China is not the first country to industrialize but it leaped from poverty to world economic power faster than any nation in history and within a space of thirty years.
But how did China achieve this feat? First Chinese leaders believe in infrastructure. They knew that modern economy runs on reliable roads, rail, electricity and telecommunications. So China spent on them more than any nation on earth. Its latest infrastructure plan, the Belt and Road infrastructure plan or the 21st Century Maritime Silk Road is to cost $1 trillion. China has goal to link itself with the neighbouring Asian countries and it is bringing its rural infrastructure to the standard of Middle income countries. After doing that, China intends to use efficient transport logistics of road and rail to knit the country into one big entity linked to the whole world.
Which country has such ambitious plan? Before all the above achievements, China knew the damage corruption can wreak on its plans. The leadership has achieved impressive results by punishing well over one million party officials since 2001. The anti-corruption campaign has snared hundreds of high-level leaders – including, most recently, former Chongqing Communist Party General Secretary and Politburo member Sun Zhengcai. China has executed many top officials for stealing.
Nigeria can take a cue from China on infrastructure spending, but it must also take very harsh and overwhelming stand against corruption.
China became a world economic power house with breathtaking speed that leaves the world in awe. How did it do it? The Economist studied Chinese businesses and came up with answers. I wholly agree with the London based magazine. I am recapping the answers as a model for Nigeria to follow. After all, the ends justify the means.
China does not play fair trade. Its competition among world trading and manufacturing nations is both illegal, intense and unfair.
1- Illegality- China steals copyright more than any nation. It spies on company secrets using state apparatus to steal technology for its industries. It has stolen technology from Toshiba, GE, Siemens and many global brands and came up with products of its own, sometimes a carbon copy of original products with Chinese names. Howo truck is counterfeit of DAF, while Hiease is counterfeit of Toyota Hiace and many more. In 2014, five Chinese military officers hacked into America’s nuclear, solar and information firms. The incident is a cause for diplomatic row and has been taken to WTO and world court.
2- Intense but legal competition- China produces good and quality products at lesser prices. It produces low quality products and knock down prices suited for poor countries. It produces anything based on specifications that tally with customer’s affordability. Because China produces cheaper products, it has snatched market control of motorbike, electronics and automobile from Japan and Korea. China produces 90% of World’s televisions, air-conditioning systems and bicycles. It effectively shut Japan and Korea out of the market. Since 1968 when China joined WTO, it has market control over just anything manufactured on earth. It is the only country with commercial deposits of rare earth, a metal needed for manufacturing of cars and electronics. China starves the world of the metal and sell it only to its companies for them to gain advantage over their foreign competitors.
3- Unfair but legal sharp trade practices- China refuses companies access to its market unless they provide their technology and trade secrets. It has done it to Apple, Siemens, Samsung and Sony. China uses its influence, through blackmail to secure contracts for its companies from other countries.
Nigeria can borrow a leaf from China for its own growth model.
China has been promoting inclusive finance trying to reach less affluent individuals and small companies with credit facilities.
This is because people in rural areas, smaller and medium sized companies, entrepreneurs, and individuals without a credit history are often unable to obtain financing and are forced to turn to the curb market for often very high interest loans. China Banking Regulatory Commission posted guidelines that require medium and large size banks to set up departments for inclusive finance. The policy allows the poor, including disabled, to have access to loans.
Making finance readily available to smaller borrowers is the first step towards growth.This is because small and medium sized enterprises (SMEs) contribute about 60% of China’s GDP. Not so in Nigeria. No company or individual can get loan from any bank and the government is not bothered about it. In Nigeria people and SMEs are forced to borrow from a variety of sources, including family and friends, money lenders, which are most times not sufficient to start up business. Even at that government is everywhere with all manner of taxation and extortion policies to kill the business.
In China the government recognized that people that lack credit history and collateral are unable to secure loans from banks. It came with policy that requires banks to provide such loan with or without collateral and make provision to absorb loss in case of default. The growing social credit system, which seeks to provide a credit history to financial institutions, coupled with the new requirement for larger banks to expand lending capacity to these smaller borrowers, will allow SMEs to spend less time and money obtaining finance.
Lending to the poor takes away poverty from them. Dangote is rich not because he is more hardworking or intelligent that others but because of his collateral, debt history and ability to get loans from banks. Nigeria will not develop without the SMEs and SMEs will not grow without loans. The earlier the government knows this the faster for the nations match to economic growth.
Nigerian banks lend money to politicians and rent seekers. They finance consumption not production. Banks give billions to national assembly to buy cars instead of individuals and SMEs to build car manufacturing plants. This mentality must change for Nigeria to move forward.