100 years of resilience

Other countries can learn from China's success in weathering challenges, whatever political system they may have

As the Communist Party of China celebrates its 100th anniversary, what can one say about China, from an economist's perspective?

At the core, it is worth remarking how, at least based on the evidence of that 100 years, China stands out not only in contrast to the achievements of most countries that have achieved lasting growth and reduced poverty, but also as a big contrast to other countries that one might think of having models of governance similar to China's. Notably, the Union of Soviet Socialist Republics failed to stick together, and its biggest defined country, Russia, has shown very little evidence of achieving the success that China has. Other countries of similar governance structure have also, so far, failed to achieve China's success, including those with much smaller populations, such as Cuba.

Over the past 30 years or so, China's achievements have been so especially notable not just because of their scale, but also considering the repeated global economic shocks that have reoccurred through this period. Just think about the forces that China and every country has had to navigate: the so-called Asian crisis in 1997-98, an event which set back a number of other Asian economies for many years; the bursting of the dotcom bubble in financial markets in 2001; the devastating financial crisis of 2007-08, from which many economies and their societies have arguably not really recovered; and then of course, the current COVID-19 pandemic, which has resulted in the biggest economic decline around the world since the 1930s.

Let me show some numbers before I delve into possible reasons why China has had this success. When I dreamed up the BRIC acronym in 2001, to describe the possible growth potential of the largest emerging economies in the world, China's economy was around $1 trillion in size. It had already experienced a decade of double-digit real GDP growth despite the devastation caused by the Asian crisis. Today, China is close to $15 trillion in current US dollar terms nominally, some 15 times bigger. It is more than three times the size of the world's third-largest economy, Japan, and has become at least three-fourths the size of the US economy. It is actually more than twice the size of the other BRIC economies put together, and of course, even during the past remarkable year, China managed to achieve positive real GDP growth of around 2 percent. China's economy today is larger than it was in 2019, which is something we cannot say for probably any other economy. And of course, in purchasing power parity terms, China is actually bigger than the United States.

China's ability to eradicate poverty has been possible because of this remarkable growth, and because of this, China has been central to a substantial decline in global poverty. While there has been significant acceleration in the wealth of the most prosperous in China, the GDP per capita is around $11,000 to $12,000, and it is well placed to double by 2035 as desired by the CPC.

One of the statistics I love to dwell on is that it is estimated that around 300 million Chinese citizens, primarily urban residents, share GDP per capita of around $40,000, which is equivalent to the average level in the United Kingdom, a country with about 65 million people. As a British citizen, it is something I ponder a lot. China's system of governance has created the same wealth as my country does, but for four times the number of people. Incredible really. So why? This is the harder part to answer.

One of the reflections I have, which I rarely see others mention, possibly does relate directly to the form of governance. Given my background in international finance, I have had a front row seat for many of the international crises and shocks I have mentioned, and somehow, despite them all being different, China has responded, seemingly appropriately to all of them. In 1997, despite currencies collapsing around it, China resisted the pressure and temptation for the RMB to weaken, which at the time could have caused havoc. Similarly with occasional bouts of financial market pressures since, somehow China has managed to respond to them. And of course, in the 2007-08 financial crisis, when China's dependency on exports was much bigger, it managed to respond quickly, and shifted its economic dependency away from low value exports, allowing wages to rise, and the renminbi to appreciate, which together with a massive domestic infrastructure stimulus, allowed the economy to shift to a more domestically driven position. And then in the past 15 months, despite the initial devastation that the COVID-19 pandemic caused in China, a nation of 1.4 billion people, the country has seemingly got to grips with it, and got back to some normality, unlike much of the rest of the world.

At the center of this appears to be not only clear decisive leadership of the CPC, but also a team of civil servants and bureaucrats that are well educated and trained, and implement with speed and thought the policy responses to help navigate through a crisis. This is something many other nations have not managed. So in this regard, this is perhaps something other nations can learn. You cannot allow your political system to smother the need for thoughtful and decisive polices when the need is highest.

Are there things that China can learn from others in the next 100 years? That is probably the topic for another article, but I might suggest that as China's economy becomes larger and more important for the rest of the world, it perhaps needs to derive some softer skill diplomacy and with it, realize that other countries might not choose the same form or governance, and that China's model may not be easily translatable elsewhere. But its success in navigating economic challenges is definitely something the rest of the world can learn from.

The author is the chair of the Chatham House based in London. The author contributed this article to China Watch, a think tank powered by China Daily.