Reasons for development

An international comparison reveals China's miracle is by no means an accident, nor is it a matter of luck. We can see it is, in fact, founded on the approach that China has taken toward development. There is nothing complex or mysterious about this approach. On the contrary, it is a straightforward approach that follows a natural grain of logic.

We have selected three indices with which we will conduct a comparison of more than 100 countries and regions on the basis of data from the World Bank and the UN Development Program. The first is average annual growth rate of GDP, which reflects performance in terms of economic growth. The second is the coefficient of relative variation in the average annual growth of GDP, which reflects the state of macroeconomic stability. The third is improvement of the human development index (HDI), which reflects the extent of social progress and social equality. Through our comparison, we found all of the 20 fastest growing economies during the period from 1978 to 2008 were developing countries and regions. Of these countries and regions, a total of 13 implemented five-year plans. Moreover, as many as eight of the top 10 fastest growing economies carried out five-year plans. This is no coincidence. Late Chinese leader Deng Xiaoping once said planning and market forces are both means of economic growth. Five-year plans, as a "visible hand," serve to promote social progress through the provision of public services, while the market economy, as an "invisible hand," promotes economic growth through the creation of a sound environment for investment. This is essential to understanding the Chinese miracle.

Numerous entrepreneurs and scholars familiar with the situation in China have given their full affirmation to this practice. In November 2009, James McGregor, former Chairman of the American Chamber of Commerce in China, told The New York Times "one key thing we (the United States) can learn from China is setting goals, making plans and focusing on pushing the whole country ahead as a nation. The Chinese have five-year plans. They devote themselves to their objectives." Moreover, in his book China's Megatrends, futurist John Naisbitt identifies "framing the 'forest' and letting the 'trees' grow" as one of the eight pillars of a New Society (in contrast to Western countries). He writes, "The vision and the goals are being shaped in a top-down, bottom-up process. The government frames the policies and priorities within which citizens create their own roles and their own contributions to the whole, forming a structure that allows and benefits from diversity while sustaining order and harmony."

During a recent economic forum in Taiwan, I cited the formulation of China's 12th Five-Year Plan for National Economic and Social Development (2011-15) to give a detailed illustration of how the Chinese mainland has realized a democratic, scientific and regulated mechanism for decision making. The plan's research and formulation process can be roughly divided into 11 steps. It took around two and a half years, during which the opinions of the people were solicited first and then researched centrally. Following this, the views of the people were sought again, which was followed by another round of central research. This process is not secretive in any way. In effect, it has made decision making on the Chinese mainland a public process. In other words, it has "swapped a black box for a see-through box" as we say. The next day, a Taiwanese scholar criticized Taiwan's policymaking mechanism in the Want Daily. One of his core views was "it is time for Taiwan to learn from the mainland."

Crisis response

The international financial crisis that originated in the United States in 2008 dealt a severe blow to the global economy. As the crisis spread, a number of the world's major economies were thrown into turmoil. China can be viewed as something of an exception. As a global challenge, the financial crisis put the response mechanisms of all countries to the test.

We have chosen four major macroscopic economic indicators to conduct a comparison between G20 countries. They are economic growth, inflation rate, unemployment rate and budget balance as percentage of GDP.

Judging from the results, it is evident China delivered the best macroeconomic performance of all G20 countries in 2009. China registered the highest rate of economic growth in 2009, reaching 9.2 percent. In addition, China was one of only seven countries in the world that managed to avert the onset of negative growth. According to the figures, the economic growth rates of the United States, EU countries (on average) and Japan in 2009 were -2.5 percent, -3.9 percent and -5.3 percent, respectively. Moreover, China's economic growth rate was also as much as 2.7 percentage points higher than its closest competitor—India.

Ironic in retrospect are the seemingly smug predictions that an influential U.S. publication proceeded to make at the beginning of 2009, the like of "China has already begun an economic decline and perhaps will be worse off than the United States," "China will not be able to continue its miracle," and "it (China) is but a caged giant." Furthermore, on March 2 of the same year, the same magazine openly predicted China's GDP growth in 2009 would not exceed 4 percent. This prediction was soon (just 10 months) to be smashed by the facts. In what can be considered a global test, China stunned the world by spearheading the economic recovery, achieving steady growth and meeting its main macroeconomic targets. While this was happening, it was the United States that went into genuine economic decline. During this time, China also closed the gap between its GDP and that of the United States, narrowing the difference from four-fold at the beginning of the crisis to roughly 2.5-fold after the crisis.