“A bad year in China is going to be a great year in any other country”. This difference in attitude and perception, of the magnitude of success and development, is not because of any discrimination or any other malpractices, but because of the levels of rapid development and the exponential rate of growth in which the Chinese economy has risen itself to. The Chinese, often regarded as a synonym to efficiency and perfectionism, have constantly evolved and improved themselves according to the world’s dynamics to become one of the world’s largest economy, seconded only by the US.
However, this road to success hasn’t exactly been smooth. It was accompanied by various circumstances and the intellect of the Chinese policymakers to tackle them by continuous changes in policy. This rise in the Chinese economy under the Mao rule and a little afterward is what we are going to briefly go to talk about in the article.
The People’s Republic of China (PRC) was proclaimed in October 1949 under the leadership of Mao Zedong, and hence the period that followed is often referred to as Mao rule. The inception of the PRC was not in normal conditions and the state was in ravages of the decades of wars it had been subjected to. The transportation, communication, and power industry were all disrupted and were accompanied by low agriculture productivity and high rates of inflation.
The Communist Party of China in 1949, had a short-term goal to resume normalcy in the working of the economy while its leaders’ fundamental long-range goals were to transform China into a modern, powerful, socialist nation. It was thus decided to follow an economic pattern similar to that of the Soviet Union and move away from the capitalist world. The model was to create a state-owned heavy industry sector from the capital accumulated from agriculture. It decided to utilize its own resources and follow the policy of import substitution. The period that followed, although witnessed the emergence of a strong industrial framework and high rates of employment and development, yet it was not enough because the massive growth of population meant that economic growth was insufficient to meet the needs of a growing population.
In the mid-1970s, the Chinese leadership decided to move away from the isolation from the rest of the world and introduce certain aspects of market forces in its economy. The idea was not to stop the intervention of the government in the economy, but to minimize it. With an aim to rejuvenate the Chinese economy, Premier Zhou Enlai proposed the ‘four modernizations’(agriculture, industry, science and technology and military) in 1973 which were later adopted in 1977. Then, in 1978, came the whole series of reforms that started China on its path to becoming “The World’s Factory”.
On December 22, 1978, the party leaders decided to undertake a program of gradual but fundamental reform of the economic system. They concluded that the Maoist version of the centrally planned economy had failed to produce efficient economic growth and had caused China to fall far behind not only the industrialized nations of the West but also the new industrial powers of Asia (namely Japan, South Korea, Singapore, Taiwan, and Hong Kong). Then, leader Deng Xiaoping announced the ‘open door’ policy and economic reforms in China. The policy aimed to open doors to the foreign businesses that wished to operate in China and to generate higher productivity by investments of capital and technology from abroad.
The privatization and the introduction of the market economy in China was done in various stages. Special Economic Zones (SEZ) were set up in 1980 in the belief that in order to modernize China’s industry and boost its economy, China needed to welcome foreign direct investment. These zones were to create productive exchanges between foreign firms with advanced technology and major Chinese economic networks.
In 1982, agriculture was privatized. The role of free markets for farm produce was expanded and, with increased marketing possibilities and rising productivity, farm incomes rose rapidly. The reform for the ‘contract responsibility system’ was implemented for production. The responsibility system allowed individual farm families to work a piece of land for profit in return for delivering a set amount of produce to the collective at a given price. This arrangement created strong incentives for farmers to reduce production costs and increase productivity. This was followed by the privatization of industry in 1988. A cluster of policies based on greater flexibility, autonomy, and market involvement significantly improved the opportunities available to most enterprises, generated high rates of growth, and increased efficiency.
These reforms, however, were not without drawbacks. They lead to a massive increase in income inequalities along with high rates of unemployment. Widespread pollution and the prevalence of corruption still remain the concern of the state. It is often argued that the benefits of the reforms never reached the people it was intended for, because of bureaucracy and red-tapism.
But even after considering these drawbacks, the Chinese economy is considered one of the most successful in the world. It evolved through the world’s dynamics to become prosperous and is among the fastest economies in the world. It is often said that “The economy is a very sensitive organism” and it would be only right to say that the Chinese have been able to master this organism.