Commentary: The People’s Republic of China at 70 – reforms, achievements and challenges

At the time of the founding of the People’s Republic, China was among the poorest countries in the world. Its per capita income was, at a little over US$700 barely 5 per cent of that of the United States then.

Nevertheless, by 1978, the onset of the era of Reform and Opening Up, China was still very poor. Almost 90 per cent of its population lived in absolute poverty, its share of the world economy barely 1.5 per cent, and its economy was predominantly agricultural, rural and closed. Per capita income in constant dollars rose 25-fold, from US$308 in 1978 to US$7,329 in 2017; and more than 800 million people, so far, have escaped poverty, according to World Bank numbers.To a large extent, China’s success in reducing poverty can be attributed to the sustained rapid economic growth unleashed by reform and opening up after 1978.Deng kicked off reforms in a famous speech from 1978 titled “Emancipate the mind, seek truth from fact, and unite as one to face the future”.

Relative macroeconomic stability allowed high savings to be turned into high investment and rapid urbanisation, which enabled rapid structural transformation and productivity growth. Hence, in place of a pre-set formula for development and shock therapy, room for the country’s own institutions and growth path to be gradually identified was provided.

The Tiananmen tragedy in 1989 interrupted reforms, but they were rekindled by Deng Xiaoping during his “tour through the South” in 1992, which made clear that even though political reforms were not in the books, economic reforms were there to stay.The second phase of reforms, from 1993 to around 2003, or the Zhu Rongji years, were more outright market-building reforms.

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