Congress in December, 1978. Among the hundred plus factors, behind the spectacular rise of
China, the role of the dedicated and honest leadership of Deng Xiaoping, his stalwarts and able
successors comes on the top. As China’s most influential leader in post Mao Zedong era, Deng
Xiaoping provided the direction for change. He observed: ‘We need not be afraid so long as we
are clear headed; We must not be afraid of making mistakes or being criticized; ‘When you open
the windows, it does not matter if a few flies get in, you would sometimes need to swat the flies
that do get in, Cross the river by feeling the stones; When our thousands of students will return
home, you will see how China will transform itself, etc. He and his team showed readiness to
reform and change; believed in collective leadership; team work; rule by consensus; forge united
front and groomed generational leadership. The conceptual journey began with the end of the
so-called ‘Cultural Revolution’, dealing a soft blow to ‘Ultra Leftism and Factionalism’ by demystification of ideology and ideologues; mass education; propaganda for mindset Change with
‘self- criticism’; decision to reforming the Communist Party first for generating trust; premium to
Merit and Professionalism instead of ideology; assigning professional role to PLA, etc.
5
3.2 Governance Reforms
The Reformist leadership realized that the ‘Economic Reforms and Open door Policy’
would be doomed if it was not preceded by Reforms of the Civil Service. Deng Xiaoping once
observed that the gravity and size of the problems did not matter, what is important is the
capacity, will and methodology to deal with them’. The Communist Party and the Central
government took momentous decisions on the devolution of power to the Provinces,
Autonomous regions, Municipalities. restructuring of Ministries; separation of the regulatory and
revenue functions in the Ministries, rapid transfers and promotions to weed out the old; rooting
out corruption and wastage by stiff punishments; penalties and deterrence; ensuring capacity
building, i.e., efficiency, coordination, supervision, monitoring, implementation, results;
establishment of sound law and order by effective border controls; modern security equipment;
human intelligence, neighborhood committees; close circuit observation/monitoring, positive
role by electronic print media; legal system reforms, use of ‘Mediation courts’ to settle civil
disputes, etc.
3.3 Economic Restructuring
The exercise of ‘Economic Restructuring’ was the most challenging and yet turned out
to be the most successful of Deng Xiaoping’s policies. The Policy and Open door to the Outside
world had begun with reversing the socialist model of egalitarianism, i.e., ‘Eating from the same
Iron Rice Bowl’. Instead, breaking the socialist taboo, Deng Xiaoping propagated: ‘There is no
dignity in poverty’; a Chinese Communist does not have to be poor’; Poverty is not socialism, to
be rich is glorious; It does not matter if the color of the cat is black or white as long as it catches
mice; Let some people get rich first and the coastal region, richer first” (so-called Deng’s Policy
of two whatever), etc. The Reformist leadership adopted the new development paradigm
welcoming Foreign Investment; Capital, Technology and Knowledge; promotion of export
culture; simplification of Rules and procedure for Foreign Investors; deputation of ‘Study
Teams’ to selected countries for imitating success stories; full hiring and firing powers in jobs;
yes to private income, employment, free enterprise and market; premium on individual
entrepreneurship; building of Industrial Townships as new growth points; promoting Small and
medium Enterprises; building of key infrastructure projects by PLA; utilization of excess capacity
in military industries for civilian goods; diversification in industrial production and innovation;
technological up-gradation; investment in R&D; building of ‘Special Economic Zones (SEZs)
and Central Business Districts’(CBDs); learning and assimilating advanced technology, corporate
knowledge and global best practices;
utilizing demographic advantage/Cheap labor by
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Vocational skills development; leveraging with the China Incorporated economies, e.g., Hong
Kong, Taiwan and Singapore. The government committed itself whole heartedly to the
achievement of the ‘Four Points Modernization Program’ i.e Uplift of Agriculture, Industry,
Science and Technology and National Defence (in that order). It adopted policies encouraging
‘re-engineering technology’; development of Township-Village Enterprises (TVEs), resource
mobilization strategy; investment in Human Resources; active role by ‘Overseas Chinese’; end to
state of security paranoid; adoption of Modernization and Moderation as state creed; restoring
public and investor confidence, trust and credibility in public policies, etc.
3.4 Soft Power Revolution
Simultaneously with the ‘Economic Reforms’, Deng Xiaoping and his team unleashed
‘Soft power revolution’ by releasing the energy of the private entrepreneurship, ensuring full
participation of women in economy and society; mindset change through education and media;
balance between change and permanence; balance between material pursuits (Wuzhi wenming) and
spiritual needs (jingshen wenming); ending security paranoia, adoption of a political culture without
mudslinging, scapegoat, victimization, victors etc. Deng Xiaoping’s new line was to bring a
mindset change, which he described as his greatest challenge but also the most important for his
success. He asked the people to keep ground realities in mind; face the world; ‘do more, talk
less’; hide their capabilities and bide for their time. ‘A Strategy was adopted to promote centuries
old Chinese Soft Power Cultural values such as realism, pragmatism, moderation, caution,
discipline, entrepreneurship commitment, hard work, humility, tolerance, tact, patience, care,
goodness, respect, dignity, sacrifice, patriotism, knowledge, etc. (Javed, 2014).
4. Investment in Human Capital
The massive investment by the government for the attainment of ‘Universal literacy’
during the early years paid off, as the primary education became widespread in the country
during the decades of 1950s, 1960s and 1970s. Due to the socialist policies and the foreign
exchange constraints, China was not deputing students for higher education, except a few to the
former Soviet Union and East bloc countries. Some were also deputed on ‘cultural and state
sponsored scholarships’ to few friendly countries such as Pakistan in those days. Similarly, in the
sector of health and maternal care, universal coverage was achieved due to the socialist policies
of providing basic health care at doorstep, i.e., ‘bare foot doctors’. The institution of ‘Commune’
organized as production units in the rural areas helped full mobilization of work force including
empowering the women as an important contributor to social and economic uplift, breaking all
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traditional taboos and practices. Women achieved equality of rights in law. The Marxist Leninist
socialist doctrine with Mao’s thought stressed on Communal egalitarian practices and
discouraged wealth generation and even less demonstrative consumption.
4.1 Human Resource Development in China:
The Socialist centralized Planning model followed by China from 1949 to 1979 left it in
an ‘impoverished state’ with more than two third populations under poverty line. The reforms
among other policy initiatives, gave utmost importance to investment in human capital. Deng
Xiaoping observed that higher education held ‘key’ to achieving science and technology
development and modernization. China began deputing thousands of Chinese students and
experts for higher education initially in the Universities of Western Europe and Japan and
subsequently to the United States, Canada and Australia after these countries liberalized their
student visa rules. The number has kept increasing from a few thousands in the early Eighties to
more than half a million as of 2015. Initially a majority did not return, but gradually as the
economy and the living conditions improved, a majority of those who travel for higher education
abroad, return to China.
4.2 R& D in Science and Technology
The availability of educated, disciplined and cheap human resource has been China’s
greatest ‘boon’ for its double digit growth for more than three decades. It has impacted the
development of science and technology sector, the most. China’s achievements and success in
producing medium to high tech goods would not have been possible without the potent
knowledge and ‘embodied technology’ acquired abroad, brought and ‘re-engineered’ at home to
produce the ‘hybrid products’ which China has excelled in exporting and creating ultimately its
own brands such as Haier, Huawei, Lenovo etc. More and more Chinese brand names are
becoming global household names. Due to advances in Science and technology, Chinese
Universities and R&D departments/ institutions are contributing ‘65 percent of global patent
applications’ as of 2014, making China the largest ‘global workshop’. Large numbers of global
Multinationals derive their ‘corporate sustainability and profitability’ from their China
exposure/portfolio. China is also no more known as a cheap quality producer, as it used to be
known in the early years of Reforms and Open door. China has gradually moved up the
technological chain and continues to make new advances every day. For example, from 40
kilometers of bullet train network in 2007, it has built 17000 kilometers as of 2015. Its recent
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achievements in Civil Aviation, Space exploration, Renewable Energy and Infrastructure
development are without any parallel in contemporary history in terms of the speed, quantum of
change and the profound impact it has generated for not only China’s own huge population but
the international community at large.
5. Foreign Relations
In the arena of foreign relations the guiding policy of the Communist Party and the
Central government were the slogans: ‘Thousand friends, Zero enemies, Export merchandise
and not Revolution; Aim for global market not Global leadership’, Make the West serve China,
Build Four Modernizations, Learn from the West and Serve your Motherland, etc. The Foreign
Policy initiatives included the postponement of territorial disputes; relaxation of tension;
normalization of relations with neighbors; resumption of ties with the Western World and Japan;
encouragement to the Western nations to have stakes in China’s development; commitment to
build a World of balance and harmony; Peaceful rise; follow a ‘Policy of Positivism ,Win-win’
outcome, etc. Deng Xiaoping declared unequivocally that ‘China is not a Superpower, nor will
she ever seek to be one’.
5.1 China’s Economic Diplomacy
The Chinese leadership in the wake of ‘adoption of the Policy of Economic Reforms and
Open door to the outside world’ realized the significance of using the ‘assets of diplomacy, to
serve the interests of economic development’. In order to achieve this objective, a massive
exercise to re-orient the work of Economic Ministries, Departments and diplomatic Missions
abroad was undertaken simultaneously. The revenue generation and regulatory functions of the
Ministries were separated. The diplomatic Missions were provided training and guidelines for
investment, trade, technology transfer, contract bidding and community mobilization related
work. Every Mission and diplomats were allocated specific measurable targets for their areas of
accreditation. The Mission targets however differed from mission to mission, in line with its local
characteristics. For example, some Missions carried out market survey for exports penetration,
others specialized in technology transfer, some engaged in using influence in local contract
bidding, a few worked hard to mobilize the overseas compatriots, etc.
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5.2 Second Phase of Economic Diplomacy.
China became a member of the World Trade Organization (WTO) in 2002. It also
established regional economic initiatives such as the ‘BOAO Forum’, ‘Tianjin Forum’, etc on the
pattern of ‘Davos Forum’. In June 2015 China took the lead to establish Asian Infrastructure
Investment Bank (AIIB) having a membership of 57 states including major European countries
such as UK, Germany, France, Italy, etc. China has also activated its regional trading ties with its
East Asian and South East Asian neighbors under arrangements such as East Asia Summit, FTA
with Asean and other states and regional groupings, active role in trans- continental and global
arrangements namely Asia-Europe Meeting (ASEM), Asia Pacific Economic Community, etc. As
a result of all these economic diplomacy endeavors, China’s exports increased from US$ 11
billion in 1979-80 to US$2.34 trillion in 2014, and Imports from US$21 billion to US$1.96
trillion during the same period. Foreign trade accounted for 75 percent of the GDP in 2015.
Chinese economy has also diversified its foreign trade linkages away from dependence on the US
market. From a high of 31 percent of exports in 2000, China’s exports to the US fell to 18
percent in 2014. On the other hand, China’s exports to the developing world accounted more
than half of its total exports in 2014. The foreign firms accounted for nearly two third of all
Chinese exports and almost four fifths of its exports of high tech items.
5.3 Mobilization of Overseas Chinese
The Foreign Direct Investment (FDI) moved in China in a big way after the Southern
Tour to Guangdong Province by Deng Xiaoping in 1992. Total FDI was US$1.54 trillion as of
2014, more than two thirds by Overseas Chinese. The Overseas Chinese including the Chinese
communities in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia, Thailand and other
countries number 50 million and are among the most prosperous dominating the business
particularly in South East Asian countries. The community is highly industrious with equally high
propensity to save and a frugal life. The foreign investors have been increasingly drawn to
China’s endless supply of cheap, skilled, disciplined and abundant manpower due to migration of
rural labor to urban centers, which prior to 1979 (marking the beginning of the Reformist era),
had been strictly controlled by ‘hukou system’ or residence permit. In addition, the assimilation of
global corporate best practices, embodied technology, knowledge and skills, state support, etc.
enabled nearly ‘106 Chinese firms join the list of Fortune Global 500 of the year 2015 as
compared to 128 American companies’ People’s Daily (2015).
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6. China Pakistan Economic Corridor (CPEC)
China has become the largest trading partner to Pakistan during fiscal year 2014-2015.
According to Chinese customs statistics, bilateral trade volume amounted to US 17 billion during
the period from January to November 2015, an increase of 19% compared to the same period of
last year. Since fiscal year 2013-2014, China’s direct investment in Pakistan has been on the top
among all the foreign countries, for two consecutive years. Chinese total investment in Pakistan
has reached more than 3.6 billion US dollars, making it the largest investment destination in
South Asia. CPEC is a flagship project of Beijing’s broader ‘One Belt and One Road’ strategy of
Silk Road initiatives as part of the long term vision of Chinese leadership for Euro-Asiatic
Integration. Other factors include outsourcing excess industrial capacity, building new markets,
developing new drivers of growth in China’s western provinces, diversifying transportation
routes away from exclusive reliance on vulnerable ‘choke points’, and stabilising China’s western
periphery in the context of a worsening terrorist threat.
6.1 Challenges and Opportunities in CPEC
The CPEC is a strategic project of Pakistan and China in accordance with their
respective needs for national security, prosperity, dreams, roles and aspirations. Pakistan is
uniquely placed to play the role of ‘hub’ between interlocking regions of China, Central Asia,
West Asia, Gulf and South Asia, because of the nature of its geography. Very few countries in
the world are so well blessed and placed too. Pakistan provides direct ‘land access’ to nearly half
of the world’s population in its immediate neighborhood. ‘The CPEC project epitomizes the
growing mutuality of interest and the vision of a shared politico-economic future on the part of
the Islamic Republic of Pakistan and the People’s Republic of China’ Rizvi (2015). Pakistan has
worked out a list of projects in Energy, Infrastructure, Motorways, Railways, Pipelines, Industrial
Zones, ready to move forward, sufficient trust between the two sides to work together on such
an ambitious plan, ports that can serve both economic and military purposes and an economy
with significant growth potential, where Chinese firms enjoy abundant goodwill.
6.2 China’s Commitments under CPEC
China’s ability to deliver CPEC goals are beyond doubt. The two countries signed 51
Agreements and Memorandum of Understanding ((MoUs) for projects worth US$ 46 billion
during the epoch making visit of President XI Jinping in April 2015. These projects have
gradually entered the stage of full implementation, particularly those in Energy and
11
Infrastructure. The huge size of CPEC investment notwithstanding, it is further likely to have
‘multiplier effects and spin offs’ for Pakistan’s economy’s push on an upward trajectory, a jobcreator, an expanding source of government revenue and various other benefits. If it succeeds, it
would make Pakistan a far more prosperous country, stronger regional Power and a credible
strategic partner for China. It provides a strategic mission and an opportunity for both countries,
to shape the 21st Century.
7. Conclusion
The economic rise of China is a development of enormous geo-political significance
during the 21st Century. It will impact very profoundly all aspects of the global society. For the
past 500 years, the Western Powers have not seen any competitor, emerge in the Orient. The
world has also been shaped by the Western ideas, institutions, philosophies and thoughts which
have been now effectively harnessed by the Chinese to gain their own ascendance. This has
striking resemblance to two other examples in ancient and medieval history, when the Arabs,
benefitting from the Greek and Roman civilization built up the formidable Islamic civilization
from the 8th to 13th century and the Europeans who benefitted from Arab learning and craze for
research to trigger their own renaissance and reformation, maturing into Industrial Revolution
and subsequent geo political domination of the world. China is a civilization state with long
history, rich cultural heritage and now with economic power, science and technology
achievements. The Policy of Economic Reforms and Open door to the outside world’ being
implemented since the early 1980 has transformed China beyond recognition, enabling it to lift a
billion people out of poverty in the shortest possible time in human memory.
Every society has its own historical, philosophical, physical, strategic, political, economic,
cultural and ethical contexts of its successes and failures. China is no exception to this rule. From
the so-called Socialist Centrally Planning Economy Model from 1949-1979 to Socialist Market
Economy Model with Chinese characteristics from 1979- till today , China indeed covered a long
distance. China’s success has been courtesy of more than a hundred factors, but none was more
critical than a ‘dedicated, honest collective leadership’ that was prepared to change and undertake
the much needed ‘Reforms’. The new leadership under Deng Xiaoping exerted the greatest
influence on China’s progress towards ‘an open economy and society’. China has repeatedly
stated that its model is not for export. Yet many countries most notably its ‘adversaries’ namely
Vietnam, Philippines, and even India have found many useful lessons in China’s development
experience and benefitted by adopting them in their own policy making. For Pakistan, the rise of
China given the ‘strategic all weather friendship’, has brought the bonanza in the shape of
12
‘CPEC’ which aims to harness Pakistan’s ‘location advantage’ in order to transform its economy
and power profile in the region, like never before. The CPEC enjoys the overwhelming
consensus and support of the large majority of Pakistanis and all major stake holders in the
country.
REFERENCES
Egan, M. (2015). “CNN Money Report (Hong Kong)”. June 15,eproduced in Wall Street
Journal July 10.
Hutton, W. (2006). “The Writing on the Wall – China and the West in the 21st Century”.
London: Little, Brown Book Group, Page 15.
Jacque, M. (2012). “When China rules the World”. London: Penguin Books, Page 6.
Javed, S. H. (2014). “Chinese Soft Power Code”.Karachi: Paramount Publishing
Company. Pages: 141-203.
People’s Daily (2015). “More Chinese Companies in Fortune 500 Global List 2015”.
Available at:www.en.people.cn. 4th August.
Rizvi, H. A. (2014-2015). “The China- Pakistan Economic Corridor” Strategic Studies
Journal ISSI, 34 & 35 (winter and spring).
Small, A. (2015). “The China Pakistan Axis: Asia’s New Geopolitics”. London: ndom
London House, Page 163.
World Bank (2015). “The people’s Republic of China”. Available at:
www.worldbank.org/country/china.
Xinhua Report (2016).
“China’s Foreign Exchange Reserves Continue to Drop”.
Available at: www.china.org.cn, 7th February.
Yunus, M. (2015). “Awakened China Shakes The World: Memoirs of a Diplomat”.
Islamabad Institute of Policy Studies; Page X111.
13
Appendix Table 1: State of the Economy of the People’s Republic of China: 2014
Population total (Number)
1,354,270,00
Population growth annual (%)
1.0
Surface area (sq.km)
9,562,911
Poverty headcount ratio ar$1.90 a day (2011PPP) (% of population)
11.0
GNI Atlas method current (US$ Trillion)
10.0
GNI Per capital Atlas method (current US$)
7.339
GNI PPP ($ Trillion)
17.9
GNI per capital PPP ($ Trillion)
13.13
GDP current (US$ ($ Trillion)
10,3
GDP growth (annual %)
7.0
Inflation GDP defaulter (annual %)
1.0
Apiculture value added (% of GDP)
9.0
Industry value added (% of GDP)
43.0
Services value added (% of GDP)
48.0
Exports of goods and services (% of GDP)
23.0
Imports of goods and services (% of GDP)
19.0
Military expenditures (% of GDP)
2.0
Mobile cellular subscription (per 100 people)
92
Merchandise trade (% of GDP)
42.0
Source: World Bank (2015).
14
Appendix Table 2: Global Top Stock Exchanges by Market Capitalization (Trillion US$)
New York Stock Exchange
NASDAQ OMX
1.7
7.4
Shanghai Stock Exchange
5.9
Japan Stock Exchange – Tokyo
5
Shenzhen Stock Exchange
4.4
Hong Kong Stock Exchange
3.96
Euronext
3.5
Source: World Federation of Exchanges, data as of end-May 2015 and Egan (2015).
15
S3H Working Paper
01: 2014
Exploring New Pathways to Gender Equality in Education: Does ICT Matter?
by Ayesha Qaisrani and Ather Maqsood Ahmed (2014), 35 pp.
02: 2014
an Investigation into the Export Supply Determinants of Selected South Asian
Economies by Aleena Sajjad and Zafar Mahmood (2014), 33 pp.
03: 2014
Cultural Goods Trade as a Transformative Force in the Global Economy: A Case
of Pakistan by Saba Salim and Zafar Mahmood (2014), 32 pp.
04: 2014
Explaining Trends and Factors Affecting Export Diversification in ASEAN and
SAARC Regions: An Empirical Analysis by Shabana Noureen and Zafar
Mahmood (2014), 29 pp.
05: 2014
In Search of Exchange Rate Undershooting in Pakistan by Wajiha Haq and
Iftikhar Hussain Adil (2014), 20 pp.
01: 2015
A Time Series Analysis of Aggregate Consumption Function for Pakistan by
Zakia Zafar and Tanweer Ul Islam (2015), 13 pp.
02: 2015
Impact of Human Capital Investment on the Exports of Goods and Services: An
Analysis of Selected Outsourcing Countries by Samina Siddique and Zafar
Mahmood (2015), 31 pp.
03: 2015
Energy Demand Elasticity in Pakistan: An Inter-temporal Analysis from
Household Survey Data of PIHS 2001-02 and PSLM 2010-11 by Ashfaque H.
Khan, Umer Khalid and Lubna Shahnaz (2015), 34 pp.
04: 2015
The Size of Trade Misinvoicing in Pakistan by Tehseen Ahmed Qureshi and
Zafar Mahmood (2015), 31 pp.
05: 2015
Services Sector Liberalization and Its Impact on Services GDP Growth in
Pakistan by Maryam Mahfooz and Zafar Mahmood (2015), 30 pp.
06: 2015
Alternative to Kibor for Islamic Banking: A Case Study of Pakistan by Asaad
Ismail Ali and Zahid Siddique (2015), 25 pp.
07: 2015
Impact of Climatic Shocks on Child Human Capital: Evidence from Ethiopia,
India, Peru and Vietnam by Mina Zamand and Asma Hyder (2015), 27 pp.
08: 2015
Energy Related Carbon Dioxide Emissions in Pakistan: A Decomposition
Analysis Using LMDI by Arslan Khan and Faisal Jamil (2015), 20 pp.
09: 2015
Decomposition Analysis of Energy Consumption Growth in Pakistan during
1990-2013 by Arbab Muhammad Shahzad and Faisal Jamil (2015), 24 pp.
10: 2015
Economic Rationality and Early Age Work-Education Choice: Rethinking the
Links by Zahid Sidique, Faisal Jamil and Ayesha Nazuk (2015), 22pp.
11: 2015
Trade Costs of Pakistan with its Major Trading Partners: Measurement and its
Determinants by Saba Altaf and Zafar Mahmood (2015), 32 pp.
01: 2016
The Statistical Value of Injury Risk in Construction and Manufacturing Sector of
Pakistan by Ahmad Mujtaba Khan and Asma Hyder (2016), 15 pp.
02: 2016
Socio-economic Determinants of Maternal Healthcare Behavior: Evidence from
Pakistan by Sadaf Munir Ahmad and Asma Hyder (2016), 19 pp.
03: 2016
Rising Debt: A Serious Threat to the National Security by Ashfaque H. Khan
(2016), 31 pp.
04: 2016
Long-run Pricing Performance of Initial Public Offerings (IPOs) in Pakistan by
Muhammad Zubair Mumtaz and Ather Maqsood Ahmed (2016), 38 pp.
05: 2016
When Enough is Not Enough: An Exploratory Analysis of Corruption Behavior
in Select Urban Populations by Kh. Ayaz Ahmed and Ather Maqsood Ahmed
(2016), 43 pp.
06: 2016
Determinants of Income Inequality among the Earners in Pakistan by Saira
Naseer and Ather Maqsood Ahmed (2016), 38 pp.
07: 2016
Natural Resource Dependence and Human Capital Accumulation – An Analysis
for the Selected SAARC, ASEAN and OPEC Countries by Rabia Qaiser and
Zafar Mahmood (2016), 31 pp.
08: 2016
Horizontal and Vertical Spillover Effects of Foreign Direct Investment on
Sectoral Productivity in Selected SAARC Countries by Noreen Kasi and Zafar
Mahmood (2016), 34 pp.