Understanding a Development Miracle: China

If people anywhere would try to assess how China emerged as the world’s second largest economy, well, what’s obvious is the country’s export-oriented industry. Everybody in the Philippines will certainly agree that explanation. With the very large export surplus, we witness how every Chinese products are displayed on almost every Filipino stalls. This is just one of the efforts done by the Chinese in shaping the kind of development that the country is molding for many years.

It feels so interesting to understand how income per capita in China by 2008 was well over 5 times what it was in 1978. However, the increase might be as well embarrassing to know that China’s income per capita in comparison to some other countries is far behind. Just late last year, TIME Magazine had this issue comparing countries of big economies. Though Japan is behind China in the world ranking, the former leads a significant higher in income per capita compared to the latter. This low income per capita relative to other countries might explain why the country still has large number of poor people. Even if World Bank estimate that the number of poor in China is falling from 53% to just 8% in 2001, still, 8% is too many in a country who has 1.3 Billion population.

Moreover, if China hailed the benefits of markets, trade, and globalization, it is still very important to understand that the country had adopted activist industrial policies, meaning, less privatization which for me gave China the wisest decision that led to their advantage in the race for rapid growth. With the neoclassical counterrevolution theories (i.e. free market model) not doing well in Africa and Latin America, China’s own crafted development policies might as well be failure without their good performance in transitional institutions which is primarily their difference against Russia who immediately abolish its central planning institutions, not allowing to coexist both institutions.

With the European countries and Russia who aimed for a “big bang” in the changeover to a free-market economy, China opted to be different. They introduced new and transitional institutions that exist side by side with previous institutions of central planning for extended periods.  It was in this core reason that perhaps generates further miracle for the country.

Well, in the investment atmosphere, China is the most favored. It has an eventual market of more than 1.3 billion consumers that is more than enough to expound the pour of investments in the region.

A factor of being homogenous also matters. Ethnic diversity impedes economic growth which associates African slow pace of growth.

In the other part of the globe, whether the country is a developing or in a transition period, state-owned enterprises were sold off to private investors quickly. China is a different case. These enterprises still remained in the government’s hands, however this was contested with many problems that later on led to some of it privatized or even closed.

Another important thing to consider is also their focus on township and village enterprises. These are local government owned enterprises. Though these were privatized lately, it spread development to rural areas. It was a perfect choice for their country to have early reforms on agriculture in rural areas, then strategic for shifting it lately toward industry.

Upon looking China’s prosperity, there are some certain drawbacks that are might as well problems encountered by almost all other counties. Extreme poverty is one. Official land grab from peasants also losses the farmers security. Also important to note is their rising local taxes and minimal improvement in technology. The latter is more delicate for the country in the years to come. With the competing countries all over the world, China who mainly relies on labor-intensive approach may not come at par with high and sophisticated technologies of their economic rivals.

It is also a country who situates the most of the polluted cities in the world. This aggravates health problems among its people. Moreover, with its skyrocketing surplus that caters too many people around the globe, we cannot forget their publicized scandals concerning their safety on food, drugs, and others. A perfect example was their melamine tainted products on milk that led too many victims especially in the South East Asia. This created a threat to international public image on Chinese products added by lists of health hazardous exported materials.

To wrap up, China has made the wisest decision for its own boundary. With a gradual change in adjusting itself into the demands of globalization, they had found themselves in a win-win situation.

(This is a reaction to a case study in China published in Michael Todaro's Economics of Development 2011 Published Book)