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Economy Changes of 30 years in China since Reform and Openin

    Economy Changes of 30 years in China since Reform and Opening in China
    Abstract: China has experienced massive changes since the policy of reform and opening was implemented in the past three decades. Before the year of 1978, it can be said that Chinese economy was almost totally closed to the world. It was not until the year of 1978 that China began to walk on the path of reform and opening up. The huge transformation is especially reflected in the sector of national economy, from a centrally planned to a market-oriented economy; moreover, the economic structure are also passing through tremendous adjustment so that an economy dominated by agriculture has gradually transformed into that mainly relying on manufacturing and services. With wave of internationalization and globalization, Chinese economy has integrated into the global economy, so the pattern of imports and exports in China also undergoes an evolution.
    Key words: Reform and opening, economy changes, exports and imports
    Chapter 1 Introduction
    Economy Changes of 30 years in China since Reform and Opening in China  代写
    At the beginning of the early 1950s, the socialism system in China was founded and central planning economic system was introduced to China following the model of the Soviet Union. In the next period, the central government began to carry out the first Five-Year Plan in the year of 1953 in the context of the planning system. In the 1960's, the Great Leap Forward promoted by Chairman Mao brings about a sharp rise for the overall production steel for the reason that strong industry power of a country is the basis of a country’s development. However, overquick increase of production leads to three-year economic difficulty period in 1961 so that the production fell back to 8 million tons (Brower, Vicki, 2004). From the year of 1966 to the year of 1976, Cultural Revolution across the whole China brought a disaster and an obvious fall of economic increasing rate. It was until the year of 1978 that China started to get ride of the rigid planning economy system and a comprehensive market-oriented economy covering all the economic sectors is gradually built. For the past 30 years, from Deng Xiaoping’s initial decision to carry out the policy of reform and opening and to largely participate in the international trade, China’s economic reform toward a market-oriented economy has been recognized as a successful one appreciated by other developing countries. According to official statistics, during the first two decades of reform policy, the average real GDP increase rate reaches about 9.6 percent for a single year (Gregory C. Chow, 2004). For this reason, Chinese economy is increasingly turning into a leading member in the global economy based on the large population and vast land as well as nature resources. Socialism has showed a new face of prosperity so that in addition to economic sector, institutional, political, and social forces also imply that China is being at a transforming period. This essay mainly elaborates the huge changes of Chinese economy in the past 30 years. The first part of this essay is an introduction of the policy of reform and opening, which was put forward by Deng Xiaoping in the year of 1976. The second part explores Chinese socialism characteristics in the course of reform and opening. The third part is main body of the essay, the development and changes of China’s economy in the past 30 years. This part is divided into five stages. The first stage is the preliminary one, from the year of 1978 to the year of 1987; the second stage is the facilitating one, from the year of 1987 to the year of 1992; the third stage is the accelerating one, from the year of 1992 to the year of the year of 1999; the fourth stage is the ongoing stage, from the year of 1999 to the year of 2008; the last stage is about the current situation of Chinese economy in the latest five years. The last but two part is the future prospect of Chinese economy development. The last part is a conclusion of the essay.
     
     
     
     
     
     
     
     
    Chapter 2 The Policy of Reform and Opening
    As is known, the Third Plenary Session of the Chinese Communist Party 11th Central Committee was held at the end of the year of 1978, which is believed to embrace a great turning point in the history of China due to its great contribution to the future development of China. Later, Chinese central government passed a resolution initiated by Deng Xiaoping in the year of 1979, a policy of reform and opening to the outside world. The reforms focus on decentralizing the national economy by means of removing central planning and making use of market forces instead, so the collective farms running pattern not belongs to state-run enterprises any longer. A variety of individual enterprises and factories are encouraged to establish by offering bonuses and other incentives so as to liberate the productivity to the largest degree. In terms of the foreign business trade, 12 previous state-owned companies as well as Special Economic Zones located in the China's southern coastline were formed in order to effectively supervise the trade of imports and exports. Until the year of 1982, communes began to be dismissed and most of the farmers began to have the rights to grow and sell agricultural products independently (Bosworth B., Collins S.M, 2003). In 1985, in order to reduce import barriers and promote the development of foreign trade, tariffs were cut from 56 percent to 43 percent (Garnaut & Ross & Ligang Song & Yang Yao, 2004). With the establishment of a socialist market economy system, an ownership structure based on public ownership as dominant position and diverse forms of ownership as supplement was built, which is involved in all-directional and multi-tiered sectors and fields. When China joined World Trade Organization in the year of 2001, the social productive forces at all levels are further released. Nowadays, based on the latest statistics, more than 50% state-owned enterprises and over 90% small- and medium-sized state-owned enterprises have changes their running patterns into joint-stock companies, and non-public-owned sectors is said to create 1/3 of the national GDP (LeRoy, Stephen F, 2009). From the year of 1978 to the year of 2007, China maintained a 9.88% annual economic growth, and thus China’s state revenue greatly improved from RMB 113.2 billion (about 16.5 billion US dollars) to RMB 5,130 billion (about 750 billion US dollar) (Li, Xiaoxi, et al., 2003).
    As a result, Deng Xiaoping, regarded as the General Designer, is the most powerful and influential of the leaders of the Communist Party of China and has recognized to his outstanding contribution to the Chinese people throughout the revolution. In the direction of this policy, the economic structure as well as the political system has been readjusted step by step leading to socialist modernization with Chinese characteristics. After more than 20 years of reform and opening-up, China has gained a comprehensive economic and social progress and there has been a great improvement both in people's living standards and national strength. Moreover, China has made enormous achievements in the areas of economic, political, cultural and social constructions as well as in the cultural, educational, scientific and technological fields. As a matter of fact, the implement of reform and opening up can be viewed as the second revolution in the new period of China. It is the policy of reform and opening up that sets in motion the most glorious and sustained economic take-off and expansion.
     
     
     
     
     
     
    Chapter 3 Socialism with Chinese Characteristics
    Socialism with Chinese characteristics is an official term containing comprehensive areas including politic, economy and culture of the People's Republic of China. Socialism with Chinese characteristics is something that combines the basic principles of scientific socialism with the practices of building socialism unique to China (Gao, Shangquan, 2002). In specific, socialism refers to the common regulations and key features of the practice, while Chinese characteristics represent the fundamental rules of socialism really rooted in the mainland of China. The theoretical foundation of this scientific road is based on Marxism and socialism. By integrating the theory with Chinese conditions, a development road specifically with Chinese characteristics is formed step by step. The theory of socialism with Chinese characteristics is a result from successful experiences and frustrated lessons in the course of building and perfecting socialism for China as well as other socialist countries. Even if there are not only benefits but also losses in the developments of a nation, the overall trend is generally good for the development of China. For the specific explanations of the practices of socialism with Chinese characteristics, as to Communist Party of China, a series of systematically key questions are explained in detail, which are closely related with China historical and social conditions, its fundamental missions in the current and future stages and strategic steps it should take. This is a development path characterized by adapting to the specific situations of China. On the economic level, China carries out a multi-ownership-oriented market economic system, where the public ownership plays the dominant role and mixed forms of private and public ownership have the right to compete equally within a fair market environment. On the political level, China sticks to a combinations for the system of the People's Congress, the system of multiparty cooperation and political consultation, and a system of regional ethnic autonomy so that democratic rights for almost all Chinese people can be guaranteed. On the cultural level, China builds unique socialist value system and at the same time, it claims to respect differences among different cultural systems as it seeks for the common ground and abandoning the divergences. These practices have proved that socialism with Chinese characteristics is the only and successful road China must take when China is on the way of building a well-off, democratic, civilized and harmonious modern nation in the current time as well as in the future. In fact, in the course of perfecting theories and practices, a series of principles and policies with correct ideological line have been formulated to the actual conditions of China (Bidani& Binu& Gorching Goh, & Christopher J. O’Leary, 2002). It is proved that it is the path of socialism with Chinese characteristics that lead the ruined economy in old China to a rapid development one. As a result, the Chinese Communist Party must adhere to Marxism and keep to the socialist road with firm belief.
     
     
     
     
     
     
     
     
     
     
     
     
     
    Chapter 4 Development and Changes of China’s Economy in the Past 30 Years
    4.1 Preliminary Opening Stage from the year of 1978 to 1987
    In terms of the context of the policy of reform and opening up, the direct reason is that after 1978, the central Chinese government made a decision to transfer its focus from class struggle to developing economy. At a starting stage of reform and opening up, there are some key time intervals when practices and theories of the economic system had been undergoing great evolutions. In the year of 1979, the monopoly of nine foreign trade corporations subordinated to the Ministry of Foreign Trade on import and export transactions was broken down while foreign trade enterprises subordinated to various industrial ministries can be founded, and moreover, more autonomy were granted. From the year of 1980 to 1981, the Law of Income Tax of Chinese-foreign Equity Joint Ventures and the Law of Income Tax of Foreign Enterprises were passed so as to provide supportive help to foreign enterprises. In the year of 1982, the new economic system, planned economy supplemented by market mechanism comes into being as a variety of department of foreign trade in the centran government such as State Council's Import-Export Control Commission, Ministry of Foreign Trade were amalgamated to be the single one, Ministry of Foreign Economic Relations and Trade. In the year of 1984, foreign trade system underwent further decentralization and the economic system was named as planned commodity economy based on public ownership (Eatwell & John A, 1987). In this case, foreign trade enterprises relatively get rid of from their parent organizations, independently responsible for their own profits and losses. In the meanwhile, specialized enterprises as agents in charge of imports and exports were established. At the year of 1986, Foreign Enterprise Law was passed to protect the legitimate interests of the foreign investors and attract more foreign investment. In this way, it can be seen that China’s economy remained steady growth and foreign exchange reserves and total trade volume kept a stable rise from the year of 1978 to the year of 1987. In a word, with the economic system evolved and adjusted varying with the situations, the complex foreign trade system in China tends to be expanded in a large degree.
    Table 1 National economy Conditions in the past 30 years in China
    Period    1978-1982 1983-1987 1988-1992 1993-1997 1998-2002 2003-2007
    Average annual GDP
    (trillion yuan)
    0.5 0.9 2 6 10 18.7
    Average annual GDP growth 8.9% 12.2% 7.4% 11.9% 8.2% 10.6%
    Average annual CPI growth 2.8%     7.4% 7.2% 16% -1.6% 3%
    Table 2 Foreign Trade Conditions in the past 30 years in China
    Period    1978-1982 1983-1987 1988-1992 1993-1997 1998-2002 2003-2007
    Average
    annual foreign exchange reserves (hundred million dollars)
    17
     
    40 174 783 1928 10633
    Average annual total trade volume (hundred million dollars) 576
     
    864 1262 2657 4579 14725
    Average annual trade surplus (hundred million dollars) -25     -73 31 125 300 1198
    Source: Chinese Ministry of Commerce
    Table 3 The annual rural poverty reduction, the growth rate of per capita GDP and farmers’ consumption level
    Year The annual poverty reduction announced by the government(10 thousand)a The growth rate of per capita GDP(%)b
     
    The growth rate of farmers’ consumption level(%)c
     
    The growth rateof farmers’ net income per
    capita(%)c
     
    1978-1985 1786 8.3 10.0 15.1
    1985-1990 800 6.2 2.5 3.0
    1990-1997 500 9.9 8.0 5.0
    1997-2002  436 7.7 3.4 3.8
    1978-2002 924 8.1 5.6 7.2
    Note: a: calculated according to the data of appendix 1; b and c: China Statistical Abstract (2002), pp. 18, pp. 32, and pp.91, all calculated by fixed price. Data sources of 2002: National Statistic Bureau: The Communiqué of China’s National Economy and Social Development, Economy Daily, March 1, 2003.  
    4.2 Facilitating stage from the year of 1987 to 1992
    In this period from the year of 1987 to the year of 1992, the socialist economy underwent a series of changes now that central planning supplemented market mechanism in the year of 1987 was replaced by a combination economy system between planning and market mechanism in the year of 1989; In the year of 1992, socialist market economy really formed and take an active role in the international world. In this course, economic policy for foreigners was continuously enhanced so as to attract foreign capital and to expand imports and exports. Moreover, for the internal market, there are also some measures taken. For instance, in rural areas, the allowance reform took place for the output of agricultural products; for urban areas, the vitality of enterprises was stimulated by means of preference policies to the largest degree so as to be the driver of the national economy. Since then, with urbanization speeding up, a large number of populations remove from the remote countryside to the prosperous cities, transforming from agricultural population to non-agricultural population (Giles, Judith A., & Cara L. Williams, 2000). As a result, the income gap between urban residents and rural residents has been paid more attention by the government and it seeks for ways to reduce the gap effectively..
    Table 4 Income and transferred income per capita of urban residents and rural residents
      Urban residents Rural residents
    year Per capita total income per year (yuan) Per capita transferred income per year(yuan) transferred income/ total income per capita   Per capita total income per year(yuan) Per capita transferred income(yuan) Transferred income/ total income per capita
    1985 748. 92 65.88 8.8% 547.31 n.a n.a
    1990   1522.79 250.01 16.4% 990.38 n.a n.a 25
    1995    4288.09 734.83 17.1% 2337.87 65.77 2.8%
    2000  6316.81 1211.86 19.2% 3146.21 147.59 4.7%
    2001     6907.08 1362.39 19.7% 3306.92 162.83 4.9%
    Note: the prices shown in this table are at current price. Sources: China’s Statistical Abstract (2002)
    Table 5 Population and labor force moving from rural areas to urban areas (1982-2000)                                                               unit:10 thousand
    Period The increased number of urban total population The number of moving population
     
    The number
    of moving labor force
     
    The average moving population per year
     
    The average moving labor force per year
     
    1982-1990  8715 6510 3208 814 401
    1990-1995  4979 3901 2020 780 404
    1996-2000  10732 10237 5732 2030 1146
    1990-2000  15711 14138 7752 1414 775
    1982-2000  24426 20675 10960 1149 609
    Sources: Industry and policy department of Ministry of Agriculture quoted from Finance and Economics, 2003, 3rd/4th issue, pp. 95; the data of total urban population are from China Statistical Abstract, 2002, pp.34.  
    4.3 Accelerating Opening from the year of 1992 to the year of 1999
    After a socialist market economy system was established at the early years of the 1990s, it is necessary and significant to complete the legal system to support the economic development and promoting practice of market economy development. In addition, The Ministry of Science and Technology of China came up with the plan of Trade Vitalization through Science and Technology in the year of 1999, aiming to promote domestic industries to a higher level by means of widely using the high technology in the field of trade. Of course, at this stage, the problem of poverty still exists. In the rural areas, the price index of agricultural products in the year of 1992 is 5.5 times more than that of the year of 1978 (Clarke D.& Murrell P.& Whiting S., 2005). In fact, in the 1990s, in particular the period of 1990-1997, even if China’s per capita GDP growth rate has ever reached 9.9%, greatly higher than that of the early period of reform, the period of 1978-1985(Chen, Muhua, et al., eds., 2003), the problem of poverty is still grim. For example, the range of rural poverty population annual decreasing is just 5 million, less than 30% of that in the period of 1978-1985 (Dong, Furen, ed.,2003). Consequently, the joint efforts are made by the government and all areas of society to help the poor in the remote areas of China. In this way, it can be said that China shall contribute a lot to the decrease of the poverty population in the global world. On the other hand, the good news is that the human capital accumulation is significantly increased since the policy of reform when the level of people’s education and health condition has been greatly improved. As shown in table 7, the average educational years of general people are more than 15 years old, which is proved to be an essential increase. In addition, the illiterate population has reduced in a stable pace, from 22.8% in the year 1982 to 6.7% in the year of 2002. Moreover, when comes to the average life expectancy, in the year of 1981, the age was only 67.77 years while in the year of 2000, it reached 71.40 years. On the whole, all of these achievements are resulted from the rapid economic growth.
    Appendix table 6 The Poverty Population in Rural China and the rate of Poverty
    Year Rural Official Poverty The rate of The rate of
      population (ten thousand person)a poverty population (ten thousand person)b population estimated by the World Bank (Ten thousand person)d poverty (%) Official data b
     
    poverty (%) The World Bank data
     
    1978    79014 25000    33.1  
    1984    80340 12800   15.9   
    1985 80757 12500     15.5   
    1986 81141 13100   16.1   
    1987 81626 12200   14.9   
    1988 82365 9600   11.7   
    1989 83164 10600   12.7   
    1990  84142 8500 28000 10.1 33.3
    1991  85280 9400 28700 11.0 33.6
    1992    84799 8000 27400 9.4 32.3
    1993  85166 8000 26600 9.3 31.2
    1994   85549 7000 23700  8.2 27.7
    1995 85947 6500 20000 7.6 23.3
    1996 86439 6000 13800 6.9 16.0
    1997 86637 5000 12400 5.8 14.3
    1998 86868 4200   4.8  
    1999 87012 3412   3.7  
    2000 80837 2200      
    2001 79563 2713c      
    2002   2820c      
    Sources: a: <China Statistical Abstract>, 2002; b: “A Monitoring Report of China’s Rural Poverty in 2000” by the research office of rural social economy of national statistics bureau, China’s Statistical Press, 2000, pp. 7; c: “Statistical Communiqué of China’s Economy and Society” by national statistical bureau, quoted from Economic Daily, March 1,2003;d: World Bank, 1999.
    Table 7 Basic status of China’s human capital (1982-2000)
      1982 1990 1995 2000
    Average educational years 4.64
     
    5.52 6.09 7.11
    The percentage of illiterate people in total population(%) 22.8
     
    15.9 12.0 6.7
    The percentage of illiterate and semiliterate rural people in total population(%) 27.87(1985)
     
    20.73 13.47 8.96(1999)
    Infant mortality rate(‰) 37.61(1981) 32.89 
     
    33.03(1996)
     
    28.38
     
    Average life expectancy(year) 67.77(1981) 68.55
     
    70.80(1996)
     
    71.40
     
    Sources: China Statistical Abstract, 2002, pp. 34: the estimation of average educational years is quoted from “The Research on the Gap between Human Capital and Economic Development of China’s Different Regions”(2001), Master’s dissertation by Li Chunbo, School of Public Policy& Management ,Tsinghua University.
    4.4 WTO Compliant and Ongoing reform from the year of 1999 to 2008
    After entering the 21st century, the most influential event for the economy of China was joining in the World Trade Organization. It is believed that China's World Trade Organization (WTO) entry has motivated its economic growth and promoted its legal and governmental reforms even if China had to relax over 7,000 tariffs, quotas and other trade barriers. In the year of 2001, China's exports increased by 19.4 per cent and the total trade volume reached US$445.1 billion, an 18.3 per cent increase compared with the last year. However, in the recent years, Chinese products frequently suffered anti-dumping allegations and the block of green barriers due to import restrictions for the reason of environmental and food safety. In addition, The Trade and Economic Framework between Australia and the People’s Republic of China was signed 2003, it can be concluded that a clear agenda for the bilateral trade and economic relationship was set up over the coming years. It contains a wide range of activities which benefit a lot for improving commercial and policy relations so as to improve the overall business environment to both countries’ mutual benefit. From the middle year of 2005 to the late of the year of 2008, cumulative appreciation of the RMB in China against the US dollar was more than 20% caused by global financial crisis. As a result, there are a series of economic challenges. In the first place, domestic demand is low and there is high unemployment rate. Thus, then corruption and other economic crimes kept on a rise. In a word, affected by the global economic slowdown, China’s real GDP growth fell from 14.2% in 2007 to 9.6% in 2008 to 9.2% in 2009 (Lampton, David M. ,2010). In this case, the Chinese government had to carry out a large economic stimulus package and an expansive monetary policy. For instance, The Chinese government responded by implementing a $586 billion economic stimulus package, loosening monetary policies to increase bank lending, and providing various incentives to boost domestic consumption (Leonard, Andrew, 2007).
    4.5 Current situations of China’s economy
    After the financial crisis of the global world including China, a variety of measures have been taken to prevent a sharp economic slowdown in China like enlarging domestic investment and consumption. In recent years, China has emerged as a major global economic and the second-largest economy entity in the world, so the imports and exports rate have greatly increased so that the largest merchandise exporter and second-largest merchandise importer also belong to China. In addition, in terms of the foreign direct investment (FDI) and foreign exchange reserves share, China is in the second place and the first place respectively. In specific, in the year of 2012, China’s real GDP growth is 7.8% (Simon, Herbert A., 2013). However, under the study of the International Monetary Fund (IMF), it predicts that China’s real GDP shall increase 7.8% in the year of 2013 and 7.7% in the year of 2014. As a result, China has definitely become one of the fastest-growing economy entities in the global world. As to real annual gross domestic product (GDP) in China, the average growth is nearly 10% throughout the year of 2012 (Needlman & Robert, 2012). In addition, due to closely related with the economy in the United States in the context of globalization, U.S. trade data shows that total trade between the two countries grew from $5 billion in 1980 to $536 billion in 2012 (Frisbie, John 2012). In the current time, China occupies the status of the United States’ largest source of imports and second-largest trading partner in the international market.
    Table 8. China’s Annual Real GDP Growth: 1979-2012 and 2013 Projection
     
    Year Real Growth Rate (%)
    1979 7.6
    1980 7.9
    1981 5.3
    1982 9.0
    1983 10.9
    1984 15.2
    1985 13.5
    1986 8.9
    1987 11.6
    1988 11.3
    1989 4.1
    1990 3.8
    1991 9.2
    1992 14.2
    1993 13.9
    1994 13.1
    1995 10.9
    1996 10
    1997 9.8
    1998 7.8
    1999 7.6
    2000 8.4
    2001 8.3
    2002 9.0
    2003 10.1
    2004 10.0
    2005 11.3
    2006 12.7
    2007 14.2
    2008 9.6
    2009 9.2
    2010 10.4
    2011 9.2
    2012 7.8
    Source: Economist Intelligence Unit and IMF. Projection for 2013 were made by the IMF in July 2013.
    Chapter 5 Future Prospect of Chinese Economy Development
    As is known, from the beginning reform and opening policy, the market-orientated economy plays a key role in the development of Chinese economy. As a result, with the Chinese economy keeping a stable increase and the rapid pace of Chinese economic development over the past 30 years, the central Chinese government should make no efforts to vigorously explore the newly emerging markets based on sustainably maintaining the traditional markets, such as Europe, the U.S., Japan and Hong Kong. In the meanwhile, the potential markets also needed to be cultivated in the near future. In the progress of exploiting the market, preference policies should be fully used to maximize the function to help enterprises cope with problems, like high risks, high costs, and limited information. Of course, Chinese national enterprises should devote themselves to update its technological innovation for its products and services. China shall ensure a solid foundation for economic and trade cooperation. As a result, a variety of strategic planning, concepts evolution should be strengthened, and at the same time, the fields and channels of cooperation should be widened in a large degree. To sum up, China’s high rates of growth over the past quarter of a century and over the past decade in particular were the result of a rapid increase in the capital stock in the modern industrial and service sectors together with an expansion in human capital under the background of the growth of student educational levels. Further productivity growth certainly requests steady and sustained improvements of the critical regulations in China’s market economy, so new efforts should be made to advocate a competent, efficient, and fair regulation system or a truly modern legal system in the future.
    Chapter 6 Conclusion
    From the beginning of reform and opening in the year of 1979, China conducted a series of evolutions seeking to decentralize economic policy and to provide incentives for farmers, workers as well as the enterprises on the free market. In addition, the four special economic zones along the coast effectively brought a large amount of foreign investment, boosting exports and imports prosperity. As a matter of fact, it is the trade liberalization that plays a major role in the economic success of China. This process can be regarded crossing the river by touching the stones, as Deng Xiaoping vividly describes. This essay mainly elaborates the huge changes of Chinese economy in the past 30 years. Although there has been a great achievement for Chinese economy, there are also numerous challenges impeding future economic growth, such as environmental issues, growing income disparities and social safety net and so on. For this reason, more concern should be focused on the overall development in the guidance of people-orientation in addition to stressing a emphasis on economy development. As a result, the government should take gradual steps to rebalance the economy and to call on innovations of science technology among the national enterprises.
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