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China's 45 Years of Reform and Opening Up: A Journey Through Achievements, Challenges, and Future Prospects ​

1. Achievements

China's remarkable transformation over the past 45 years, marked by unprecedented economic growth, urbanization, and global influence, has earned it titles such as "Wonders in heaven and earth", "The miracle of China", “the title "21st century is the century of China" and “Threats from China”. This assessment reflects a phenomenon where economic growth, outpacing the world for over a decade, has taken place in a nation representing one-fifth of the global population, with a vast diaspora across continents and successful reunification with Hong Kong and Macau, implementing the innovative "one country, two systems" motto.

Initiated by Deng Xiaoping in the late 1970s, economic reforms catalyzed rapid industrialization and urbanization. By 2010, China had overtaken Japan to become the world's second-largest economy, maintaining this position ever since. Joining the World Trade Organization (WTO) in 2011 further solidified China's global standing, evident in McKinsey's analysis revealing it as the largest export partner for 33 countries and the leading import source for 65 nations.

Over three decades, China ascended 69 places in the global GDP per capita ranking. Average life expectancy increased by six years, electricity access became universal, and less than 2% of the population lived below the world poverty line in 2017. Concurrently, China strategically transitioned from a manufacturing-led economy to one emphasizing service and creative industries, signaling a departure from its status as the world's factory.

Ms. Kathryn Shih, President of UBS Asia-Pacific, notes this shift, stating, "Now a lot of things are being created in China, instead of China just being a manufacturing factory." China has become a hub for global industry, contributing 1/6 of the world's GDP and housing all industries classified by the United Nations.

China's comprehensive manufacturing industrial chain, robust production and supply capacity, and advancements in science and technology underscore its pivotal role in the global industrial landscape. The nation stands out in innovative technology industries, emerging economic sectors, and the research and development of technology applications geared towards marketization. China's ability to adapt, innovate, and lead on the world stage reflects its journey over the past 45 years, positioning it as a key player in shaping the future.

1.1 Special Economic Zones (SEZs)

As of 2019, the United Nations Conference on Trade and Development (UNCTAD) reports a global presence of 5,383 Special Economic Zones (SEZs) across 147 countries. These zones are particularly concentrated in three-quarters of developing economies and numerous transition economies. Strikingly, China stands out as the proprietor of over half of the world's SEZs, underscoring its pivotal role in the global economic landscape. Other notable countries hosting a substantial number of SEZs include India, the United States, and the Philippines.

China's commitment to openness and development, since the initiation of reforms in 1978, has led to the continual establishment of numerous Special Economic Zones. This evolution can be succinctly categorized into five distinct phases:

Phase 1 - Special Economic Zone:

Phase 2 - Coastal Economic Opening Zone:

Phase 3 - High-Tech Park:

Phase 4 - New National Area

Phase 5 - Free Trade Zone:

Number of SEZs worldwide, 2019



Total SEZs

Under development

Planned Additional SEZs







Developed economies










North America





Developing economies










East Asia










Southeast Asia





South Asia










West Asia










Latin America and the Caribbean





Transition economies





Least developed countries LDCs





Landlocked developing countries LLDCs





Small Island Developing States SIDS




Source: UNCTAD:

(Zones are tallied based on their legal establishment, excluding 8,368 single enterprise zones (free spots) identified in 18 economies. Special Economic Zones (SEZs) in developed economies such as Australia, Israel, Japan, and New Zealand, along with those in Oceania, are included in their respective economic group totals and the global total.)

Over the 45 years since the initiation of reform and opening up, the development of Special Economic Zones (SEZs) has unfolded in five stages, with a particular focus on two economic stages—the initial stage and the current stage. Many Chinese scholars liken SEZs to a strategy of "bait and catch fish," while free trade zones are seen as a means to "open the door and attract fish."

In recent times, China's attraction extends beyond policy incentives to a favorable investment environment characterized by streamlined procedures, institutional innovation, removal of policy barriers, and reduced investment costs. The government has reduced intervention, liberalized access, and ensured equal treatment for state-owned enterprises, foreign direct investment (FDI) enterprises, and private enterprises. Noteworthy is the introduction of investment prohibition/restriction lists (Negative Lists) in free trade zones, aligning with Vietnam's "List of industries with limited market access for foreign investors." While SEZs concentrate on export goals, free trade zones prioritize trade, logistics, and emerging high-tech industries.

1.2 Private Economic Sector:

The non-state sector's role in the Chinese economy became institutionalized during General Secretary Jiang Zemin's tenure (1989-2002). Under Mr. Jiang's "three representatives" theory, entrepreneurs, or capitalists, have been instrumental in propelling China to its current status as the world's second-largest economy.

The private economy has gradually surpassed the state-owned sector, contributing over 50% of total tax revenue, 60% of GDP, more than 70% of technological innovation, over 80% of urban jobs, and 90% of new businesses in China. This "50/60/70/80/90" formula succinctly highlights the pivotal role of the private sector in China's economic development.

Since joining the WTO in 2001, China's goods exports have experienced significant growth, reaching an estimated $3.6 trillion by the end of 2022. Major export markets include the US, the European Union, and Vietnam.

1.3 Transforming the Economy from Brown to Green:

The concept of "ecological civilization" was incorporated into the political report of the 17th Communist Party Congress in 2007, emphasizing “the creation of consumption habits, economic growth methods, and industrial practices that conserve energy and protect the ecological environment”. Professor Han Qingxiang, Vice Dean of Philosophy at the Central Party School of China, suggests that "ecological civilization" entails “constant improvement in the quality of life, the development of an environmentally friendly and energy-saving society, and the long-term maintenance of energy sources”.

In fact, the concept of "ecological civilization" has been in the discourse of the Chinese government since the 1990s. However, due to objective reasons, the practical implementation of this concept has not been fully synchronized. During that era, Mr. Wen Jiabao, while serving as deputy prime minister, foresaw that "the 21st century will be the century of ecological civilization."

China is experiencing a remarkable surge in the deployment of solar power capacity and the sales of electric vehicles. The rapid pace of adopting clean energy suggests that the nation's economy might soon embark on a sustained trajectory of reducing reliance on fossil fuels, encompassing coal, crude oil, and gas in the coming year.

Bloomberg NEF's projections indicate that China is poised to achieve its peak greenhouse gas emissions this year, a significant advancement compared to the initially targeted date of 2030. This accelerated timeline reflects China's proactive measures and commitment to curbing emissions. A pivotal factor driving this reduction is the substantial contribution of clean electricity, heralding a positive trend in mitigating greenhouse gas emissions within the world's second-largest economy.

Jenny Chase, the lead solar analyst at BloombergNEF, underscores China's pivotal role in shaping the global solar market. Notably, she asserts that China currently stands as the world's largest solar market and anticipates maintaining this leadership position through 2030. This declaration speaks to China's enduring commitment to renewable energy initiatives, particularly solar power, signaling a sustained influence on the global clean energy landscape in the coming decade.

China's recent five-year plans reflect a strategic emphasis on industry restructuring and the pursuit of sustained medium to high growth rates. Reports from the country's media suggest a potential reduction in the GDP target in the upcoming plan, signaling a shift towards prioritizing high-quality growth over sheer economic expansion.

This strategic evolution is notably evident in China's steadfast commitment to renewable energy. The Global Energy Monitoring (GEM) Research Center's calculations reveal the impressive scale of China's solar and wind energy projects. Currently underway or announced, these projects boast a combined capacity of approximately 379 GW for solar energy and 371 GW for wind energy—effectively doubling the nation's existing capacity.

Projections by GEM suggest that if China successfully executes these projects, it will surpass its targets, reaching an extraordinary 1,200 GW of solar and wind power capacity by 2025—five years ahead of schedule. Particularly noteworthy is China's significant investment in solar power alone, amounting to 228 GW, exceeding the collective investment of the rest of the world. Bloomberg reports that China's total investment in renewable energy reached an impressive $495 billion in 2022, constituting 55% of the global investment in this sector.

The surge in green finance is a pivotal driver of China's sustainable economic trajectory, further aiding in emissions reduction. China has proactively constructed a multi-tiered green financial market system, solidifying its position with substantial loans and bonds in this burgeoning sector. According to estimates from the CICC Global Institute, green investment capital in China soared to nearly 2,600 billion yuan in 2022—a remarkable 20% increase from 2021. Forecasts indicate that the growth momentum of green investment capital will continue to outpace traditional industries like real estate and infrastructure in the coming years. This underscores China's unwavering commitment to environmentally conscious financial practices, fostering a sustainable economic landscape.

1.3 Chinese Science and Technology: From Imitation to World Domination:

In 1964, China initiated economic relations with Western countries, signing agreements focused on "strategic partnerships" and deploying advanced technologies. The construction of Special Economic Zones (SEZs) has significantly contributed to China's transformation into the "world's factory" and facilitated the circulation of highly qualified students, fostering a global scientific community.

As highlighted in a report by the Australian Science Policy Institute (ASPI), China leads in global technology competition, surpassing the United States in 37 out of 44 critical technologies, including 5G, 6G, hydrogen, electric car batteries, nano materials, advanced coatings, supercapacitors, and supersonic technologies. Experts predict that China will possess exclusive capabilities in these technologies in the near future.

China's growth has been particularly pronounced in emerging areas, with a notable dominance in green vehicle technology, where it is anticipated to account for 60% of the world's electric car market in 2022.

According to the World Intellectual Property Organization (WIPO), China ranks among the top 11 in the "global innovation index," considering factors such as the political environment, human resources training, infrastructure, and financial markets. Scientific research projects in China have demonstrated a continuous shift from quantity to quality.

In the classification list of global research organizations published by Nature magazine, the Chinese Academy of Sciences (CAS) has surpassed renowned institutions such as Harvard University (USA), the Max Planck Society, and the French National Scientific Research Center (CNRS). The CAS, with over 60,000 researchers, stands twice as large as the CNRS, traditionally considered the world's largest research organization.

At the individual researcher level, China's strategy involves recruiting top talents globally, gradually cultivating a new generation that shines on the international stage. The latest rankings reveal that China boasts 304 researchers in the Top 10,000, 1,982 in the Top 50,000, and 4,178 in the Top 100,000 scientists with global influence. In contrast, France, with a population nearly half the size, has 177, 1,214, and 2,856 scientists in the corresponding categories.

This evidence underscores China's standout position in science and technology, both in terms of quality and influence, surpassing most major Western countries.

At the level of higher education and research institutions, international rankings demonstrate a breakthrough for China. Notably, there are 16 Chinese organizations in the top 25 of scientific influence globally, as per the Leiden ranking.

The comprehensive information presented showcases China as a nation with distinct research and innovation capabilities, actively competing with and even surpassing the scientific superpowers of the world.

2. Points Worth Noting

2.1 Supply Chain and Supporting Industries:

Official data underscores China's crucial role as the primary supplier to the United States for home appliances, beds, night lights, toys, and sporting goods. The dependence on China is so substantial that several American companies, despite attempts to relocate production, have either returned or partially shifted operations back due to the absence of a superior alternative. Businesses relocating from China often find themselves collaborating with Chinese suppliers in new markets or importing raw materials and equipment from the Asian giant. Consequently, many American businesses reluctantly acknowledge that finding an alternative supply chain to China is a formidable challenge. This sentiment is encapsulated in the phrase, "It can only be China," reflecting the frustration of American fashion companies unable to identify a viable alternative supply chain.

Despite efforts to tighten sanctions and restrict China's access to U.S. technology, major Washington-based technology companies persist in relying heavily on the billion-dollar Chinese market. Even after a five-year period of attempted disengagement, this dependence has witnessed little change.

2.2 Exclusive Position in Minerals:

China boasts a near-monopoly, supplying nearly 90% of the world's processed rare earth elements and standing as the largest producer of lithium. Its dominance in the global mining market isn't solely due to extensive reserves but also stems from the expensive, intricate, and environmentally risky mining and processing processes. Acknowledging this reality, the CEO of Raytheon, a leading missile manufacturer, recently conceded in the Financial Times that ending dependence on Chinese supplies is nearly "impossible." While measures can mitigate risks, complete separation remains an elusive goal.

2.3 Developing Logistics System:

China's dominance in maritime infrastructure is evident, boasting an impressive 76 ports capable of accommodating large vessels carrying over 14,000 20ft containers each. In stark contrast, South and Southeast Asian nations collectively possess only 31 such ports. MDS Transmodal, a data provider, reveals that large container ships contribute significantly, comprising approximately two-thirds of cargo capacity on maritime routes between East Asia and Europe.

Mike Garratt, director of MDS Transmodal, emphasizes the necessity for substantial investments in ports across emerging Asian markets to contend with the container volumes handled by China. Glenn Koepke, the general manager of FourKites, a supply chain monitoring company, underscores China's unparalleled manufacturing and transportation prowess.

According to MDS Transmodal, Shanghai port, China's largest, facilitates 51 weekly freight services to North America—more than double the services of any hub in South Asia or Southeast Asia. Even Ho Chi Minh City, a key port connecting Southeast Asia with North America, manages only 19 services a week.

This capacity disparity underscores China's strategic investment in port infrastructure, with the Shenzhen-based Qianzhan Industrial Research Institute reporting a staggering $40 billion investment between 2016 and 2021. This investment equates to the capability of handling 275 million 20-foot containers in Chinese ports in the previous year, representing 80% of the annual container handling capacity of all South Asian and Southeast Asian countries combined.

China's appeal to multinational companies is further bolstered by abundant human resources, efficient highway and railway systems, and a vast consumer market. The recent challenges posed by the pneumonia outbreak shed light on the substantial costs associated with dependence on Chinese production. Ana Boata, Head of macro research at Euler Hermes, estimates a weekly loss of $26 billion in global trade as Chinese factories close. Nikkei Asian Review references another study indicating that every $10 billion decrease in Chinese production corresponds to a $6.7 billion reduction in global production.

The Eurasia Group's recent risk report highlights China's emergence as a leader in clean energy and technology development, particularly in batteries, solar energy, and wind. The commitment to carbon neutrality by 2060 positions China to surpass the United States in green development, earning diplomatic points on the global stage. Despite setting ambitious goals in 2020, including completing a comprehensive and moderately prosperous society and the 13th Five-Year Plan, China's declarations fell short of grand ambitions.

3. Challenges and Issues Raised

The World Bank issues a cautionary note on China's economic deceleration, predicting a global ripple effect, particularly on nations reliant on exporting raw materials and equipment to China. Despite being the primary market for numerous countries, spanning from Australia to Uruguay, consuming substantial quantities of iron ore, agricultural products, food, energy, and raw materials, China's economic downturn poses challenges. The country's reliance on external technologies has impeded its journey to becoming a "manufacturing superpower," a sentiment echoed by Mieu Vu, former Minister of Industry and Information Technology, emphasizing the vulnerability of China's manufacturing industry due to heavy dependence on American high-tech products like semiconductors.

China's remarkable achievements in recent years are marred by persistent challenges such as being "big but not strong" and "comprehensive but not good enough." Barriers to the manufacturing sector's development, including tax pressure, a scarcity of skilled personnel, and the immediate need for increased financial support, add to these challenges.

The wealth gap and environmental pressures in China are anticipated to escalate, with about 100 million people experiencing a Western European standard of living, 400 million being well-off, and a significant 900 million people classified as poor, with approximately 80 million being genuinely impoverished. Despite being a champion of green energy, China faces criticism for its continued reliance on coal, as evidenced by the approval of numerous new coal-fired power plants in early 2023.

While China has made significant progress in reducing air pollution, particularly in cutting PM2.5 fine dust density by 27% and sulfur dioxide by 55%, challenges persist. Ozone emissions increased by 11% during the same period, and the combination of ozone and NO2 presents a formidable barrier to China's pollution control efforts, contributing to hundreds of thousands of premature deaths annually.

China's economic boom over the past four decades, driven by investments in factories, infrastructure, and hard platforms, has propelled the nation to global export superpower status. However, this growth model, with capital comprising 44% of annual GDP from 2008 to 2021, has led to a staggering total debt exceeding 300% of GDP in 2022, surpassing the US. Localities resorting to off-balance sheet capital have accumulated debts exceeding $9,000 billion, as reported by the IMF.

Recognizing the limitations of past growth patterns, Chinese President Xi Jinping conveyed a decisive shift away from borrowing to expand the economy in 2022. The parallels with Japan's lost decade, marked by deflation, economic stagnation, a declining real estate market, and financial stress, raise concerns about China's trajectory. Factors such as overinvestment, a real estate bubble, financial imbalances, population aging, and potential productivity challenges contribute to the complexity of China's economic landscape, underscoring the enormity of challenges for the world's second-largest economy. Analysts suggest that the unfolding crisis is unpredictable, as reported by The New York Times.

4. Lessons for Vietnam

Vietnam shares an extensive border with a neighboring country that surpasses it in various dimensions: area (28.6 times larger), population (15.2 times more populous), and economic scale based on purchasing power parity (PPP) - a staggering 45 times. Additionally, China's GDP per capita is 2.3 times higher, and its export scale dwarfs Vietnam's by 17.9 times. Beyond being a significant neighboring nation, China holds the status of a global leader, influencing countries and territories worldwide and sharing deep-rooted historical, cultural, and political ties with Vietnam.

In navigating this dynamic relationship and drawing valuable insights, Vietnam can learn from several key areas:

1. Construction and Development of Special Economic Zones: Understanding and implementing successful strategies for establishing special economic zones can spur economic growth and development.

2. Attraction of Foreign Direct Investment (FDI): Leveraging effective methods to attract FDI is crucial for fostering economic expansion and diversification.

3. Science and Technology Advancement: Embracing and advancing in the realm of science and technology is vital for staying competitive on the global stage.

4. Human Resource Development: Prioritizing the development of a skilled and adaptable workforce is essential for sustained economic progress.

5. Supply Chain Development; Logistics, Railways, Seaports: Enhancing and optimizing supply chains, logistics, and transportation infrastructure can significantly boost efficiency and competitiveness.

6. Ecological Civilization and Green Economy: Embracing ecological civilization principles and fostering a green economy aligns with global sustainability trends.

7. Real Estate Market Development: Learning from successful real estate market strategies contributes to balanced urban development and economic stability.

Vu Huy Hung

Department of Information and Trade Promotion - VIOIT