China's New Stage of Development

Abstract

China's New Stage of Development Peilin Li (bio) Since China began to implement the reform and opening-up policies in 1978, its development and reform have centred on two T-changes, namely the transition of economic institution and the transformation of social structure. The Chinese experience is often analysed in economic terms, with special attention given to the extent to which it conforms with or deviates from the more general development experiences. Efforts have been made to understand China from the theoretical framework of transition from a planned economy to a market economy. China is also analysed as the newest case of the East Asian development experience, following Japan and the Four Little Dragons of Korea, Taiwan, Hong Kong and Singapore. More recently, China is also considered one of the four emerging big economies, along with Brazil, Russia and India, in a framework widely known as "BRIC". The Chinese experience is, however, more than just economic development, thus it is different from the "China Miracle".1 The Chinese experience, though not yet in its final shape, is not diametrically distinct from the Western experience of modernisation. This stance does not concur with the so-called "Beijing Consensus".2 The Chinese modernisation experience is that of an oriental country with a large population. This fact makes it therefore somewhat [End Page 133] incomparable with the experience of Western countries. Examining the Chinese experience can contribute to a better understanding of the trajectory of human history in the context of globalisation. As China's modernisation is an ongoing process, the Chinese experience will be defined, to a large extent, by how China responds when it enters a new stage of development. New Challenges in the Post-Global Financial Crisis Period Over the past 30 years, China has undergone rapid economic growth and enormous social transformation. But all of this has come at a heavy cost, especially in terms of natural resources and the ecological environment. In the aftermath of the global financial crisis, China put forward a new concept of "changing the mode of development". The theme is close to, but takes a broader view than "sustainable development". "Changing the mode of development" conveys at least three important messages. First, economic growth should no longer rely excessively on investment and exports, but more on domestic consumption. Second, the mode of economic growth should be changed from low-cost quantitative expansion to qualitative technological improvement, and from "made in China" to "created in China" to promote industrial upgrading. Third, the mode of development at the expense of natural resources and environment should be changed to a resource-saving and environment-friendly mode. Development should no longer be driven largely by the manufacturing sector, but to a greater extent by a modern service industry; and a low-carbon economy should be energetically promoted.3 There are three main factors that drive a country's economic growth: investment, exports and domestic consumption. As for exports, the global financial crisis hit China's exports badly. They registered negative growth of over 20 per cent in 2009 for several consecutive months and bottomed out [End Page 134] in 2010.4 Due to the global financial crisis, international trade protectionism prevails in many countries as a result of unemployment pressures, giving rise to many trade disputes between China, the United States and the European Union. Even when the crisis is completely over, China is not likely to resume its 60 per cent high dependency ratio on foreign trade, which is the ratio of the total volume of imports and exports to GDP. Moreover, unlike the export-oriented small economies in East Asia and Southeast Asia, China has a large population, making it risky, unsustainable and unstable for China to rely excessively on foreign trade for economic growth. It is well known that in terms of value added, China has to export about 100 million pairs of jeans in exchange for a Boeing airplane. To preserve and increase the value of foreign exchange earned through exports of large quantities of cheap products, China continues to buy the relatively secure US treasury bonds. However, in order to stimulate its economy, the US increases its investment by printing money, leading...