Is Revolution. Those made China maintain policies that kept

Is Reform and
Opening-up the turning point in Chinese Economy?

 

Introduction: the path
of China’s economy since 1949

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On October 1in
1949, the People’s Republic of China was
officially proclaimed. Since then, China experienced ‘Mao Era’ and ‘Deng
Xiaoping’ and other presidents. It’s full of ups and downs during this period.

Before 1978,
there were several movements, such as the Great Leap Forward, the Cultural
Revolution. Those made China maintain policies that kept the economy very poor,
stagnant, centrally-controlled, vastly inefficient, and relatively isolated
from the global economy.

However, after
the reform and opening-up was established in 1978, China’s economy has achieved
great growth and success in the last 30 years.

Therefore, is
the reform a turning point in China?

Body: 1.Is the reform
and opening-up a critical juncture in China’s economy?

In 1978, China
was a very poor country in the world. The real per capita GDP in China was only
one-fortieth of the U.S. level and one-tenth the Brazilian level. After 1978, the
Chinese economy began to grow dramatically. China’s real per capita GDP has
grown at an average rate beyond 8 percent each year. Eventually, China’s real
per capita GDP is now almost one-fifth the U.S. level and at the same level as
Brazil. This rapid improvement in average living standard has occurred in China
with more than 20 percent of the world’s population. Now China is the
second-largest economy in the world.

The following
graph shows the growth of GDP per capita in China since 1950. Before 1978,
there was little GDP growth. After that, the GDP has grown largely and
dramatically.

 

2. Why did the reform happen in China?

 In the early 1950s, planning market was
introduced in China that was modeled after the planning system of the Soviet
Union. In 1978, China carried out the economic reform to get rid of the
planning system. And it returned to a more market-oriented economy. Then why
did this reform happen in China?

First, people suffered a lot from the
Great Leap Forward in 1953 and Cultural Revolution in 1966. During the Great
Leap Forward, the government emphasized a lot on steel production and tried to
surpass US. As a result, there was great shortage of food. “It is estimated that about 45 million people died in this
period and the resulting famine. Stories of suicide and cannibalism are
abundant. It is also reported that many people attempted to eat dirt to stay
alive.” During the Cultural Revolution, the government shut down the
nation’s schools. Red Guards attacked members of China’s elderly and intellectual
population. That resulted in that China lost a lot of intellectuals and the
chances to develop.

Therefore, after the two movements,
China’s economy has been destroyed a lot and people couldn’t afford a normal
life. Many economic planners realized that planning market was not suitable in
China and it’s hard to manage the market and it’s economically inefficient.

Besides, it’s witnessed that many
neighboring economies have achieved great success who adopted the market
economy. The neighboring economies included Hong Kong, Taiwan, South Korea and
Singapore.

Thus, after the death of Mao Zedong in
1976, Deng Xiaoping became the president and he reformed the economy system in
1978.

3.
Institutional changes in this reform in China.

In 1978, the
Third Plenary Session of the CPC 11th Central Committee was held. Since
1979, China has pursued a policy of reform and opening to the outside world.

The reform
covered many areas including important institutional change. In agriculture,
China adopted “household responsibility system.” The government distributed its
land to individual households to farm separately. Each got the additional
reward for additional labor after delivering a fixed amount of output to the
team for delivery to the government procurement agencies.

Gradually, the institutional change began to expand
after 1978. By the late 1990s, state-owned enterprises were adopted. After
paying a fixed tax to the government, each state enterprise was allowed to keep
the remaining profit for distribution to its staff and workers and for capital
investment.

 Most
important is the open-door reform. Under this policy, foreign trade and foreign
investment are allowed. Before the policy came out, China was a kind of close
economy. Mostly, the foreign trade required strict control for the purpose of
providing exports to pay for the imports required under central planning. “In 1978, the total volume of its foreign
trade, or the sum of the values of its exports and imports, amounted to only 7
percent of its national income. Deng Xiaoping’s open-door policy encouraged the
opening of China to foreign imports and the promotion of exports. By 1987, the
volume of foreign trade increased to 25 percent and by 1998 to 37 percent of
gross domestic product. ”

Under this policy, a number of institutional reforms
were adopted in the development of foreign trade. Trading companies can
cooperate with industrial enterprises manufacturing products for exporting. These
companies were responsible for their own profit and loss. It made the economic
institutions more inclusive. What’s more, there were special measures for
encouraging exporting.

Education systems have changed as well. During the
Cultural Revolution, all universities were forced to close. Students couldn’t
receive higher education. After the reform, it started to become normal and
better. Students could have the chance to apply for the colleges through
examinations. Gradually, the education in China has developed a lot. And people
started to explore the outside world.

4. Why is this
reform so successful in China?

As I mentioned above, there is a huge difference in
economic growth before and after 1978. Why did China’s economic performance
differ so much?

Firstly, a market economy has been proved that it could
obtain success in a nation’s development. The basic elements of it had been
adopted successfully and achieved great growth in Chinese economy in the beginning
of the reform.

Secondly, China has a huge a population which can
provide a large amount of cheap labors. After 1949, the president Mao Zedong
encouraged people to give birth to more kids. Therefore, it caused a large increase
in Chinese population. In the 1950s, the population grew from 600 million to
almost 1400 million. During
1960-2015, the population doubled to nearly 1.4 billion.

Thirdly, the higher education has also developed a
lot. That provided sufficient intellectuals supply. As Suzanne Pepper observed,
“Change in the education sector thus did
not need to await the Third Plenum of the Eleventh Central Committee in
December 1978, which officially inaugurated Deng Xiaoping’s reform
administration. By that time, almost all the decisions necessary to recreate
the regular education system in its pre-1966 state had already been announced,
and implementation was well under way.”

In the winter of 1977, 5.7 million people took part
in the national college entrance examination. Only 273,000 students of them
were admitted to attend higher education. Compared with the number of eligible
participants, the number of students admitted was only a minority. They only
accounted for 4.8 percent of those who took the exam.

In 1976, there were 392 higher learning institutions
in China. The educational goal was to train leadership both with specialized
knowledge and political trustworthiness. In 1978 when the reform and opening-up
was announced and the decision for economic reform was made, higher education
expanded as fast as it could. Therefore, in the early 1980s, many colleges were
updated into universities. Between
1976 and 1985, 618 such institutions were upgraded into colleges or
universities. In 1985, the total number of public higher learning institutions
was 1,010. Most of the upgraded colleges and universities related with
medicine, law, economics, science and technology.

Therefore, there was a huge intellectual supply
after 1978 and the supply kept growing since the reform.

Lastly, the competence of the presidents “Deng
Xiaoping” did matter a lot. Without
the particular leader the, reform would have started and have been successful,
though perhaps more slowly.

Conclusion: Future
prospects of reform in economic growth

In the last 30 years, China has achieved great
growth in economy, education and so on. Besides, the institutions have become
much more inclusive since 1978. Thus, the reform and opening-up is for sure a
critical juncture for China. There are huge differences before and after the
reform, which includes almost all areas. Although there are still weaknesses of
this reform, it still plays a very significant role in China’s development. We
can conclude that the reform leads China to success to certain extent.

In short, after economic reform the economic
institutions in China, it had improved a great deal for the functioning of a
market economy. However, on the whole, the institutions are still not up to the
standard of the imperfect market institutions. For instance, the foreign trade
and investment policy was strict. Foreign trade is characterized by high
tariffs. Foreign investment is subject to numerous restrictions.

 Therefore,
China can learn from this success and stick to the open-door policy. Besides,
there are still other ongoing issues which are urged for solution, such as huge
inequality in income in China. The government should pay more attention to
those issues and try to carry out more reforms which can benefit residents in
China.

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