S3H Working Paper Series

Number CS-01: 2016

China’s Development Experience

Syed Hasan Javed

May 2016

School of Social Sciences and Humanities (S3H) National University of Sciences and Technology (NUST)

Sector H-12, Islamabad, Pakistan

S3H Working Paper Series

Faculty Editorial Committee

Dr. Zafar Mahmood (Head)

Dr. Najma Sadiq

Dr. Sehar Un Nisa Hassan

Dr. Lubaba Sadaf

Dr. Samina Naveed

Ms. Nazia Malik

S3H Working Paper Series

Number CS-01: 2016

China’s Development Experience

Syed Hasan Javed Director, Chinese Study Centre of Excellence

s.hasanjaved@gmail.com

May 2016

School of Social Sciences and Humanities (S3H) National University of Sciences and Technology (NUST)

Sector H-12, Islamabad, Pakistan

iii

Contents

Abstract………………………………………………………………………………………...v

1 Introduction…………………………………………………….................................................1

2 Era of Centralized Planning in China (1949-1979)…………………………... ……………..2

2.1 Socialist Central Planning Model………………………………............................................3

2.2 Era of Economic Reforms and Open Door Policy (1979-2016)…………………............3

2.3 Results of Economic Reforms and Open Door Policy …………………………………4

Major Lessons from China’s Rise……………………………………………………............4

3.1 Leadership, Reforms and Values………………………………………………………5

3.2 Governance Reforms …………………………………………………………………..6

3.3 Economic Restructuring ………………………………………………... ……................6

3.4 Soft Power Revolution………………………………………………….............................7

Investment in Human Capital ………………………………………………………............7

4.1 Human Resource Development in China……………………………………………….8

4.2 R& D in Science and Technology………………………………………………………8

Foreign Relations…………………………………………………………………………..9

5.1 China’s Economic Diplomacy………………………………………………………….9

5.2 Second Phase of Economic Diplomacy………………………………………................10

5.3 Mobilization of Overseas Chinese………………………………………………............10

China Pakistan Economic Corridor (CPEC)……………………………………...................11

6.1 Challenges and Opportunities in CPEC………………………………... ………............11

6.2 China’s Commitments under CPEC…………………………………… ………............11

Conclusion…………………………………………………………………………............12

References…………………………………………………………………………………13

Appendices………………………………………………………………... …….................14

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Abstract

There are clear signs of the dawn of a Chinese propelled Asian century. China’s gross

national income alone in terms of Purchasing Power Parity exceeded US$17.9 trillion in 2014

making it the largest economy in the world. Because of its large population, Size, Economic

resources, Location, Active Diaspora, Large resource rich hinterland, Social capital and

Worldview of Positivism or Win-win (Shuang Yin), the Asian century looks more likely as the

century of the Chinese. The Chinese comprise a fifth of world’s population with pockets of

flourishing communities in Hong Kong, Taiwan, Singapore, Malaysia, Indonesia and Thailand.

The Chinese community also owns a fifth of the World’s GDP and sits on roughly US$ 4 trillion

of foreign exchange reserves. In 1980, China found itself at the 32nd position in the world

trading community with a per capita income of US$250 (less than the per capita income of

US$280 in Pakistan, in 1980). There were virtually no foreign exchange reserves. Stock market

was unheard of, just as imported goods. As per the World Bank estimates, China has now taken

out all but 11% of its population below poverty line of US$1.90 per day by the year 2014, the

largest number of people in human history in the shortest possible time. China has become

already the largest trading partner of more than 142 countries. According to Goldman Sachs

estimates in 2007, China’s economy is expected to be US$70 trillion, more than double of the US

economy by 2050 (Jacque, 2012). From the so-called Socialist Centrally Planning Economy Model

from 1949-1979 to Socialist Market Economy Model with Chinese characteristics from 1979-till

today, China indeed covered a long distance. For Pakistan, the rise of China given the strategic

all weather friendship, has brought the bonanza in the shape of ‘CPEC’ which aims to harness

Pakistan’s location advantage in order to transform its economy and power profile in the region,

like never before.

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1. Introduction

With GNI (PPP) of US$17.9 trillion China’s rise as the world’s largest economy has been

the most spectacular in contemporary history (Appendix Table 1). It has converted its relative

national power profile of inferiority and vulnerability into one of opportunity and strength for

itself and others. It has lifted a billion people out of poverty in the shortest period of time of

three and half decades. It is rather difficult to imagine the transformation of China unless a

comparison of sorts is made with the situation that existed prior to 1978. The ravages of the

Centralized Planning and socialist experiments culminated in the class war driven so-called

Cultural Revolution, which turned the society upside dawn. Essential goods were in short supply,

famines were common, and rationing of necessities such as cooking oil, sugar, grain etc was no

exception. Three times food was a luxury, even in cities. Food queues were common. The

security paranoid made the ordinary Chinese, avoid the few Foreigners. Four Star hotels and

Cars were conspicuously absent. China was essentially ‘bicycle driven society’. The agriculture

sector was primitive, devastated by experiments of Communes mismanagement. Poverty,

miseries, deprivation and underdevelopment were visibly present. The industrial sector produced

low quality consumption goods, which were also in short supply. Poor quality hampered the

export of Soviet era machinery and equipment. Shortage of foreign exchange and sanctions

enforced by the West, did not let imports of modern technology or goods. China was truly a

Third world country which it also preferred to call itself.

The miracle change happened when the visionary leader Deng Xiaoping visited Singapore

in November 1978 and took the vow to turn around China, as was disclosed by the Singaporean

Founder of Nation Late Lee Kuan Yew in his Memoirs ‘From Third World to First’ Singapore

Story (1965-2000). Immediately on his return, Deng Xiaoping and his pro-reformist supporters

adopted the ‘Policy of Reforms and Open door to the outside world at the Third Plenum of the

11th Party Congress in December 1978. The Reforms though comprised of well researched,

broad based social and economic re-engineering recommendations with a clear target,

methodology and deadline for policy outcomes, it took however more than a decade for China

to see the real impact of the change, in its policy direction. What is however unfortunate is that

the impact of the new policies was devastating in the shape of ‘Tian Anmen Uprising in June

1989. The Western Sinologists predicted the end of Reforms and opening up. The Chinese

leadership though shaken by the turn of events, acted wisely by further opening up and adopting

more reforms. These were announced by Deng Xiaoping in his tour of Guangdong Province in

1992. This encouraged the entrepreneurial wealthy ‘Overseas Chinese’ who were so far sitting on

the fences to throw in the towel and take the bait offered by the Mainland China. Chinese

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abodes such as Hong Kong, Singapore, Taiwan and Overseas Chinese communities in Malaysia,

Indonesia, Thailand, Philippines, Japan, South Korea and elsewhere joined the bandwagon.

There has been no turning back, ever since.

‘With China’s rise, globalization has entered a new phase’ Hutton (2006) China’s exponential

rise brings opportunities for all Euro-Asiatic nations, particularly Pakistan, as both countries

have enjoyed an ‘all weather strategic Partnership’ over decades. With the announcement of

‘China Pakistan Economic Corridor’ (CPEC) or Zhong Ba Jingji Zuolang, as the first of the six

major Euro Asiatic Transcontinental Arteries of Roads, Railways, Energy Pipelines and

Industrial Zones, under the long term strategic vision of the Chinese government’s ‘One Belt,

One Road’ (OBOR), Pakistan China relations has been elevated to yet another higher level. For

Pakistan and the region, the CPEC is a ‘game changer’, which if properly planned, monitored

and implemented will enable Pakistan to join the ranks of the Top Ten largest Economies of the

world by 2050 AD. A noted Chinese scholar Professor Wang Jisi observes: ‘The strategy is to

stabilize China’s Western periphery but also countries surrounding it.’ Small (2015) In many

respects it resembles the ‘American Marshall Plan for Germany’ and other West European

countries at the end of the Second World War. The only difference is that China is rehabilitating

a devastated neighborhood, not of its making but which has been ‘superpowers’ playground’

causing havoc directly or through proxies in the region, for the past four decades. ‘Today, China

is almost the only country, and a foremost world power for that matter, that stands four squares

for the unity and the integrity of Pakistan’ Yunus (2015).

2. Era of Centralized Planning in China (1949-1979)

The Socialist Central Planning Model diligently implemented through Five Year

Development Plans in China brought mixed results during the pre-Reform period from 1949-

1979. While it contributed in lessening the income inequality, eradicating abject poverty and

achieving mass literacy, it impoverished China, by discouraging individual initiative,

entrepreneurship, innovation, wealth generation, foreign investment, etc. The economy as a

result developed a bloated and inefficient heavy industrial sector of Soviet era Plants, machinery

and equipments producing goods of inferior quality. Essential Consumer goods were in short

supply and rationed. Foreigners were looked with suspicion and the Overseas Chinese

compatriots were despised. There was a paranoiac obsession with state security and ideology.

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2.1 Socialist Central Planning Model

Like in the former Soviet Union and other Socialist countries, the Chinese State through

Collectivization system of Communes fixed quotas of production of finished goods in Industrial

Plants, and crops in agriculture units (organized in military style such as Brigades, Battalions and

Units). The Central and Provincial Authorities would determine what and how much to produce

and when to produce. Such a controlled management given the complexities of nature, human

organization and intra as well as inter relationships between the factors of production,

consumption and distribution, could not but make China a huge economic wasteland. Under the

guise of ‘Policy of Self –Reliance’ or ‘Zili gengsheng’ of failed socialist experiments of Great Leap

Forward, Cultural Revolution and a security paranoid set-up, it became the ‘biggest orphanage in

the world’ with colossal wastage of resources, state monopoly, human misery, shortages of

essential items, underutilized excess capacity and gross mismanagement. The harsh realities in

national economy called for a change/shift in ‘Paradigm’. The Chinese socialist system however

survived, courtesy the strength of its century old Chinese cultural values most commonly

referred to in contemporary political jargon, as the ‘Chinese characteristics’. It is therefore of

utmost important for all students of ‘Sinology’ or Chinese Studies to know the ‘Chinese Social

capital or Chinese soft power’ in order to fully comprehending China’s development experience.

However in comparison, the Centrally Planned development Model inflicted catastrophic results

in the other so called Socialist nations such as the former Soviet Union, Yugoslavia and Eastern

European nations.

2.2 Era of Economic Reforms and Open door Policy (1979-2016)

The Policy of Economic Reforms and Open door to the outside world was implemented

by Chinese leadership under Deng Xiaoping since the Third Plenum of the 11th Congress of the

Communist Party in December 1978. The Policy reversed some of the main aspects of the

Centrally Planned Economy of Chairman Mao Zedong’s days. The new changes introduced,

permeated all aspects of Chinese life, society, economy, politics, defence and diplomacy. On the

political level the main initiatives included Establishment of rule of law, Freedom, Grant of basic

individual rights, Investment in higher education, Avoidance of conflicts and disputes,

Improvement of relations with neighboring countries, Normalization of relations with the

Western nations, Japan, etc. On the economic level the new policies included implementing Four

Point Modernizations Program, Free enterprise, Hiring/firing practices, Incentives/bonuses,

Mobilization of Overseas Chinese, Incentives to foreigners, Establishment of Household

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Responsibility system, Relaxations on rural-urban migration, One Child family, the building of

Industrial townships, construction of Special Economic Zones, etc.

2.3 Results of Economic Reforms and Open door Policy

China had no stock market from 1949-1979 under the Centrally Planned Economy. The

Shanghai stock market was re-born in November 1990. ‘The Shanghai and Shenzhen stock

Market combined capitalization at US$ 14.2 trillion as of 15 June, 2015 is the second largest in

the world after the New York Stock Exchange’ (Appendix Table 2). Egan (2015) A ripple on the

two Chinese Stock Exchanges have a knock down effects on other stock exchanges because of

the sheer size of the Chinese economy. Prior to 1979, Foreign Direct Investment (FDI) was

unknown in China. The reforms carried out by China under Deng iaoping’s leadership took the

path of FDI, learning lessons from the other East and South East Asian nations. China made

stellar success in attracting FDI, mostly by the overseas Chinese. To- day, outbound investment

by the Chinese companies is competing with inward inflows. In 1979, when China embarked on

the journey of Economic reforms and Opening up, it had no foreign exchange. The shortage

was reflected in the difference between the Official and Market exchange rate. Travel was

restricted and so were the imports. Black market was rampant. With sustained growth of exports

and a positive balance of trade, China has built up large foreign exchange reserves which even

after recent declines amounted to ‘US$ 3.23 trillion as of 7 February 2016’ Xinhua (2016). This

has bestowed stability to Chinese currency Yuan, which continues to be envy of many developed

nations who feel that it is ‘undervalued’ making China’s exports competitive. The Success Stories

in Chinas’ Economic Reforms such as Poverty alleviation, Human resource development,

Agriculture modernization, Industrial Powerhouse, Science and Technology modernization and

Space exploration have very few parallels in contemporary history.

3. Major Lessons from China’s Rise

According to a little known Survey (Insider Communist Party Report) conducted by the

government, out of 16 million Civil servants in 1980, one third of civil servants did not want to

work, the other third wanted to work but lacked capacity, while the remaining one third did not

work themselves but also did not let others to work. Effective reforms were introduced to

improve the performance of the bureaucracy by reducing the size of the government servants to

4 million as of 2014. Those who did not want to work and had no capacity were given ‘double

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promotions’ to voluntarily march out with ‘golden handshake’. Those who wanted to work but

lacked capacity were provided education and training. Those who did not work themselves and

did not let others to work were not out rightly dismissed, but provided ‘corrective rehabilitation’

and alternate livelihoods in accordance with their preferences in the emerging private sector. Due

to these far reaching measures aimed at creating a small size of government, China’s GDP as a

result increased forty times from US$250 billion to US$ 10.3 trillion (at market exchange rate)

and its per capita income from US$ 250 to US$7,400 during the period December 1980-2014.

Other recent indicators of China’s progress as the world’s largest exporter, second largest stock

market and the largest GDP on the basis of more credible Purchasing Power Parity, showed how

much governance reforms, could trigger change. Most countries in East and South East Asia

such as South Korea, Singapore, Malaysia, etc also began their economic transformation with

‘Civil Service Reforms’.

3.1 Leadership, Reforms and Values

The Chinese leadership which toppled the ‘Gang of Four’ and assumed power after the

death of Chairman Mao Zedong in 1976, decided on a wholesale transformation of China, by

adopting a gradual Policy of Reforms and Open door, at the Third Plenum of the 11th Party

Congress in December, 1978. Among the hundred plus factors, behind the spectacular rise of

China, the role of the dedicated and honest leadership of Deng Xiaoping, his stalwarts and able

successors comes on the top. As China’s most influential leader in post Mao Zedong era, Deng

Xiaoping provided the direction for change. He observed: ‘We need not be afraid so long as we

are clear headed; We must not be afraid of making mistakes or being criticized; ‘When you open

the windows, it does not matter if a few flies get in, you would sometimes need to swat the flies

that do get in, Cross the river by feeling the stones; When our thousands of students will return

home, you will see how China will transform itself, etc. He and his team showed readiness to

reform and change; believed in collective leadership; team work; rule by consensus; forge united

front and groomed generational leadership. The conceptual journey began with the end of the

so-called ‘Cultural Revolution’, dealing a soft blow to ‘Ultra Leftism and Factionalism’ by de-

mystification of ideology and ideologues; mass education; propaganda for mindset Change with

‘self- criticism’; decision to reforming the Communist Party first for generating trust; premium to

Merit and Professionalism instead of ideology; assigning professional role to PLA, etc.

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3.2 Governance Reforms

The Reformist leadership realized that the ‘Economic Reforms and Open door Policy’

would be doomed if it was not preceded by Reforms of the Civil Service. Deng Xiaoping once

observed that the gravity and size of the problems did not matter, what is important is the

capacity, will and methodology to deal with them’. The Communist Party and the Central

government took momentous decisions on the devolution of power to the Provinces,

Autonomous regions, Municipalities. restructuring of Ministries; separation of the regulatory and

revenue functions in the Ministries, rapid transfers and promotions to weed out the old; rooting

out corruption and wastage by stiff punishments; penalties and deterrence; ensuring capacity

building, i.e., efficiency, coordination, supervision, monitoring, implementation, results;

establishment of sound law and order by effective border controls; modern security equipment;

human intelligence, neighborhood committees; close circuit observation/monitoring, positive

role by electronic print media; legal system reforms, use of ‘Mediation courts’ to settle civil

disputes, etc.

3.3 Economic Restructuring

The exercise of ‘Economic Restructuring’ was the most challenging and yet turned out

to be the most successful of Deng Xiaoping’s policies. The Policy and Open door to the Outside

world had begun with reversing the socialist model of egalitarianism, i.e., ‘Eating from the same

Iron Rice Bowl’. Instead, breaking the socialist taboo, Deng Xiaoping propagated: ‘There is no

dignity in poverty’; a Chinese Communist does not have to be poor’; Poverty is not socialism, to

be rich is glorious; It does not matter if the color of the cat is black or white as long as it catches

mice; Let some people get rich first and the coastal region, richer first” (so-called Deng’s Policy

of two whatever), etc. The Reformist leadership adopted the new development paradigm

welcoming Foreign Investment; Capital, Technology and Knowledge; promotion of export

culture; simplification of Rules and procedure for Foreign Investors; deputation of ‘Study

Teams’ to selected countries for imitating success stories; full hiring and firing powers in jobs;

yes to private income, employment, free enterprise and market; premium on individual

entrepreneurship; building of Industrial Townships as new growth points; promoting Small and

medium Enterprises; building of key infrastructure projects by PLA; utilization of excess capacity

in military industries for civilian goods; diversification in industrial production and innovation;

technological up-gradation; investment in R&D; building of ‘Special Economic Zones (SEZs)

and Central Business Districts’(CBDs); learning and assimilating advanced technology, corporate

knowledge and global best practices; utilizing demographic advantage/Cheap labor by

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Vocational skills development; leveraging with the China Incorporated economies, e.g., Hong

Kong, Taiwan and Singapore. The government committed itself whole heartedly to the

achievement of the ‘Four Points Modernization Program’ i.e Uplift of Agriculture, Industry,

Science and Technology and National Defence (in that order). It adopted policies encouraging

‘re-engineering technology’; development of Township-Village Enterprises (TVEs), resource

mobilization strategy; investment in Human Resources; active role by ‘Overseas Chinese’; end to

state of security paranoid; adoption of Modernization and Moderation as state creed; restoring

public and investor confidence, trust and credibility in public policies, etc.

3.4 Soft Power Revolution

Simultaneously with the ‘Economic Reforms’, Deng Xiaoping and his team unleashed

‘Soft power revolution’ by releasing the energy of the private entrepreneurship, ensuring full

participation of women in economy and society; mindset change through education and media;

balance between change and permanence; balance between material pursuits (Wuzhi wenming) and

spiritual needs (jingshen wenming); ending security paranoia, adoption of a political culture without

mudslinging, scapegoat, victimization, victors etc. Deng Xiaoping’s new line was to bring a

mindset change, which he described as his greatest challenge but also the most important for his

success. He asked the people to keep ground realities in mind; face the world; ‘do more, talk

less’; hide their capabilities and bide for their time. ‘A Strategy was adopted to promote centuries

old Chinese Soft Power Cultural values such as realism, pragmatism, moderation, caution,

discipline, entrepreneurship commitment, hard work, humility, tolerance, tact, patience, care,

goodness, respect, dignity, sacrifice, patriotism, knowledge, etc. (Javed, 2014).

4. Investment in Human Capital

The massive investment by the government for the attainment of ‘Universal literacy’

during the early years paid off, as the primary education became widespread in the country

during the decades of 1950s, 1960s and 1970s. Due to the socialist policies and the foreign

exchange constraints, China was not deputing students for higher education, except a few to the

former Soviet Union and East bloc countries. Some were also deputed on ‘cultural and state

sponsored scholarships’ to few friendly countries such as Pakistan in those days. Similarly, in the

sector of health and maternal care, universal coverage was achieved due to the socialist policies

of providing basic health care at doorstep, i.e., ‘bare foot doctors’. The institution of ‘Commune’

organized as production units in the rural areas helped full mobilization of work force including

empowering the women as an important contributor to social and economic uplift, breaking all

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traditional taboos and practices. Women achieved equality of rights in law. The Marxist Leninist

socialist doctrine with Mao’s thought stressed on Communal egalitarian practices and

discouraged wealth generation and even less demonstrative consumption.

4.1 Human Resource Development in China:

The Socialist centralized Planning model followed by China from 1949 to 1979 left it in

an ‘impoverished state’ with more than two third populations under poverty line. The reforms

among other policy initiatives, gave utmost importance to investment in human capital. Deng

Xiaoping observed that higher education held ‘key’ to achieving science and technology

development and modernization. China began deputing thousands of Chinese students and

experts for higher education initially in the Universities of Western Europe and Japan and

subsequently to the United States, Canada and Australia after these countries liberalized their

student visa rules. The number has kept increasing from a few thousands in the early Eighties to

more than half a million as of 2015. Initially a majority did not return, but gradually as the

economy and the living conditions improved, a majority of those who travel for higher education

abroad, return to China.

4.2 R& D in Science and Technology

The availability of educated, disciplined and cheap human resource has been China’s

greatest ‘boon’ for its double digit growth for more than three decades. It has impacted the

development of science and technology sector, the most. China’s achievements and success in

producing medium to high tech goods would not have been possible without the potent

knowledge and ‘embodied technology’ acquired abroad, brought and ‘re-engineered’ at home to

produce the ‘hybrid products’ which China has excelled in exporting and creating ultimately its

own brands such as Haier, Huawei, Lenovo etc. More and more Chinese brand names are

becoming global household names. Due to advances in Science and technology, Chinese

Universities and R&D departments/ institutions are contributing ‘65 percent of global patent

applications’ as of 2014, making China the largest ‘global workshop’. Large numbers of global

Multinationals derive their ‘corporate sustainability and profitability’ from their China

exposure/portfolio. China is also no more known as a cheap quality producer, as it used to be

known in the early years of Reforms and Open door. China has gradually moved up the

technological chain and continues to make new advances every day. For example, from 40

kilometers of bullet train network in 2007, it has built 17000 kilometers as of 2015. Its recent

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achievements in Civil Aviation, Space exploration, Renewable Energy and Infrastructure

development are without any parallel in contemporary history in terms of the speed, quantum of

change and the profound impact it has generated for not only China’s own huge population but

the international community at large.

5. Foreign Relations

In the arena of foreign relations the guiding policy of the Communist Party and the

Central government were the slogans: ‘Thousand friends, Zero enemies, Export merchandise

and not Revolution; Aim for global market not Global leadership’, Make the West serve China,

Build Four Modernizations, Learn from the West and Serve your Motherland, etc. The Foreign

Policy initiatives included the postponement of territorial disputes; relaxation of tension;

normalization of relations with neighbors; resumption of ties with the Western World and Japan;

encouragement to the Western nations to have stakes in China’s development; commitment to

build a World of balance and harmony; Peaceful rise; follow a ‘Policy of Positivism ,Win-win’

outcome, etc. Deng Xiaoping declared unequivocally that ‘China is not a Superpower, nor will

she ever seek to be one’.

5.1 China’s Economic Diplomacy

The Chinese leadership in the wake of ‘adoption of the Policy of Economic Reforms and

Open door to the outside world’ realized the significance of using the ‘assets of diplomacy, to

serve the interests of economic development’. In order to achieve this objective, a massive

exercise to re-orient the work of Economic Ministries, Departments and diplomatic Missions

abroad was undertaken simultaneously. The revenue generation and regulatory functions of the

Ministries were separated. The diplomatic Missions were provided training and guidelines for

investment, trade, technology transfer, contract bidding and community mobilization related

work. Every Mission and diplomats were allocated specific measurable targets for their areas of

accreditation. The Mission targets however differed from mission to mission, in line with its local

characteristics. For example, some Missions carried out market survey for exports penetration,

others specialized in technology transfer, some engaged in using influence in local contract

bidding, a few worked hard to mobilize the overseas compatriots, etc.

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5.2 Second Phase of Economic Diplomacy.

China became a member of the World Trade Organization (WTO) in 2002. It also

established regional economic initiatives such as the ‘BOAO Forum’, ‘Tianjin Forum’, etc on the

pattern of ‘Davos Forum’. In June 2015 China took the lead to establish Asian Infrastructure

Investment Bank (AIIB) having a membership of 57 states including major European countries

such as UK, Germany, France, Italy, etc. China has also activated its regional trading ties with its

East Asian and South East Asian neighbors under arrangements such as East Asia Summit, FTA

with Asean and other states and regional groupings, active role in trans- continental and global

arrangements namely Asia-Europe Meeting (ASEM), Asia Pacific Economic Community, etc. As

a result of all these economic diplomacy endeavors, China’s exports increased from US$ 11

billion in 1979-80 to US$2.34 trillion in 2014, and Imports from US$21 billion to US$1.96

trillion during the same period. Foreign trade accounted for 75 percent of the GDP in 2015.

Chinese economy has also diversified its foreign trade linkages away from dependence on the US

market. From a high of 31 percent of exports in 2000, China’s exports to the US fell to 18

percent in 2014. On the other hand, China’s exports to the developing world accounted more

than half of its total exports in 2014. The foreign firms accounted for nearly two third of all

Chinese exports and almost four fifths of its exports of high tech items.

5.3 Mobilization of Overseas Chinese

The Foreign Direct Investment (FDI) moved in China in a big way after the Southern

Tour to Guangdong Province by Deng Xiaoping in 1992. Total FDI was US$1.54 trillion as of

2014, more than two thirds by Overseas Chinese. The Overseas Chinese including the Chinese

communities in Taiwan, Hong Kong, Singapore, Indonesia, Malaysia, Thailand and other

countries number 50 million and are among the most prosperous dominating the business

particularly in South East Asian countries. The community is highly industrious with equally high

propensity to save and a frugal life. The foreign investors have been increasingly drawn to

China’s endless supply of cheap, skilled, disciplined and abundant manpower due to migration of

rural labor to urban centers, which prior to 1979 (marking the beginning of the Reformist era),

had been strictly controlled by ‘hukou system’ or residence permit. In addition, the assimilation of

global corporate best practices, embodied technology, knowledge and skills, state support, etc.

enabled nearly ‘106 Chinese firms join the list of Fortune Global 500 of the year 2015 as

compared to 128 American companies’ People’s Daily (2015).

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6. China Pakistan Economic Corridor (CPEC)

China has become the largest trading partner to Pakistan during fiscal year 2014-2015.

According to Chinese customs statistics, bilateral trade volume amounted to US 17 billion during

the period from January to November 2015, an increase of 19% compared to the same period of

last year. Since fiscal year 2013-2014, China’s direct investment in Pakistan has been on the top

among all the foreign countries, for two consecutive years. Chinese total investment in Pakistan

has reached more than 3.6 billion US dollars, making it the largest investment destination in

South Asia. CPEC is a flagship project of Beijing’s broader ‘One Belt and One Road’ strategy of

Silk Road initiatives as part of the long term vision of Chinese leadership for Euro-Asiatic

Integration. Other factors include outsourcing excess industrial capacity, building new markets,

developing new drivers of growth in China’s western provinces, diversifying transportation

routes away from exclusive reliance on vulnerable ‘choke points’, and stabilising China’s western

periphery in the context of a worsening terrorist threat.

6.1 Challenges and Opportunities in CPEC

The CPEC is a strategic project of Pakistan and China in accordance with their

respective needs for national security, prosperity, dreams, roles and aspirations. Pakistan is

uniquely placed to play the role of ‘hub’ between interlocking regions of China, Central Asia,

West Asia, Gulf and South Asia, because of the nature of its geography. Very few countries in

the world are so well blessed and placed too. Pakistan provides direct ‘land access’ to nearly half

of the world’s population in its immediate neighborhood. ‘The CPEC project epitomizes the

growing mutuality of interest and the vision of a shared politico-economic future on the part of

the Islamic Republic of Pakistan and the People’s Republic of China’ Rizvi (2015). Pakistan has

worked out a list of projects in Energy, Infrastructure, Motorways, Railways, Pipelines, Industrial

Zones, ready to move forward, sufficient trust between the two sides to work together on such

an ambitious plan, ports that can serve both economic and military purposes and an economy

with significant growth potential, where Chinese firms enjoy abundant goodwill.

6.2 China’s Commitments under CPEC

China’s ability to deliver CPEC goals are beyond doubt. The two countries signed 51

Agreements and Memorandum of Understanding ((MoUs) for projects worth US$ 46 billion

during the epoch making visit of President XI Jinping in April 2015. These projects have

gradually entered the stage of full implementation, particularly those in Energy and

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Infrastructure. The huge size of CPEC investment notwithstanding, it is further likely to have

‘multiplier effects and spin offs’ for Pakistan’s economy’s push on an upward trajectory, a job-

creator, an expanding source of government revenue and various other benefits. If it succeeds, it

would make Pakistan a far more prosperous country, stronger regional Power and a credible

strategic partner for China. It provides a strategic mission and an opportunity for both countries,

to shape the 21st Century.

7. Conclusion

The economic rise of China is a development of enormous geo-political significance

during the 21st Century. It will impact very profoundly all aspects of the global society. For the

past 500 years, the Western Powers have not seen any competitor, emerge in the Orient. The

world has also been shaped by the Western ideas, institutions, philosophies and thoughts which

have been now effectively harnessed by the Chinese to gain their own ascendance. This has

striking resemblance to two other examples in ancient and medieval history, when the Arabs,

benefitting from the Greek and Roman civilization built up the formidable Islamic civilization

from the 8th to 13th century and the Europeans who benefitted from Arab learning and craze for

research to trigger their own renaissance and reformation, maturing into Industrial Revolution

and subsequent geo political domination of the world. China is a civilization state with long

history, rich cultural heritage and now with economic power, science and technology

achievements. The Policy of Economic Reforms and Open door to the outside world’ being

implemented since the early 1980 has transformed China beyond recognition, enabling it to lift a

billion people out of poverty in the shortest possible time in human memory.

Every society has its own historical, philosophical, physical, strategic, political, economic,

cultural and ethical contexts of its successes and failures. China is no exception to this rule. From

the so-called Socialist Centrally Planning Economy Model from 1949-1979 to Socialist Market

Economy Model with Chinese characteristics from 1979- till today , China indeed covered a long

distance. China’s success has been courtesy of more than a hundred factors, but none was more

critical than a ‘dedicated, honest collective leadership’ that was prepared to change and undertake

the much needed ‘Reforms’. The new leadership under Deng Xiaoping exerted the greatest

influence on China’s progress towards ‘an open economy and society’. China has repeatedly

stated that its model is not for export. Yet many countries most notably its ‘adversaries’ namely

Vietnam, Philippines, and even India have found many useful lessons in China’s development

experience and benefitted by adopting them in their own policy making. For Pakistan, the rise of

China given the ‘strategic all weather friendship’, has brought the bonanza in the shape of

13

‘CPEC’ which aims to harness Pakistan’s ‘location advantage’ in order to transform its economy

and power profile in the region, like never before. The CPEC enjoys the overwhelming

consensus and support of the large majority of Pakistanis and all major stake holders in the

country.

REFERENCES

Egan, M. (2015). “CNN Money Report (Hong Kong)”. June 15,eproduced in Wall Street

Journal July 10.

Hutton, W. (2006). “The Writing on the Wall – China and the West in the 21st Century”.

London: Little, Brown Book Group, Page 15.

Jacque, M. (2012). “When China rules the World”. London: Penguin Books, Page 6.

Javed, S. H. (2014). “Chinese Soft Power Code”.Karachi: Paramount Publishing

Company. Pages: 141-203.

People’s Daily (2015). “More Chinese Companies in Fortune 500 Global List 2015”.

Available at:www.en.people.cn. 4th August.

Rizvi, H. A. (2014-2015). “The China- Pakistan Economic Corridor” Strategic Studies

Journal ISSI, 34 & 35 (winter and spring).

Small, A. (2015). “The China Pakistan Axis: Asia’s New Geopolitics”. London: ndom

London House, Page 163.

World Bank (2015). “The people’s Republic of China”. Available at:

www.worldbank.org/country/china.

Xinhua Report (2016). “China’s Foreign Exchange Reserves Continue to Drop”.

Available at: www.china.org.cn, 7th February.

Yunus, M. (2015). “Awakened China Shakes The World: Memoirs of a Diplomat”.

Islamabad Institute of Policy Studies; Page X111.

14

Appendix Table 1: State of the Economy of the People’s Republic of China: 2014

Population total (Number) 1,354,270,00

Population growth annual (%) 1.0

Surface area (sq.km) 9,562,911

Poverty headcount ratio ar$1.90 a day (2011PPP) (% of population) 11.0

GNI Atlas method current (US$ Trillion) 10.0

GNI Per capital Atlas method (current US$) 7.339

GNI PPP ($ Trillion) 17.9

GNI per capital PPP ($ Trillion) 13.13

GDP current (US$ ($ Trillion) 10,3

GDP growth (annual %) 7.0

Inflation GDP defaulter (annual %) 1.0

Apiculture value added (% of GDP) 9.0

Industry value added (% of GDP) 43.0

Services value added (% of GDP) 48.0

Exports of goods and services (% of GDP) 23.0

Imports of goods and services (% of GDP) 19.0

Military expenditures (% of GDP) 2.0

Mobile cellular subscription (per 100 people) 92

Merchandise trade (% of GDP) 42.0

Source: World Bank (2015).

15

Appendix Table 2: Global Top Stock Exchanges by Market Capitalization (Trillion US$)

New York Stock Exchange 1.7

NASDAQ OMX 7.4

Shanghai Stock Exchange 5.9

Japan Stock Exchange – Tokyo 5

Shenzhen Stock Exchange 4.4

Hong Kong Stock Exchange 3.96

Euronext 3.5

Source: World Federation of Exchanges, data as of end-May 2015 and Egan (2015).

S3H Working Paper

01: 2014 Exploring New Pathways to Gender Equality in Education: Does ICT Matter?

by Ayesha Qaisrani and Ather Maqsood Ahmed (2014), 35 pp.

02: 2014 an Investigation into the Export Supply Determinants of Selected South Asian

Economies by Aleena Sajjad and Zafar Mahmood (2014), 33 pp.

03: 2014 Cultural Goods Trade as a Transformative Force in the Global Economy: A Case

of Pakistan by Saba Salim and Zafar Mahmood (2014), 32 pp.

04: 2014 Explaining Trends and Factors Affecting Export Diversification in ASEAN and

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05: 2014 In Search of Exchange Rate Undershooting in Pakistan by Wajiha Haq and

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03: 2015 Energy Demand Elasticity in Pakistan: An Inter-temporal Analysis from

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08: 2015 Energy Related Carbon Dioxide Emissions in Pakistan: A Decomposition

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10: 2015 Economic Rationality and Early Age Work-Education Choice: Rethinking the

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11: 2015 Trade Costs of Pakistan with its Major Trading Partners: Measurement and its

Determinants by Saba Altaf and Zafar Mahmood (2015), 32 pp.

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02: 2016 Socio-economic Determinants of Maternal Healthcare Behavior: Evidence from

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03: 2016 Rising Debt: A Serious Threat to the National Security by Ashfaque H. Khan

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04: 2016 Long-run Pricing Performance of Initial Public Offerings (IPOs) in Pakistan by

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07: 2016 Natural Resource Dependence and Human Capital Accumulation – An Analysis

for the Selected SAARC, ASEAN and OPEC Countries by Rabia Qaiser and

Zafar Mahmood (2016), 31 pp.

08: 2016 Horizontal and Vertical Spillover Effects of Foreign Direct Investment on

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Mahmood (2016), 34 pp.