Again, this is a very mainland-centric view. Hong Kong has never simplified their writing system or even developed a proper romanization, and yet consistently has one of the highest literacy rates in the world. Guess what helped literacy? Post-war socioeconomic development like poverty reduction and mass education. Romanization might have helped, but it’s not the panacea like you described.

> it added a phonetic component to the language

Fanqie has been a thing since the 2nd century. Zhuyin was invented in 1913.