Is China’s success riding on Western development

Editor’s note: Daryl Guppy, a special commentator on current affairs for CGTN, is an international financial technical analysis expert. He has provided weekly Shanghai Index analyses for the Chinese media for more than a decade. Guppy appears regularly on CNBC Asia and is known as “The Chart Man.” He is a former national board member of the Australia China Business Council. 

China’s rapid economic growth first astounded Western countries, but now it frightens them. The West is keen to attribute much of the growth to China’s entry into the World Trade Organisation (WTO) in December 2001. This paternalistic attitude diminishes China’s contribution to its own economic growth and also helps to explain the resentment the U.S. in particular harbors against China’s growth.

Some in the West argue that China’s rapid economic growth is largely due to Western assistance, but economic growth always rests on the advances made in other economies. Early American manufacturing success rested on ideas and designs imported from England, and then improved upon. Japanese economic growth in the Meiji period grew from deliberate government policy to use Western assistance to emulate methods and products from the West.

However, the speed and nature of the reorganization of an economy depends upon community attitudes towards foreign assistance. China’s entry into the WTO certainly made some aspects of economic growth easier to achieve. Other countries admitted to the WTO have not always experienced a similar massive boost to economic growth. We need to look more deeply at the contribution made by WTO membership and the discontent that surrounds China’s success.

The foundation of China’s economic change can be traced to Deng Xiaoping, former Chinese leader. Talking with a Japanese delegation on June 30, 1984, he said, “To uphold socialism we must eliminate poverty. Poverty is not socialism.” This represented a significant step on the path towards socialism with Chinese characteristics that is the foundation of China’s astounding economic achievement in lifting millions of people out of poverty and toward common prosperity.

The main motivation of Chinese leaders in promoting China’s entry into WTO was to use foreign expertise and competition to speed up economic reform in both the industrial and service sectors to achieve socialism with Chinese characteristics.

When China joined the WTO, it agreed to accept considerably harsher conditions than other developing countries which were WTO members. These more demanding conditions are forgotten in the current Western criticisms of China’s relationship with the WTO.

China’s service sector was considerably liberalized and foreign investment was allowed, ending the restrictions on retail, wholesale and distribution. Banking, financial services, insurance and telecommunications in China were also opened up to foreign investment. China also had to deal with certain concerns linked to transparency and intellectual property.

The protocol for China’s accession to the WTO removed nontariff barriers, reduced tariffs, and outlined further economic reforms needed to align with WTO standards. These represented, in some cases, substantial changes to the structure of the economy. Progress has been steady, although not always at the pace demanded by some Western countries.

China’s economic growth did not start with its membership of the WTO but growth accelerated after 2001. In 2000, China’s share of global manufacturing output was 6 percent. And by 2021, the figure increased to over 30 percent. China’s WTO entry reframed local economies by inviting foreign competition while creating opportunities for commerce abroad.

One of the contentious areas of growth was the speed of opening-up. China managed a delicate balance to ensure that development did not result in an economy dominated by foreign companies which repatriated their profits overseas. To allow this would have been a repeat of a colonial relationship.

Occupying the same WTO bed, China and the United States had different dreams.

The U.S. expected that China would become a version of America capitalism. President Clinton urged Congress to support the U.S.-China trade agreement and China’s accession to the WTO, arguing that increased trade with China would benefit America’s economy. American business leaders who rushed to take advantage of cheap Chinese labour and the country’s massive market were motivated by the pursuit of profit, not the welfare of the Chinese people.

According to the U.S. Council on Foreign Relations, the country’s exports to China have skyrocketed by 450 percent since 2001. And according to a report by the American Chamber of Commerce this year, more than 50 percent of the surveyed companies said their overall return on investment in China outperformed their global counterparts’. Moreover, 90 percent of American companies have achieved profitability in China.

Since China joined the WTO, U.S. consumers have benefited from lower prices in areas with increased Chinese imports, as noted by economsits from the London School of Economics and the the Federal Reserve Board.

China did not become a subservient version of American capitalism that put profit before people. The U.S. became increasingly resentful that China’s economic growth not only continued along the path of socialism with Chinese characteristics but that this path led to outstanding growth that dwarfed the United States trajectory.

China’s global engagement rests on adherence to the WTO protocols. China’s growth has been deeply connected with global development. Growth has been sustained, not by imitation, but by innovation. China learned many skills from Western experts, but then built on those skills to advance and innovate at a speed that now unsettles some Western observers.

No country fully opens its markets, and some are in the process of closing theirs with protectionist barriers. The U.S. ignores and undermines the WTO in an attempt to impede China’s economy, applying discriminatory subsidies under the Inflation Reduction Act and imposing arbitrary high tariffs. The U.S. impedes the appointment of new judges to the WTO’s Appellate Body.

China’s economic growth has been enhanced by its membership of the WTO. This growth has contributed to global growth and prosperity. It is continuing to bring opportunities for mutually beneficial cooperation that, echoing Deng Xiaoping, aspires to put people, not profit, at the center of the economy.