The Chinese Communist Party is celebrating its 100th anniversary, confident of making China the superpower of the 21st century. In purchasing power terms, it has overtaken the US as the world’s biggest economy, and will soon do so in dollar terms. It has become a world leader in high-tech areas like solar energy, battery storage and 5G telecom. The US seeks to curb China’s rise by banning exports of technology and curbing imports from it. China views this more as a compliment than a threat.
Other Communist economies, led by the USSR, have collapsed. Even at their zenith they never matched China’s current prowess. The Chinese Communist Party succeeded dramatically whereas its compatriots elsewhere failed miserably.
Historians will give credit to several people — Mao Zedong, who re-established the Chinese state after 150 years of colonial humiliation and civil war; Deng Xiaoping, who ushered in radical economic reforms that abandoned conventional ideology (he declared “to get rich is glorious”); and Xi Jinping, who has led the transition from a cheap-labour economy to a high-tech powerhouse.
Yet I would say China’s success owes most to Lee Kwan Yew, who was not a Chinese citizen. As President of Singapore, a Chinese-majority country, he took it from colonial poverty to a per capita income of $59,780, well above China’s $10,504 and close to America’s $63,544.
Mao sneered at Lee as an American puppet who would come to grief. Instead, Singapore’s per capita income skyrocketed to overtake that of its former colonial master, the UK ($40,285). A Communist when young, he later turned capitalist. He achieved astounding success by combining iron-fisted political control with a globalised market economy that welcomed foreign trade and investment as the keys to prosperity, totally rejecting the traditional Communist model. Deng Xiaoping recognised Mao’s failure and Lee’s success and steered China towards the Singaporean model. The rest is history.
Some similar lessons came from the other two Chinese-majority states, Taiwan and Hong Kong. But Hong Kong was a British colony, while Taiwan was the renegade rump kept independent purely by US military support. Politically, these could never have become role models for Red China.
Yet Taiwan had become 20 times richer in per capita terms than Red China by 1980. Hong Kong is richer today than its ex-colonial master (per capita income $46,323). So, all three capitalist Chinas prospered mightily by becoming what Mao derided as “capitalist roaders.” Of the three, the most remarkable was undoubtedly Singapore under Lee.
Mao united and rebuilt a country shattered by more than a century of colonial humiliation and civil war. He eroded this success by his horrific errors of the “Great Leap Forward” that in 1958-62 took the lives of around 30 million people, followed by the Cultural Revolution that virtually created another civil war to upend his political rivals.
Unlike Stalin, Mao did not shoot all dissidents, but sent them to “re-education camps.” After his death, these dissidents, led by Deng, assumed power and brought radical changes, many influenced by Singapore’s success.
Mao was a rigid Communist ideologue, but Deng saw how Red China had been beaten hollow by the three other Chinas, especially Singapore. Abandoning conventional ideology, he said it did not matter if a cat was white or black as long as it caught the mouse.
Lee held free, fair elections in Singapore. But he used draconian defamation laws to bankrupt or jail critics, creating what in practice was a one-party state. Censorship was used judiciously but the fax and later the internet allowed access to global critical views.
Lee saw that high productivity was the key to prosperity and needed foreign investment and trade. These were facilitated by low taxes and incentives for select industries. Huge public sector companies provided world-class infrastructure — ports, water, electricity, education — but the production of goods was left to the private sector. Foreign investment was emphasised to access the best technology, management, and marketing knowledge. Lee opted for a low-key foreign policy posture, something Deng also followed.
Lee said welfare was the job of government and production was the job of business. He proved that the combination could produce record-beating growth and prosperity. He crushed corruption relentlessly, a rarity in developing countries. He paid civil servants only modestly less than they could earn in the private sector. He slashed red tape to zero or the minimum consistent with global quality standards. Dispute settlement was quick and fair.
While Deng learned much from Lee and launched China’s economic miracle, Xi Jinping is now reversing gear, bringing in Maoist touches. Will this blunt China’s rise? Read about that in next week’s Swaminomics.