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What Drives China’s Success?

On September 19, 2014, Alibaba of China created the largest U.S. IPO in the modern history. Thirty years ago, no one in the world imagined this could happen. Nobody believed that China would be able to grow its GPD at an average of 10% per year, becoming the second largest economy in the world in 2010 and expected to surpass the American economy by 2025. Nobody would believe that China has not only become the “World’s Factory,” but also sent their astronauts into space.  Since 1978, China has lifted more than 500 million people out of poverty, creating one of the largest economic miracles in the later 20th century.

What drives China’s success?  One major explanation is through the introduction of market mechanisms, modern technology and management from the West. Since Deng Xiaoping implemented the open and reform policy, China has experienced rapid productivity improvement. Obviously, learning from the West is an essential contributor to China’s economic growth. However, it alone fails to explain why many other nations in Africa, South America and South Asia were unable to duplicate China’s success, though lots of them have implemented democracy and have little restriction of trade and information.

Alternatively, some scholars attribute China’s success to better governance of the Chinese government. Dambisa Moyo, economist and recipient of the Presidential Medal of Freedom regards China as “new idol for emerging economies.”  Thomas Friedman also gave significant credit to the Chinese government for its ability to get things done quickly by stating “what if we could just be China for one day?”

It is true that the Chinese government has done an extraordinary job in managing a difficult transition from an isolated communist nation, to a largely open, economic driven nation without falling into turmoil. The Chinese government has also successfully implemented many pro-development policies such as Special Economic Zones and industrial development guidelines.  However, the opposite views could argue that the Chinese government has also created many problems, such as serious corruptions, pollution and inefficiency in allocating economic resources, all of which hinder growth.  As a matter of fact, the Chinese leaders have recognized many weaknesses in their governance and President Xi Jinping has called for modernizing China’s governing systems.  Even with the right governmental policies, China cannot achieve success without a highly motivated and competitive workforce—human capital.

I would argue, among the major drivers for China’s success are the Chinese people, the true creator of China’s economic success and the great culture that shapes their characteristics: ambitious, hardworking, thrifty, caring for their families and relentlessly pursuing good education and success.

We all knew the American Dream, a symbol of American ambition. However, people are largely unaware that there are more than 40 Chinese phrases ( Chengyu), to encourage children and adults to have big dream for their future. These motivate Chinese people to study diligently and work hard. Age of Ambition: Chasing Fortune, Truth, and Faith in the New China, authored by New Yorker reporter Evan Osnos, echoes this untold secret of China’s success: Ambition, which is called Zhixiang in Chinese.

The next secret of China’s success is an emphasis on education. Shanghai, China has consecutively ranked the #1 in 2009 and 2012 PISA international student assessment. Each year, China educates about 6-7 million college graduates, 40% with engineering and science degrees. In January 20013, a New York Times article claimed: “Next made-in-China boom: college graduates.”  Chinese educated scientists and engineers are rapidly driving China’s technological advancements and economic growth.  In fact, educated Chinese immigrants have become a major driving force in America’s high tech and engineering industries as well.

Thrift is another secret of China’s success.  With a 25% personal saving rate, Chinese people rarely suffer from personal bankruptcies or foreclosures.  The huge saving by Chinese people have created financial security for many Chinese families, reduced government spending on social welfares, and helped fund many grand infrastructure projects in China, such as the world’s #1 high speed railway system.

The above are just a few examples of how the Chinese culture, predominately Confucian values shapes Chinese people’s characteristics and drive China’s success.  In 1979, Herman Kahn, the world-famous futurist, predicted, “the Confucian ethic—the creation of dedicated, motivated, responsible, and educated individuals and the enhanced sense of commitment, organizational identity, and loyalty to various institutions—will result in all the neo-Confucian societies having at least potentially higher growth rates than other cultures.”   In 1980, Roderick MacFarquhar, the world-renowned China expert and Harvard Professor declared: “That ideology [Confucianism] is as important to the rise of the east Asian hyper-growth economies as the conjunction of Protestantism and the rise of capitalism in the West.”

In my opinion, China’s success is built upon an inseparable three-legged stool: Pro-development government policies, learning from the West, and great cultural values that help create highly motivated and competitive human capital.  Today, the global economic rivalry is not only a competition on governance of a nation, but also a competition on its human capital and cultural values. Any nation who wants to advance their economies needs address both.

This Oped was first published on October 2nd, 2014 by Forbes