Chinas Economic Miracle

Question 1

Reasons for Chinas Rise

Answer 1

A. Consolidation of CCP power
B. Reform policies (HRS, TVEs, SEZs, SOEs, 4 Modernisations)
C. Deng Xiaoping’s leadership
D. External Developments

Question 2

Concentration of power in the CCP

Answer 2

Under Mao, concentrated a lot of power in the CCP; easier for the party to enact policies at will
Deng Xiaoping retained tight monopoly of political control through willingness to use coercion.
While Deng formally made way for younger members, still exercised control from behind scenes
Shown in how anti reformers were crushed in Tiananmen Square protests of 1989

Question 3

Reform policies: Four Modernisations

Answer 3

Four modernisations initially introduced by Zhou Enlai and brought back in 1978
Agriculture: Called for maximisation of farm production through the use of tech. To stimulate farm initiative and enthusiasm, encouraged more pay for more work and sideline production (25% of production)
Industrial: Heavy industrial investment and an annual industrial growth rate of 10%
Scientific: called for greater development to accelerate towards other nations level of tech
Military: occupied lower priority due to massive requirements in foreign capital

Question 4

Reform Policies: Gaige Kaifang ***

Answer 4

A. HRS
B. TVEs
C. SOEs
D. SEZs

Question 5

Role of Deng: Incrementalism and Gradualism

Answer 5

• Transformation of system was accompanied with efforts to raise income and meet society demand
• Reform was always cautious and gradual; enabled Chinese individuals to fill in the demand the state failed to meet to earn more income
• Marketisation only implemented to production that was already above that by the state
• HRS and TVE only started in the countryside first to gain momentum
• Solved agricultural ceiling product which later allowed industrial reforms (SOE reforms)

Question 6

Dengs role: Overcoming Opposition

Answer 6

After Tiananmen Square in 1989 (Student protests in backdrop of Zhou Ziyangs coastal Development strategy and Hu YaoBang’s death):
Deng Xiaoping reignited desire for Reform by embarking on the Nanxun tour to the south and praised the southern coast for economic development, reinforcing reform benefit

Question 7

Effects of the HRS

Answer 7

• Housing Responsibility Scheme allowed contractual of ownership to private farming households
• Still imposed quotas but allowed peasants to sell surplus (profit incentives)
• By 1983 98% households under the HRS
• Led to increase of 127% in agricultural output and 34% increase in grain
• Resolved the growth ceiling of food during industrialisation
• Also led to increased efficiency and incentive to produce more, and increased disposable income and investments into TVEs
• Gained momentum for further reforms

Question 8

Effects of the TVEs

Answer 8

Private medium scaled business that were market and export oriented; could hire and fire anyone
TVEs very efficient at producing handcraft, textile goods.
Initially run by peasants but organised by government units but later more privatised to be more efficient
Effect:
Created source of employment and prevented rush of surplus labour into city
TVEs comprised 30% GDP due to superiority in performance and innovation
Contributed to 2/3 of growth of exports from 1978 - 1993

Question 9

Effect of SOE reforms (mid 90s onwards)

Answer 9

Resolved to cut off Govt aid
SOEs were corporatised and then restructured, privatised and downsized
Company law of 1994; clearly separated the rights of ownership from the Govt
Legalised sale of SOEs and we’re no longer dependent on Govt.
Also allowed private and foreign ownership of SOEs

Under Jiang Zemin:
1997 plan 308,000 SOEs privatised and unprofitable ones closed

Question 10

Effect of SEZs

Answer 10

Special economic zones; zones for local experiments in export processing
- Enclaves exposed to international economy and enjoyed lower taxes, and private ownership that boosted economic growth, as well as import resources at low tax and minimum regulations for exports
- Originally setup in 1989 in the Guangdong and Fujian provinces and grew at twice the rate of rest
- Further opening up in 1984 established Open Cities and opened coastal inland to FDI and JVs
- 1988 Zhao Ziyang also implemented Coastal Development Strategy to utilise Chinas CA in labour along the coastal belt and opened it to FDI
Second Phase: opened up to more of rest of China
1997 investments totalled $45 billion, FDI now 6% of GDP
9% growth of economy, exports grew by over 500%

Question 11

Rulers other than Deng

Answer 11

1. Mao Zedong
2. Zhou Enlai (Pioneer of four Modernisations in 1975)
3. Zhao Ziyang (Deng right hand man and accelerated coastal Development Strategy, 52-56% GDP increase)
4. Jiang Zemin (After Deng, initiated 1997 SOE plan that caused output to increase by 40%, further cut of SOE aid, also collaborated with Clinton for WTO entry)

Question 12

Effect of SINO-US Rapproachment

Answer 12

Zhou Enlai X Henry Kissinger normalised relations
Increased trade to $4 billion in 1979, as well as China gaining MFN status (duties fell 50% to 8%)
USA purchased 35% of Chinas total exports and reached $40.5 billion trade surplus in 1997

Question 13

Effect of FDI from West into China

Answer 13

Capital inflow and investments: FDI from overseas Chinese led to much needed capital for development; infrastructure, industrial investments
Tech transfers: FDI facilitated tech transfers into China
Export growth: Foriegn companies invested in Export oriented production, led to Chinas rapid growth as an exporter