Pragmatism drives China's economic transformation

As the global economy becomes increasingly fragmented and countries struggle to sustain long-term growth, China's economic transformation offers experiences that transcend its borders.

Over the past four-plus decades, China has orchestrated one of the most extraordinary economic transformations in modern history. Since the launch of reform and opening-up in 1978, the country's economy has registered one of the fastest growth rates ever recorded by a major economy in the world, expanding at an average annual rate of close to 9 percent. In the process, China has lifted hundreds of millions out of poverty, become the world's second-largest economy, and emerged as a major driver of global trade, investment and innovation. Today, China accounts for nearly a fifth of global economic output and remains the largest contributor to world economic growth.

The significance of this achievement lies not simply in its scale, but in what it reveals about the process of economic development itself. Too often, discussions of China's rise focus on whether it "validates" a particular model of "capitalism" or "state intervention". This misses the larger point.

China's success reflects a pragmatic willingness to experiment, adapt and evolve as circumstances changed.

Four key experiences remain highly relevant today.

First, development is an evolving process, not a rigid blueprint. Unlike many countries, China pursued gradual and sequential reform. Agricultural reforms came before industrial reforms. Special economic zones served as testing grounds before market-oriented policies were expanded nationally. Successful experiments were scaled up, while unsuccessful ones were revised or abandoned.

This pragmatic approach generated political support, reduced social disruption and allowed policymakers to learn from experience. For developing countries, the message is clear: Successful reform is often less about finding the perfect design than about creating institutions and mechanisms capable of learning and adaptation.

Second, markets and governments are not rivals. For decades, development debates were framed as a choice between state-led and market-led growth. China's experience suggests that this is often a false dichotomy.

Markets provide incentives, competition, entrepreneurship and efficiency. At the same time, the government plays an important role in maintaining macroeconomic stability, investing in infrastructure and education, and supporting long-term development objectives. Sustainable development requires capable markets operating within an effective policy and institutional framework.

Third, openness is a powerful engine of growth. China's integration into the global economy accelerated technology transfer, attracted investment, expanded exports and exposed domestic firms to international competition. Participation in global markets has transformed China from a largely closed economy into a manufacturing and technological powerhouse. This shows that national development and participation in the global economy can be mutually reinforcing rather than contradictory.

This is particularly important today. Rising geopolitical tensions and growing protectionist pressures have led many countries to reassess economic integration. While legitimate national security concerns cannot be ignored, history suggests that openness generally leads to faster growth, higher productivity and greater innovation. Countries that isolate themselves risk limiting their own development prospects.

Fourth, economic miracles rarely occur without sustained investment in infrastructure, education and human capital. China's modernization was supported by massive improvements in transportation, communications, energy systems and public services. Equally important was the steady expansion of educational opportunities and scientific capacity. China now produces more than 5 million STEM graduates annually, providing a strong foundation for continued technological innovation, industrial upgrading and future productivity growth.

China's growing strengths in advanced manufacturing, renewable energy, digital technologies and artificial intelligence reflect investments made over many years. For policymakers elsewhere, the implication is clear: Development requires long-term vision and persistent effort. The foundations of future prosperity are often built decades before their full benefits become visible.

China's experience also highlights an often-overlooked reality: Development success brings new challenges. The factors that drove China's rapid growth in earlier decades — a growing labor force, rapid urbanization and exceptionally high investment rates — have become less powerful. Aging population, property-sector adjustment, slower productivity growth and a more challenging external environment are reshaping the country's economic landscape.

As a result, China is entering a new phase of development. While annual GDP growth rates once regularly exceeded 10 percent, China is now transitioning toward a more moderate pace of expansion. However, annual growth of around 4 to 5 percent in the coming years would remain impressive for an economy of China's size and would continue to place it among the major contributors to global economic growth. Future growth will depend less on the accumulation of labor and capital and more on innovation, technological progress, productivity improvements and domestic demand, particularly consumption.

In this sense, China's next challenge is fundamentally different from the previous one. The question is no longer how to move from low-income to middle-income status, but how to move to the technological frontier and achieve sustained long-term high-quality growth. Whether China succeeds will depend on its ability to continue reforming and adapting.

Economic development is never a finished project. Countries that succeed are not those that discover a permanent formula for growth. They are those that continuously adjust to changing domestic and international conditions.

China's rise cannot simply be copied elsewhere. Every country's history, institutions and circumstances are different. But China's experience does demonstrate that sustained development is possible when policymakers combine long-term vision with practical flexibility, openness with stability, and market dynamism with effective institutions. The world may not be able to replicate China's experience, but it can still learn from it.

To achieve successful development, solving real problems, learning from experience, maintaining the flexibility to adapt as circumstances change and ultimately improving people's lives are crucial. In an increasingly uncertain world, that may be by far the most relevant experience today.

The author is an advisory professor at Shanghai International Studies University and a former secretary of the International Monetary Fund.

The views don't necessarily represent those of China Daily.

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