The Chinese competitive example

Building Competitive Economies in Africa – the Chinese example

Eddie Cross, Zimbabwe

13 May 2018

How have China and the Far East Tiger States built up their economic systems so as to be able to compete in the new globalized world order and to challenge the dominance of western capitalist States? I think this is one of the most important questions for the world today. Important because it helps countries with mature economies (the USA, Europe and Japan) understand how to compete and what the nature of the challenge is and for States elsewhere in the World to understand what they need to do to find their own feet in this global economy that seems to get more and more competitive every day.

The first key principle in my view combines the two key pillars of pragmatism and stability. China after [Chairman] Mao Zedong recognised that they could not continue down the narrow ideological path that had dominated China since 1949. The “Great Leap Forward” had failed miserably – China was poorer, hungry and devastated, millions had died an early death and the closed Kingdom was not rated as a significant player in any field. We tend to forget that was in 1975 – not long ago.

Then Deng [Xiaoping] came to power under the guidance of the Red Army who recognised that China needed new leadership and new direction. Deng’s famous dictum – “it does not matter what the color of the cat is, does it catch mice?” became the new mantra. The energy, vitality and ingenuity of the Chinese population did the rest – the Communist Party, evolving more slowly, provided stability, continuity and direction. Leadership was selected, not on the basis of popularity or membership of the Party (although that was a prerequisite) but on merit and China has become the largest State in history to choose leaders on the basis of their track record.

The second fundamental was to ensure that as they liberalized their economy, that corruption in all its different forms, did not take root in the new China. Since coming to power in 1975 over 200 000 people at all levels of society, including the highest organs of the Party, have been executed (not jailed) for corruption. Chinese leadership recognised that if they allowed the scourge of corruption to take root anywhere, the disease would spread throughout and development would become impossible because human nature knows no limits when it comes to personal greed and accumulation.

The third principle was to ensure that all economic activity was conducted on a secure basis – peasant agriculture was given security of tenure, business interests were carefully protected and the rule of law observed. The manner in which these principles were invested in society was not the same as in the West but it was effective and investors, both foreign and local felt secure. The State maintained its leadership in business, but gradually private capital took over and western firms began to cautiously explore the biggest market in the world. As a result of the reforms in agriculture, hunger vanished and China became almost self-sufficient in food. In the industrial sector the changes took longer to emerge but when they did, the changes were truly revolutionary.

The next principle the Chinese leadership followed was to pay their bills on time and in full. As a consequence, China was recognised as a “safe pair of hands” and was able to borrow what it needed, at very low rates, from Western States who, after three centuries of free markets and capitalism with its accumulation of surpluses, had vast sums of surplus liquidity without a secure, productive home.

It is not widely recognised that as a consequence, China has become the most indebted country in the world (after Japan) and perhaps in history. She has used these massive sums of cheap, long term money, to build its infrastructure, cities and industries, so that today some 70 per cent of the Chinese population lives in a modern city and works in an industrial environment that has made Chine the manufacturer to the world.

As a result of these huge investments in infrastructure, China today can deliver its products to virtually every corner of the Globe at one third of the cost in Africa and half the costs of the USA and Europe. Manufactures throughout the world look at the landed cost of Chinese goods and ask how on earth do they do that – I was a director of a large shoe manufacturer in Bulawayo many years ago and we found that the productivity of the average Chinese factory in the same field was many times our own – modern equipment, just in time deliveries of raw materials, no delays and shortages of energy, motivated, educated and skilled staff who worked long hours, lived nearby and earned a third of what our staff demanded.

In 2013, I was tasked to get offers of “T” shirts for the MDC – Zimbabwean manufacturers offered me product at over US$6 per unit and 5 months’ delivery, South Africa US$3,60 and three months’ delivery, China US$1,67 a unit and delivery in three weeks by air, customs cleared. How do you compete with this?

Another key principle the Chinese adopted was to become a more open society, to allow people to dream, to engage and to travel. Today there are more Chinese learning to speak English than there are English speakers in the rest of the world. Hundreds of thousands of young, bright, well-educated students travelled abroad and attend the best universities in the world. Delegations from Chinese companies scoured the world for ideas, best practices and new innovation. It is probably true that any new product marketed for the first time in the West, is challenged by the same product or better in days or weeks. Open markets and competition became Chinese by-words and at DAVOS in 2017, it was the Chinese President who championed the development of open markets and free access.

So where do we go from here? Firstly, we need to recognise that the sort of growth that China and the Asian Tiger economies achieved over the past 50 years is possible in all states and on every continent. Singapore has shown (as has Mauritius) that you do not need natural resources to become a middle income country in 25 years.

BUT you cannot do this unless you walk the path that they have walked since 1975. We need to adopt more pragmatic policies, the rhetoric spouted by the South African Communist Party and some elements of our own society is simply history speaking to itself. We need to attack corruption and severely punish anyone who is caught. I have been astonished at how much government knows about corruption and who is involved and even what sort of resources are being taken out of our economy – but no action, because those in power think that “it is our time to eat”.

We need to open up our economy and give our people freedom to make mistakes and create new enterprise – when the Government of National Unity (GNU) in a few minutes in February 2009, abandoned exchange and price controls, lifted the restrictions on gold trading and adopted the multi-currency system, observers could hardly believe the reaction. In days the shortages which had plagued the country for years vanished. [Under MDC finance minister Tendai Biti] revenue to the State rose 70 per cent per annum for the next four years.

We need to keep our promises and pay our bills and open up to the global economy. There is no reason why goods sourced in South Africa or Zambia or Botswana should be three times as expensive here than they are there.

Just follow the Chinese example, it’s that simple. 

Eddie Cross is a renowned Zimbabwean economist and founder member of the mainstream Movement for Democratic Change party led by the late Morgan Tsvangirai. Mr Cross is currently the Policy Coordinator General and Secretary for Local Government.

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