China’s gigantic strides, ahead of Gambia

Monday, October 02, 2017

Sixty-eight years ago, precisely in 1949, the People’s Republic of China was established.  Sixteen years later, The Gambia was to follow suit in 1965, when the country gained its independence.  But the gap in terms of growth and development between China and The Gambia cannot be fathomed.

The Gambia, after its independence from the British rule, embraced an economic growth model that is predicated on the need to ‘borrow and spend.’  At the same time, China focused on boosting productivity – and the associated emphasis on rapid and large investments in human and physical capital, high savings rates, and an overarching ability to consistently drive towards long-term objectives.

But even up to 1978, according to a World Bank report, China was among the poorest countries in the world.  It gradually took off thereafter.  Since 1979, China’s real per capita income has grown on average, by more than 8 per cent each year. In contrast, per capita income in The Gambia, like many African countries, fell consistently.

China has enjoyed extremely high increases in productivity over the last several decades. Early on, this productivity growth was driven by the agricultural sector, followed by productivity growth in township and village enterprises in the 1980s and 1990s, and then by the privately-owned firms and a restructured state-owned sector into the 2000s.

Beyond growth, productivity increases in China have been dramatically pro-poor.   Between 1981 and 2004, China went from more than two-thirds of the population living on less than $1 a day, to less than one person in ten living in poverty.

Beyond reforms that increased productivity, China has nurtured a population with high levels of human capital. The average years of schooling for Chinese adults (ages 15 and up) rose from 1.5 in 1950 to more than 7.5 in 2010. In China, more than 40 per cent of all tertiary degrees are awarded in science, technology, engineering, and mathematics (the so-called “STEM” fields).

Much of the investment that has fueled China’s exceptional growth has been facilitated by strikingly high savings rates. The most recent data suggests savings rates of about 50 per cent in China.  Some of China’s high savings comes from the corporate sector: enterprises have risen in profitability, and limited access to bank financing has motivated enterprises to save in order to finance their own investments.

Although productivity increases may have been the principal driver of China’s growth over the last 35 years, that growth has come from a variety of sectors: first agriculture, then village enterprises, and then private firms. It seems that whenever one set of productivity-enhancing reforms has been exhausted, the Chinese economy found a new way to reignite productivity growth. Over this period, there has been an ongoing focus on productivity, through a range of policy choices that propelled China towards the goal of sustained economic growth.

While a significant amount of China’s productivity growth has been driven by market reforms, The Gambia’s recent growth has been highly dependent on exports of raw materials and commodities.

While much of the population remains working in agriculture, many have shifted to working in services, the growth of which is mostly restricted to low-productivity activities, such as informal sector trade and production.  The annual growth in the GDP in The Gambia has been accompanied by much slower poverty reduction.

Of course, The Gambia cannot mimic China’s institutions; we must create the conditions to define our own growth path, based on our history, our culture and our institutions.  Various models for structural transformation, as offered by different groups of academics, will need to be adapted to our unique circumstances and conditions. 

Whatever the case maybe, there are very many great lessons that The Gambia can learn from China’s leapfrog.
“‘Happy independence.”
The Point