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Explore China’s Long Road to Wealth and Prosperity: Report on the Field Trip of ISSCAD at Peking University to the Yangtze River Delta Region in 2019

From July 1st to 9th in 2019, over 60 students with different cultural backgrounds of 25 developing countries from the Institute of South-South Cooperation and Development at Peking University were sent to the Yangtze River Delta region in an attempt to conduct field trips to Xiaogang village , Shanghai, Hangzhou and the city of Yiwu concerning their politics, economy, society and culture. Among them, Xiaogang village is the birthplace of rural reform in China; the latter two are the representative metropolis of the Yangtze River Delta Economic Region; Yiwu is hailed as the world’s largest small commodities market.


Some of the students are masters of national development, seeking to finish their “last class” in China by the field trip. While the remainder are doctoral students, the excursion would start their investigations of graduation theses. Before the trip, our students had taken the systematic theoretical courses about national development and public policies for a year. Thus, the field trip serves as the concrete supplement to the abstract theoretical learning.  Always coming to the class with questions in mind, our students thought about and tried to explore China’s long road to wealth and prosperity through the combination of theories and practice, which means they would apply the theories they’ve learned to practice and in turn further improve the theories through practice time and again. Naturally, the secret of China’s success will appear.





“Villagers in Xiaogang are not only China's hero, but also the world's”

In the afternoon on July 1st, Yan Junchang, the head of a production brigade in 1978, Yan Jinchang and Guan Youjiang shared in the exchange meeting their personal experience of signing the “Da Baogan” contract, which is a secret agreement to divide the land, a local People’s Commune, into family plots. Upon hearing this, an Ethiopian student couldn’t help rising from his seat, lauding these pioneers of China’s rural reform as the world’s hero.


In Xiaogang village, it is in the Farmhouse in Those Days(Dangnian Nongjia), which is a small, dingy thatched cottage, that 18 farmers risked their lives to agree to break the law at the time by signing the “Da Baogan” contract, marking the beginning of China’s rural reform. Dozens of students jammed the cottage, imagining the scene of 41 years ago. Out of curiosity, the students pressed their fingers into the red ink as if they were the 18 courageous and wise farmers who were about to leave their fingerprints on the contract. 


What on earth prompted the farmers in Xiaogang village to take risks on that cold winter night in 1978? After the first visit to Xiaogang Village in June 2018, Professor Fu Jun, Academic Dean of ISSCAD of Peking University, led the research team to sort out and write the teaching case of the ISSCAD titled “Xiaogang Village, the Birthplace of Rural Reform in China.” In this case, we can see that “in Anhui Province in 1977, only 10% of the 280,000 production teams in the whole province could barely keep the wolf at bay... In 1978, the drought even worsened the poverty of Xiaogang Village”.


Poverty gives rise to the desire of change, which can serve as the stimulator to the reform. In that way, the Da Baogan spirit of “dare to break through, dare to try, dare to be the first” is the inner impetus that makes Xiaogang villagers become reform pioneers. As Prof. Fu puts it, “Reform requires leadership. Xiaogang’s story tells us that leadership is not about the level of official posts, but the courage of Xiaogang people to think and act bravely and take the first step on the way out of poverty. It is the historical mission of ISSCAD to help developing countries cultivate leaders committed to national development with the successful experience of China’s reform and opening up.”


Other than the “Da Baogan” spirit, ISSCAD students were also amazed by the productivity released by the reform. In the second year, Xiaogang village produced 66,000 kilograms of grain, equivalent to the total yield in the past five years; per capita income rose from 22 yuan to 400 yuan, 18 times as much as in 1978 (data from Xiaogang case compiled by ISSCAD).


The theory of institutional economics discussed in the classroom is abstract, while the old photographs of “bumper harvest in 1979” showing the grain mountain of Xiaogang Village showcased in Fengyang Exhibition Hall, are powerful evidence for that system changes behavior and promotes economic development. In China, Xiaogang’s case shows that the definition of property right is not monotonous, but clear and dynamic, and it’s time-varying and location-dependent.


China took it as a starting point of shaking off poverty. Are there any potential opportunities of other developing countries to release large amounts of productivity? Incentives are often contained in the system, therefore, how to strengthen incentives is a problem that students from different countries need to discuss according to their own national conditions.




Government Builds Market

“State and Market” are two dimensions Professor Fu Jun’s would use to guide students to analyze and deconstruct development problems in the course of Political Economics. “What role does the state play? How does the market bring vitality to the economy? What is the relationship between them? Historically, neither the country nor the market was created, but developed. What are the implications of balanced development in all parts of China?


A large proportion of the trainees are middle and senior government officials from developing countries, who are responsible for their own economic development. Shanghai Pilot Free Trade Zone and Hangzhou High-tech Zone (Binjiang) have become another starting point for them to think about the government’s initiatives.


The establishment of economic pilot zones is an innovation of the Chinese government. Lin Yifu, dean of ISSCAD, has been introducing China’s experience in the innovation to African countries such as Ethiopia for many years, which is to use the strength of the country to attract enterprises from all walks of life to develop the park, concentrating production factors and industrial chains in an industrial park so as to improve production efficiency and reduce production costs.


In Waigaoqiao Bonded Logistics Park of Shanghai Free Trade Zone, VAFA, a female student from Azerbaijani, was delighted to see the high-quality red wine from her motherland going to China and the world. The pattern of stores in the front and warehouse in the back has greatly promoted trade exchanges. In Hangzhou High-tech Zone (Binjiang), the ideas like “As long as it is a talented person, as long as the project is good, capital is not a problem,” and “becoming the nicest angel investor” have warmed us with the concept of China’s “service-oriented government”.


Whether it’s in the Overseas High-level Talents Innovation and Entrepreneurship Base to discuss the details of chip development with entrepreneurs, or to interact with Binjiang government officials, ISSCAD students all felt the Binjiang government’s enthusiasm for learning new things. “Innovation is risky. As a big incubator, Binjiang must create a culture of tolerance for failure. We are also constantly exploring how we can better attract talents, build a capital platform, and figure out the innovation mechanism.”


Then, “What is the comparative advantage of Binjiang? How does it transform its comparative advantage into its cutting edge?”


“Innovation is embedded in the gene of Binjiang, whose greatest advantage is ecology. It is with good ecology that Alibaba and Hikvision, which are world renowned enterprises, have been hatched. For 20 years, our preferential policies have been targeted at high-tech enterprises, bringing together high-tech talents; instead of doing real estate, we have chosen a way of development that is in line with the natural endowment here.” The Binjiang government has given the best answer with its 20-year insistence.


How can such a small city like Yiwu manage to “create gold out of thin air”?


“Yiwu’s success can be attributed to three aspects: tradition, market and the government that builds the market,” concluded Professor Fu Jun. Yiwu is poor in resources, notwithstanding, as early as in the Wanli era of the Ming Dynasty, there was a unique commercial tradition of “feather for sugar ”. The gene of small commodity trade flowed into the blood of Yiwu people. Yiwu gathered small commodities from Yiwu, Zhejiang Province and the whole country (each accounting for one third of the total commodity quantity), which access to the global market through a wide range of logistics networks, information networks and business platforms; the Yiwu government, in the beginning of the reform, positioned the development of Yiwu in the international trade of small commodities. On the one hand, through supporting policies and training programs it can achieve the “development” function and help enterprises “learn by doing”; on the other hand, the Yiwu government should play the its regulation role to ensure the good order of the market.




Industrialization cannot be done at one go

Today, many developing countries are still in the pre-industrial natural economic state, with no complete industrial system domestically. Depending entirely on natural resources, or agriculture and animal husbandry, the country’s economic growth is extremely slow. “Industrialization, however, cannot be done at one go. From status A to status B, we have to go through a process, which may be painful.” Prof. Fu told the students that poverty alleviation needs a little “patience”.


"In pursuit of development, we should not confuse goals with strategic measures to achieve them. Formulating development strategies must be tailored to local conditions. What we need is a dynamic and orderly model to link up different periods of development. Because countries have different starting conditions and are restricted by path dependence, there is no so-called global best practice. In China, as a reform strategy, a transitional dual-track price system has been implemented between planning and market.


“But the wrong order will only end up in failure. For example, in China, reform begins in rural areas (such as Xiaogang Village), in special economic zones (such as Shenzhen Special Economic Zone), then in coastal cities, and then inland. China’s experience shows that reform is an evolutionary process, which is impossible to achieve the overall best but often starts from the local sub-optimal. Trial-and-error and adjustment are needed in the process. In terms of enterprise types, China has also made use of the advantages of low labor costs to develop labor-intensive industries, gradually upgrading to capital-intensive industries, and then to knowledge-intensive industries. Reform must take into account the affordability and learning ability of all participants, step by step, from point to face since rash advance often backfires.


In the factory of Yiwu Mona Socks, there are only a few workers in the production workshop as one colored stocking after another is spit out of the machine’s mouth, then turned inside-out by the workers and smoothed out to complete the last process; in Yiwu Shuangtong Straw Enterprise, a small straw it produced is not only colorful, but also artistic in shape. It also upgraded for the sake of environmental protection to use corn starch as raw material, replacing non-degradable plastics. On the one hand, Mona Socks works for international clothing brands, on the other hand, it is also building its own brand. The domestic market share of Shuangtong Straw is expected to be 60 or 70 percent, while being exported to many international markets. Is the model of focusing on small commodity, going to the global market and supplying foreign brands applicable in other developing countries?


With the rise of labor costs, industrial upgrading has become the only way for China’s development. In Yiwu Geely Automotive Engine Workshop, the smiling faces on the “wall of employee’s smile” has witnessed the joy of Chinese technological innovation; in Hangzhou Infineon Electronics Company, high-quality LED drives bring colors to the Zhuhai-Hong Kong-Macao Bridge; in Hangzhou Zhengtai Solar Energy Company, the solar cells manufactured by robots indicate that some private enterprises in China have been at the forefront of industrial 4.0. In the design and development center of Shanghai China Commercial Airlines Corporation, following the commercial implementation of C919, more new large aircraft models are hatched and designed in the center, which makes China’s industrialization system more comprehensive and mature. However, all of these need to build a platform for continuous learning, that is, learning while doing, because knowledge is mute and can only be learned and improved in practice.


Unlike other developing countries, China’s internet industry has boosted its economy a great deal. Alibaba’s Global trade network, payment system and big data application let ISSCAD students expect more cooperation between their countries and BAT enterprises to share the dividends of globalization and the Internet industry. Against the backdrop of the overall downturn in the automotive industry, Shanghai NIO Automobile Co., Ltd. enhances the new mode of user sharing experience, exploring new ways to the development of new energy resources.




South-south Cooperation: from BRICS Bank to G20

Development and cooperation are inextricably linked. If government, market efficiency and entrepreneurship are the domestic elements of a country’s development, then South-South cooperation makes developing countries focus on the outside of the economy.


In Shanghai, Vice President Zhu Xian explained why BRICS Bank was renamed “New Development Bank”, because he hoped to serve not only BRICS countries but also other developing countries in the future.


According to Zhu, BRICS strives to have its own unique position among several major international financial organizations, that is to establish equal relations with its member countries, only to provide financial development proposals rather than imposing its own views on developing countries; at the same time, in terms of project selection, BRICS will “do certain things and refrain from doing other things,” and concentrate more on infrastructure and sustainable development projects since these projects are more urgently needed in developing countries; BRICS is not an international donor, so it will balance its financial functions with the development needs of developing countries.


"As a bank, we need capital returns. Therefore, we will assess the risks of a project in advance and discuss with the other countries how to mitigate or avoid these risks. NDB cooperates well with the World Bank, and we will learn from the experience of the World Bank, but will not indiscriminately imitate it,” replied Zhu to the ISSCAD students’ questions.


Entering the Hangzhou International Expo Center and visiting the G20 site, you can feel the possibility of another kind of international dialogue and cooperation. In 2016, the G20 Hangzhou Summit placed development issues on the top of its agenda of the global macro-policy framework for the first time, formulated an action plan for the United Nations’ 2030 Sustainable Development Agenda, and collectively supported the industrialization efforts of Africa and the least developed countries for the first time. “At present, with the economic slowdown, the countries of the South need to strengthen cooperation to achieve sustainable and inclusive development,” Prof. Fu said.


“The impossible thing is possible”,said Dore, Minister of State of Ethiopia’s Ministry of Agriculture, expressing his confidence in the country’s economic development at the final sharing meeting. This confidence comes from the wisdom and efforts of the Ethiopian people, as well as from the experience and interpretation of China’s reform and opening up.


“In understanding the nature of your motherland, finding out the developing strategies and learning from each other’s experience, I sincerely hope that China and the other developing countries achieve economic growth together,” said Prof. Fu. It’ s the sincere wish from the academic dean, from ISSCAD and from China before the students returning to their countries.