China’s economy: 40 years of reform

Global Business

Forty years ago, China embarked on a reform program that changed the global economy.

By some measures, what was once of the world’s most backward economies is now the world’s biggest.

Its complex relationship with the U.S. has been a critical part of that.

CGTN’s Owen Fairclough reports.

It was called “Emancipate the Mind” — Chinese leader Deng Xiaoping’s 1978 speech setting China on the path to an unprecedented economic transformation.

“We must learn to manage the economy by economic means,” Deng told the Chinese Communist Party’s National Congress. “If we ourselves don’t know about advanced methods of management, we should learn from those who do, either at home or abroad.”

China was predominantly an agricultural nation and one of the poorest countries in the world back then. But it became the world’s factory and now generates nearly a fifth of global economic output—the most by any single country.

The key was a gradual reduction in state control of industry and an opening up to foreign investment.

When he visited Shanghai Foxboro, the first China – U.S. joint industrial venture, in 1984, U.S. President Ronald Reagan, said: “I’m delighted that American businessmen are working side by side with their Chinese counterparts to develop new technologies for Chinese industries.”

Chinese leaders call it “socialism with Chinese characteristics.”

And it was trade with the U.S. that really exploded. In 1978, the U.S. sold China more than double the amount of goods and services it bought from China, creating a trade surplus.

Now it’s the reverse. This year, China has sold the U.S more than three times what it bought—driving an enormous trade deficit for the U.S. that keeps on growing.”

It’s also one reason why this 40th anniversary is taking place amid an unprecedented commercial battle between the world’s two biggest economies, triggered by Donald Trump.

“We’ve been in a trade war for many years and we’ve lost for many years,” Trump told a rally in March – a few months before the trade battle with China began.

“But over the last year and a half we are winning.”

Trump has hit China with tariffs on around half its U.S. exports…partly to reduce that deficit.

And although China has retaliated with similar taxes, Chinese President Xi Jinping’s tone has been markedly less combative.

When he addressed the World Economic Forum in early 2017, Xi said: “Pursuing protectionism is like locking oneself in a dark room. Wind and rain may be kept outside, but so is light and air. No one will emerge as a winner in a trade war.”

The two sides have declared a truce as China pledges to buy more from the U.S.—this year’s international import fair, reflecting that shift.

According to economic analyst Ye Tan, “We don’t want such a big trade surplus. So, our imports are increasing on a big scale.”

Even so, Washington has a litany of other complaints against China—from accusing Beijing of stealing U.S. trade secrets to cyber espionage. China denies the allegations.

And these sensitive issues must be resolved if a trading relationship that once promised so much can resume unimpeded.

Isaac Cohen for more on China’s 40 years of reform and economy

CGTN’s Asieh Namdar spoke with Isaac Cohen for more on China’s economy, the challenges it faces and the current trade tensions. China is also celebrating 40 years of reform and opening up this year. Cohen is President and CEO of Inverway, a business development company based in Washington.