Infocus-nov-dec2010

INFOCUS | CHINA | DEBATE

Why China is still a developing country

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ot long ago, many media outlets covered the story that in the second quarter this year, China’s GDP figure and growth rate had surpassed Japan’s. This has triggered arguments that China has become the no 2 in the world and that China is no longer a developing country but a strong economic power. Views like such are shared by much of Europe’s media as well.

Judging by the size of GDP alone, it is fair to argue that China is now the world’s second largest economy. The economic strength of China has indeed recorded significant growth over the last three decades through reform and opening up. As a Chinese, I am proud of the fact that today’s China enjoys much stronger international standing.

That said there is absolutely no basis to the argument that China is no longer a developing country but a developed one. China’s GDP is only one of many indicators of our economy, and it is by no means a sufficient proof that the Chinese people are even nearly as wealthy as the Japanese people.

In fact, way behind Japan in science and technology, production level, and living standard, we still have a long way to go before we can call ourselves a strong and wealthy nation. Although size matters, a holistic and simplistic approach is not enough for a fair understanding of a country

as populous as China.

With per capita GDP at only 3,700 US dollars, China is among middle and low income level countries, ranking below the 100th place in the world behind Cape Verde and Algeria. In terms of per capita possession of natural resources, China is far behind the majority of the developed world. In some cases, we are even far below the world’s average. In per capita terms, our fresh water reserve is only 1/3 of the world’s average, coal consumption 1/2, and natural gas 1/5.

In China, 150 million people, equivalent to the total Russian population, are caught in poverty according to the UN standard, living on less than 1 US dollar a day. By our own definition, 35.97 million rural residents, equivalent to the size of Polish population, were living in poverty as of 2009, with a yearly income under 175 US dollars.

Nearly 83 million people in China are living with disabilities, matching the total population of Germany. Each year, 12 million people are newly added to our job market, outnumbering the total population of Greece.

China is still at the lower end of the global industrial chain. Our trade mix is dominated by commodity trade that is resource and labour consuming. The knowledge-based trade in services only accounts for a small portion in our foreign trade however. Due to our modest production level and reliance on conventional

Song Zhe is the People’s Republic of China’s Ambassador to the EU.

A developing nation with growing pains

Despite a dramatic increase of its GDP, China is still a “rising developing country” rather than a developed one. |42| India-China Chronicle  November-December 2010

Though 61 is a mature age for people, the new China, which celebrated the 61st anniversary of its founding on Oct 1, is still in its adolescence, developing rapidly and full of the vigour of a young man.

Also like a youth, the country has experienced growing pains over those contradictions between its self-perception and recognition by its peers.

China has been on track for rapid development during the three decades since its reform and opening-up in the late 1970s, as gross domestic product (GDP) jumped to more than 34 trillion yuan (5.08 trillion US dollars) in 2009, from 364.52 billion yuan in 1978.

Even the global financial crisis failed to slow the country’s developing momentum, with an annual growth rate of 9.1 per cent last year, outshining its developed counter-

parts, such as the US and Japan.

Despite the impact from the economic downturn, China also replaced Germany as the world’s third largest economy and largest exporter last year, and overtook the US to become the world’s largest auto market.

What’s more, in the second quarter of this year, China’s GDP exceeded that of Japan for the first time.

Zhuang Jian, chief economist with the Asian Development Bank, praised the achievements China has accomplished during the past three decades, saying its strong growth has boosted the confidence of the Chinese people and encouraged them to work harder for a better future.

As China’s economic clout grows so do suspicions, criticism and even intentional exaggerations. Different readings on China’s development have caused confusion - is November-December 2010  India-China Chronicle |43|

INFOCUS | CHINA | DEBATE

Personally, I find it more reasonable and convincing, as many others do, to argue that China is a rising developing country. Both ‘rising’ and ‘developing’ describe an ongoing process.

China still a developing nation or a developed one?

The Chinese government has reiterated its status as a developing nation, while some insisted that China could no longer be called an emerging economy, and thus held China accountable for more responsibilities in its trade surplus, exchange rate, emission reductions and energy consumption. There is also fear that the emerging China would be a threat to other nations.

Premier Wen Jiabao said in September at the UN General Assembly that China was still in the “primary stage of socialism” and remains a developing country.

“These are our basic national conditions.

This is the real China,” he said.

Wen stressed this point with data showing that, although China’s GDP ranks it as the world’s third largest economy, per capita GDP is only one-tenth of those of advanced countries. China’s further development is constrained by its shortage of resources, as well as energy and environmental problems, he added.

Experts believe that the growing Chinese economy is too large to be ignored, despite it industries with low added value, the energy intensity of China’s GDP is much higher than the world’s average, let alone that of the developed countries.

Our shortfalls in scientific and technological innovation capacity impede our corecompetitiveness. Across China, industrial structure and the development between urban and rural areas and among different regions remain quite unbalanced. Apart from these, we are also faced with such challenges as lack of investment in education, medical services, and social security.

The Cannikin Law argues that the greatness of a nation would not be recognised if there are definite weaknesses in certain aspects. Although China boasts a large economy and moderately prosperous society, its development is indeed constrained by a number of weak links.

Chinese Premier Wen Jiabao once said, “Since China has 1.3 billion people, any small individual problem multiplied by 1.3 billion becomes a big, big problem.

And any considerable amount of financial and material resources divided by 13 billion becomes a very low per capita level, and becomes really small.” This remark vividly depicted the difficult reality that we in

|44| India-China Chronicle  November-December 2010

still being a developing economy.

Wang Jun, a researcher with the China Center for International Economic Exchanges, said China would continue its relatively fast economic growth for an extended time, a fact that would be difficult for some nations to accept in the short term. This also requires constant adjustments in how China views its own development, as well as how other nations see China, he said.

“Misunderstandings and conflicts are inevitable,” Wang noted.

“I can’t name another country in the world that has changed so much in so short a time,” said Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing. He has been coming to China since 1986.

Chovanec noted that China has undergone one of the most rapid and dramatic social changes in history, and “it is still playing out.”

“People around the world have a lot of uncertainty over what a more powerful China would look like and what it would mean for them. A lot of cultural and political differences remain, and some of them

are pretty significant,” said Chovanec. So it is understandable that people have some fears and concerns, he added.

Further, to deal with misjudgements, Zhuang Jian said China should be more involved in explaining its true self to the world as it becomes more involved in the international community.

Patrick Chovanec suggested China should “try to empathize, and develop a thick skin ...

As it becomes more powerful, China is going to be on the receiving end of more, not less, criticism.”

Sheng Hong, director of the Beijing-based Unirule Institute of Economics, warned of self-complacency and arrogance, saying the larger one’s economy grows, the more cautious and humble it should become.

“China should take some criticism seriously, apart from that criticism based upon purposely harmful intentions, which could help step up its economic and political reform. Also, a clear understanding of its real strength would help the government to make the right decisions,” he said.

Zhuang Jian said China’s strong economic growth, mainly fuelled by its large investment

of resources and capital, is unsustainable, inefficient and energy-consuming, remaining vulnerable to the changes of the outside world. China has a long way to go to catch up with the developed nations in terms of per capita GDP, and China is lagging far behind in terms of industrialization, Wang Jun said.

The biggest challenge that China will face in this century is how to achieve sustainable development, he said, adding that the imbalance of regional development, income disparities and the widening gap between state-owned and private firms are also among the difficulties China must face during its future development.

Additionally, Sheng Hong said China has to step up its reforms in becoming a market economy to achieve sustainable development. For the achievements China has gained have been attributed to economic reforms, because of which millions of Chinese workers can now unleash their creativity, rather than only their hands.

China should also accelerate political reforms, including restraining and effectively supervising its administrative power to match the economic reforms, said Sheng.

China must face.

Personally, I find it more reasonable and convincing, as many others do, to argue that China is a rising developing country. Both ‘rising’ and ‘developing’ describe an ongoing process, suggesting that the development of China is not a one off task.

The remarkable achievements we have made in economic and social development have not changed the fact that we are still a developing country. And being a developing country provides us time, room and potential for further growth.

As we narrow our gap with the rest of the world, we will also contribute, through our own development, to healthy global economic growth.

What China pursues is peaceful and open development of cooperation and win-win progress. China will not seek development at the cost of other’s interests. Our approach is to make the cake bigger and bring more development opportunities to the whole world.

Though a developing country, China will not walk away from its international obligations commensurate to its capability, and we will continue to try our utmost to contribute to world peace, stability and prosperity. 

What China pursues is peaceful and open development of cooperation and win-win progress. China will not seek development at the cost of other’s interests.

November-December 2010  India-China Chronicle |45|