Table of Contents
Undoubtedly, China has made a successful transition to the market economy since 1978. Years ago, it had a central-planning economy with extremely rigid mechanisms and controlled prices. The country was dominated by the state ownership and incomes of citizens were very low. The determination of the Communist Party to retain the leading position was quite strong.
However, regardless of all these challenges the country has managed to shift towards the market-based economy and today it is one of the most rapidly developing states in the world. The chapter under consideration asserts that all these changes have been inevitable. However, there are also other views as to the history of this country that let one presume that the success has not been anticipated. Moreover, the author outlines several reforms and considers them to be the key in Chinese modernization when it has not been quite the case. The presented paper aims to prove this statement and rebut some of the assertions of the author made in the chapter.
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The Overview of the Main Ideas of the Chapter
The author of the chapter traces the history of China from 1978 till 1990s and its transition to the market-based economy in particular. He points out key reforms were undertaken by the Communist government and links these achievements to the similar events that have taken place in Taiwan.
First, it should be stressed that the reforms in China were rather comprehensive from the very beginning. They also were widely supported by people though not by all of them. The majority was concerned about the economic development. Thus, privatization, launch of market mechanisms for controlling prices, and introduction of the renewed banking system were initiated. However, the government started the legal reform as well. It conducted successful foreign policies and invested money in education and science. Apart from that, it carried out well-thought demographic policies that later resulted in the growth of productivity and raise of competition on the labor market. The configuration of powers as well as the reconstruction of the world order also created the foundations for the successful economic rise of China.
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The transition has been admitted to be gradual. Indeed, in contrast to the shock therapies performed in other countries in regard to their economies, the government in China took the longer road. For example, at the beginning of the reforms there were two kinds of prices: market prices and the ones regulated by the Chinese government.
The Influence of the Communist Party
The author of the chapter claims that both citizens of China and leadership of the Communist Party were pragmatic enough to understand the benefits of the new economy based on the market mechanisms. Indeed, one should stress that the success of the reforms depends on their acceptance and recognition by the people. More than that, the reforms initiated by the Communist Party were truly revolutionary and demanded a lot of the initiative and pro-active position from citizens of China (Baker & Minnich, 2013). Hence, they were asked to lead enterprises and establish new businesses. Perhaps, the key reason for that was the short period of the Communist rule in China. As a result, citizens of this country were still able to become innovative entrepreneurs on a large scale.
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Nevertheless, certain researchers still claim that the leadership of the Communist Party was not that pragmatic and willing to initiate the creation of the new economic order in the country. The Communist Party itself experienced retention of its powers. The direction of the party was also significantly threatened in 1989 when students started their demonstrations in Beijing’s Tiananmen Square. The response to this protest was rather brutal and in most cases the country’s government ends up with the imprisonment, fleeing from the country, or global isolation when it responds in such a way. However, none of these scenarios was played. China managed to restore the country after this tragedy and continue its movement towards a more stable market economy.
The author asserts that the main reason for that was political stability within the country and the ability of the political establishment to deal with internal and external challenges. Indeed, the political elite of China should be praised for not abandoning the new economic trajectory. However, it should be stressed that Chinese people turned out to be less patient than their peers in modern Europe (Baker & Minnich, 2013). The fact that the murder of people on the main square was committed roughly twenty years ago when there was no trace of social media, perhaps, minimized the social effect of this event. Nevertheless, it would be quite impossible to do that in the modern era.
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Therefore, it should be noted that the Chinese market-based economy and its promotion in the Chinese society were threatened by a number of reasons. However, the Chinese government managed to handle these challenges and proceed with the reforms, guaranteeing China leading positions on the global trade arena.
The Demographics of China
The author also does not mention the demographics of China. In fact, its performance and rapid growth have been mainly influenced by changes that have occurred in relation to the population composition and size. The introduction of the One Child Policy in 1978 has resulted in a longer working age.
China has benefited from the demographic situation in a variety of ways. Its population increased from 550 to 980 million in 2011 (Kong, McKissack & Zhang, 2012). Of course, it has helped to drive economic and industrialization processes. In addition, it was the first generation that could afford saving money, which, of course, contributed to the increase of the savings rates. Moreover, the decrease of the young age dependency has resulted in the improvement of the human capital since a fewer number of children means that more investments could be made into one child only. In turn, children have become more educated and acquired more skills and abilities that have opened the doors to new opportunities (Kong, McKissack & Zhang, 2012).
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Such a change in the demographic policies had also contributed to the advance in the industrialization and development of service industries in the country since educated young men and women could apply their knowledge in these emerging industries. Therefore, China has managed to perform such a transition from the agriculture-based to industrial economy. The mobilization of the rural workforce has led to the concentration of the labor market with the overwhelming number of workers. As a result, companies have had a broad range of employees to choose from. Hence, their demands have grown and productivity rates have exceeded all expectations.
Global tendencies are also important to be reconsidered in the view of the rise of China. Niall Ferguson once mentioned that people who lived in twentieth century were provided with the unique opportunity of watching the descent of the West. By claiming that, he meant that attention would be drawn from wealthy Western countries to hardworking states located in the Far East (Knight, 2013). Realists today go on saying that the Chinese positions are getting stronger and some of them, the most daring ones, suppose that the dominance of China currently exceeds the one of the USA.
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Many historians have predicted the change of the world order. They have necessarily associated it with conflict, distrust, and misunderstandings that usually accompany the allocation of powers in the world. In any case, the lost prestige of the West and destruction of its hegemon status might have played in favor of China (Knight, 2013). Globalist Samuel Huntington once predicted the fall of the Western civilization and reconfiguration of the world powers. His famous book “The Clash of Civilizations” provides a successful prognosis for the economic development of the Asian region and for China in particular.
Therefore, global movements and changes that have occurred in Europe after the World War II might have also played a role in the rise of China. This factor should not be ignored in the process of assessing Chinese transition to the market-based economy.
Other Pillars of Chinese Success
Generally speaking, success of the country should be considered in the realm of realities and features of this state and trends that have existed during those times. The market mechanisms have indeed been adapted to the new realities of the world. However, the political elite itself has changed greatly as well. Eventually, they have enabled a large amount of citizens to benefit from the fruits of their labor. They have introduced new and clear rules of the game that everyone could benefit from (Knight, 2013). Openness and changes-driven spirit of the leadership of the political party in China should also be attributed to the success of its economic reforms. Despite initial frustration and inability to accept the changes, the political establishment has eventually integrated the reforms into the vision of the country’s future (Kong, McKissack & Zhang, 2012).
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In addition, China has been cultivating its relations with the world-acknowledged institutions. For example, in 1980 it became a member of the International Monetary Fund and the World Bank (Ikenberry, 2008). Of course, cooperation with such recognized institutions has paid off in the growth of the Chinese prestige on the global arena and attracted new investors to the state. Fostering its economic reforms, it has concluded a series of trade agreements with the USA, which has enhanced cooperation between the two states. In 1981, the country created four special economic zones in Xiamen, Zhuhai, Shenzhen, and Shantou in order to raise foreign investments spurring into the country (Ikenberry, 2008). Later, this policy has been extended to coastal regions. In the end, all these areas have served as prototypes for the development and following by other regions in China.
The transition from collectivism and planning economy to the marked-based economy has been reported to be rather gradual in China. It has been associated with a number of reforms that have changed the key areas of life and deepened the effects of economic transformations. It should be stressed that all of them have been comprehensive and results-oriented.
Nevertheless, these changes have not been inevitable. In other words, the trajectory of Chinese development could have been changed by various factors. However, for some reasons the country has managed to remain on the way towards political and economic transformations and nowadays it is ranked among the most rapidly developing economies in the world.
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