Nothing quite compares to China's economy

06th July 2012

China is a modern-day economic phenomenon. Under the leadership of Chairman Mao Zedong, the chief force behind the Chinese Revolution of 1949, the country was plunged into abject chaos.

His great socio-economic plan to transform the country from a predominately agricultural-based culture into a socialist utopia through rapid industrialisation and collectivism was an almighty failure, resulting in massive ecological devastation.

Famine followed and millions died (estimates range wildly from around ten million to 35 million). The country was sent back to the Dark Ages, a wasteland that was once a place of opportunity. It would take untold years for it to climb out of the deep, dark hole it had fallen into.

It did more than just emerge from the wilderness though. Metaphorically speaking, it filled in that gaping hole with a solid concrete foundation of resolve, upon which it laid brick after brick of optimism, confidence and hope. China today is the not only the world's fastest growing economy, it is the second most powerful, a growing shadow behind the US.

Such has its growth been in recent times that the country has achieved what many thought impossible – experienced a second industrial revolution. As the most populous country in the world, this is probably no surprise. As the country continues to emerge from its old communist past and embrace capitalism, the growing middle class is powering economic expansion with a ferocity that is breathtaking.

All of this originated post-Mao, in the late seventies. The economic reforms, popularly known as "socialism with Chinese characteristics", began in 1978 under the stewardship of the great reformer Deng Xiaoping, leader of the Communist Party of China, whose policies were markedly different to Chairman Mao's.

Mr Xiaoping took the closed, isolated and centrally-governed system of economics and turned it on its head. He opened up the country to the global market. It was pragmatic, typified by the shrewd introduction of policies which were clearly based on a capitalist system.

The biggest change of all was wider engagement on an international level, a decision that has paid off. It is now the largest exporter of goods in the world and the second biggest importer. All of this originated with Mr Xiaoping's break with history: fiscal decentralisation, greater autonomy for private enterprises, allowing foreigners to invest in the country and the diversification of the banking system.

Moving to China makes good business sense. Working with Chinese businesses is not just smart, it's essential. Learning Mandarin will imbue you with a skill that will be invaluable. In short, we're living in a world that is increasingly shifting its focus away from traditional markets in the West, and casting them towards the East. The 21st century may be defined by this new reality.

Here are a few facts that will reassure Brits expats. In general, growth rates in the country have averaged at around ten per cent every year for the last 30 years; in the past decade alone, China's economy grew seven times as fast as America's; and its GDP has multiplied tenfold over the last 25 years.

If anything can be determined about the country's foreseeable future it is that growth is part of that equation. Though it has invariably suffered some setbacks – the global financial crisis, the reduction in trade with European nations – it is making changes for self-preservation.

Last year, the government announced its new Five-Year plan, which, in addition to continuing to build on its major economic reforms, sees China look at how it can reduce its dependence on international goods and services. It wants to increase domestic consumption so that should another severe economic catastrophe emerge, it will not be so hard hit.

However, the country does face some economic challenges, which will interest British expats. It needs to develop a more coherent strategy to expand a job market to cope with increasing demand for work, which comes from both foreign workers and new entrants (i.e. graduates).

The scope of opportunity in China is unprecedented. It is the land of opportunity and expats can look forward to enjoying a very comfortable and fruitful life, that much is certain. However, there has to be, argue economists, greater political reform to fully modernise the country. Reform in this arena has been modest at best and the Communist party still maintains a strong hold on all areas of power and enforces strict discipline on its citizens.

If you take for example the fact that 80 per cent of the ten largest stocks on the Shanghai Stock Exchange are state-owned – including PetroChina, Sinopec and China Life Insurance Company – you can start to grasp the idea that financial autonomy in the country isn't as clear-cut as one might have perceived.

Commitment to this will no doubt be as significant as the tacit move towards a consumerist based society. After all, it got over the Great Leap Forward. Back then, in its ashes, today's China was near enough impossible to have imagined.

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