China: A history of economic development
If you're not interested in China's development then skip to the last paragraph which is the most relevant to the course, otherwise I apologise for the excessively long post and lack of pictures. [James]
Throughout the ancient world China was regarded as an early ‘superpower’, they were vastly more technologically developed than most (if not all) other nations. This reign of power continued all the way until 19th Century when Europe entered the Industrial revolution, leaving China struggling behind. A shadow of it’s former power and influence. The period that followed was plagued with civil war as the dynastical reign that had controlled China up until that point collapsed. The civil war ended in 1949 when the Communist party defeated the Chinese Nationalist Party (who went on to form the Republic of China).
From 1949 China became one of the strictest communist countries with harsh penalties for any capitalists often torture. Many managers of businesses committed suicide although it’s often been debated over how voluntary these deaths actually were. These campaigns were known as the three anti and five anti campaigns; they targeted capitalists and political opposition. During the years of isolation the government aimed to reduce whilst greatly investing in industrialisation to boost the economy. This period did nothing for the standard of living for the urban Chinese who had the same standard of living in 1957 up until the reforms and rural Chinese were even worse off. The standard of living was no different in 1970 than in 1930. The strict communist control did little to help China and in 1958 it suffered a terrible famine that went on to kill between 30 and 40 million. It was caused through a mixture of factors but was largely down to the fact that agricultural workers had been moved to steel manufacturing thus crops were rotting as they couldn’t be collected and the fact that Chairman Mao continued to export grain even though there was a shortage of it within China. He wanted to maintain that China had a strong image yet it was clear worldwide that people were starving within the country. After this failure Chairman Mao realised that he would take the majority of the blame so quickly jumped ship and Deng Xiaoping took leadership of China.
This marks the second phase of China’s development, 1978-1984. The first action Deng took was to increase agricultural production to prevent a repetition of the famine under Mao. This was successful and the living standards within China finally began to improve. He also made China ‘less communist’; state owned businesses were allowed to sell excess production and private businesses were once again permitted. Deng also introduced arguably the most important economic reform in China’s history and one that has had global impacts. He set up the Special Economic Zones, which allowed foreign investment and were free of bureaucracy that hampered economic growth. These areas went on to become the engines for China’s economic growth creating a growth pole for the coastal areas around them.
The period from 1984 onwards was a period of decentralisation of businesses allowing them more freedom to grow (however not as much freedom as within a capitalist country). The state sector however was still holding back the rapidly growing economy and slowing the economic development. This led to the accelerating privatisation after 1992; this led to the private sector generating a higher percentage of GDP than the state sector for the first time in the mid 90’s. The Chinese authorities recognised the increased contribution, in 1988 the private sector was said “to complement” the state sector and was then described as an “important component” in 1999. Although Deng passed away in 1997 his reforms continued under the leadership he had handpicked. This resulted in a decrease of 48% of state owned businesses between 2001 and 2004. During the same period the leadership made moves to remove the number of trade barriers, regulations and tariffs to help promote a freer movement of trade. By 2005 few companies remained state owned however the ones that did were the largest such as petroleum and banking industries.
2005 marked a turning point in Chinese economics with observers noting that the country was once again becoming more egalitarian (communist) due to conservative reformers entering the government. The state sector has been pumped full of money to encourage “national champion” businesses which can compete with global giants. Only time will tell whether this is a wise move.
What is clear that the reforms allowed and encouraged by Deng have greatly boosted China’s economy with economic growth averaging 9.5% per year from 1978 until 2005. This growth exceeded that of the Four Asian Tigers and has had dramatic effects internally and internationally. Average wages rose sixfold between 1978 and 2005 and absolute poverty declined from 41% in 1978 to 5% in 2005. The 2009 Gini coefficient report has placed China in the same category as the USA and much of South America, much higher than what it would have been ranked pre-reforms. The Chinese economy is even said to be keeping the economy of Asia afloat, the trade deficit it has with the rest of Asia is helping countries to grow and develop. It could then be said that China is the driving force behind the west’s decreasing economic power. Of course China’s growth hasn’t been without controversy, it’s regularly in the news for trying to hide something from the western world whether it’s environmental concerns, such as the three gorges dam or human rights. The day I wrote this China are in the news again being accused of trying to hack top American and South Korean accounts, although I personally feel that the North Koreans should also be investigated. The power that China now has over the world is worrying some of the western world and rightly so, but its no more power than America once held and significantly less than the British are used to. The only reason the western worlds are scared is because China isn’t an ally and the Americans are petrified of communists. Throughout history there’s often been a nation or a group of nations who have held the majority of power; the Chinese, the Romans, the Persians, the French, the British and most recently America/Europe. It appears that China and Asia are about to take that power from the western world and surely it’s only fair that power is distributed evenly over time?
I’m just looking forward to the day Africa holds the majority of the power.
