SYSTEMATIC EVOLUTION OF CHINA: From Being One of the Smallest Economies to the Second Largest Economy

 

Although having one of the most robust and time cognizant government machinery has helped China deal fairly efficiently with the pandemic crisis; it has indeed become clearer than even in times of crisis (even if it’s something as big as a global epidemic), the Chinese economy will continue to sail through. The primary reason for this is that the dragon economy has managed to constitute a humongous 40% of the global supply chain in the major 8 sectors in the international market. Bear in mind, when we talk about China, we’re referring to the country officially called People’s Republic of China, and not Republic of China.  While the former is the one colloquially known as Mainland China, the latter is colloquially known as Taiwan. The distinction (between PRC and ROC), unfortunately is based on the disputed issues of sovereignty and legitimacy as a state entity, however, that’s not what this article would be discussing.

This article would be discussing about how, China (again, the People’s Republic and not the “Republic”), managed to rise through the rags of contributing no more than 3% in the world’s total output to the riches of sharing no less than a significant 25% in the world’s total output in 2019. Now, we won’t be talking about the reforms and/or the improved business policies, instead this article would address 4 primary underlying elements that have fundamentally helped the dragon economy become the most competitive industry hub in the world:

1. Political Climate

Although this shouldn’t come as a surprise, however we often tend to ignore that the economic conditions, however “economics” in nature, are at the end of the day dependent upon the leadership currently in power of the country. With that kept in mind, even though China’s near-communist political system is sometimes, more so than often renounced in the international space (contrary to the idea of democracy), one thing that the history sure has seen the leadership in China exhibit is vigour and robustness. Before beginning a project, China makes a vision for the next 25 years, while celebrated democracies and constitutional monarchies make projects by taking into account the next elections. While it seems utopian to assume that projects worth several billion dollars can’t just be finished within years, China does in fact dominate this time response domain. Here’s a fact, while the US sits ducks on the construction of bullet trains simply predicting that with given R&D, it might take at least 25 years for them to make bullet trains, China has already developed an extensive bullet train system in a meagre period of 6 years.

A contributor to quora.com encapsulated the rationale behind this so perfectly as follows:

“The Chinese can build things faster than other countries because the government is a one-party system where there is no accountability, no oversight, no criticism and only a plan & execute agenda”

2. Large workforce

Not getting much into the conventional definition, we assume “workforce” to be the community of those people who have a job currently or are in search of one. As of 2019, China’s workforce stands at about 810 million people; that’s a huge number. Let’s make some sense around this, on the basis of recent surveys and census’, the US’ workforce stands at 163 million people, while that of India stands at around 650 million. We do the math; China’s workforce is almost equal to the combined workforce of the US and India. Except, how do these little bits of information even matter? Well, yes they do; in the following two manners:

The Chinese workforce is just so large than there is always an availability of labour, the labour supply is always just there in abundance, but more importantly

The labour wage rates are significantly lower in China than that of both India and US respectively

As a result, it becomes extremely cheap to produce not only the good that can be produced cheaply in the Chinese domestic region, but also the good that would otherwise be more suited for the US and/or Indian domestic territory. 

TL; DR?

You can produce literally anything and everything in China at a much cheaper labour cost than anywhere else in the world.

We took the example of the US and India as they’re themselves the typical cases of the most technologically advanced technology and another country that houses the largest labour supply surplus pool.

3. Reverse engineering

Reverse engineering is not as fancy as it sounds, except it is exactly and literally the same as it sounds. Let’s understand it this way, say you really liked this salami sandwich you had at your friend’s restaurant; now as much as you know that you could just ask her the recipe for the same, since it’s a menu item, it technically becomes a novelty idea reserved only to your friend, right; So what do you do now, considering you yourself want to start a small fast food kiosk wherein you want to sell a sandwich, with a similar, if not the exact same recipe?

Well, ideally (and here’s what I’d do too), you’d take away the salami sandwich from your friend’s restaurant, go back home, and disassemble the sandwich piece by piece; even if you don’t know the sauce recipe, you would in fact be able to understand the ingredients and individual proportions right? 

And now that you know the recipe, let’s say you’ve actually started selling the sandwiches made using an essentially stolen recipe, but with a different sauce (because nothing’s too perfect, right?) but instead of calling it a salami sandwich, you choose to call it “cold cut meat slices placed in between fermented dough with tangy sauce”. And you end up making good money off this! 

Great job, Charlie! 

Except, that’s technically cheating, innit? 

That is exactly how reverse engineering works; according to Cambridge.org, reverse engineering is defined as:

“the act of copying the product of another company by looking carefully at how it is made’’

Yes, ethically, reverse engineering does in fact qualify as cheating, but legally? It sure is legal. With that kept in mind,

Historically, even though the education and other human resources sectors in china receive one of the largest allocations by the government, Chinese manufacturers don’t necessarily invest in the research and innovation of those prospects that have already been worked on by some other country in the world. Instead, they’d simply copy the technology from advanced countries and start making their own products. 

It saves their costs and resources on investing in already done innovation, R&D, and IPR.

4. Highly productive labour

In addition to having an abundant supply in labour, the productivity of the said labour is also something that always gives upper hand to China when it comes to MNCs and industrialists deciding where to establish their units internationally. It would definitely be an inaccurate in assuming that China’s monopoly over production is because of the high capital investment; a rather inclusive, and therefore reality is that their government has also invested in working on their human resource, not only in the field of research and sciences, but also in collaborations with industries worked on the skill development of labour force. As a result, the efficiency of land therefore, production rates go through the roof relative to countries like India. 

Or as Dr. Vivek Bindra, CEO, Bada Business, would rightly exemplify as,

“Indian labour manufactures 10 mobiles in an hour, while Chinese labour makes 50 mobiles in an hour”

5. Belief system

Lastly, the Chinese understand what’s necessary and what isn’t; what’s important and what isn’t. Be it their politburo, their people or their corporate institutions, they know what works and have over the years internalized the same. The Chinese government works in tandem with the corporate sector and is directly involved in expanding its economic activities in foreign countries. They have developed supply chain cities and clusters for producing a product at a single place. They’ve brought major reforms in education by making it more global and pragmatic. Economic reforms helped them scale up their production so massively that its cost of production has come down drastically, becoming a home to mass production. Fore mostly, people have strong patriotic complexes. They pay much attention to the command issued by the state, so people often work hard when they are building. 

While most, in fact all of these seem like political tasks, we’re talking about China here, the People’s Republic; it would simply be unreasonable to undermine the politburo as to how long they can and would go to fulfil ambitions.

With this, let’s just conclude the discuss asking ourselves just one question; 

“What is it that China’s doing right while we Indians are still struggling with”?

Well, if you’ve got even the tad littlest answer to this, let us know in the comments; we’ll be happy to have a discussion over this; 

After all, 1 makes it an idea, 2 a conversation and 3 a religion; 

Say what, communism?

:) 

Content Credits: Mayul Manav (Zakir Husain Delhi College, DU)