One is a willingness to learn and the spirit of humility. This is the essence of Deng Xiao Ping’s reform and opening policy. He replaced pragmatism with ideology, urged the people to learn from the foreigners, and felt the pebble in the stream while walking across it. The Chinese were well aware that the inflow of foreign investments was because it offered a cheap production base from its plentiful supply of labour. It did not pay attention to people talking about foreign exploitation of cheap Chinese labour. Learning and humility were the mantra.
Two was that China was very poor and the low wages were attractive, even though the living conditions for the immigrant labour were very harsh. It was therefore easier for the government to rally the people. But the point to remember is that this lasted a long time, even when jobs were plentiful. This was because the people trusted the government and willingly adopted the mantra of humility and learned to learn from foreigners. Learn they did, giving rise to the proliferation of skilled labour, and bolstered by the supply from the educational system skewed towards vocational training and STEM education.
Three was the emergence of the private enterprise companies (PECs) that in due course took off on their own steam. Whilst the early Chinese industrial companies were SOEs, it was the PECs which took the lead to make China the industrial powerhouse it is today. The PECs made China the centre of manufacturing and at the forefront of technology, and increasingly, also at the forefront of the development and innovation of the service industry, offline and online like Ant Financials, Alibaba and Tencent. The SOEs are still important, especially for government policy projects, but the PECs are in the driving seat, driving China’s economy in all fronts, and making the bulk of the investments. The rising crop of entrepreneurs intensifies this process.
Four was the government's business-friendly policy that provides the environment for all these developments to take place. The big picture policy includes the setting up of SEZs whose boundaries are enlarged in consonance with their growth, Belt & Road Initiatives, policy on IPs and foreign investments, and technology like MIC 2025, and consolidation of territories such as the Greater Bay Area in the south to cultivate specialisations and synergies within and between different activities like hi-tech manufacturing, R&D, transportation & communications and medical, entertainment, and recreational facilities. Important point to note is the government’s preoccupation to grow the economy and the social benefits that come with it.
Five are careful and clever husbandry and mobilisation of resources, notably into transportation and communication infrastructures, water, power and sanitation, and education, all essentials in the pursuit of economic growth. These infrastructures enable China to pursue its goal of urbanisation, which is being extended from the coastal and eastern regions to inland and western China to spread growth across China and to reduce the income disparity across the regions. These infrastructures make China into a single market. They facilitate the relocations of activities from the high-cost regions into the lower-cost inland regions, from the first-tier cities like Shenzhen into inland cities which are being built up and are urbanised. Urbanisation will enable China’s growth to anchor more and more on domestic demand than on foreign trade.
China adopted the “dual circulation” in June, seen as an insurance to prepare it for self-sufficiency if the US decouples completely from China. More generally, it is to reduce dependence on foreign markets and technology and more on domestic consumption. President Xi explained in his speech during the 40th anniversary of Shenzhen’s rise to the industrial city that it is not a closed domestic market circulation, but “an open domestic and international dual circulation”.
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