China Unbalance

Manfred Ayuk

China Unbalance

Question 1

Beginning in 1978 under Deng Xiaoping, China fundamentally transformed its economy. What have been the key elements in China’s economic reform?

China’s economy has stagnated for a couple of centuries even showed signs of decline in absolute economic terms in the nineteenth and much of the twentieth century. In short, China was an impoverished socialist undeveloped country with a close economy, no real private sector and citizenship whose income per capital ratio was one of the lowest in the world. To remedy this unaccepted situation, President Deng Xiaoping went in for a set of reforms.

The Chinese President Deng Xiaoping’s economic reforms of a capitalist type began in 1978. His strategy was straight forward – grow the economy with a series of sustainable steps while maintaining the centralized system of government. This process occurred in two phases; the first phase ran from the late 1970s and early 1980s and involved:

The de-socialization of agriculture from the national to the local and regional level by putting in place socialist organizations such as the TVEs (Town and Village Enterprise with finances derived from the farmer’s surplus. These TVEs were involved in labor-intensive industries producing products such as shirts, pants and Christmas ornaments. One of Xiaoping’s most successful and innovative undertaking was the creation of Social Economic zones (SEVs) whose features such as cheap labor, availability of power and no taxed, drove in investment and capital from all the rich countries around the world. This really helped to jump start a new economic era in china and moved it from an agricultural based economy to a manufacturing economy. Nonetheless, the fast growing population was a great challenge to any economy growth. Xiaoping put in place a very contradictory but efficient one-child policy and curb the country’s population by 50% in 19 years.

The second stage of this economic restructuring kicked up...