/ 26 July 2013

China dreams of better fields

China Dreams Of Better Fields

Arriving in Beijing, we are reminded: "Check the AQI regularly!"

The AQI, or Air Quality Index, is an app that provides a reading of the levels of pollution for most major centres across China. Beijing and industrial towns such as Tianjin and Shijiazhaung have notoriously high readings. These regularly breach the "severely polluted" and "harmful" levels of 300, recommending one stays indoors.

Not only is the AQI a must-have reference for planning day-to-day activities in cities such as Beijing, it is also the nature of debate around air quality and how it is measured that is interesting. Expats and Beijingers alike challenge air quality readings as much as other topical issues such as food, fashion, politics and the economy.

The AQI has come to represent one of the many new attributes of China today. Rapid economic growth and development have built mega-urban centres the likes of which we have never seen before. These are filled with an aspiring middle class of almost 350-million people – greater than the population of the United States – with growing demands for a better life, higher standards of living and improved services.

It comes as no surprise then that the Chinese model of economic growth is shifting from an over-reliance on fixed-asset investment, heavy industry and bulk export-led growth to a focus on value-added manufacturing, more refined ­services and internal consumption.

The words from the 1989 blockbuster Field of Dreams – usually glossed as "Build it and they will come" – have been adopted wholeheartedly in China. Having rebuilt the country and the economy over the past 30 years, the domestic market will now follow.

This is the next phase of growth. It is characterised by higher degrees of demand and supply-side sophistication along with increasing connected­ness both locally and globally. It also signals the next major shift or moment in the world's second largest economy.

There have been three pivotal moments in China's emergence since the start of the new millennium. The first came in 2001 with China's accession to the World Trade Organisation. This was when the world first recognised China as a market economy, and signalled the rapid opening of this global behemoth.

The second moment was the 2008 Beijing Olympics. This was the event that changed China's image abroad. The world's perception of China shifted with the economic centre of gravity, which was moving decisively eastward, driven by a relentless growth rate and increasing commercial and cultural exposure. Meanwhile, the West entered into the doom-and-gloom cycle of credit crunches and financial crises still evident today.

We are currently witnessing China's third pivotal moment in its evolution towards a modern economy and leading nation. Some have coined this the "Golden Transformation" to follow on from the "Golden Decade" that China has just experienced. We call this "the end of the beginning" or "the end of the first chapter".

This period will be characterised by seismic shifts driving increasing openness and structural change. Never before has modern China had to deal with such profound political, social and economic adjustments simultaneously. Never has it faced so many challenges.

Dramatic changes in the Communist Party of China leadership along with political reforms and bold statements targeting accountability and corruption are coinciding with turbulent economics and deep structural changes. This is all taking place against the backdrop of growing social demands linked to rapid urbanisation, yawning inequality and an ageing population on a scale like no other.

China's citizens may lack a voice on the streets, but they have found one on the internet. Despite the Great Firewall, hundreds of millions of ­netizens have been successful in making themselves heard through social media and forcing change from the government.

China has successfully grown its way out of trouble in the past. But this time is different. With growth edging below 8% – the lowest rate in 30 years – the response to such a confluence of factors needs innovative approaches well beyond simple growth-based solutions.

The good news is that China is prepared. It has both the capacity and the will to implement change and reinvention in key sectors. This is evident in new policies and incentives driving green solutions across the country and the push towards higher quality products orientated around technology and innovation. China's 105 national high-technology parks and the 10000 high-tech companies generating revenues of $161-billion are just part of the comprehensive new model of growth and development that is emerging.

Such progress is also evident in China's internal connectedness. Board a bullet train in Beijing and within one hour you are walking the streets of Shijiazhaung, a second-

tier city of 10.3-million people about 300km away. Such progress in infrastructure and technology has brought faraway people and places closer together and is opening new frontiers of growth all the time. Connectivity and scale must never be underestimated.

While the world debates the broad array of issues confronting China and whether the economy will suffer a hard or soft landing, as based on classical Western orthodoxy, things continue to change and improve on the ground, despite the enormous challenges that lie ahead.

Understanding the context in which China is growing and developing must be taken into account before making conventional assessments of and predictions about its short-term future. Its diverse characteristics will lead it along a unique path to development. China's Field of Dreams mind-set has catapulted the country into a league of its own.

Dr Lyal White is director of the Centre for Dynamic Markets at the Gordon Institute of Business Science, and Kobus van der Wath is group managing director of the Beijing Axis, based in China