How wealth is made in China

As China released its 13th five year plan last week, there are key ingredients of China’s model of development from which African countries can definitely learn.

The Asian dragon has emerged from typical developing country backwardness to the second-largest economy in the world within four decades, regularly posting double digit economic growth rates.

Of course not all of China’s reforms are applicable to African countries. The specific country conditions are different. Furthermore, within China there is not a consensus over what exactly the Chinese developmental “model” is, except over some of the broad outlines.

Nevertheless, African countries can benefit richly from studying some of the key Chinese development approaches.

China has done this by a combination of introducing catalytic new policies and institutions, overhauling the structure of the economy, changing the societal distribution of resources, opening access to land, and improving human and physical capital.

China made sustaining high economic growth rates a core pillar of economic policy. African governing parties and leaders since independence appeared ambivalent – others still do – about pushing all out to raise economic rates.

The question should not be about whether to go for growth, but how to make growth inclusive. Inclusive growth is when economic growth affects the widest number of people in a country, not just small elites.

China focused on building a labour-intensive agricultural sector. In developing countries with mass poverty combined with low skills, sustained agricultural growth has a big potential to reduce poverty.

It dismantled the traditional Chinese feudal system, whereby a few landowning families own the land and an army of poor peasants work for them for a pittance. The Chinese government distributed land among all rural peasants.

This was different to many of the African examples of land redistribution, for example in Zimbabwe, where land was taken from white farmers, and then mostly given to the elite of ruling Zanu-PF leaders, their families and allies.

But just as important, the Chinese government abolished the power of the traditional chiefs and authorities, whereby they have control over land, patronage and the social values. The Chinese set out a programme to equalise the status between traditional leaders and authorities and ordinary peasants, setting new rules of behaviour.

In many post-independence African countries, traditional leaders and authorities retained their power over communal land, their “subjects” and traditional culture.

They more often than not abuse such powers for their own enrichment, leaving the vast majority of Africans living in rural areas as feudal “subjects”, living in abject poverty, as well as controlling almost every part of their lives, and even who they should vote for.

In return for having untrammelled feudal power, African traditional chiefs and authorities, made sure that their “subjects” voted for the ruling party, repressed and isolated critics of the unequal system, accusing them of wanting to be “white”, of “rejecting” their own culture and of being “agents” of the colonial or Western powers.

The Chinese also introduced a greater measure of gender equality than any African liberation movement, opening up education, skills and labour opportunities.

The Chinese also introduced industrial policies which emphasised labour-intensive manufacturing aimed for export and linked to the country’s comparative advantage. This created mass jobs, wealth and slashed poverty. For most of the 50 years following independence, African countries remain stuck in exporting raw materials – which create few jobs and wealth only for the selected few – without adding any value to them, or beneficiating or leveraging it to create new industrial sectors.

China put an extraordinary emphasis on developing human capital – quality, technical and research skills – given that they have few natural resources. It introduced nine years of compulsory education, as well as rolling out preventative primary health-care programmes.

In fact, it targeted poor households by providing them with assets (land), education and skills, to help them secure opportunities.

Furthermore, it dramatically beefed up tertiary education, introducing a mix of artisan, technical and agricultural training institutions and high quality universities – channelling students according to their aptitudes to these different professional streams.

It accelerated physical “capital”, such as infrastructure across the country – rolling out special programmes in historically poor areas – linked to industrialisation, human capital development and giving the poor access to markets.

China over time managed to make workers across the economy more productive – whether through new education, skills and health.

The Chinese Communist Party also focused on lifting the widest number of Chinese out of poverty, not one ethnic group, region, or political faction; unlike many African independence movement governments, who in spite of the rhetoric to the contrary, often looked after their own ethnic group, region or political constituency.

China introduced a reasonable sense of meritocracy in its political, economic and social system – not favouring one ethnic group, region or constituency. This unleashed the energy of vast numbers of people, who might have opposed the communist political ideology, but who believed if they worked hard they would fairly gain opportunities.

China also effectively used fiscal – government spending, taxes and monetary policy – adjusting the money supply and interest rates – to stimulate growth, create jobs and maintain economic stability.

During downturns when demand in the economy was low, the Chinese government actively intervened and increased spending, especially on infrastructure, and reduced taxes. The Chinese have often been accused of keeping the country’s currency artificially low, to help their exporters.

China planned development better: their long-term plans were detailed – typically with specific targets, assigning who is accountable for what, and when, and robust monitoring mechanisms.

China was more pragmatic, less ideological in learning from other development experiences, whether from Japan, its ancient foe, or the US, its more recent adversary.

Some African governments and leaders were either trying to be more Marxist than the Soviet Union, more Maoist then China, or more neo-liberal than the US under Ronald Reagan or the UK under Margaret Thatcher.

Alternatively, some African countries implemented a hotchpotch of so-called “African socialism”, or African “communalism”, supposedly the ancient way in which Africans conducted economic transactions.

Such efforts, not surprisingly, mostly failed.

China also policed public corruption, mismanagement and waste better than their African independence movement government peers.

*This article appeared int he African Independent and can viewed on their website here. 

William Gumede is Associate Professor, School of Governance at the University of the Witwatersrand. He is Executive Chairperson of Democracy Works Foundation and former Deputy Editor of The Sowetan newspaper.

During the anti-apartheid struggle, Gumede held several leadership positions in South African student, civics and trade union movements. He was a political violence mediator and area coordinator for the National Peace Committee during the multiparty negotiations for a democratic South Africa and was seconded to South Africa’s Truth and Reconciliation Commission. He is the author of several number 1 bestsellers. His more recent books include: Restless Nation: Making Sense of Troubled Times (Tafelberg); and South Africa in BRICS – Salvation or Ruination (Tafelberg).

To read publications by William Gumede on our website please click here.

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