July 2021 commemorates a century of the official founding of The Chinese Communist Party.
In these 100 years, China’s economy has monumentally transformed.
The party had a goal set that by the time we reach 100 years old, we’re going to
alleviate poverty in China.
And more than 800 million people have been lifted out of poverty since China began to open
and reform its economy in 1978.
But the journey to where it is today wasn’t without controversy and failed policies.
So how did China grow into the world’s second biggest economy, and what’s next for the nation’s
sole governing party?
To help bring the party’s 100-year history to life, I called up CNBC’s China correspondent
Evelyn Cheng in Beijing.
Thank you for joining in. There’s really no one better to have this discussion with.
Glad to be here. Hope I can be of some help.
Now I know, like 100 years is a long time.
So, because we're CNBC and cover business news and in the interest of time,
let’s focus on the economic story today.
Sounds good.
While the People's Republic of China was founded in 1949, the Chinese Communist Party was created
28 years before that in 1921.
There was a whole upheaval globally and 1946 so Chinese young people at that time were
very heavily influenced by Marxist thinking, by the workers’ movement.
In 1945, Mao Zedong emerged as the leader of the party.
After defeating the Kuomintang in the Chinese civil war, the People’s Republic of China
was established in October 1949.
In the early years, Mao launched various socio-political and economic campaigns, notably the Great
Leap Forward in 1958 and the Cultural Revolution in 1966, which devastated China’s economy.
You had efforts to implement local industrialization through the ‘Great Leap Forward’.
That involved villages, setting up furnaces in their backyards and having very localised
production, but with things like machinery, I think that ran into a lot of problems, which
was in famine, and reportedly tens of millions of people died because of that.
And there were also a lot of waste and poor quality of production.
China then embarked on a series of market reforms, including a new ‘Open Door’ policy
in 1978, which was the country’s first opening to foreign investment.
Essentially, the major jobs and industries were all dominated and led by state-owned
enterprises, and then in 1978 and into the 80s and 90s, there was more of an effort to
allow private companies to develop in the Chinese economy.
Now that you have a market that’s not dominated by the state, you want competition, and particularly
some of the goods and the technical know-how that foreign companies can bring.
This liberalization coincided with a program to advance China’s economy, called the Four Modernization Plan.
The Four Modernization Plan, you can still see tenets of that today because you have
emphasis on agriculture, industry, national defense and science and technology.
So, it set up these four pillars of economic development that China would really rely on
to come into the 21st century.
The 1990s onwards, it was a very eventful time for China’s economy.
First, you had, allowing more foreign companies into the market.
Many of these other major American companies, European companies coming in, and bringing
a little bit more competition and professionalization to this market.
At the same time, you also had the establishment of China’s stock market, stock exchanges,
early innings, I would say, of regulation.
But it was a start, and that interaction with foreign businesses, and interaction on a political
level, led to more support for China in joining the World Trade Organization in 2001.
That helped boost their manufacturers into global supply chains.
Evelyn now brings us to the Chinese Communist Party’s most recent chapter.
In 2012, President Xi Jinping came into power, and has arguably become the country’s most
influential leader since Mao.
He’s even been written into the party’s constitution.
Early in his presidency, he announced the country’s most high-profile economic project
to date: the Belt & Road Initiative.
The general understanding of the Belt and Road Initiative is China's effort under
President Xi Jinping to increase its influence globally.
China’s also in a region that has been less economically developed versus other parts of the world.
A lot of state-owned enterprises are the ones who are actually taking the contracts to build
these bridges, hospitals or agricultural trade projects that are happening as a part of the
Belt and Road initiative.
It's just building up the regional pie, larger, in a way that China can benefit,
and it builds up potentially some goodwill with these other countries.
The details of many of these projects are usually opaque and come with strings attached.
You know, a lot can happen in between.
We’ve already seen Australia pulling out of Belt and Road deals in April this year.
What other challenges are there?
The G-7 has also announced recently their own infrastructure plan.
And you have governments, which had signed on to the Belt and Road Initiative, and then
now they’re not quite happy with how some things played out in terms of debt or other
issues.
You're working with governments of developing countries and they have their own institutions
that are still trying to battle the coronavirus pandemic right now, their own social issues.
The very fact that they did not have their own ability to develop some of these projects
perhaps highlight some of the risks.
Then when you’re talking about developed countries and their international relations
with China, that’s an entirely different matter.
Right, especially now when companies that are actually caught in the middle face a lot
more compliance issues if you're thinking about either existing or potential sanctions
that could be applied from either the U.S. or EU or China, and it just makes things a
lot more complex.
Since the reforms in 1978, China’s annual GDP growth has gained steadily through the decades,
with the exception of 2020 due to Covid-19.
But while most big economies are still recovering, the IMF predicts that China’s economy will
expand by 8.4% in 2021.
China's fast recovery from the Coronavirus pandemic largely relied on its ability to
lock down cities very quickly.
By the second quarter, China could reopen, and it was reopening while the rest of the world
was still closed, and that created a lot of demand for Chinese exports, which also
helped the economy grow.
So by the end of the year, China was able to grow by 2.3% and keep that momentum going.
China’s five-year plans also play a big role in shaping the country’s future,
for many aspects of economic and social development.
The latest one encompasses sustainability targets, among others, as it aims to achieve
carbon neutrality before 2060.
We’re now in the 14th five-year plan, which just started this year.
And there’s a big emphasis on self-reliance in technology, because of the sanctions put
on some Chinese tech giants.
And then also, efforts to respond to the potential crisis from China’s ageing population.
China sees how it could become more influential globally because innovation and creativity,
new products, new software, new technology was actually developed in the country, and
of course, there would be a lot of ownership and benefits that come with that.
Are there any challenges that you foresee?
The coronavirus has given that bit of a setback, and we’re still waiting on a bigger pickup
on consumer spending.
The economy is still going to rely on other drivers of growth, such as industries, and
manufacturing, which, in the grand longer-term plan that Chinese authorities have, is not
something they want to see.
They actually want to rely more on consumption and private individual spending to boost economic growth.
Despite its challenges, China remains one of the world’s biggest economic powers,
second only to the United States.
The two countries have been each other’s major trading partner on a single-country
basis for years.
However, in the past year, China has been steadily increasing its trade with ASEAN and the EU.
China is also part of the RCEP, a trade agreement between 15 Asia-Pacific nations,
accounting for about 30% of the world’s population.
We have emerging economies, all surrounding China and growing, and being able to trade
more with each other.
And so, analysts have said, RCEP is the largest trade pact.
And these countries will now need to think about, am I going to work more with China,
or do I need to work more with the U.S. and the EU, because there's going to be more and
more opportunity that might be tied with China than previously.
What is the future for China’s economy under the Chinese Communist Party?
Under the government right now, they have this cohesion that’s allowing the country
to do things at a grand scale.
People in China also emphasise to me that it’s important for China to be unified,
that once China is unified, then they’re able to do much greater things,
I mean, 1.4 billion people.
Having come 100 years since its founding, they’ve achieved their first goal of alleviating
poverty, but they’re certainly not settled with that alone.
They have higher ambitions to build up a moderately prosperous society and go even further beyond that.
China isn’t the only country with a state capitalism model, but it is one of the most
prominent examples.
While this model hasn’t been without controversy, its competitiveness on the world stage has
made the international community take note.
Anything else you wanted to share? Maybe you plans for next weekend.
Next weekend? I don't know. I'll go to see an art show.
It's all back to normal, right, in Beijing?
Yeah, it's back to its over-achieving self.