Economy

Markets

Industries

Insights

Reports

Events

How China used growth to reshape social justice

By Jeffrey Liang (China Daily)
Updated: 2008-10-06 15:29

This year marks the 30th anniversary of China's economic reforms and opening-up initiated by Deng Xiaoping. Over the past 30 years, China maintained an average GDP growth of more than 9 percent. Rapid economic growth has lifted at least 235 million people out of poverty and created a burgeoning urban middle class that has a growing stake in continued reforms and modernization. China's success has created enormous interest among developing countries to distill China's experiences and share knowledge with China. So a natural question is: how has China achieved the economic miracle, and what are the underlying factors unique to China's development process?

In recent China Daily articles, I made some modest attempts to distill part of the success story. This relates to China's unwavering commitment to reforms and openness including its relentless efforts to accede to WTO and attract foreign direct investment; leadership's open-mindedness and pragmatism toward ideas and advice from the West, and a strong "government hand" to mitigate market deficiencies and create new markets particularly for goods and services traditionally in the public domain. In this article, I shall argue that China's massive investment in infrastructure may be another crucial factor in China's miracle that sets China apart from many aspiring developing countries in development strategies.

China's 30-year reforms could be broadly characterized as a process of unleashing market forces, and reshaping the force of social justice to maintain her socialist characteristics. The gradual permeation of the market force at every corner of the economy has restored the fundamental commutative justice that matches reward with incentives and productivity. It has awakened the Chinese spirit of entrepreneurship and risk-taking that was in dormant during planned economy. But to promote market force was not to ignore the much-cherished socialist traditions and real problem of inequality and regional disparity. Social justice, or narrowly distributive justice, calls for progressive income redistribution to mitigate inequality and regional disparity and provide basic public goods in education, health and unemployment and retirement benefits.

China's massive investment in infrastructure has gradually extended the two forces but tugged them together for balanced and harmonious development. A swing to either extreme of the two forces was economically and socially unhealthy, as shown in China's experiences with the planned economy and experiences elsewhere with unfettered free market and excessive social welfare.

First, massive investment in infrastructure, particularly in various transport modes, directly supported initial market experimentation with special economic zones in the coastal regions and household responsibility system in the countryside. In less than 30 years, China has built 54,000 km of expressways and 27,000 km railways. (The Asian Development Bank as a development partner of the Chinese government has provided financing for 34 expressways and 15 railways amounting to $10 billion.) Roads and railways reduced costs of transporting farm produces and manufactured goods. It has also facilitated steady flows of migrant workers, and thus reinforced the export-oriented strategy and its scaling up beyond the coastal regions.

With initially predominately rural population and a strong socialist characteristic of having "women to shoulder half the sky", China has secured an abundant labor supply that is behind the success of export-oriented and labor-intensive development. Massive movement of migrant workers has created strong human bonds between the eastern and western regions. Remittances sent by migrant workers eased the hardship of family members working on farms and contributed to poverty alleviation.

Second, massive investment in infrastructure has spurred broad-based urbanization and created new infrastructure demand unprecedented in the Chinese history. In less than 30 years, urban population has grown from less than 200 million in 1980 to close to 600 million. Many small villages such as Shenzhen have transformed into bustling cities and major manufacturing power houses for the global market. Remote places such as Heilongjiang and Xinjiang house cities as big as city-state Singapore and economically as busy as many coastal cities. These remote cities, connected by the transport network gradually taking shape, are engines of the local economies.

The burgeoning middle class in the sprawling cities not only demand for more houses, electricity and telecommunication, but also cleaner environment. Urban fixed asset investment enjoyed one of the fastest growths with waste water and solid waste treatment becoming major investment priority. Investment in urban environment protection amounted to 60 billion yuan in 2007 alone from being practically non-existent in the beginning of the reforms.

The virtuous cycle between infrastructure investment and urbanization is a major phenomenon of the 30-year reforms, and is the source of hope for China's transformation into an environment-friendly, people-centered and innovation-based development paradigm. Propelled by broad-based urbanization, growth will no longer be a problem but a solution to environment as experienced in most industrialized economies.

China deserves a big celebration for the triumph of 30-year reforms no smaller than the opening ceremony of the Beijing Olympic Games. However, China cannot afford to be complacent; challenges ahead are daunting. Some of the challenges are perhaps unique to China including market segmentation at the crossroads of provincial administrations that may stifle competition, industry consolidation, and coordinated protection of major river basins and natural resources.

Regional cooperation among provinces and sub-regional cooperation across countries are the government's measures to confront these challenges and break economic isolation of remote regions. China also needs massive investment in soft infrastructure - quality and affordable education, vocational training, healthcare for all - that prepares citizens for more fierce market competition and make growth more inclusive.

The future of China shaped by the two balancing forces - commutative justice and distributive justice - will surely be harmonious and have strong Chinese characteristics. Achieving the vision requires strong political leadership and collective resolve to push the envelope of reforms and openness with trial and error. Crossing the river by groping for stones rings as loud as ever.

The author is chief of programs and regional cooperation unit, Asian Development Bank's Resident Mission in China