The Communist Party of China (CPP), the worldâs biggest political party with 90 million card-carrying members, marked its 100thÂ year with a grandiose celebration at Tienanmen Square in July this year. The highlight of the commemoration was the speech of a proud and assertive President Xi Jinping, who issued a warning to the outside world: âThe era of China being bullied is gone forever.â He added:Â âWhoever wants to do so will face bloodshed in front of a Great Wall of steel built by more than 1.4 billion Chinese people.â
Xiâs speech clearly alluded to Chinaâs humiliating defeats in the hands of the British imperial forces in the so-called opium wars during the 19thÂ century. The said wars ended with the Chinese rulers signing treaties allowing the British to run their lucrative opium trade within ChinaÂ Â without any restrictions. An added war trophy for Britain: Chinaâs cession of Hong Kong, subsequently named as the British âCrown Colony.âÂ
Xi is right: A repeat of Chinaâs 19thÂ century humiliations is next to impossible. Not in 21stÂ century China.Â Â Today, China is poised to overtake the United States as the worldâs Number One economic power, that is, in a few years from now. With close to a billion Internet users and able to graduate tens of thousands of engineers and scientists annually, China is also on the verge of becoming the worldâs technology and innovation leader. This technology race is at the roots of the US-China trade wars.Â Â Modern China is giving the West a run for their money in the development and deployment of modern technology such as AI, robotics, 5G communications and so on. And yes, China is modernizing the biggest military force on Earth.
Not surprisingly, the big birthday bash of the CPP was focused not on the first 60 years of CPP but on how the âmodernizationâ program of Deng Xiaoping helped transform China into an economic colossus in the last four decades. It wasÂ Â Deng and his fellow âcapitalist roadersâ in CPP who crafted in 1978-1980 the âFour Modernizations,â whose goals are strengthening agriculture, industry, defense and science. As a backgrounder, Deng was labeled a âcapitalist roaderâ during theÂ Â disastrous Cultural Revolution of the 1960s-1970s and was sent by Mao Tse-tung to the countrysideÂ Â for ârehabilitation.â After the death of Mao and the fall from power of Maoâs wife in the mid-1970s, Deng and his fellow âmodernizersâ succeeded in regaining leadership in the CCP.Â
China watchers quickly labeled the modernization program of Deng as nothingÂ Â but an instrument for the capitalist transformation of China. The famous agricultural commune system of China collapsed within two years, when individualÂ Â farmers were allowed to shift to family-based âself-responsibility systemâ and grow and sell part of their agricultural produce to the private traders. The huge sector of âstate-owned enterprisesâ (SOEs) was overhauled, with around a quarter of the SOEs either privatized or abolished.Â
However, the most dramatic and publicized component of the modernization program was the opening of China to the global market and the encouragement for foreign capital to come in under the âOpen Door Policy.â This policy includesÂ Â the establishment in the coastal provinces such as Shenzen and Xiamen of Special Economic Zones (SEZs) catering to foreign manufacturers. These SEZs subsequently became the core of âFactory Asia,â churning out myriad labor-intensive products such as toys, garments, electronics, household appliances and so on that are exported to the world market.Â Â Â Â Â Â
In summary, it was in the pivotal 1978-1980 period that Deng and company launched China on the high road to marketization and globalization. The so-called âFourÂ Â Modernizationsâ program has remained the overall guiding framework of development for China, from the 1980s to the present.
Coincidentally, in the same 1978-1980 period, the economic technocrats of the Marcos Administration were ânegotiatingâ with the World Bank and the International Monetary Fund for a series of âstructural adjustment loansâ (SALs) supportive of deeper liberalization and global integration of the Philippine economy. According to the WB-IMF twins, the never-ending trade deficits and poor economic performance of the Philippines in the martial-law decade of the 1970s were due to the countryâs failure to implement fully the outward-looking export-oriented industrial (EOI) strategy adopted by theÂ Â National Economic Development Authority (Neda) in 1972. Hence, the policy conditionalities attached to the SALs required the Philippines to adopt a comprehensive structural adjustment program aimed at the further opening up of the economy. The SAP had the following major policy thrusts: trade and investment liberalization, privatization of government corporations and deregulation of different sectors of the economy.Â
It is thus ironic that Dengâs Open Door Policy and the Philippinesâ SAP were crafted and put in place at about the same time: 1978-1980 period. They also had one overriding goal: integration in the global economic order in order to win markets, investments and jobs for their people. The only difference: capitalist Philippines was way ahead of China in the marketization process as well as in the adoption of the outward-looking EOI strategy.
The question is: four decades after, what is the scorecard? Who is the winner and who has been lagging in development under this business of global economic integration?Â
Obviously, China is the runaway winner. A quick look at the statistics on the per capita GDP growth of the two countries (see table 1) indicates the amazing success of China in posting continuous high economic growth, close to 10 percent a year, in the last four decades. In contrast,Â Â the Philippines, with a per capita three times bigger than China in 1980 was left behind, âtrappedâ in what the Asian Development Bank calls as the middle-level income trap, unable to scale up and reach the status of a highly-developed middle-class economy.
Now what accounts for the differing economic outcomes for the two countries, which had seemingly similar economic liberalization and globalization goals at the beginning, four decades ago?
One major explanation: the liberalization and globalization processes in a given economy are not the same for all countries.Â Â In the case of the Philippines, the SAP program is a classic âWashington Consensusâ recipe. On the other hand, Chinaâs âOpenÂ Â Door Policyâ is only part of a bigger and complex development blueprint labeled by Western economists as the âBeijing Consensus.â What is the difference between the two and what are the policy implications for the Philippines? More on this in the next issue.