The Benefits of China's Path to Modernization

Over the past 45 years of reform and opening-up, China has made tremendous achievements. As the largest developing country in the world, its unique experience has not only benefited its own people, but also made significant contributions to global economic growth.

China’s Economic Stability and Global Economic Recovery

Over the 45 years since the beginning of China’s reform and opening-up, the average annual growth rate of China’s economy has been near 10 percent, which is a remarkable achievement worldwide. After the outbreak of the international financial crisis in 2008, the growth of major economies significantly slowed down or even declined. The Chinese economy, on the other hand, still maintained a relatively high growth rate and took the lead in rebounding, becoming an important engine for driving global economic recovery. Since 2014, the Chinese economy has entered a new normal characterized by medium-high growth rates.

The “new normal” has three significant characteristics: firstly, China’s economy has transitioned from high-speed growth to medium-high growth; secondly, the economic structure keeps optimizing and upgrading; thirdly, it has shifted from being driven by factors of production and investment to being driven by innovation. The outbreak of the COVID-19 epidemic in 2019 seriously impacted world economies, and the global economy today still faces the risk of supply chain disruptions and imbalance in growth. According to data released by the International Monetary Fund (IMF), the global economy shrank by 3.1 percent in 2020, while China’s economy bucked the trend and gained 2.2 percent, becoming the only major economy in the world to achieve positive growth. According to data from the National Bureau of Statistics (NBS), China’s GDP reached RMB 98.7 trillion in 2019, accounting for over 16 percent of the world economy. The contribution rate of China’s economic growth to that of the world reached around 30 percent.

When faced with the impact of the epidemic, China’s economy stands out as an important engine for global economic recovery and growth. During the epidemic, China took decisive and effective prevention and control measures, resulting in the rapid resumption of production and business activities. This timely resumption has reduced the impact of the epidemic on the economy and allowed China to become the first major economy achieving positive growth. Since the beginning of 2023, China has accelerated the restoration of normal production and living order, not only making positive contributions to the stability of global industrial and supply chains, but also bringing hope for the full recovery of the world economy.

Promoting International Industrial Capacity Cooperation

In May of 2015, the State Council issued the Guidelines on Promoting International Cooperation in Industrial Capacity and Equipment Manufacturing. China has achieved fruitful results in international production capacity cooperation with developing countries in Asia, Africa, and Latin America, as well as developed ones in Europe.

Firstly, the international industrial capacity cooperation advocated by China promotes balanced and sustained growth of the world economy from the supply side, which is an effective way to cope with the global economic downturn. The impact of promoting such cooperation on world economic growth is reflected in the following aspects: first, the cooperation helps developing countries cultivate localized industrial clusters, promotes their industrialization process, and assists them in forming new economic growth points.

A typical example is the steel project of the Malaysia-China Kuantan Industry Park (MCKIP): Alliance Steel (M) Sdn. Bhd., the construction of which began on December 23, 2014. The total investment on this project is US $1.4 billion, mainly producing hi-tech steel products (such as H-beam), with an annual steel production of 3.5 million tonnes. Alliance Steel (M) Sdn. Bhd. is now the joint enterprise that has the most advanced equipment and produces the most complete varieties in the steel industry of Malaysia. It is one of the most competitive steel enterprises in Southeast Asia and the first enterprise in ASEAN to adopt a full process of producing H-beam. It has greatly promoted the development of Malaysia’s steel industry and created nearly 10,000 jobs for local residents. Malaysia plans to create a steel industry cluster by establishing a steel industry base during the first phase of the MCKIP and focus on building modern comprehensive steel plants.

Secondly, international industrial capacity cooperation facilitates the infrastructure construction of participating countries. A typical example of this is the Sino-Thai Railway project launched in September 2017. After the completion and operation of the railway, the round-trip fare from Kunming, China, to Bangkok, Thailand, was approximately 3,600 Thai baht (approximately RMB 700) per person, equivalent to half or one-third of the air fare, and the freight cost was only one-ninth of the air cost. After the completion of the railway, it is expected to bring two million more Chinese tourists to Thailand every year and make the exporting of Thailand’s agricultural products more convenient. According to the plan, this railway shall connect with the China-Laos Railway, which will be conducive to Thailand’s interconnection with other ASEAN countries and make it a transportation hub of ASEAN.

Thirdly, international industrial capacity cooperation will promote the development of industries across the global industrial chain, which is conducive to deepening South-South and North-South cooperation and promoting inclusive growth of the world economy. China has many mid-end products, production lines, and equipment production capacity, which are cost-effective and suitable for the needs of developing countries, while developed countries boast high-end technology and equipment. Through cooperation, the high-end equipment will be produced at lower prices, and thus drive China’s industrial upgrading and help developed countries to expand exports.

A Channel for Other Countries to Share the Chinese Market

The development of China’s economy and improvement of its people’s living standards has resulted in the rapid expansion of China’s import demand, making greater contributions to the prosperity of international trade and the recovery of the world economy. Since 2018, China has successfully held six consecutive import expos, actively opening up its market to the world, and effectively promoting the recovery and growth of an open world economy.

Chinese President Xi Jinping predicted at the first China International Import Expo (CIIE) in 2018 that during the following 15 years, China’s imported goods and services would exceed US $30 trillion and US $10 trillion respectively. After the outbreak of the epidemic, China continued to comprehensively expand opening-up to the outside world through the formation of a new development pattern of dual circulation with the domestic market as the mainstay and domestic and foreign markets reinforcing each other. This has helped open up channels for other countries to share the Chinese market.

As a member of the World Trade Organization (WTO) and a major trader, China is an active advocate of global free trade and firmly opposes any form of trade protectionism. It also actively advocates the development of a global trade growth strategy, promotes trade financing, and works to enhance the competitiveness of developing countries in global trade. Faced with the irresistible trend of global economic integration, cross-border investment has become a common phenomenon. The development of a global investment governance framework and the coordination of global investment policies will effectively protect the interests of investors. Some developing countries face a dual dilemma of lacking both financial support and attractiveness for investors. The series of initiatives proposed by China to promote investment and improve the investment environment in low-income countries will give wings to their economic development.

Optimizing the Environment for Foreign Investment

The Chinese government is committed to optimizing the foreign investment environment and creating business opportunities and convenience for foreign investors. On January 1, 2020, the Foreign Investment Law of the People’s Republic of China and its implementation regulations came into effect. Starting from April 1, 2020, restrictions on the proportion of foreign-held shares in securities companies were lifted. China’s ranking in the World Bank’s 2020 Global Business Environment Report has jumped from 78th in 2017 to 31st in 2019, ranking it among the top 10 economies in the global business environment which had realized the biggest improvement for two consecutive years. The improvement of the business environment has increased China’s attractiveness to foreign investment.

This year, the State Council issued the Opinions on Further Optimizing the Foreign Investment Environment and Strengthening the Foreign Investment Attraction, proposing 24 targeted measures to stabilize foreign investment in six aspects including improving the utilization of foreign investment and ensuring equal treatment of foreign-invested enterprises. Subsequently, the China Council for the Promotion of International Trade (CCPIT) conducted a survey on nearly 800 foreign-funded enterprises in 26 provinces. The survey showed that nearly 90 percent of the enterprises were satisfied with obtaining business premises, tax paying, market access, cross-border trade, and market competition in China, and over 90 percent of the enterprises surveyed were satisfied with the foreign investment policies introduced by the central government since the fourth quarter of 2022.

On August 18, 2023, Starbucks announced that it would open up an innovation center in Shenzhen, Guangdong Province, with an initial investment of approximately RMB 1.5 billion. This will enhance its technological capabilities and data infrastructure, while further driving the digitization process of its stores and other channels.

“Already operating for 24 years in China, Starbucks has full confidence in the Chinese market and has been increasing investment and accelerating its development during the past few years. This year, the Starbucks China Coffee Innovation Industrial Park in Kunshan, Jiangsu Province, is about to open,” said Liu Wenjuan, chief operating officer of Starbucks Enterprise Management (China) Co., Ltd. The company now has over 20 million active members. Whether it is product innovation or digital experience innovation, the company looks forward to creating and sharing with its consumers on a larger scale.

During the first seven months of this year, the total import and export volume of AstraZeneca’s production and supply base in Jiangsu Province exceeded US $2.65 billion, a year-on-year increase of over 26 percent. “China has a super large market and a resilient supply chain. It is now the second largest market for AstraZeneca and an important engine for our future development,” said Wang Lei, AstraZeneca’s global executive vice president.

The large and constantly growing Chinese consumer market provides an inexhaustible driving force for enterprise innovation, and the strong demand of Chinese consumers helps enterprises quickly realize large-scale commercialization of their innovation achievements. With the development of the economy and the increase in disposable income of residents, the scale of China’s consumer market continues to expand. At present, China has become a major smartphone consumer in the world, with 750 million smartphone users, 4.2 times the number of smartphone users in the United States. The number of Internet users in China has reached 650 million, 420 million more than in the United States. In addition, China is also the world’s largest consumer market for personal computers, air conditioners, refrigerators, microwave ovens, and household washing machines. Relying on China’s vast consumer market, Baidu, Alibaba, Tencent, and Haier have respectively become leaders in Internet search engines, e-commerce, online games, and home appliance industries in China and even the world. Foreign-invested enterprises in China can also benefit from the huge market demand in the country.

China’s Strength in Global Development Governance

Since China launched its reform and opening-up, it has made great economic achievements with several social indicators improved. Measured by the World Bank’s absolute poverty standard of US $ 1.9 per person per day, in 1980, just after the reform and opening-up had begun, almost the entire country was living below the poverty line. Compared with 1982, the number of impoverished people in China had decreased by nearly 800 million in 2022, signifying nearly 75 percent of the global population lifted out of poverty during the period. This is undoubtedly China’s greatest contribution to global development governance.

On September 25, 2015, the United Nations Development Summit adopted the Post-2015 Development Agenda, which inherited and upgraded the Millennium Development Goals and pointed out the direction for development and international cooperation during the following 15 years.

China firmly supports the Post-2015 Development Agenda and promises to take practical measures for the common development of humanity, which include the establishment of a South-South Cooperation Assistance Fund for implementing the agenda, more investment in the least developed countries, exempting interest-free loan debts of some least developed recipients, establishing a center for sharing knowledge for research on international development and exchange of development theories and practices suitable for each country’s national conditions. China is an active advocate and practitioner of global development governance and is willing to contribute its strength in this regard.

As a responsible developing country, while being committed to its own development, China actively engages in South-South cooperation and provides assistance and support to other developing countries, especially the least developed and low-income ones. In this way, it is making positive contributions to the international community’s Millennium Development Goals. China’s assistance mainly includes helping complete construction projects, providing materials, donating funds to relevant development organizations, providing professional and technical personnel training, sending medical teams, and offering debt relief for recipient countries. According to the Report on China’s Implementation of the Millenium Development Goals 2000-2015 jointly released by the Chinese Ministry of Foreign Affairs and the United Nations System in China, China has provided nearly RMB 400 billion in assistance to 166 countries and international organizations since the founding of the People’s Republic of China and has trained over 12 million professionals and technical personnel for recipient countries.

The past over 40 years of China’s reform and opening-up have fully demonstrated the fact that reform and opening-up not only greatly promote the deep integration of the Chinese economy into the world economy and long-term stable growth, but also greatly improve the living standards of the people. At the same time, China’s development experience also provides a reference for other developing countries to move towards modernization. It is fair to say that the Chinese path to modernization is a major contribution of the Chinese nation to the progress of human civilization.