Economy In China

The Chinese economy has undergone some of the most dramatic changes in the world, and possibly human history, over the past one hundred years. In 1911 China was still a poor country, struggling under an ineffectual emperor as foreign powers carved its territory into “spheres of influence,” in which foreign countries were allowed to take all the resources out of the country and pay nothing back in return. After the 1949 Communist revolution, China struggled under Mao
Zedong’s revolutionary policies and could barely feed itself; in fact, more than 40 million Chinese starved to death from 1959 to 1962. However, by 2012, China had a GDP of $11.4 trillion, making it the second largest economy in the world behind the United States.

     What has made this difference? First, a series of reforms since Mao’s death have allowed China’s economy to open up to the world. Under Mao, China followed the Soviet model of a planned economy. After the death of Mao in 1976, Deng Xiaoping came into power and introduced his own idea of “socialism with Chinese characteristics,” which allowed for some experiments in capitalism. For example, Deng established several Special Economic Zones (SEZ) on the Eastern Seaboard,
where total capitalism could be practiced within these zones.

    The next major change occurred under Deng’s successor, Jiang Zemin, who introduced the concept of the “Three Represents” to the Communist Constitution. This allowed capitalists to join the Chinese Communist Party. Jiang almost completely changed China’s economic system in function, if not in name, by adopting measures of nineteenth-century “state capitalism,” with members of the Chinese Communist Party as stakeholders and owners of new enterprises with huge rewards.
As China’s economy prospered, members of the Chinese Communist Party became millionaires (and sometimes billionaires), increasing the incentives of the ruling class to keep the capitalist reforms in place.

     Additionally, China’s economic miracle has been aided by the rest of the world’s policies toward China. Since the 1970s, many Western nations, particularly the United States, have allowed tens of thousands of young Chinese men and women to enroll in Western universities, to study and learn the newest technology and inventions as well as economic theories and investment strategies. Many of them returned to China and contributed to the growth of society.

     Furthermore, Western companies invested billions of dollars in setting up joint ventures and manufacturing and research and development centers in China. In exchange for developing the Chinese economy, these companies were able to make use of China’s large and cheap labor force which the government guaranteed would be stable and well behaved by banning any outside unions.

      Finally, China has developed many sound governmental policies, despite being a Communist totalitarian system. It has invested heavily in improving the country’s infrastructure from roads to railways to bridges and airports and it has spent hundreds of millions on trying to create a world-class educational system. China was careful not to get drawn into any expensive wars, despite its sometimes bellicose rhetoric, and the country did not launch any wasteful political campaigns as it
had under Mao.


      What remains to be seen is if China can continue its economic growth and adapt its policies for its new social realities. Economic inequity is high in China, second only to that of South Africa, according to some indices. Most growth has been driven by government investment. Experts say in its next phase of development, China must bring together government funds with more private capital to create sustainable growth. Moreover, no country in human history has survived only on the basis of economic growth. There must also be a fundamental reform of the political structure and of China’s social policies. China’s rapid urbanization will demand the ruling Communist Party meet the needs and demands of a large middle-class society, with hundreds of millions of young, educated citizens. Nor can China ignore the needs of its rural residents, who have not benefited from China’s urbanization and who still lack a basic social safety net. Finally, China must tackle the problem of corruption, which exists at every level of society. Only then will the world know if China’s economic miracle is here to stay.