hotelX1000

Reform and Opening Up

China’s Best Christmas Gift Ever

Keeping the sheen on Deng Xiaoping’s Big Idea

The Hotel Jingxi
Seven days before Christmas, forty years ago, China got its best Christmas gift ever. On December 18, 1978, China “tore open the shutters and threw up the sash” on itself to let the light of the world in for the first time since 1949.

What has transpired there ever since is more than astounding; it’s never been done before in human history, no matter how big the country or how large its population.

No one knows what China might look like today if that Christmas gift hadn’t been delivered and opened in 1978. Maybe an epic-size North Korea with “accurate” ICBMs.

One thing for sure is that the International Federation of Robotics wouldn’t be gushing over the tens of thousands of industrial robots sold to China.

The Deng effect
China’s best Christmas gift ever wasn’t dropped down the chimney by an elderly guy in red suit, but rather by an elderly guy in a gray suit: Deng Xiaoping, the diminutive, 78-year-old Chinese leader from Guang’an, Sichuan province.

Purged twice during the Cultural Revolution (1966-1976), disappearing from public until reinstated, Deng became a champion for “reform and opening up” (gǎigé kāifàng).

On Dec. 13, 1978, at a Communist Party gathering two years on from the deaths of both Chairman Mao and Premier Zhou Enlai, Deng Xiaoping rose to give a speech that would set out his vision for China’s future.  “We need large numbers of pathbreakers who dare to think, explore new ways and generate new ideas,” said Deng. “Otherwise, we won’t be able to rid our country of poverty and backwardness or to catch up with—still less surpass—the advanced countries.”

Five days later, at Beijing’s Hotel Jingxi, a small group of party elite agreed to adopt Deng’s new direction for China, and the rest, as they say, is history.

Amazingly, “in 1981, just three years after Deng’s reform project was launched, almost 90 percent of Chinese people lived in extreme poverty, by the definition of the World Bank. By 2013, that number had dropped to less than 2 percent.”

By 2013, China’s middle class was 500 million; its urban mass, hovering just below middle class and striving to make the jump to middle class, was another 500 million.

This middle class has money and is buying. A look at the extraordinary rise of appliance maker Haier shows the middle-class effect on China’s industry.

Haier Group, “in the last 35 years has been transformed from a failing state-owned refrigerator maker to the world’s largest white goods company with $23 billion in sales in 2017. Its rise to global dominance was cemented in 2016 when it bought GE Appliances, for decades a symbol of high quality.”

Haier is not an exception; it’s the rule in China’s industrial growth.

As Bloomberg recently pointed out, China must now try to avoid falling into what economists call the middle-income trap (see: Dani Rodrik: China’s Boldest Experiment), where per-capita income stalls before a nation becomes rich. “Usually that happens because rising wages and costs erode profitability at factories that make basic goods like clothes or furniture, and the economy fails to make the jump to higher-value industries and services.”

Only five industrial economies in East Asia have succeeded in escaping the trap since 1960 (World Bank): Japan, Hong Kong, Singapore, South Korea, and Taiwan.

China, for this year’s Christmas gift, is hell-bent on becoming the sixth.

Such a leap is impossible to make without modernizing industry with robot-driven automation. In his 2014 speech on core technologies, President Xi Jinping called for a revolution in robotics; and with that speech made a commitment to robot-driven automation.

Here in 2018, Xi and China continue to live up to that commitment, as this recent CNBC headline reports: Why China is spending billions to develop an army of robots to turbocharge its economy. Plainly, the robots and automation are necessary; there are no substitutes, and there’s no going back to depending solely on human labor. Billions of dollars are flowing from the government to subsidize robots, and the flow will continue unabated, even in the face of a trade war.

However, China’s best Christmas gift ever from Deng Xiaoping now needs a critical upgrade, which has now fallen to Xi Jinping to deliver.

The Xi effect
After forty years of “reform and opening up” (gǎigé kāifàng), which besotted China’s skies, polluted water supplies, and poisoned agricultural lands larger than the entirety of Great Britain, a major cleaning of the tables is long overdue.

Even corruption, which drains away the equal of China’s entire defense budget, needs constant rooting out.

That gargantuan undertaking has fallen to 65-year-old Xi, who, like Deng, also ran afoul of the Cultural Revolution, and also survived it. For those lifted out of poverty, it will be up to Xi to sustain them with a quality standard of living.

Ensuring the food supply, trustworthy pharmaceuticals, dependable medical care, reliable transportation, and high-quality, consumer goods, have all fallen on his shoulders.

So too has “reskilling” workers displaced by robot-driven automation. “By 2020, China’s Ministry of Education plans to enroll 23.5 million students into three-year vocational programs designed for the new economy.”

And all the while, the vortex of the middle-income trap swirls menacingly closer.

Automation is how Xi will maintain the sheen on China’s best Christmas gift ever.

See also: Industrial Robot Adoption Key to Productivity
In the West it’s a must-have for the future; in Asia it’s a desperate race for survival.

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