China's Development Direction After Three Decades of Reform

IMGXYZ1214IMGZYXAfter thirty years of economic reform, China has achieved an unprecedented level of development. Since 1978, the growth rate has averaged 9.8% and the number of citizens living below the poverty line has decreased from 250 million to 14 million. But significant economic and political challenges lie ahead for the Chinese Communist Party (CCP).

To discuss the future policy of the CCP, Carnegie hosted Li Jingtian, chairman and executive vice president of the China Reform Forum. Jessica Mathews moderated the discussion.
 
The Past Thirty Years
China’s historic economic advances are well known. Since the reforms of Deng Xiaoping, the CCP has lifted hundreds of million out of poverty and has grown the economy to among the three largest in the world.
 
Some social and political progress has occurred as well. 89% and 85% of urban and rural communities, respectively, have set up congresses for democratic decision-making. And over 85% of village committees have been elected directly. Citizens receive a free nine-year compulsory education, and China has the largest system of higher education in the world. Social security spending has also been raised in recent years, to over 2 trillion yuan ($300 billion).
 
The last three decades have also seen significant changes in China’s relations with other countries. From 1978 to 2008, China’s overall foreign trade skyrocketed from $20.6 billion to $2.56 trillion; its foreign exchange reserves grew from $167 million to $1.95 trillion; foreign investment jumped to over $100 billion; and the number of Chinese students studying abroad has risen from 52 to 1.36 million in 109 countries.
 
Challenges Ahead
Despite these achievements, China still has significant obstacles to overcome. Rapid economic growth has depleted resources and degraded the environment. The gap between wealthy urban areas and poorer rural communities has widened. China’s GDP per capita lingers at 100th in the world. Many problems persist in employment, social security, education, and health care. In addition to these long-term challenges, the global financial crisis is affecting China and challenging the Party’s ability to deliver continued stable growth.  
 
The Party’s Plan
In light of these hurdles, the CCP will pursue two general goals: “building a well-off society in an all-around way that brings prosperity to the billion people by 2020,” and “achieving modernization by 2049 when the People’s Republic celebrates its 100th birthday.” These objectives will be obtained, Li said, in the context of scientific and harmonious development domestically as well as peaceful development and cooperation internationally.
 

1. China will continue to open up without backtracking on reforms already made, without complacency, and while maintain social stability.
    
2. The government will further promote sustainable development, including a reduction in per unit GDP energy consumption of 20% by 2010, balanced with the goal of maintaining 8% annual growth.
    
3. China will continue to build a society focused on social harmony and welfare for everyone. This includes more investment in education and a social security net that covers both urban and rural areas.
    
4. This harmonious focus also extends to international relations, where China will “always uphold the banner of peace, development, and cooperation.” China will continue to increase its holdings of US Treasury bonds (already at $739.6 billion in January 2009). China’s contribution to global growth is expected to be, according to the UN’s World Economic Situation and Prospects 2009, 50% in 2009 – up from 22% in 2008. China has contributed 20,000 personnel to UN Peacekeeping and sent three ships to the Arabian Sea to protect against piracy. While China will continue to develop, Li assures that its actions prove that “Chinese development is not a threat to other countries,” and “China’s defense policy adheres to a strictly defensive principle.”
    
5. China will adhere to the strategy of mutual benefits in foreign affairs because for “such a large country to grow, [China] cannot solely rely on [itself].” Although China runs a trade surplus with the U.S. the large trade relationship with China has created jobs in the American economy. But China will continue to address concerns of other nations. In the future, the CCP plans to send trade and business delegations to the U.S. to sign large purchasing agreements, as China did with four European countries already this year.

 Finally, China will seek to contribute to a harmonious world. It will do so through more and deeper strategic dialogues, continued engagement in international organizations and summits, and increased effort to seek common ground.