Sixty Years of Industrialization in China

From: English Edition of Qiushi Journal Updated: 2011-09-19 23:59
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    Chinese industry has been developing rapidly over the past 60 years, especially during the past 30 years, transforming the country from a backward nation to an economic power, from a poverty-stricken land to a country with the world’s largest accumulation of foreign exchange reserves, and from a country subjected to the forces of international free trade to a country able to actively implement and protect the free trade principles. Today we can proudly say that China’s industrialization has had a profound impact on global development.

    In view of the international environment and the very poor industrial base of the country following the founding of New China, the government decided to first develop heavy industry. Beginning with the First Five-Year Plan (1953-1957), China concentrated the energy of the entire population on large-scale industrial development. Some industries started from zero and others from a very weak base to build up an independent, fairly comprehensive industrial system within a fairly short time. Industry became the main driving force behind the country’s economic development. Under the conditions of a planned economy, social and economic development proceeded at a fast pace as a result of industrialization, but this also led to the emergence of certain problems, which manifested in a number of ways. The cost of industrial development in the framework of the highly concentrated planned economic system was negligence of development in other areas, especially agriculture because of the high differential set between the prices of industrial and agricultural products to support high investment, high accumulation and high consumption in industry. Moreover, the economic performance of industry was poor and the industrial structure was irrational. Since the institution of the reform and opening up policy, China has taken a more pragmatic approach by actively pursuing a path to industrialization more suited to conditions in the country, following a strategy of putting equal emphasis on industrial growth and improvement in the industrial structure, relying more on the role of market forces in the economic system, and taking advantage of both domestic and foreign resources and both domestic and foreign markets through opening up the country to the outside world. In this way, China has entered a period of accelerated industrialization during the institution of the reform and opening up policy, accumulating experience with global significance.  

    One, changes in systems and mechanisms allowed industrial growth to become the strong engine that drives economic development. Beginning in 1978, the industrial systems and mechanisms began shifting from a planned economy to a market economy, allowing the force of competition to accelerate industrial development, putting constant pressure on industrial enterprises to upgrade technology and make innovations and promoting sustained industrial growth. Chinese industry grew at an annual rate of 11.98% between 1978 and 2008, supporting a high national economic growth rate of 9.6% and creating the “Chinese miracle” in the history of global economic growth. At the same time, the entire chain of industrial production has been growing and constantly gaining in strength, giving a strong boost to the process of Chinese economic modernization.  

    Two, by making use of the comparative advantage, China has created a strong core competency to promote the development of an industrial base for rapid industrialization. In the 1980s and 1990s, China took advantage of its cheap production factors to actively participate in domestic and foreign market competition in an open manner, rapidly expanding production capacity and market share. Although industrial growth in China was still effected by high consumption and high cost during this period, the country’s industry was still able to develop a basic core competency marked by independent technological development, a historical contribution not easily denied. Even today, the competency of Chinese industry relies primarily on comparative advantages such as a cheap labor supply and is insufficiently based on technological advances. The Chinese economy, including industry, is still facing the huge task of transforming the mode of development, and the task of improving the core competency of industry will be an arduous and long-term effort.  

    Three, the reason for promoting industrialization is the fact that industry promotes concomitant development in other areas. The beneficial experience gained from developing industry first, such as the principle of industrial efficiency, corporate management, independent responsibility system and rules for competition within an industry, provides a greater and greater stimulus for the reform and development of other areas, and the reform and development of other areas is actually based mainly on the experience gained in the reform and development of industry. The rapid development of other areas has not only resulted in an expanded domestic market for the development of industry, but provided a strong boost for reform and opening up, which further eliminated institutional and structural barriers to efforts to deepen industrial reform and promoted long-term industrial progress as well. 

    

    Industrialization in China over the past 60 years has taken a tortuous path, with some great successes and many issues that need to be considered.China’s industrial production has grown rapidly over the past 60 years.  / Chart supplied by Xinhua

    1. Stable, sustained industrial growth is the basis and prerequisite for smooth operation of the economy. When a country industrializes, industrial growth becomes an important factor affecting overall social and economic development. Sluggish industrial growth can cause all kinds of problems in economic and social development, such as difficulties in employment, incomes, markets and government budgets. Maintaining growth has become a top priority objective in China’s economic policy, particularly during this international financial crisis, and industrial growth is crucial for addressing the crisis. It is precisely because industry has been put first during the last 30 years of reform and opening up that Chinese industry has become a powerful international competitor in the face of strong competition. For this reason we can confidently say that China will be one of the first countries to recover from this international financial crisis and resume steady and rapid economic development. And, looking at the long term, a country’s potential for economic growth and development is in the end determined by how competitive its industry is. Therefore, strengthening of the ability of Chinese industry to compete in the international arena and rapid industrialization are the basis for resolving the current and all future major economic and social issues. 

    2. Improving the core competency must be the priority objective in upgrading the industrial structure. Today’s world is, in general, still in an age of industrialization in which countries around the world are following the lead of countries that were the first to industrialize. In developed countries such as the US, for example, industry still constitutes an important foundation for the country’s economic system. China is a developing country that is now in the intermediate stage of industrialization. The upgrading of Chinese industry not only consists of upgrading in relation to different industries. Even more important, and of even greater general significance, is upgrading within each industry to create lean manufacturing by upgrading manufacturing processes, upgrading the value chain and upgrading product quality. Therefore, upgrading industry is not simply a process of substituting “high end for low end,” but a process of “allowing the cream to rise to the top” through competition. Only by constantly working to develop more competitive industries or industry chains in promoting industrialization can China carry out effective industrial upgrading on the basis of sustained strong growth and control of the risks involved in upgrading. 

    3. Technological innovation and mechanism optimization represent the core solutions to resolving resource and environmental issues. The division of the materials of the world as “resources” and “waste” is determined by industrial technology and industrial demand. The higher the level of industrial technology and the more developed the economic system of industry, the more “resources” there are in the world, i.e., the more materials of the world can be classified as “resources,” and even garbage can become resources. From a basic scientific perspective, any material can be turned into a resource with the right industrial process. We can see that, in essence, industrialization is a constant process of creating “resources.” Therefore, only by developing industry and never stopping the process of industrial development can we overcome the restrictions presented by lack of resources. In the same way, industrialization can make more places on earth suitable for human habitation, making the environment and human society more in harmony and bringing people closer to nature. Naturally, there are conditions to beneficially balance industrial development and environment and resources. In developing industrial technology, we must place the emphasis on making resource utilization more efficient and improving the environment and ensure that systems and mechanisms encourage resource conservation and environmental improvement in making advances in technology. Therefore, the key now to resolving issues with the environment and resources is to accelerate efforts to develop systems and mechanisms that promote innovations in industrial technology that lead to greater resource conservation and environmental improvement. 

    4. Industrialization must first of all benefit the people. Starting with the new century, China has made application of the Scientific Outlook on Development the highest priority in all matters. Applying the Scientific Outlook on Development does not mean putting aside the pursuit of material wealth, but rather putting greater emphasis on human values in the process of developing material civilization and creating material wealth. In other words, the criteria for judging development include more than just the material results and material wealth produced. Another important criterion is whether development benefits or promotes improvement in the lives of all the people and improvement in the living environment. Therefore, China believes that industrialization must put people first and not harm nature in the process of using natural resources so that generation after generation of people can enjoy the benefits of nature and thus enjoy the freedom, equality and dignity under affluent material conditions and the civilization, justice and harmony under thriving economic conditions. In this sense, the pursuit of wealth must and should be a kind of social responsibility and action. This means that enterprises in the process of creating wealth must both have responsibility to their stakeholders and have social responsibility and requires that the process of creating and accumulating wealth not only allows the process to continue generation after generation, but also should and must ensure that society and all of humankind can continue and that the process has value to them. Industrialization has not only been the main thrust of economic and social development during the 60 years since the founding of New China, but has also had great value to society and all of humankind. We firmly believe that as long as we promote industrialization bearing in mind our responsibility to all of humankind and taking practical steps, we can ensure that the entire Chinese population of 1.3 billion people can fully enjoy the benefits of modern industrial civilization and the accomplishments and values of Chinese industrialization will have an even greater impact on people around the world.

(From Qiushi in Chinese No.18 2009)


Note: Author: Director of the Institute of Industrial Economics, the Chinese Academy of Social Sciences

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