China has stepped upon the path of blistering, stable, and sustainable development owing to Deng Xiaoping’s “Open Door Policy” to foreign nations for business, trade, and investment in 1978. China is such a country that was once destitute and necessitous, ensnared in debt and monopoly with little or no acknowledgment and reputation on the world stage. It feels surreal that such a hapless and ill-fated country has now exceeded all the boundaries of advancement and progression. Once an impecunious country is now an economic giant or “the rising dragon”, to put it succinctly.
China has witnessed prodigious and astonishing metamorphosis since Deng Xiaoping’s presidency and owing to this tectonic shift, China has shaken the post-Cold war world order that was subdued by the USA. Now as president Xi is at the helm of the affair, China is making consequential strides both on the domestic and international level. By the dint of its soft and sharp diplomacy, China is branching out its economic and strategic tentacles across the world.
President Xi has his own extensively glorified and a touted doctrine called “Socialism with Chinese Characteristics” or “China Dream”. Through his doctrine, President Xi has managed to accomplish two objectives. Firstly, to project China Communist Party as a saviour of China. Secondly, to create and enlarge his own personality cult. The removal of the two-term presidential limit has already paved the way to remain in power for life. Owing to these reasons, he is ranked second to Mao Zedong in importance and competence.
At present, China is facing some domestic problems to which Xi’s administration is giving the attention these problems demand. These problems are the middle-income trap, growing income gap, and old growth model.
The most important objective of Xi’s administration is to shun the middle-income trap. Middle-income trap is defined as the phenomenon in which some countries, owing to their rapid economic growth, quickly reach middle-income status (economies with a gross national income (GNI) per capita between $1,036 and $12,535), but then are unable to go up any further to get to the income status of the developed countries. China has started to enter Lewis turning point (increase in wages, consumption, and inflation rates because of the dearth of surplus labour in the country).To cope up with this problem, Xi’s administration started the process of privatization of state-own enterprises, reduction of excessive equipment, and liberalization of the financial market.
China adopted a policy of zhuada fangxiao, meaning grasp the big, release the small. This policy was adopted to integrate and strengthen the huge number of state assets. Owing to this policy, a series of mergers and privatization of small enterprises began that were too costly to supervise. The ownership of those companies that were previously owned by state agencies and operating in similar fields was to holding companies. These holding companies are entirely owned by the State-Owned Assets Supervision and Administration Commission (SASAC).
As regards liberalization of the financial market, China removed the limitations on the share of foreign shareholding in securities and fund management firms in 2020. This initiative will enable foreign shareholders to set up wholly-owned units on the Chinese mainland. This has provided much confidence to foreign institutions to invest more in China.
China is faced with the problem of a growing income gap which President Xi’s administration wants to bridge. Although there are claims that China has put an end to absolute poverty, yet inequality and distributive injustice are still prevalent in the country because of the constant asset growth of the urban and upper class.
To handle this issue, President Xi has descanted on reforming the tax sector, along with restimulating the welfare and labour policies. These policies are intended to achieve his much-touted slogan of common prosperity. In addition to that, austerity is encouraged, foreign trips of government officials have been curtailed, securities of VIPs have been reduced, and crackdowns on defrauders and culprits have been enforced.
China is striving to refashion its growth model under Xi’s administration. Currently, the Chinese economy is grappling with heavy pollution, rising disparities, industrial saturation (meaning supply is already enough to meet the demand), inefficient financial market, excessive credit, and growing debt, state-dominated banking sector, and a dated one-child or even two-child policy that is the reason behind labour force depletion. Xi’s administration has broached an updated growth model along with its Made in China 2025 plan that aspires to encourage high-quality manufacturing, private consumption, innovation, green and low-carbon economy, and human capital services to tackle the issues.
In fine, it can be stated that at present China is battling problems like an aging population, market saturation, social disparities, and antiquated growth model; nevertheless, China is setting new precedents of advancement and progression under President Xi. It is a cocktail of regional cooperation, economic statecraft, and smart diplomacy that has made China all the more indispensable and important in the comity of nations.
In the dust of defeat as well as the laurels of victory there is a glory to be found if one has done his best