A new think tank was set up by Tsinghua University in Beijing to disseminate China’s economic experience of reform and opening up in the past 40 years. The Academic Center for Chinese Economic Practices and Thinking, with its suggestive acronym “Accept” is dedicated to understanding and disseminating China’s development experience. In December it published its first report, called “Economic Lessons Learned from China’s 40 Years of Reform and Opening Up”.

China’s economic weight reached its peak in 1600, when it accounted for more than one-third of the global economy. Its share of global gross domestic product (GDP) declined slowly until 1820, when it began to drop precipitously, owing to the Industrial Revolution’s enormous impact on economic growth in the West. By the early 1960s, China’s share of global GDP had fallen below 5%. Then, Deng Xiaoping initiated China’s reform and opening up, and the country’s own growth miracle began. Since 1978, China has lifted hundreds of millions of people out of poverty, and its share of global GDP, now at one-fifth, continues to rise. If China wants to hold up its experience as a model for others to emulate, it must identify the mechanisms that underlay its success and explain why they are transferable. Growth over the past four decades was spurred mainly by the entry of new firms, rather than the restructuring of old ones. Moreover, the distribution of rents from the conversion of agricultural land to industrial and residential use played a vital role in encouraging investment. At the same time, financial deepening was essential to spur entrepreneurial activity and consumption. Opening up also encouraged learning, and, finally, a proactive macroeconomic policy enabled the country to avoid financial crises and smooth out fluctuations in growth.

One key question raised by the report concerns the relative roles of the state and the market. The report highlights how state management and economic liberalization interact. New private enterprises were key drivers of economic growth, but it was the state that created strong incentives for market entry. Entrepreneurs invested heavily in their relationships with government authorities, and the state used market signals to guide resource allocation and evaluate experimental initiatives. Beyond encouraging the entry of new firms, the Chinese state mobilized considerable domestic resources for investment. Even more impressive, the state ensured constant experimentation and learning at all levels of government, which will remain essential as China addresses issues like inequality. But if China is to export its development model in a meaningful way, it will need to overcome a number of additional barriers – beginning with growing international mistrust. Developing countries are also increasingly questioning whether Chinese investment is really helping them.