A truly remarkable Chinese economic miracle!!!
China in the late 18th century was one of the most prosperous nations in the world with a yearly government income of 73 million taels a year. However in mid 19th century due to the lack of industrialization and modernization Chinese economy declined significantly. Defeated by western power in various wars, it endured a century of humiliation from their hands and only started to bounce back after the economic reforms of 1978.
Today China is the second largest economy in the world with a nominal GDP of $19 trillion. Its poverty rate has fallen to 3% and it is a world leader in manufacturing. It all happened in the past 40 years. So what are the reasons behind this remarkable feat of economic miracle, let’s find out.
Table of Contents
Leaving behind a failed system:
Communist Party of China took power in China violently by fighting a vicious civil war with the Kuomintang party in 1949. Afterward, it followed the Soviet economic system of collectivization of agriculture and state-run industry. By 1960 it was evident that this system had failed but the then leader of China Mao Tse Tung refused to make any changes. However, when Mao died in 1976, his successor Deng Xiao Ping left behind the socialist state-controlled economic system and adopted a free market economy with some own Chinese twist on it.
Starting From Grassroot:
Unlike Stalin who had begun the transformation of the backward Russian Empire into a superpower Soviet Union by starting from the top that is heavy industries, Deng started from the bottom. He started his reforms in the agriculture sector by decollectivizing it and removing the price control system and planned quota system. It helped to increase the productivity and income of peasants.
China was really behind in education compared to the Western world and even some of the Asian nations despite some remarkable technological achievements by the scientific community in China. Deng restarted several universities and exams that were previously closed. He even sent the Chinese students to other countries like Singapore, Japan, the USA, and so on to study their methods and bring them back to China. This helped China to create manpower that would be required later on for an economic miracle.
Inviting Foreign Investment:
Deng knew that China did not have the required capital for the economic transformation that it hoped to achieve, so he invited foreign companies in China to invest in China for manufacturing through provisions like cheap land, cheap labor, low taxes, and fewer bureaucracy hurdles, and so on. This made China very attractive to foreign investors to invest in and lead the economic miracle.
Transfer of Technology:
Due to a long period of isolation, China was bereft of advanced technology. After the foreign company began their investments, China quietly asked them to transfer or teach their technology to Chinese people as well. This helped the country to acquire the knowledge and know-how of operating the technology and using it as well.
Indigenous Technology Development:
After learning to operate and use a technological piece of equipment, it also began to develop its own indigenous technology i.e. developing its own. The manpower which they had sent outside to study came in handy in establishing the base for this economic miracle.
Special Economic Zones:
China established various “Special Economic Zones” in various parts of countries to facilitate the manufacturing industries both domestic as well as foreign. Special Economic Zones are those places that are specially designated for the industrialization process by lowering taxes and removing government control. At first 4 coastal cities were selected later increased to 14 for this purpose only this led to an immense boom in export-oriented manufacturing industries along with rapid economic development of China.
Focus on Poverty Elimination:
After the economic boom, the problem occurred of economic inequality which almost always happens during this time and most countries choose to neglect it like India, Thailand, and so on. China did not do that. The Chinese government under Jiang Jimin and Zhu Rongzhi started various programs to address this problem while not entirely successful but it lifted millions and millions of people out of poverty.
Investment in Infrastructure:
After the reforms, the construction of infrastructure accelerated rapidly. For example: In 1976 during the death of Mao China only had 53000 km of railways none of it electrified, today it has 150000 km of railway of which 66% is electrified compared to only 0.92% in the USA (Source: Wikipedia). Seriously USA and Damn China!! Well Done!!
Last but not least the authoritarian nature of the Chinese government whose ministers and Communist party members do not have to haggle with other party members which allow for swift decision-making along with some drawback is also one of the reasons behind the economic miracle of China.
Conclusion: Achieving the Chinese Economic Miracle
In general, we can safely say that this combination of factors has allowed China to be an economic superpower and claim the respect that it truly deserves.