What are some important differences and similarities between the Chinese and British economies?

Shenzehn in south China shows the current emphasis on ‘harmony’ in Chinese economic thinking

What are some important differences and similarities between the Chinese and British economies?

This is a question that has been raised by some of our SACU members. I must make it clear from the start of this article that I am not an economics expert. What I’ll do in this blog is to share some of my understandings and open a space for others to share theirs.

To write this blog as always I’ll draw on my own first-hand experiences in China. However I will also be drawing heavily on an excellent recent book called ‘The New China Playbook’ by Professor Keyu Jin of the London School of Economics. If you’re fascinated by this topic I really recommend you read this.

This is a business partnership by WH Smith locating stores in Chinese airports

The strength of China’s economy is a subject of constant speculation. One reason for this I’m sure is an ongoing disbelief about how China can have made so much progress in such a short period of time. On a day to day basis it certainly feels as though the Chinese economy is in good shape.To the best of my knowledge there are no food banks anywhere in China. I have travelled to some of the remotest villages in what used to be the poorer areas of China and seen no signs of this type of poverty. I vividly remember in one Guizhou village where the people were still living in traditional houses, a large red banner was hanging across a wall celebrating the first ever students from the village to be accepted into the local university.

As someone who has worked in the education sector all his life I tend to see the quality of education as a critical factor in the economic health of a country. Just as in the UK, the private Chinese education company that I work for, provides alternatives to state education. When I started working here ten years ago, I was frequently told by parents and students that limitations in the state sector were driving them to consider buying our education services. Ten years later improvements in state schools in Beijing mean that I hear this complaint a lot less often.

At the same time, I can gauge the strength of the economy by ongoing increases in the demand for private, fee paying education. In the spring of every year there are education fairs in very up market Beijing hotels where an increasing number of schools compete for the attention of an ever increasing aspirant Chinese middle class.

The author’s school team at a Beijing Education Fair

Another factor in Chinese economic success that I have seen for myself is the distribution of the new wealth of the country. In the UK we have a version of this in the arguments about ‘levelling up’. The Chinese have their own parallel term – 小康社会 – xiǎokāngshèhuì, which translates as ‘moderate prosperity for all’. This is strongly linked to the concept of 和谐社会 – héxié shèhuì, which can be translated as ‘a harmonious society’. The meaningfulness of this economic goal can be seen first hand again by visiting the remoter Western areas of the country. Again in Guizhou, I remember standing in the countryside, looking down the sweeping modernity of a newly laid highway, stretching from horizon to horizon. At that point there were ten locals and a couple of buffalo using it to get from village to village, which might have made it seem an inappropriate investment. But the very same road is now carrying tourists by the busload and all of their rmb into the local economy and at the same time carrying tonnes of local produce out of Guizhou to wealthy consumers in the cities who can pay above the board prices for ‘fresh’, ‘organic’, ‘grown in Guizhou’ produce. Every week in Beijing I bring my teacher team new fruit to try from a different region of China.

Modern infrastructure in rural Guizhou

Another example of this economic resilience and innovation is the boom in ‘live-streaming’. Investment was key. 5G digital infrastructure has been installed in most rural regions of China. This has enabled all sorts of local entrepreneurs to take to the internet, promoting locally grown fruits and vegetables and locally made products in an amazing diversity of new formats.

Turning to the research of Keyu Jin, we find evidence to support this diversification of the Chinese economy. She argues that one of the misleading misconceptions about the Chinese economy is that it is all centralised and state run. She reports that contrary to this, one of the critical factors in the growth of China’s economy has been the success of de-centralisation.

‘It is local officials in provinces, municipalities, counties and towns who push for local development, meet growth targets, implement reforms and attract foreign investment. These are the local cadres who have transformed fishing villages and rural backwaters into modern export hubs, manufacturing centres and high tech economic zones.’

I have first hand experience of this too. One of the ambitions of local officials across China is to secure improvements in education. As illustrated by the story of the red banner celebrating the first university entrant, educational achievement really matters. Behind this is the centuries old tradition of the kējǔ – the Imperial Examination, which from 650 CE until 1905 enabled the smartest and most aspirational from any level in society to enter the equivalent of the civil service.

The Chinese Education company that I work for is part of the China Dream of levelling up education provision. Along with other company officials I am invited to meet local government members and entrepreneurs to discuss the possibilities of opening one of our schools for families and communities there. This takes place even in what appear to be relatively small, modest towns. These local committees are incredibly professional, earnest and well informed. Sometimes they proudly show us models of the infrastructure and developments they are working towards. They know that there are virtuous cycles of economic development to pursue, because better quality schools attract hard-working aspirational families and produce better educated, higher qualified young people prepared for the high tech industries now flourishing across China.

Live streaming is a significant new economic tool

There is a further benefit of this economic de-centralisation. In effect it generates the capacity for economic experiments to take place in a controlled way. There are incentives for private and local government innovation at a grass roots level. It won’t surprise you to hear that for politicians the rewards of successful economic management at a local level are opportunities to move to the larger cities or more developed areas and bring in new thinking, building on existing economic success in innovative ways.

The reverse of this is also true. There is a form of rotation which means that leaders from the cities are in turn transferred to smaller areas, allowing them to bring in economic ideas tried and trusted to see if they have the same benefits in rural settings. For enterprises this same flexibility allows for the small scale trial of new products and services in controlled local markets. If successful, these can then be scaled up across wider markets.

Linked to this, another piece of first hand evidence of my own, is a high degree of entrepreneurial thinking amongst young people in China. As part of my job I speak to countless Chinese young people aged between 15 and 18. It’s worth pointing out that the parental demographic of these students is not one of wealth or privilege. The overwhelming number of parents of these young people have come from cities and towns outside of Beijing, from hard-working, aspirational families. When I talk to them about the opportunity international university education will bring to gain lucrative, stable employment with international corporations, most say this is not what they want. Their instinct is to set up their own businesses and have more direct control of their economic lives. There is a Chinese phrase for this – xiàhǎi – which literally means to ‘go into the sea’, but has the modern meaning of stepping into the large and unpredictable world of managing your own business. Some of my students even prefer this to following the traditional university route.

For example, one young man turned down international university places to start his own highly successful rap music clothing brand and now, in I think a highly typical Chinese business decision, is ploughing the profits from the clothing label into opening an international school in his home town. I absolutely will not support any thoughts of a ‘Chinese entrepreneurial gene’, but it is self-evident that both economic growth in China and an entrepreneurial culture are currently coming together to create an environment in which there are high levels of confidence about beating the risks attached to being your own boss.

Many young Chinese aspire to xiàhǎi ~ to open their own business

Another theme which Keyu explores is the critical role of technology in driving Chinese economic growth. China’s investment in ‘research and development’ is staggering. In 2022 the United States invested 760 billion dollars in research, with China breathing down its neck at 620 billion. We can compare this to 84 billion in the UK. There are times as you travel around China where this scale of investment becomes something you can see and even taste for yourself. Chongqing, the city where Joseph Needham was based in the 1940’s, is now a mega-city of 15.4 million people. There are times when it looks and feels like a city from a futuristic science fiction movie like Bladerunner. It was here, for example, that I witnessed my first 3D advertising hoarding, with a hologram appearing to come out of the flat screen and become a ‘real entity’. Many hotels in China now have robot waiters who will collect food or other deliveries in the hotel foyer and bring them to your door. At an education fair in Beijing, I had my first experience of fully immersive virtual reality driven learning. I pulled a pair of VR goggles over my eyes and found myself inside a digital environment that brought a classical Chinese poem to life, with voices, film, animations and music.

As the arguments about computer chip technology between China and the US show, China is pushing hard to be at the cutting edge of new technology. However as Keyu points out, the real driver in contemporary China is not currently pure innovation, but the innovative application of technology in new forms of business. There’s a commonplace statement that the ‘new oil of business is data’, in other words that just as oil drove the economic growth of the 20th century, so data is driving the economic success of the twenty first century. If that is true then China is at the forefront of driving this digital transition. Digital transactions are already deeply embedded in Chinese business practice. Here in the UK I pay electronically by tapping my bank card. In China every transaction goes through ‘we-chat’, a social media app which started as a Chinese version of ‘WhatsApp’, but is now embedded in the finances of nearly every Chinese citizen.

Keyu’s research includes some amazing data. She claims that any given day in China, the number of digital payments exceeds those made in the US in a whole year! She states that on-line food delivery is ten times more prevalent in China than in the US.

Don’t get me wrong, I can see from a sustainability point of view that there are environmental concerns linked to this volume of consumer activity and I constantly bemoan the amount of protective plastic which surround every delivery in China. However, from a simply economic perspective, consumerism is a significant driver of economic health in China.

Here’s a final example from first hand experience. We recently had an end of year show at school, with some lovely costumes for the children. A mother in front of me held up her mobile phone and I was sure she wanted an adorable photo of her child. Amazed I watched as she used a number of APP on her phone to identify the fabric and design of the costumes, to create an AI driven image of how she might look in a similar costume, identify the on-line creator and seller for the outfit (a small independent retailer) and complete an on-line retail purchase which meant she would be wearing the new outfit for the following day! And all of this in ten minutes while still watching the show.

Is this ‘shopaholic’ behaviour, or does it streamline the shopping process to a point where it fits unobtrusively into a life full of more meaningful activities?

3D advertising hoarding in Chongqing city

Finally in this introduction to my impressions of the current economy of China, I have to comment on the transition to a ‘green economy’. Coming to the UK in the midst of the current election, it seems there is still uncertainty about whether this is the right path to the future. Once again, with its determination to put in place infrastructure which supports further development, China is investing in a clean energy future right now. Wherever you travel in China the numerous mountain tops are now sprouting with elegant white rows of wind turbines – the onshore wind farms that are proving so controversial here in the UK. In 2023 the data tells us that China made one third of total world-wide investments in clean energy. In 2022 the amount of clean electricity generated by wind turbines grew by 66%. In 2023 industries involving the three clean energies of lithium batteries, solar cells and electric vehicles grew by 30%. If you have been watching the current European Football tournament, I’m sure you’ve noticed that a major sponsor is BYD. If you’ve never heard of the BYD, ‘Build Your Dream’, is a Chinese company which until 2009 was a manufacturer of car batteries. In 15 years it has grown to become the world’s largest supplier of plug in electric vehicles. It employs 704,000 of whom 102,000 work in research and development.

Enormous on~shore wind~farm in Gansu Province

As I said at the start, this article is non-judgemental. I have simply tried to set out important components of the economic system in contemporary China, both from my own experiences and the well received research of Keyu Jin. It’s my view that there is much here that the United Kingdom could learn from and potentially partner with, but it’s for you to reach your own conclusions on this.

What is objectively undeniable is that economic changes in China will continue to have important consequences for the world as we go forward. The Oxford University professor, Peter Frankopan, in his thought-provoking book, ‘The Silk Roads, a new history of the world’,published in 2015 makes the argument that what we are living through is not a new economic trend in the world, but actually a return to the situation from the fall of Rome through to the industrial revolution, where the Chinese economy was pivotal to the world.

If this should turn out to be the historical reality, then bridges of understanding to the people and economy of China will be more vital than ever.

Taking a long view of the Chinese economy and how it relates to the world