China’s lessons for emerging economies

A vendor attends to customers looking for Chinese New Year decorations at a bargain bazaar in Beijing. China's economy has grown exponentially in recent years. Picture: Rolex Dela Pena/ EPA

A vendor attends to customers looking for Chinese New Year decorations at a bargain bazaar in Beijing. China's economy has grown exponentially in recent years. Picture: Rolex Dela Pena/ EPA

Published Jan 22, 2016

Share

It would be beneficial for SA and the region to study China’s poverty-alleviation model, writes Shannon Ebrahim.

In 1984, when Germans never thought the Berlin Wall would fall and Russia hadn’t started debating glasnost, Chinese leader Deng Xiaoping articulated his dream to rejuvenate the Chinese nation. The goal was to create a moderately prosperous society within 20 years. Today the leaders of the People’s Republic of China (PRC) are celebrating the fact that they are well on their way to realising that dream within the next five years.

When the PRC says that it will finish building a moderately prosperous society by 2020, there is every reason to believe that it will achieve that and more. Chinese citizens have watched their GDP per capita rise from $200 in 1984 to $800 in 1990, $900 in 1999, $4 500 in 2010 and $7 800 in 2015. So when China’s current 13th Five Year Plan outlines the road map to increasing GDP per capita to $10 000 by 2020, the Chinese people know that the targets are not only likely to be met but exceeded.

The irony is that as the country embraces what their leaders call “socialism with Chinese characteristics”, and living standards are drastically raised, the ruling Communist Party will celebrate its 100th anniversary in 2021. If liberation movements in southern Africa think they have accomplished a lot for their people, they can be mesmerised by the fact that the PRC has lifted 678 million people out of poverty over the past 30 years.

Chinese leaders lament that 70.17 million Chinese citizens out of a population of 1.3 billion still live below the official poverty line of $400 a year, but the strategy to address poverty and the wealth gap is notably specific.

According to the 13th Five Year Plan, over the next five years 40 million citizens will be able to take advantage of new job opportunities, 10 million will be relocated and 20 million will benefit from the state social security programme.

This is poverty alleviation on a mass scale when you compare that South Africa, with a population of 54.96 million, has managed to lift 3.6 million out of poverty. South Africa’s relative success is owed in part to social grants, free basic services and taxes favouring the poor. According to StatsSA, South Africa still has over 27 million citizens living below the poverty line – over half the population. It would be beneficial for South Africa and the region to study the Chinese model of poverty alleviation and identify the most successful strategies.

While China’s economic growth has been unprecedented in recent years, it has not been without problems, many of which developing countries can learn from. Up until 2010, the PRC had achieved a growth rate of more than 10 percent, which then levelled off in 2012 and 2013 to 7.7 percent. Chinese leaders realised that the country’s resources and environment could not accommodate such high levels of growth, and that a target of 7 percent growth would be more manageable.

This new way of thinking was labelled “the new normal” in 2015, whereby there would be a transfer from high growth rates to medium to high growth rates. Even a growth rate of 6.5 percent would double GDP per capita income and exceed that of all other major economies.

The Chinese leadership was compelled to change course for a number of strategic reasons. The massive energy consumption of the past decade resulted in unacceptable levels of pollution in China’s cities, creating long-term damage to the environment.

The PRC now wants to set up green and low-carbon industry systems, and make protecting natural resources part of an official performance evaluation.

Promoting new energy vehicles will also be a priority.

The mass production of low-quality products also began producing negative results for efficiency. The new normal will see the removal of low quality products and a move towards high quality products.

The PRC also wants to avoid the “middle income trap” which has blighted development in Latin American countries like Brazil.

The middle income trap is where people have moved from the lower to middle income category, but have not contributed to economic growth as they get stuck in occupational categories rather than becoming innovative entrepreneurs. With higher labour costs and an ageing society, the PRC will now need to find new ways to maintain economic momentum, which also explains the reversal of its one child policy.

The shift in emphasis over the next five years will be from investment and exports to domestic consumption.

The PRC has been quick to reassure the developing South that its new economic priorities may change the type of products China wants, but not the volumes it imports. It insists that this will not negatively affect the level of imports from countries like South Africa, which accounts for 25 percent of all China-Africa trade.

As China heeds the lessons from its fast-paced development and rebalances, as emerging economies we should take note.

* Shannon Ebrahim is Independent Media’s Group Foreign Editor

The Star

Related Topics: