The China miracle explained

The Great Wall of China. Photo: Uwe Aranas via Wikimedia Commons

China has lifted 800 million people out of poverty and is betting on doing the same for the developing world by exporting its developmental approach focused on trade, infrastructure investment and technology transfer. It does so through both entrepreneurial and state-backed endeavors such as the Asian Infrastructure Investment Bank and the Belt and Road Initiative.

Over the past 40 years, the number of people in China with incomes below US$1.90 per day — the International Poverty Line as defined by the World Bank to track global extreme poverty — has fallen by close to 800 million. With this, China has contributed close to three quarters of the global reduction in the number of people living in extreme poverty. At China’s current national poverty line, the number of poor fell by 770 million over the same period.  

China has also been helping countries to develop in a few ways, including:

  • Providing financial assistance: China has provided billions of dollars in financial assistance to developing countries, in the form of loans, grants, and debt relief. This has been used to support projects including infrastructure development, education, and healthcare.
  • Infrastructure investment: China has invested heavily in infrastructure projects in developing countries, such as roads, railways, and ports. This has helped improve connectivity and trade, boosting growth.
  • Transferring technology: China has transferred technology to developing countries, helping them improve their manufacturing and production capabilities. This has helped to create jobs and foster growth.
  • Sharing expertise: China has shared its expertise in several areas, such as agriculture, public health, and disaster management. This has helped developing countries to address some of their most important needs.

Whether we like it or not, there is no doubt that China is playing an increasingly important role in global development. It remains to be seen how China’s role in this will evolve in the future, but it will be a major player.

While some are critical of China’s motives, there is no doubt that its policies are having a positive impact on millions of lives. Today, China is looking for markets with the huge growth potential that comes from lifting the majority out of poverty and bringing them into the marketplace as consumers.

There are valid worries that this exchange of raw materials for high-value goods, especially when purchased through debt dependence, is nothing more than a new twist on capitalist imperialism. However, to the extent that the assumed debt is sustainable and the benefits flow to raising the living standards of the whole society, it must be considered a net plus. 

A world of not enough

If the Belt and Road Initiative is part of a larger effort to build out infrastructure, it is good. If the capabilities being built allow for a further set of ties for development — logistical networks connecting different places — it can only help boost economic activity. Infrastructure development does not necessarily translate into dependency. It could help the free market and improve access to goods and services much desired by our society.

Most humans alive today live in a world of not enough: not enough food, security, housing, education, healthcare, rights for women, potable water. They are desperate to get out of that situation, as China has. They might or might not like Chinese government policies or the transactional attitudes of Chinese entrepreneurs, but such concerns are usually of little importance to countries struggling to bootstrap their way out of poverty.

After the Second World War and until the eighties, the non-aligned world was almost entirely poor, cut off from the means of production in a world where nearly 50% of GDP globally was in the U.S. Today China can offer these countries the possibility of building their own future without depending on the US-led west.

The U.S. challenge to China’s dominance should not stop the rest of the world from spinning if China offers a better alternative to those who are determined to rise. In the end, free competition should decide. Isn’t it what Adam Smith described in his famous work, The Wealth of Nations? A market where people acting in their own self-interest decide what is necessary. In this China–US world where an autocratic society will compete with a democratic driven order, it is for the people of each nation to freely choose.


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