China’s Pathways to Economic Self-Reliance: Lessons for Ethiopia

Tsegaye Tegenu, PhD
2021-09-06

Self-reliance is a commitment to use the natural and human capital of the country to generate sustainable growth and employment that is not excessively dependent on the outside world for markets, supplies and investments. China has followed different strategies to attain self-reliance and studying the journey and Chinese commitments provides valuable lesson for Ethiopia. The followings are some of the historical stages and strategies of Chinese economic self-reliance:

Commitment to Heavy Industry

Initially Chinese concentrated their efforts in the heavy industry sector even at the cost of agricultural development. Heavy industry refers to the industry which produces capital goods and provides various sectors of the national economy with necessary material and technical basis. It consists of three branches of production: i) mining, ii) raw materials industry, and iii) manufacturing industry. The heavy industries were state owned, where the means of production or income are owned by the state. These enterprises relied heavily on government subsidies through heavy taxation on agriculture.

Commitment to Agricultural Transformation and Rural Industrialization

In the 1940s and 1950s the country had a large subsistence agricultural sector, subject to ravages of nature and a very high population pressure. Growth in the agricultural sector came from land reform and public investment in rural infrastructure and agricultural research. The government policy focused on raising public investments in agriculture instead of input subsidies to farmers. The government spent on agricultural research, education, irrigation system and rural roads and other infrastructure development.

The public investment in agricultural infrastructure and research created demands for quantities of industrial inputs. For example, irrigation systems generate demands for building materials, earth-moving equipment, pumps, power. The constant supply of water and harvest increase demand for an increased fertilizer application. Greater output intensifies the pressure to mechanize some of the work tasks. These inputs were supplied by local and small-scale industrial enterprises in countryside. Rural areas which were previously specialized in handicrafts began to produce industrial inputs as a result of public investment in irrigation systems and transport infrastructure.

Commitment to Growth-driven Urbanization and International Trade

Since the 1970s, heavy industry cities could no longer depend for their growth on the rural economy and domestic agriculture. Large factories which were broken down into subsidiaries and those bankrupted once were pressured to make profit or at least not loose so much money. Theses factories began to produce clusters (a geographic concentration of interconnected firms) with the support of the government. In addition to clusters, in 1978 China opened the domestic economy and the government established numerous special economic zones (SEZs) to attract foreign direct investment and technology. The numerous special economic zones (SEZs) and industrial clusters put considerable pressure on urban planning. Regulations and laws have been issued and amended to reduce restrictions on urban commercial and industrial land use.

Commitment to Rural Market Reforms and Agriculture Productivity

Since the 1978 reform period, urban growth in China (discussed above) became dependent on international trade and much less on rural economy. This shift of interdependence necessitated an introduction of domestic reform in the rural areas for the purpose of increasing agricultural productivity. To attract the rural surplus labor to the growth driven urban centers and to ease the burden on agriculture, and to ensure the self-sufficiency of the rural sectors the government introduced new institutional reforms.

The government introduced the household responsibility system in agriculture, instead of the collectivization policy. “Smashing the communal pot” solved old problems of low labor motivations, inefficient allocation of resources, and low agricultural productivity. Decollectivizing the ownership of productive resources was followed by a policy of encouraging the growth of town-and-village enterprises. TVE were run by local governments and some operated as private enterprises.

Role of Central, Provincial, and Local Governments

In China, economic self-reliance was the principle of not only the central government but also a value shared by all levels of government down to that of the communal and the individual enterprise. Self-reliance at all levels was associated with the way the economy is partitioned for planning purposes. Individual localities and enterprises were encouraged to develop on self-sufficient autonomous lines.

Large factories were self-sufficient like cities unto themselves, with hospitals, schools, housing and cradle-to-grave social programs for their workers. Factory management and work units in many ways served as local and community government. The government supported heavy industry such as steel making, and heavy machine making and large infrastructure projects and supported enterprises that produced an array of goods.

While heavy industries and military complexes were controlled by central government, rural industries were administered at county levels. The localities were free to initiate industrial undertakings without the approval of higher authorities as long as they solve their own problems of finance, equipment and raw material supplies. As the rural industrial enterprises began to grow rapidly, provinces came to play an important role in the coordination and supervision required by economies of scale. During the reform period of the late 1970s, the market structure was changed and there was a very substantial degree of integration as a result of interregional flows of goods, people, and funds.

What are the lessons for Ethiopia?

China has achieved self-reliance at different stages through different approaches and strategies: heavy industry, agricultural transformation (collectivization and commercialization), rural industrialization, growth-driven urbanization, and international trade. Notwithstanding the changes in policy choice and approaches (top-down and bottom-up), self-reliance remained as the means for China’s continued rise within the global economic order. The Chinese have basically remained their own masters, despite China’s increasing dependence on imports and exports. They have not relinquished their “capacity for autonomous goal setting and decision-making”.

Ethiopia’s economy is structurally dependent on the behavior of other country’s economy and politics. The country is excessively dependent on aid (basic needs), energy (oil), foreign exchange (FDI and external debt), international market (agricultural commodities), defense equipment, electronic goods, pharmaceuticals, etc. The country had six decades of planning experience and these challenges have not been addressed squarely to create resilience to negative economic shocks and rapid population growth effects. There is a glaring absence of the idea, principle and use of economic-self-reliance at all levels and in all time and space.

It is now high time that the Ethiopian government and people should commit themselves to the idea and principle of economic self-reliance. Without the idea of self-reliance, economic policies produce hit-and-miss successes, running twice to keep in the same place (menferaget, in plain Amharic word).