This is great book if you want to have a better understanding of how China did what it did over the past 50 years. The book is easy to read, for the most part, and provides some very frank insights into the positives and negatives of what has gone on in China since 1979.
The author lived in Bejing for more than 10 years, as a background to writing this 2016 book, which tells the story of how China got to where it is today, and where it is headed.
The author concentrates on Chinese history over the past 50 years, when, in 1979, Deng Xiaoping started what the author calls the “reform era.” This was 23 years after capitalism was banned in China.
In 1979, China’s economy was way behind its neighbors: Japan, South Korea and Taiwan. Japan at that time had the second largest economy in the world. China had a lot of catching up to do.
Agriculture at that time was the biggest industry in the country. It was concentrated in the countryside, which was overpopulated and impoverished, per the author. Only about 18 percent of Chinese people lived in cities at that time. Xiaoping ended the agricultural communes. He saw that the land was returned to individual landowners. Infrastructure was dramatically improved in rural areas. The first 10 years of the reform era was dedicated to the countryside. Rapid gains in income and prosperity there followed, but so did inequality.
Migration to the cities was prohibited at that time, but the government, under Xiaoping, began to switch the efforts of reform to the cities, where there was also growing inequality. By the 2000s, the goal of the government was to move as many people off the farms into urban areas. By 2013, 53 percent of China’s population lived in cities.
Large plots of rural land were bought by local governments for the development of cities. But much of these transfers being viewed as unjust, as the farmers could not control the prices for their land.
Per the author, “China’s emergence as a great industrial and exporting power is one of the truly world-changing events of the last two decades.” By 2014, China had become the second most powerful nation, economically. In 2009, it became the largest export nation in the world. A primary reason for these accomplishments was that the government concentrated on building ports, roads, powerplants, and electrical networks as a base of infrastructure.
But the author also says, “the confluence of historical advantages, good luck and good policy produced an unusually powerful economy.” He also sites low labor costs in the mix. Special economic zones attracted foreign investment. Many Hong Kong factories simply relocated to the Chinese mainland, and most of the imports were shipped out of Hong Kong. The focus was on labor-intensive light industry that produced cheap textile goods and cheap consumer goods for export, at the expense of the production of domestic consumer goods.
As this second part of the reform era stabilized, investment in housing and heavy industry was added. By 2014, China was producing half of the world’s steel. This gave the country the ability to invest billions of dollars in rail lines, roads, airports, ports and pipelines. This would lead to the development of automotive, chemical, shipbuilding, machinery and other large-scale industries.
Urban housing was privatized in the 1990s. Previously, it was controlled by the factories for their workers. But the government gave residents the option to buy their units in the early 2000s, via process that made those who controlled urban housing relatively wealthy.
There can be no denying the huge number of urban poor who remain in Chinese cities. Says the author, “China has done a good job of urbanizing jobs, but a bad job of urbanizing people.” There is an oversupply of high-end housing, and an undersupply of affordable housing. There is also an estimated 100 million of migrant workers in China. And, says the author, “the government has done very little to address individual income inequality.”
But it is equally true, he says, that “China’s economic growth since the 1980s has lifted hundreds of millions of people out of poverty. This is a great achievement.”
The author goes through the history and organizational structure of State Owned Enterprises (SROs). He says that, today, the SROs tend to be concentrated in the heavy-industry sectors. He says that many studies show that private firms outperform the SROs and that the continued conversion of SROs to private firms must continue for China’s economy to keep growing at a rapid pace. He says that China is burdened with debt from the inefficient borrowing of SROs for production that was less and less in demand.
Some other info from the book:
• At present, China has neither a property tax or an individual income tax. Virtually all taxes are paid by companies.
• It is the world’s biggest consumer of energy, and it is just getting started, in many ways.
• It has plenty of coal, and will probably stay dependent on coal for may decades. It is by far the biggest polluter in the world.
• By 2030, China’s urban population will be more than 1 billion.
• By 2050, one of three Chinese will be over the age of 60.
• In 2016, China sold 28 million cars and trucks. In contrast, about 17.5 million were sold that year in the U.S.
• The population of China’s middle class is about the same as the entire population of the U.S.
• Uncontrollable corruption will eventually force the system into either political collapse or economic sclerosis.
• The Communist Party is the gatekeeper of all information that flows into the country.
• China’s increased prosperity is beneficial to the rest of the world.
The author does not see China today as under the control of a dictator, but under the leadership of the Communist Party. He feels that China is highly decentralized and that local areas have a great deal of independence and power, much more than most observers in the outside world perceive. He also feels that China does not “cheat,” except in ways that every industrial country has done during catch-up phases.
Additionally, he says that “solving the social welfare puzzle is essential if China is to bridge the vast gulf of income and social inequality that has arisen as the result of the fast economic growth of the past three decades.”
China is in the process of converting its economy from investment and exports to a domestic consumer economy. Says the author, “Ultimately, though, a more open and less paranoid political system will be required for Chinese society to remain vibrant as it grows older and richer.”
And, a final thought from the author: “There is plenty of room in the world for both the U.S. and the Chinese systems, so long as people on both sides can agree that this peaceful coexistence is a goal worth striving for.
Like I said in the beginning of this review, this is a great book if you want to have a better understanding of how China did what it did over the past 50 years.
In this review, I am just scratching the surface of all the book has to say or offer.
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Vuthy Chrun
Best book I have read so far on modern Chinese economic transformation
Reviewed in Canada 🇨🇦 on September 24, 2017
Adam Carlton
Clearly written and balanced take on the history and future prospects for China
Reviewed in the United Kingdom 🇬🇧 on February 24, 2018
