South Africa: The Use Of The Chinese Economic Development Model In Africa

Last Updated: 18 September 2014
Article by Kenny Chiu

Most Read Contributor in South Africa, September 2016

After 30 years of reform, China has achieved rapid economic development. In 2010, China surpassed Japan and became the world's second largest economy. Both Africa and China are faced with the tasks of developing their economy, improving people's livelihood and realising social stability.

Can the Chinese economic development model be used in Africa? How can Africa make fast-track developments into the modern era? To answer these questions, we must first explore the Chinese model, and demonstrate the possibilities of applying it in Africa, showing why it would be advantageous for Africa's development.

The success of the Chinese model

Why is China's economic development successful?

The first reason why the Chinese model has been successful relates to reform and relaxation of certain foreign policies. Through reform, China has changed from being a state-controlled economy to being a socialist market economy. The vitality of state-owned enterprises and the market were stimulated by reforming state-owned enterprises, achieving joint-stock transformation, eliminating retrogressive enterprises and establishing a modern enterprise system. China's reform and policy relaxation started almost at the same time as this enterprise reform. By opening up foreign relations, import and export and advanced technology, international funds and programmes started coming to China's coastal and inland areas. China also gradually began to participate in the international division of labour, and was integrated with world affairs.

The second reason why the Chinese model has been successful is that it is based on a socialist system. The political party in power has access to huge political, economic and diplomatic resources and has great control over economic development. Under the control of the ruling party, the Asian financial crisis in 1997 and the 2008 world financial crisis did not fundamentally impact on the Chinese economy.

The third reason why the Chinese model has been successful is because it has a huge influence on the state economy and the state's ambitious development prospects. It is well known that China's state-owned enterprises are the lifeline of the national economy spanning the energy, finance, heavy industry and military sectors. The Chinese companies listed on the Fortune 500 are mostly state-owned enterprises. These enterprises have become popular with their strong resources and political advantages.

Disadvantages of the Chinese model

The Chinese model has had remarkable achievements, however, it also has its disadvantages. Some are caused by historical reasons and some were accumulated during the development process. When drawing on the experience of the Chinese model, Africa must also understand its disadvantages.

The Chinese model has extensively adopted the investment approach but at a low level of development. It depends greatly on resources with a high output per unit, which has a hugely negative impact on the environment by destroying some the ecological balances and violating sustainable development. An example of this is in recent years is that most cities in China have endured serious fog and haze.

Although China has established a socialist market economy, the economy is not fully market-orientated. The various players in the market cannot fairly compete with each other. As the economic pillar of the country, the state-owned enterprises have been enjoying preferential policies in the country and dominate the market, while most private enterprises and micro enterprises in the market are in weak positions. The unfair and non-transparent competitive environment does not comply with the rules of the market economy. In addition, the Chinese government has strongly intervened in the market economy. Many projects related to the national economy and people's livelihood do not involve the participation of private enterprises.

Although China's state-owned enterprises are favoured by the government, these enterprises still enjoy a fair amount of criticism. For instance, their operating mechanism is sluggish. It cannot be determined if they are political organisations or corporations. They have many resources, but operate inefficiently, and a considerable number of them have had successive losses and they are propped up by national policy. Bureaucracy prevails in the state-owned-enterprises and corruption is prevalent. These phenomena indicate that state-owned enterprises, in being the backbone of the economy, have become privileged enterprises. They must be reformed and stripped of privileges that should be returned to the market. Only in doing so can the healthy functioning of the economy be realised.

The Chinese pattern of development is also not balanced. Economic growth is fast but social programmes (the improvement of people's livelihood and proper ecological interventions) are not ideal. The gap between the rich and the poor, housing difficulties, schooling, employment difficulties, and medical difficulties are all disadvantages of the Chinese model.

Africa should take up the advantages and avoid the disadvantages of the Chinese model

Most African countries are developing countries facing the arduous tasks of developing their economies, improving people's livelihood, and achieving modernisation. China's development model can be used as a reference, but cannot be copied. Rather it should be critically implemented in the African context.

The prerequisite for the success of the Chinese model is a stable social environment. Many countries in Africa are politically unstable. To develop the economy, a stable political environment is necessary. There would be no economic development or improvement of people's livelihood without stability. Countries should achieve mutual understanding, actively build trust, and create a peaceful and stable environment for economic development. African countries should work with the African Union (AU) and other regional organisations to accelerate the integration process in Africa. AU member states should uphold the authority of the organisation and ensure that the AU can coordinate the handling of regional and international affairs, thereby guarding the interests of Africa.

The key to the success of the Chinese model is reform. Africa needs to reform because although it is rich in resources, it is at a low level of development with inefficient allocation of resources. African countries should change the outdated economic system through relaxation of certain policies and allowing the market to play a decisive role in the allocation of resources in order to eliminate the institutional barriers which impede economic development, such as taxation systems, industrial policies and distribution policies. Africa should also actively participate in the international division of labour and introduce greater foreign capital to create a favourable investment environment.

Applying the Chinese model, Africa must also deal with the relationship between state-owned and private enterprises. Africa should appropriately position state-owned enterprises; State-owned enterprises must be present, but not privileged. Well-developed market economies should have fair competition between state-owned enterprises and private enterprises. When most private enterprises flourish, there is increased employment and enthusiasm about innovation. Private enterprises, are the most active market players and can promote social innovation and can increase entrepreneurship. The monopoly of state-owned enterprise should be resolutely prevented.

When using the Chinese model, Africa should pay great attention to the construction of an environment that encourages innovation and entrepreneurship. Africa should interact with international public opinion and establish a positive image and create a good operating environment. This will draw foreign investors. Of course, a good investment environment requires governments to shoulder the responsibility and to maintain domestic political stability.

All in all, Africa and China are at the same stage of development and have similar developing features. Africa can learn from China's successful experience, but should not copy the whole model. Africa must maintain political stability, implement reform and foreign policy relaxation, encourage innovation and entrepreneurship, create a favourable environment, and prioritise the development of private enterprises over state-owned enterprises. As long as Africa has multinational solidarity and can make good use of the platform of the African Union, it can accelerate economic development under globalisation and rapidly realise modernisation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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