By John Ross Source: China.org.cn Published: 2016-3-24
Chinese Premier Li Keqiang delivers a speech at the opening ceremony of the Boao Forum for Asia (BFA) annual conference in Boao, south China`s Hainan Province, March 24, 2016. (Xinhua/Rao Aimin)
The annual Boao Forum is a key expression in the global economic and business discussion of China`s rise. It therefore provides a suitable opportunity to reflect not only on the material but on the international intellectual impact of China`s economic development. This equally casts a clear historical light on current attempts in sections of the international media to talk down China`s economic prospects.
When the Forum was initiated in 1998, it was initially seen internationally as an Asian regional event not widely followed elsewhere. Now, the Forum has become one of the world`s most studied economic events.
The prevailing intellectual atmosphere in the West in the period leading to the Forum`s creation was symbolized by one of the most famous, and most erroneous, articles by a Western economist, "The Myth of Asia`s Miracle" by Paul Krugman. Published in 1994 in Foreign Affairs, the US`s most prestigious foreign policy publication, this argued that the significance of Asia`s economic rise was overstated and "from the perspective of the year 2010" claims regarding Asia`s rise would seem as ridiculous as exaggerated claims in the 1960s by the USSR`s Khruschev. Enthusiasm concerning Asia`s growth "deserves to have some cold water thrown on it" and "future prospects for that growth are more limited than almost anyone now believes."
The reason that claims for Asian economies, referred to as "paper tigers", were allegedly exaggerated was that Asia had wrongly failed to follow a "Western" economic development model. China and Singapore were particularly criticized, which was due to "perspiration rather than inspiration," and represented "the most extreme" case of this erroneous Asian approach.
Facts in the following 20 years have devastatingly dated Krugman and other non-Asians` arrogance. Singapore overtook the US in per capita GDP - achieving 103% of the US level at current exchange rates and 144% at Parity Purchasing Powers. While Singapore`s performance might be explained away by it being a small country, no evasion could be made regarding the Boao Forum`s host China.
China, after 1978, achieved the fastest growth over a prolonged period by a major economy in human history. China`s poverty reduction dwarfs the rest of the planet. By World Bank international classification, China lifted 728 million people from poverty compared to 152 million in the rest of the world.
China is now also about to transform the situation of the world`s high income economies. China achieving its annual 6.5% GDP growth target in the new 13th Five Year Plan will not only attain its domestically defined goal of "moderate prosperity," but bring it to the threshold of World Bank criteria for a "high income" economy. In the latest World Bank data, the combined population of all high income economies is 1.399 billion while China`s population is 1.364 billion. China achieving the "high income" status will double the population of those living in such countries. Nothing remotely matching such economic achievements has come from developing countries following the "Western model".
Professor Dale Jorgenson of Harvard University, the world`s leading authority on measuring economic growth, has recently summarized the situation, saying, "The emergence of Asia… is the great economic achievement of our time. This has created a new model for economic growth."
The truth was the exact opposite of Krugman`s prediction in the period preceding the Boao Forum`s launch. China and Asia did not "miss out" by not following the "Western model." The rest of the world needed to learn from China and Asia and the Boao Forum`s growing impact reflects this.
For many years, China internationally followed a policy described as "hide brightness, cherish obscurity". China had valid reasons for this approach, but it had some undesirable side effects. International attempts to downplay China`s achievements, whether in Krugman`s sophisticated form, or the semi-nonsensical genre symbolized by Gordon Chang`s book The Coming Collapse of China were given unmerited intellectual space. This has some negative current consequences in giving an excessive long term base for attempts to claim that China will not hit growth targets and have a "hard landing."
Even as overwhelming factual evidence of China`s economic success has accumulated, some in the West have attempted to retain one final economic conceit, which is the claim articulated by Krugman that the West has superiority in "economic thinking." Apparently, China`s success occurred "by accident" or "despite bad economic ideas," all despite the fact that for anyone seriously thinking about it, the idea that the fastest economic development in human history can be achieved by "accident" is laughable.
Considering President Xi Jinping`s recent reiteration that the originality of China`s economic ideas was made primarily to deal with domestic issues, it also plays an important role globally. In a May 2014 Politburo study session he pointed out that China`s economic combination of the "visible hand" with the "invisible hand," unlike the West`s exclusive reliance on the "invisible hand." In November 2015, Xi restated that Marxism underlays China`s economic philosophy, which is evidently not a position in the West. At this year`s Chinese People`s Political Consultative Conference, Xi restated that in China public ownership plays a dominant role with diverse forms of ownership developing side by side - sharply differentiating China from both the former USSR and the West.
China`s economic ideas are certainly highly "practical," in the sense of solving practical issues, but not "pragmatic" in the sense of not being guided by underlying economic theory. The facts confirm that by pursuing its own economic model, China not only outperformed but "out thought" the West.
For most Western economic strategists, accepting the fact that Marxism is the underlying philosophy of China`s economic success is certainly too advanced. But the real global development of economic thinking was well described by Justin Yifu Lin, China`s former World Bank Senior Vice-President. He said that from Adam Smith up to the year 1930, most master-economists were British or foreigners working in the UK. This trend changed during the 1930s, when the United States started to become home to great economists. Lin believed that only when an economist lives in an important economy can he or she have a good command of real social and economic variables key to better illustrate the cause and result relationship. He said that it is inevitable, then, that the research center of economics will move eastward to China.
The Boao Forum`s development is part of this shift of the center of gravity, not only of economic performance but economic thinking, to China.
The author is a Senior Fellow at Chongyang Institute for Financial Studies, Renmin University of China.