How China opened its doors to world

Photo by Song Chen/China Daily/Asia News Network

BEIJING — Forty years ago this week, the Jingxi Hotel in Beijing’s Haidian district was the venue for one of the 20th century’s landmark events.

The Third Plenum of the 11th Communist Party of China Central Committee, held from Dec 18 to 22, 1978, saw the launch of China’s reform and opening-up policy.

This momentous initiative not only transformed the country－turning it from a largely agrarian and poor society to the second-largest economy in the world－but also the world itself, shifting its center of gravity eastward.

Martin Jacques, the British academic and author of When China Rules the World, believes 1978 was the year in which the world we are living in today began to take shape.

“The reforms (of former leader Deng Xiaoping) not only transformed the whole of the Chinese economy, they transformed China’s vision of the world and the world itself. It is an absolutely revolutionary shift. It was a momentous event, absolutely incredible. In my view, it marked the beginning of the 21st century,” he said.

The new policy began with reform of the economy’s agricultural base.

The 1980s saw Special Economic Zones set up in Shenzhen, Guangdong province, and other coastal areas, which became hives of manufacturing and the platform for China to become the workshop of the world.

The policy welcomed foreign investment, with multinational companies from around the world launching operations in China through joint ventures.

The economy has grown, at mostly double-digit rates, from $306.17 billion in 1980 to $12.25 trillion last year－a 40-fold increase, which has taken 800 million people out of poverty.

Since the financial crisis of 2008, China has contributed a quarter of global growth.

However, Kerry Brown, director of the Lau Institute at King’s College London, said it would be wrong to see 1978 as a complete break from what had gone before.

He views the nation’s development as a continuation of the progress made in the three decades after the People’s Republic of China was founded in 1949.

“The journey started in 1949. There was a modernization going on that was complicated and it was all part of a learning experience. Without what happened before 1978, you wouldn’t have had the opportunities to do what occurred afterward,” he said.

The reform and opening-up initiative has shaped many people’s lives.

Jing Ulrich, managing director and vice-chairman for Asia Pacific at JPMorgan Chase, who is one of China’s most prominent businesswomen, was 11 when it was launched.

“I remember as a child witnessing the economic reforms that placed China on a path of extraordinary growth and prosperity,” she said.

“Every year I saw how the introduction of market principles allowed China to open up to foreign investment, and gave people the opportunity to set up businesses and build something out of nothing. The transformation created much-needed jobs, drastically raised living standards, and gave people the chance to build the lives they always wanted. It was the beginning of the Chinese dream,” Ulrich said.

Now 51, Ulrich has been ranked by Fortune magazine as one of the 50 most powerful global businesswomen. She was also one of the first students from the Chinese mainland to study at Harvard University at the United States.

“When I was studying in America, people didn’t really know much about China. But over time, as the reforms continued to ripple through the market and focused global attention on ‘the rising dragon’, I knew it was my calling to interpret the ‘China story’ for the world,” she said.

One of the contentious issues with reform and opening-up is whether it receives the attention and recognition in the West that it deserves, if only by one criteria alone－for delivering so many people out of poverty.

Former United Kingdom prime minister Tony Blair acknowledged this in an interview with China Daily earlier this year.

“It is a really significant event. If you were a Western student, you would study lots of things about the politics of the late 20th century. You would study the Soviet Union, the fall of the Berlin Wall and the end of apartheid,” he said.

“You wouldn’t probably study, in the same way, the opening-up of China, and yet it signaled that China was going on a new path of engagement with the world with the opening-up of its economy. The results have been staggering.”

Brown, although recognizing the significance of 1949, said the world we live in now derives from 1978.

“In terms of global leadership, nothing comes close to it in terms of its impact on one-fifth of humanity. This was a truly great event, and so many issues we are dealing with now, such as the shape of the global economy, all date back to that year.”

Jacques, the British academic, also believes there is insufficient acknowledgement of 1978 in the West.

“You barely see anything (about this) in the Western media. That tells you virtually everything you need to know about the inability to comprehend one of the greatest trends in the world. The West is now blind and does not have a sense of the future anymore. It has lost its compass and has moved into a siege mentality,” he said.

For Ulrich at JPMorgan Chase, the impact of reform and opening-up will continue to shape the world, with its ability to invest in other nations through moves such as the Belt and Road Initiative, which was proposed by President Xi Jinping in 2013.

“China’s economic reforms have paved the way for the nation to create some of the world’s leading companies in e-commerce, artificial intelligence, genetic engineering, financial services and biotechnology,” she said.

“With China already achieving its goal of shifting from an export-oriented economy to a consumption-driven one, the nation’s leaders are now on a journey to build and invest in its neighbors through the trillion-dollar Belt and Road Initiative.”

State direction has played a significant role in the success of the Chinese economy, from establishing SEZs in the 1980s to current initiatives such as setting up Free Trade Zones.

Rana Mitter, director of the University of Oxford China Centre, said the reform measures developed a momentum of their own in the 1980s.

“You had the de-collectivization of the countryside. With the setting up of Special Economic Zones, Guangdong took off like a rocket,” he said.

Deng’s Southern Tour in 1992, when he visited the Shenzhen SEZ, and famously said “to get rich is glorious”, was also another important stepping stone, Mitter said.

“This is when you have the real beginning of the Made in China export-oriented economy,” he said.

William Kirby, T. M. Chang Professor of China Studies at Harvard University, said part of the reform dynamism was the return of family businesses, particularly after 1990.

“They had been the dynamo of China’s economy up to the 1920s and (also drove) other East Asian economies,” he said.

Ulrich believes one of the most important ingredients in China’s success has been the way it has managed to rapidly integrate itself with the global economy.

“China’s unprecedented economic growth over the past 40 years is a testament to the importance of an economy embracing global business and international markets. Over the past half century, China has transitioned from a closed, agriculture-based economy to one that is vibrant and deeply connected across virtually every sector in the world,” she said.

Mitter, author of China’s War With Japan, 1937-45: The Struggle for Survival, said part of the reform initiative’s success was its timing.

“It coincided with the end of the Cold War, and the US was then buying a lot of stuff, although this was largely debt-fueled, while China was producing it. It created what the historian Niall Ferguson called ‘Chinamerica’, referring to the two economies becoming complementary.”

Kirby, the author of Can China Lead? Reaching the Limits of Power and Growth, said the reform initiative has not been without its problems, particularly widening the inequality between the rich coastal regions and poorer inland ones.

“Reform led to the extraordinary development of the south and east, but some other less-developed regions got left behind,” he said.

He believes this has particularly affected the farming community, which has not benefited in the same way as the urban population.

“It is the farmers who have not enjoyed these benefits. If you look at France, the UK, Germany and the US, the farmers have not been impoverished. For China to be an enduring rich country, it needs to have a prosperous agricultural sector as well.”

As the anniversary of the reform initiative is marked, China, which became a member of the World Trade Organisation in 2001, is continuing to open up its economy.

Mitter said: “People are looking to see what role China will play as a key actor on the international stage in the next phase of its development. That question remains to be resolved, and the way that China addresses it will do a great deal to decide what China’s reputation, reach and power is.”

Ulrich also believes further opening-up will be important to the country’s future success.

“There is still room for China to accelerate market liberalization. In addition, it can further open its financial system to foreign competition, encourage foreign direct investment and continue to lead in global trade. These reforms will take time, but we do see China making meaningful progress on every front,” she said.

As people look back to 1978, Brown, also author of China’s World: What Does China Want?, said it is important to remember and reflect on Deng’s leadership.

“Through his reforms China has emerged as a country that once again is a force in the world. It is innovating and creating its own technologies. It is becoming what the US was in the 20th century, but with Chinese characteristics,” he said.