Thirty years of Chinese reform and economic growth: Challenges and how it has changed world development
While the beginnings of Chinese reform don’t seem so long ago for some of us, we are talking about a fairly long period in modern Chinese history. The reform era is now longer than the period of Communist Party rule within the paradigm of central planning that preceded it. The total span of Communist Party rule now covers more years than passed between the fracture of imperial authority in the first Opium War and its humiliation in the invasion following the Boxer rebellion at the end of the nineteenth century. It now covers more years than passed between the Boxer Rebellion through the formation of the Republic to the coming to power of the Chinese Communist Party. We are talking about a period that is long enough for historic transformations. Through the reform period, there has been a transformation of the Chinese mind. Hundreds of millions of Chinese are now part of an international community of ideas and information. Many threads have been woven to produce this result. One was the audacious scale of the early promotion of study abroad. This was carried through in explicit recognition that many students would not return, and on the basis that enough would return or in other ways contribute to Chinese development for study abroad to provide a net gain for the country. Another was the unequivocal early commitment to opening the economy to foreign trade and investment, and its requirement of open movement of business and professional people in and out of China. A third was largely autonomous to Chinese reform decisions: the extraordinary increase in the power and reduction in cost of international information flows, with technological improvements including the internet. Amongst much else, the transformation of the Chinese mind included the development of a modern economics profession, familiar with the theory and techniques of economics in the West, and increasingly confident in the exchange of economic ideas. Leading members of China’s economics profession are now contributing to the critique and expansion of received wisdom about economic development, and to the distillation of lessons from the Chinese experience of development into the understanding of the global profession (Lin 2007, 2008; Fan 2006). This has been an important and fascinating element of the reform process involving deliberate efforts of the Chinese state, external institutions (with the Ford Foundation’s role being noteworthy) and Chinese intellectual entrepreneurs (with the establishment of the China Center for Economic Research building on contributions from each of these sources). As important as any other element of the transformation of the Chinese mind was the acceptance of major roles for impersonal markets as important instruments for allocating resources and distributing incomes. This was a change not only from central planning since the revolution, but from patterns of imperial power extending far back into Chinese history. Through these changes, personal economic security is now provided significantly through the value of people’s labour and produce in the market place, in the stead of an intrusive and overwhelming state. This personal security has been enhanced in recent years as labour has become scarce and valuable in a way that has no parallel in Chinese history, as coastal China unambiguously and inland
China to a considerable extent experiences the rising wage rates that come with what Minami called the turning point of economic development (Minami 1973; Garnaut 2006; Cai 2008). Reform in China has not and could never have been a smooth or painless process. There have been challenges at every step. There have been some bumps in the road, detours and dead ends. As it happens, the three biggest challenges have coincided with the decennial anniversaries: the inflationary boom of 1988, which established the conditions for the one political crisis of the reform era in 1989; the East Asian financial crisis of 1998; and the global financial crisis of 2008. I return to these challenges later in the chapter.