China’s rise from poverty an economic miracle
By Justin Yifu Lin |
Updated: 2019-01-24 10:34
Looking back upon the past four decades’ achievements on the occasion of the 40th anniversary of China’s reform and opening-up, there really has been nothing short of a miracle unseen before in human economic history.
In 1978, China was one of the poorest countries in the world. According to World Bank standards, China’s per capita GDP that year was only $156. In sub-Saharan Africa, by contrast, the per capita GDP in 1978 was a much higher $495.
At that time, 81 percent of China's citizens lived in rural areas and depended on agriculture for a living, while 84 percent of Chinese lived on less than $1.25 a day, falling below the international poverty line. What’s more, the economy was quite domestically oriented, with exports accounting for only 4.6 percent of GDP and imports 5.1 percent. With only 9.7 percent of GDP involving in international trade, 90 percent of the national production was not connected with the international community. Of the exports figure, 75 percent came from agricultural products and their processing.
Young people may find it hard to learn what these figures mean, but I have been there myself.
I came from Taiwan to the mainland to study at Peking University in 1979. At that time, Taiwan was already an emerging industrial economy with a higher living standard than the mainland. So life in Beijing was quite a shock to me. I remember that a bicycle would cost 200 yuan, but the monthly wage for most teachers at Peking University was not even 70 yuan, so they had to work and save for three months before they could afford a bicycle. Television was quite a new thing and a most popular 9-inch black and white set cost 900 yuan. And these provide just a few examples of what China’s economy was like in the beginning of reform and opening up.
From this low starting point, China maintained an average annual growth rate of 9.5 percent from 1978 to 2017, far exceeding everyone’s expectation. In the beginning of reform and opening-up, China’s leader Deng Xiaoping proposed to “quadruple the GDP within 20 years” -- an annual 7.2 percent growth rate needed to be secured.
Most people, including me, deemed this goal unattainable. I grounded my judgment on the natural growth theory of economics: Only during a period of recovery from wars or natural disasters can a 7 percent growth rate be achieved for one or two years; any country or society cannot realize 7 percent or higher growth rates in normal conditions. Thus, this theory seemed to have made the target unrealistic.
But Chinese people have an adage saying: If you set a high target, you may only achieve mediocrity and if your goal is at the middle level, you could only end up with low achievements. I believe the reason why Deng put forward this target was to stimulate people with a wonderful goal and if the 7.2 percent rate could not be reached, 6 percent would also do.
However, what we got is 9.5 percent. In 2017, the Chinese economy is 34.5 times that of 1978 at comparable prices. It is with this robust growth momentum that China surpassed Japan in GDP in 2010 and became the world’s second largest economy. In 2014, China’s economic size exceeded that of the United States and became the world’s biggest economy if calculated at purchasing power parity.
The proportion of international trade in GDP is another important index for reform and opening up. From 1978 to 2017, China’s imports and exports surged at an annual 14.5 percent growth rate calculated in dollars, and the international trade volume in 2017 is 198 times that of 1978. In 2010, China overtook Germany to become the world’s biggest exporter. If we take a look at what we are exporting, manufactured products were less than 25 percent in 1978, but now accounting for 97 percent of total exports.
It’s for good reason that China is now called “factory of the world”. Since the industrial revolution, several countries were given this title: the United Kingdom, the United States, Germany and Japan. And now the factory of the world is based in China.
In 2013, China overtook the United States in terms of total trade volume, becoming the world’s largest trader. The proportion of international trade in GDP peaked at 64.5 percent in 2006 and stood at 37.8 percent in 2017, while that of the United States hovers around 25 percent. By this measurement, the Chinese economy is more open than that of the United States.
China’s per capita GDP reached $8,640 in 2017, above the average income of the world’s nations. In the past four decades of reform and opening-up, China has lifted more than 700 million people out of poverty, contributing more than 70 percent to the global poverty reduction endeavor.
So the fundamental reason why I could have the chance to work as the World Bank’s senior vice-president and chief economist is that the country backing me up has made enormous contribution to the world’s poverty reduction to the world and that its experience is greatly valued by the world.
There is no exaggeration in calling China’s achievements in last 40 years a miracle in human economic history. The Chinese people are all participants, contributors and beneficiaries of this miracle.
Justin Yifu Lin is the dean of the Institute of New Structural Economics of Peking University and former chief economist of the World Bank. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Looking back upon the past four decades’ achievements on the occasion of the 40th anniversary of China’s reform and opening-up, there really has been nothing short of a miracle unseen before in human economic history.
In 1978, China was one of the poorest countries in the world. According to World Bank standards, China’s per capita GDP that year was only $156. In sub-Saharan Africa, by contrast, the per capita GDP in 1978 was a much higher $495.
At that time, 81 percent of China's citizens lived in rural areas and depended on agriculture for a living, while 84 percent of Chinese lived on less than $1.25 a day, falling below the international poverty line. What’s more, the economy was quite domestically oriented, with exports accounting for only 4.6 percent of GDP and imports 5.1 percent. With only 9.7 percent of GDP involving in international trade, 90 percent of the national production was not connected with the international community. Of the exports figure, 75 percent came from agricultural products and their processing.
Young people may find it hard to learn what these figures mean, but I have been there myself.
I came from Taiwan to the mainland to study at Peking University in 1979. At that time, Taiwan was already an emerging industrial economy with a higher living standard than the mainland. So life in Beijing was quite a shock to me. I remember that a bicycle would cost 200 yuan, but the monthly wage for most teachers at Peking University was not even 70 yuan, so they had to work and save for three months before they could afford a bicycle. Television was quite a new thing and a most popular 9-inch black and white set cost 900 yuan. And these provide just a few examples of what China’s economy was like in the beginning of reform and opening up.
From this low starting point, China maintained an average annual growth rate of 9.5 percent from 1978 to 2017, far exceeding everyone’s expectation. In the beginning of reform and opening-up, China’s leader Deng Xiaoping proposed to “quadruple the GDP within 20 years” -- an annual 7.2 percent growth rate needed to be secured.
Most people, including me, deemed this goal unattainable. I grounded my judgment on the natural growth theory of economics: Only during a period of recovery from wars or natural disasters can a 7 percent growth rate be achieved for one or two years; any country or society cannot realize 7 percent or higher growth rates in normal conditions. Thus, this theory seemed to have made the target unrealistic.
But Chinese people have an adage saying: If you set a high target, you may only achieve mediocrity and if your goal is at the middle level, you could only end up with low achievements. I believe the reason why Deng put forward this target was to stimulate people with a wonderful goal and if the 7.2 percent rate could not be reached, 6 percent would also do.
However, what we got is 9.5 percent. In 2017, the Chinese economy is 34.5 times that of 1978 at comparable prices. It is with this robust growth momentum that China surpassed Japan in GDP in 2010 and became the world’s second largest economy. In 2014, China’s economic size exceeded that of the United States and became the world’s biggest economy if calculated at purchasing power parity.
The proportion of international trade in GDP is another important index for reform and opening up. From 1978 to 2017, China’s imports and exports surged at an annual 14.5 percent growth rate calculated in dollars, and the international trade volume in 2017 is 198 times that of 1978. In 2010, China overtook Germany to become the world’s biggest exporter. If we take a look at what we are exporting, manufactured products were less than 25 percent in 1978, but now accounting for 97 percent of total exports.
It’s for good reason that China is now called “factory of the world”. Since the industrial revolution, several countries were given this title: the United Kingdom, the United States, Germany and Japan. And now the factory of the world is based in China.
In 2013, China overtook the United States in terms of total trade volume, becoming the world’s largest trader. The proportion of international trade in GDP peaked at 64.5 percent in 2006 and stood at 37.8 percent in 2017, while that of the United States hovers around 25 percent. By this measurement, the Chinese economy is more open than that of the United States.
China’s per capita GDP reached $8,640 in 2017, above the average income of the world’s nations. In the past four decades of reform and opening-up, China has lifted more than 700 million people out of poverty, contributing more than 70 percent to the global poverty reduction endeavor.
So the fundamental reason why I could have the chance to work as the World Bank’s senior vice-president and chief economist is that the country backing me up has made enormous contribution to the world’s poverty reduction to the world and that its experience is greatly valued by the world.
There is no exaggeration in calling China’s achievements in last 40 years a miracle in human economic history. The Chinese people are all participants, contributors and beneficiaries of this miracle.
Justin Yifu Lin is the dean of the Institute of New Structural Economics of Peking University and former chief economist of the World Bank. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
