{"id":139127,"date":"2018-12-19T06:35:32","date_gmt":"2018-12-19T11:35:32","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=139127"},"modified":"2018-12-19T06:35:32","modified_gmt":"2018-12-19T11:35:32","slug":"why-chinese-reforms-will-stay-the-course","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2018\/12\/why-chinese-reforms-will-stay-the-course\/","title":{"rendered":"Why Chinese Reforms Will Stay the Course"},"content":{"rendered":"
December 19, 2018<\/div>
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By Dan Steinbock<\/b><\/strong><\/p>\n

After four decades of reforms and opening, China is accelerating the transition to post-industrial society.<\/b><\/strong><\/p>\n

By Dan Steinbock<\/b><\/strong><\/p>\n

As Chinese President Xi Jinping gave his highly-anticipated speech on Monday on the 40th<\/sup>\u00a0anniversary of Chinese reforms and opening-up policies, it was closely watched internationally in light of the 90-day truce in the U.S. trade wars.<\/p>\n

Xi called the pursuit of reform and opening-up and socialism with Chinese characteristics \u201ca milestone in realizing the Chinese nation’s rejuvenation.\u201d He emphasized the importance of innovation, which has been prominently displayed by world-class productivity in the Greater Bay Area of South China, and international cooperation, as evidenced by the One Road One Belt initiative that\u2019s fueling 21st<\/sup>\u00a0century globalization.<\/p>\n

In particular, Xi\u2019s speech was very clear about China\u2019s historical debt to Deng Xiaoping other reformers \u2013 and the need to go further.<\/p>

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China\u2019s pragmatic transitions<\/b><\/strong><\/p>\n

In Chinese modern history, it was Sun Yat-sen, the founding father of the nation, who paved the way for sovereignty with his \u201cthree principles\u201d of nation, democracy and socialism. But followingr imperial disintegration and Western colonialism, these efforts could be started only after world wars, Japanese invasion and a Civil War.<\/p>\n

When in 1949 Mao Zedong could finally declare that \u201cthe Chinese people have stood up!\u201d, China began the march to a new future. In the early 1950s, Mao\u2019s economic policies unleashed state-led industrialization, which started promisingly but stagnated amid the Cold War polarization. In historical view, Mao\u2019s crucial contribution was the establishment of Chinese sovereignty.<\/p>\n

Already by the early 1960s, foreign minister Zhou Enlai called for the \u201cFour Modernizations\u201d in agriculture, industry, defense, and science and technology. These reforms started in the late \u201870s, when Deng Xiaoping initiated the \u201creform and opening\u201d era, with the Special Economic Zones (SEZs) first in Southern China, then in Shanghai, Beijing and elsewhere.<\/p>\n

It was Deng\u2019s bold pragmatism – \u201cIt doesn\u2019t matter if the cat is black or white as long as it catches the mice,\u201d as he put it – that finally led to the inflow of foreign investment and technology, business success, and parallel price structures. With extraordinary foresight, Deng understood the opportunities of globalization, but also knew the risks of the international environment in the Reagan-Thatcher era when \u201cone had to cross the river by feeling the stones\u201d – a phrase that Xi quoted approvingly in his speech.<\/p>\n

As President Jiang Zemin pushed the role of the private sector \u2013 \u201cthe Three Represents\u201d doctrine \u2013 and Premier Zhu Rongji began the struggle against corruption in the 1990s, China became the member of the World Trade Organization (2001). That paved the way to a decade of export-led double-digit growth, which President Hu Jintao characterized as \u201cChina\u2019s peaceful development.\u201d<\/p>\n

The fourth great transition \u2013 the shift to post-industrialization \u2013 has been intensified by the Xi leadership.<\/p>\n

Trade, markets and the Party <\/b><\/strong><\/p>\n

Just as the WTO membership allowed China to execute tough reforms, U.S. trade wars may actually accelerate Chinese reforms, as long as compromise makes pragmatic sense.<\/p>\n

Xi\u2019s reform speech offered clarity in a difficult international environment that is often overshadowed by ideological misinterpretations of economic fundamentals. Recently, New York Times reported that China was amid \u201ca steep downturn.\u201d Yet, the growth forecast for the year remains 6.5- 6.6%, after a strong first half. Moderation will ensue in the second half and especially in 2019, depending on U.S. tariffs and slower demand worldwide.<\/p>\n

U.S. may be navigating toward a correction by 2019-20, which will prove challenging to all major economies. Indeed, many Americans oppose President Trump\u2019s policies and the word \u201cimpeachment\u201d is getting louder in the Capitol Hill. Meanwhile, a bipartisan group of senators -Rob Portman (R-Ohio), Doug Jones (D-Ala.) and Joni Ernst (R-Iowa) – seeks to claw back trade power from Trump with legislation. They hope to \u201cbetter align\u201d Section 232 of the Trade Expansion Act of 1962 with its \u201coriginal intent,\u201d which was to respond \u201cto genuine threats to national security.\u201d Foreign cars and car parts are not exactly a typical geopolitical threat.<\/p>\n

In his speech, Xi also emphasized the role of the Chinese Communist Party in the reforms. Historically, when China has thrived, it has been attributed to \u201cWesternization\u201d in the West, and when China has ailed, it has been attributed to Chinese communism.<\/p>\n

The West has not yet come to terms with the inconvenient truth that China\u2019s economic miracle has been possible because of the Party\u2019s leadership, not despite it. Unlike the West where middle classes continue to shrink at the expense of the ultra-wealthy, China is expanding middle classes, fighting corruption and fostering sustainability.<\/p>\n

Irrespective of Washington\u2019s trade actions, U.S. trade wars will not change the course of Chinese reforms which will continue to broaden and deepen. China will \u201cstay the course,\u201d as Xi put it, while stressing that \u201cno one is in a position to dictate to the Chinese people what should or should not be done.\u201d<\/p>\n

Like Liu He, Xi\u2019s economic adviser, Chinese reformers are determined to complete by the late 2020s the rebalancing of their economy, which is rapidly moving toward consumption and world-class innovation.<\/p>\n

About the Author:<\/i><\/em><\/strong><\/p>\n

Dr Dan Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see <\/i><\/em>http:\/\/www.differencegroup.net\/<\/i><\/u><\/em><\/a>\u00a0\u00a0<\/i><\/em><\/p>\n

The original commentary was published by China Daily on December 18, 2018<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Dan Steinbock After four decades of reforms and opening, China is accelerating the transition to post-industrial society. By Dan Steinbock As Chinese President Xi Jinping gave his highly-anticipated speech on Monday on the 40th\u00a0anniversary of Chinese reforms and opening-up policies, it was closely watched internationally in light of the 90-day truce in the U.S. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-139127","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/139127","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=139127"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/139127\/revisions"}],"predecessor-version":[{"id":139128,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/139127\/revisions\/139128"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=139127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=139127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=139127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}