ISLAMABAD: Since opening up in the late 1970s, China has undertaken a series of economic reforms that have transformed it into the world’s second-largest economy and the largest trading nation and exporter. Despite these achievements, China’s commitment to reform remains unwavering. The most recent reaffirmation of this commitment came during the annual meeting of the Central Committee of the Communist Party of China (CPC) last July. The Central Committee of the CPC, comprising around 200 members, is arguably China’s most influential forum. It elects the top CPC leadership, including the general secretary, every five years and makes strategic decisions regarding the country’s political and economic governance. Consequently, the annual meetings of the Central Committee attract significant attention both domestically and internationally, often overshadowing sessions of the People’s National Congress (NPC), China’s legislature.
In its July meeting, the CPC Central Committee established both long-term and medium-term economic targets and outlined a broad strategy to achieve them. The key decision was to establish “a high-standard socialist market economy in all respects” by 2035. To reach this goal, China aims for approximately 5% annual growth over the next five years. The resolution called for a shift to a new growth model, which includes greater involvement from the private sector and local governments, along with innovation-driven development. Following the proclamation of the People’s Republic of China (PRC) in 1949, the country implemented a socialist economy characterized by public ownership of production means. This system persisted until Mao Zedong’s death in 1976, despite various fluctuations. Deng Xiaoping’s leadership ushered in an era of openness to the private sector and foreign investment, while maintaining state control over economic outcomes and the CPC’s total authority.
This approach, known as Socialism with Chinese Characteristics or Market Socialism, blended market mechanisms with central planning. Market socialism set China on a path of rapid growth. Multinational enterprises flocked to China to exploit its vast market and affordable, disciplined labor force. Deng’s successors continued this trajectory, transforming China into an economic powerhouse. The economy expanded from $191 billion in 1980 to $18 trillion in 2023, with per capita income rising from $195 to $12,614. Additionally, over 800 million people were lifted out of extreme poverty, making China the first nation to eradicate this issue by 2020.
As wages rise and the proportion of elderly people (65 and above) in the population increases—currently above 14% and projected to rise to 25% by 2050—China’s competitive advantage in labor-intensive development is diminishing. Recognizing the need for innovation and high technology, the current leadership is focusing on high-quality development through a capital-intensive and technology-driven economy. The Central Committee resolution aims to solidify this new economic paradigm, termed Socialism with Chinese Characteristics for a New Era.
China’s economic miracle over the past four decades offers several lessons for countries like Pakistan. Despite the strong ties between Pakistan and China, there has been little uptake of these lessons. High Economic Growth Should be a Priority: For developing economies, high economic growth should be a primary focus. Achieving this requires real sector investment (both domestic and foreign), which depends on socio-political sability, long-term planning, and security. Investment and growth are hindered by political instability, frequent policy changes, and media sensationalism. Pakistan’s low investment-to-GDP ratio, around 14% in recent years, and slow economic growth reflect these challenges.
Sustained Growth is Crucial: High growth must be sustainable. Pakistan has experienced periods of strong growth followed by stagnation due to unsustainable fiscal and current account deficits. Growth rates exceeding 5% often lead to economic adjustments, as high growth based on unrealistic expectations and insufficient fundamentals is not sustainable. Government Regulation is Essential: No country has succeeded without some level of government regulation. The invisible hand of the market can lead to issues like substandard goods, cartel formations, and environmental pollution if not managed by the state. China’s example demonstrates that a well-regulated economy is more efficient. Effective regulation should serve the public interest and be based on merit and efficiency.
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