How China developed. Economic growth of China and Japan

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St. Petersburg State University of Architecture and Civil Engineering

Department of Economic Theory

Essay

China's economic successI: causes and results

Completed by: student of group 2-M-I

Bobchenok Pavel Sergeevich

Checked by: Lesnaya Maya Ivanovna

Saint Petersburg

Introduction

In the world press, today's China is spoken of as the “major phenomenon” and at the same time the “great unknown” of the 21st century. Indeed, its significant successes achieved over a quarter of a century are an impressive international event at the turn of the 20th and 21st centuries. But these successes are the result of a number of factors.

Purpose of the work: to find out why the Chinese economy has achieved such power.

Job objectives:

· Consider the features of China's economic policy;

· Find out what factors contributed to such success.

Object of analysis: China.

Subject of analysis: economic relations.

When the People's Republic of China (PRC) was founded in 1949, the country was in devastation as a result of decades-long hostilities and inflation. The government was given a number of tasks: consolidating power, restoring public order, and solving the problem of mass unemployment and hunger. In 1975, Chinese Prime Minister Zhou En Lai put forward a new economic program, the goal of which was to take a leading position among the world's economic powers by the year 2000. This program was aimed at accelerating the pace of growth in industry and agriculture, as well as the development of science. After the death of Mao Zedong, the role of ideology in government policy was noticeably reduced.

Since 1978, the basis of China's economic policy has been the thesis of the indivisibility of consumer welfare, economic efficiency and political stability. The emphasis was on increasing the level of personal income and consumption, introducing new systems of incentives, management and productivity improvements. In August 1980, a controversial reform program was adopted aimed at reducing the role of central government in favor of a mixed economy with planned market methods of management. This program was reflected in China’s sixth five-year economic development plan adopted at the same time. Key elements proposed were: implementation of agricultural reforms, including long-term land leasing and allowing farmers to produce cash crops and engage in non-farm activities; the right of enterprises to self-government; development of greater competition in the market; reducing the tax burden of non-state-owned enterprises, and finally, developing direct contacts between Chinese and foreign trading companies. Over the past 10 years, China has made impressive economic progress. GDP growth rates averaged 7% per year and are projected to remain at this level.

Since the early 1980s. China's government budget regularly runs into deficits that have been growing for more than 20 years. Since 1982, the state budget has consisted of two parts - the state budget and the construction budget. In particular, in 2002, state budget revenues amounted to 1890.4 billion yuan, and expenses - 2205.3. Most of the state budget of the PRC is formed from taxes - 93.4% (2001). There are only five types of taxes: 1) trade and industrial tax, which makes up the majority of tax collections (83% of all taxes); 2) customs duties; 3) agricultural tax; 4) income tax from state enterprises; 5) income tax from collective enterprises. A significant portion of state budget expenditures goes to capital construction (34.2% of all expenditures), development of the social sphere, culture and education (27.6%), defense (7.6%) and administrative expenses (18.6%) .

The starting point in the formation of export production areas and the establishment of foreign economic relations was the creation of special enclaves in the provinces of Guangdong and Fujian. Then areas of economic cooperation arose in the delta of the Pearl River (Pearl) in Guangdong province, in Fujian, in the delta of the Changjiang (Yangzi) River, where the economic complex of Shanghai, Jiangsu and Zhejiang provinces developed. The development of economic cooperation areas on the coast of the Bohai Gulf began. Here, the production complexes of Beijing-Tianjin, as well as the provinces of Liaoning and Shandong, became the base centers. Their creation required huge capital investments. In the second half of the 1990s, the share of government and business investment in export production areas consistently exceeded half of the country's total investment. These areas gradually became the main engine of the country's economic growth. In 2000 they created 56%, In 2005, over 58% of the GDP of the entire country.

Economic development was accompanied by a dynamic process of urbanization. In 1984, at the beginning of the reform of the urban economy, there were 465 cities in the country, in 2005 - 657. During this time, the number of villages decreased by almost 2.5 times. Almost 75.5 thousand volosts disappeared. Their number decreased by 5.7 times. The urban population increased from 240.2 million to 562.1 million people.

Enormous successes have been achieved in foreign trade. China has become one of the main players in the global market. Foreign trade has become a powerful engine of the economy. The volume of exports and imports amounted to 39% of GDP in 1995, 40% in 2000, but already about 64% in 2005. Thanks to the rapid growth of foreign trade, China's share of world trade increased from 4.6% in the 90s to 9.4% in 2007. Along with the USA, Germany and Japan, the country has formed a kind of club of the world's leading trading powers.

China has become one of the largest recipients of foreign capital, ranking third in the world and first among developing countries in terms of inflows from abroad. The amount of foreign capital used increased from $10.3 billion in 1990 to $63.8 billion in 2005. The influx of foreign capital investment played a leading role in the development of foreign trade and international economic relations of the PRC. The share of enterprises with foreign capital in 2005 .accounted for 58.5% of exports and 58.7% of imports. In mid-2006, the total volume of Chinese direct investment abroad exceeded $3.6 billion.

The country has acquired the role of an important participant in geo-economic processes. Considering itself as a “strategic partner” in relations with many countries of the world, China simultaneously and invariably acts as a competitor and adversary, seeking to realize its long-term national interests. China has become a major, recognized player in the geopolitical arena. Without its participation, decisions are not made

China is the owner of the largest foreign exchange reserves, placed mainly in securities of the United States and partly EU countries. In 2006, their volume exceeded $1 trillion. The increase in foreign exchange reserves was a natural result of the implementation of the strategy of export orientation of the national economy over 15 years, widely known under the motto “Go outside!”

The largest contribution to GDP comes from industry. Industrial production in China grew at a faster pace - in 1979-2001. on average 11.5% per year. Production is growing most rapidly in export-oriented industries (light, food, textile industries, mechanical engineering and electronics), in high-tech industries, as well as in the production of durable consumer goods (passenger cars, computers, mobile phones, televisions, household appliances).

Rice remains the main grain crop, which is harvested three times a year in the southern regions of the country. Important branches of agriculture are livestock farming and fishing. China ranks first in the world in the production of meat, eggs, honey, bee products, silkworm cocoons, total livestock, and poultry.

According to data for 2001, highways rank first in length in China - 1,698 thousand km, of which only 19.4 thousand km. make up expressways. The length of the airlines is 1553.6 thousand km, of which 517 thousand km are international airlines.

In China, the functions of the central bank are performed by the People's Bank of China. There are also four specialized industry banks: 1. Industrial and Commercial Bank of China; 2.Agricultural Bank of China; 3.Bank of China; 4.People's Construction Bank of China. In 1994, three “policy” banks were created - the State Development Bank, the Agricultural Development Bank of China and the Export-Import Bank of China, which began to compete with the four sectoral Chinese banks. In 1995-96 14 national and regional commercial banks were created, as well as a large number of various non-banking financial institutions, which began to play an active role in the financial life of the country. There are 2 stock exchanges in China - in Shanghai and Shenzhen.

Five key factors have underpinned China's remarkably rapid economic growth over the past three decades: the introduction of market mechanisms, openness to trade and direct investment, high savings and investment rates, transformation of the labor force structure, and development of the education system.

Before the reforms, officials in China's State Planning Committee were responsible for distributing basic industrial goods such as steel and machine tools, while the state distributed consumer goods. The State Price Committee often arbitrarily set prices for many goods, so that there was sometimes no direct relationship between income and labor productivity .

On the eve of the reforms, there was no labor market in China. In cities, there was a state distribution of jobs among graduates of educational institutions, and the salary system was also established by the state. The state also played a very significant role in the distribution of capital. A quarter of all investments were financed from the state budget.

Over the first two decades of economic reform, market forces gradually replaced non-market institutional orders. The share of planned production fell sharply, and in determining prices for the vast majority of goods and services, state planning was replaced by market mechanisms. Competition appeared in urban labor markets, wages were no longer fixed, and labor mobility increased significantly. The role of the budget in financing investments rapidly declined.

The second key driver of economic growth over the past three decades is the increasing openness of the global economy, which has already led to marked changes in market structure and increased competition. Domestic producers have to compete not only with huge volumes of imports, but also with a large number of goods produced by foreign firms within the country. Because these foreign firms have advantages in technology, design, and marketing, they stimulate competition in the domestic market. Chinese leaders understood that domestic firms needed to improve their efficiency to remain competitive.

The third factor that underlies rapid economic growth is high rates of savings and investment. The established level of investment in China is much higher than in other developing countries with comparable levels of per capita income. A high level of investment leads to a rapid increase in fixed capital, which, in turn, contributes to the redistribution of labor from the agricultural to the modern sector, which has a beneficial effect on economic growth.

The fourth factor that has significantly influenced the rate of economic growth in China is the sectoral transformation of the workforce. The share of people employed in agriculture has fallen from 70% at the beginning of the reforms to 50% today. As the labor force moves from agriculture to industry or services, overall productivity increases as a result. Thanks to investment in primary education, China already had a relatively high literacy rate for a low-income country in the run-up to the reforms. Adult literacy in 1977 was 66%, almost 2 times higher than in India (38%). Adoption of the Compulsory Education Law of 1986, which increased the duration of compulsory schooling from five years to nine. By the mid-90s. adult literacy was just above 80%. This gave China a key advantage in attracting foreign investment in industry. Most foreign manufacturing in China involves component assembly, and the workforce is overwhelmingly female, mostly from rural areas.

Over the next decade, each of these factors will continue to contribute to economic growth. Structural transformation of the labor force will also remain an important positive factor for economic growth, as the share of workers still employed in agriculture will continue to decline in the coming decades. China will likely continue to rely on investment in education, and the first decades of reforms contributed significantly to the rapid development of the economy.

Centralization of power has been and remains the most important condition for the implementation of ambitious plans for accelerated economic growth, as well as overcoming acute problems and contradictions along this path. And like every centralization, in China it showed a tendency to weaken/erode. This was the price the state had to pay to achieve its goal. In addition, China has directly or indirectly contributed to the complication of many resource, and with them, environmental and economic problems of the world. Environmental destruction has reached enormous proportions.

While all the major drivers of economic growth will be favorable for another decade or so, China faces three daunting challenges to ensure continued growth.

List of used literature.

economic reform china

1. Valery Romanyuk. Myths and realities of the Chinese miracle. "News".

2. Gelbras, The price of China’s economic success, “World Economy and International Relations.” 2007, No. 9, pp. 26-34.

3. Melyantsev, Economic growth of China and India: dynamics, proportions and consequences, ”Me and Mo”, 2007, No. 9.p.18-25.

4. Mikheev, Russia-China: “Reloading” relations, “World Economy and International Relations.” 2010, No. 6.

5. Fred Bergsten, Bates Gill, Nicholas Lardy, Derek Mitchell. China. What you should know about the new superpower. “Institute for Comprehensive Strategic Research”, 2007, 256 p.

6. Encyclopedia of the countries of the world.”Economics”, 2004, 1319c.

7. http://rutube.ru/tracks/3120241.html?v=6dd0d192f9256ef1e7d05ce01999a869

8. http://www.ereport.ru/graph/gdpchina.htm

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Financial system

China's main currency is the yuan. It is believed that the yuan can become a competitor to the American dollar. However, currently the yuan is directly dependent on the dollar, and changes in its exchange rate are strictly controlled by the state. Since China is a leader in export trade, an increase in the value of the yuan will negatively impact all sectors of the economy.

Now China ranks first in the world in terms of foreign trade volume. The most popular items are electronics, cars, toys and textiles.

China not only successfully exports products, but also invests in the economies of other countries. For example, the volume of investments in states located on the African continent amounts to more than a trillion dollars. In addition, Beijing is successfully implementing its projects in the construction, energy and transport sectors.

Development of economic sectors

Since the end of the 20th century, China's economy has developed rapidly. The largest part of the country's GDP is occupied by industry, agriculture and the service sector. The most actively developing:

mechanical engineering;
automotive industry;
healthcare;
information technology industry;
Internet trading.

The rapid pace of development is especially noticeable in agriculture and industry.

Agriculture

All lands suitable for arable land are actively used. Most of the land is grown with rice, which is the main crop. In addition to rice, soybeans, potatoes, wheat and other crops are grown in China. In livestock farming, China occupies a leading position in the breeding of chickens and pigs. Sheep farming is developing rapidly. The large number of reservoirs in the country contributes to the active growth of fisheries. The pace of development of the agricultural industry directly depends on natural factors. Constant droughts and floods threaten its further development.

Industry

Construction and industry form the backbone of China's economy. A fifth of the world's industrial output belongs to China. Almost half of the country's GDP comes from these industries. The automotive industry, the production of personal computers and steel are developing at an active pace. Particular attention is paid to the development of the energy industry. A large amount of resources is invested in the development of nuclear and alternative energy (construction of wind farms).

The influence of foreign capital on the Chinese economy

The main feature of the Chinese economy is state control over foreign investment in a number of industries. For example, the intervention of foreign partners in such industries as:

mining industry;
production of nuclear fuel and radioactive materials;
air travel.

In social activities, there is a strict ban on the presence of foreign capital in the following areas:

GMO production;
publishing activities;
social studies.

Government procurement is available to foreigners, but the quantity is regulated by Chinese law. In the financial sector, the “rights” of foreign investors are also limited. In banks, the volume of foreign investments should not exceed 25%, in the securities market - no more than 49%. In the telecommunications and construction industries, the presence of foreign investment is no more than 50%, and in the construction industry, the participation of foreign capital is limited to the construction of office buildings, hotels and inns.

China's economic development can rightfully be called phenomenal. China is a leader in many economic sectors and has a significant influence on global trade.

The question is not new, even, to be honest, it is already quite old, but some people who are not particularly interested in economics may have it. What are the reasons for the success of the Chinese economy and why such development could not be achieved in Russia?

[Article updated 6/26/2019]

Preface

This article, like all articles on the Econ Dude blog, is not a scientific source of truth. This is just my private and subjective opinion, my analytics and my view on this issue. Of course, I try to collect sources, analyze the issue in detail and write interestingly, but such a huge topic as the reasons for China’s economic success is actually impossible to cover in one article.

They will laugh.

Now that we're done with the introduction, let's move on to the analysis.

Only the lazy didn’t talk about China’s economic miracle

At the moment, China's GDP is about 11 trillion dollars, China is the second economy in the world according to this indicator, after the United States.

China's economic growth

Third, if we consider the European Union to be an integral economy, but I would not think so, since its integrity after Britain's exit is slightly violated and can also be violated by other countries at any time.

China's GDP growth has been 8-11% or higher for many years, only beginning to slow down slightly in recent years. Although, curiously, the US is growing faster than China. I wrote about this separately:

It should be noted that GDP per capita is not the same thing as population income. GDP is, as it were, the value of all assets per person, although this is a rather rough definition, but it makes no sense for us to go deeper now.

The fact of China's success in recent decades rarely causes controversy, and this despite the fact that China is formally a communist-socialist country. This is what breaks many patterns, and this is why I want to compare China a little with Russia and the USSR. How did China manage to achieve such success and what was the reason for the rapid growth of the Chinese economy?

Success story of the Chinese economy

History is also educational for Russians, since we have an example of “how it could have been” hanging right next to us. After Mao's death in 1978, reforms began in China - Reform and opening up policy. And the key person in this whole story was Deng Xiaoping, about whom everyone definitely needs to know, how he almost single-handedly brought China out of oblivion and turned it into a world leader.

Often history is changed not by the people as a whole, but by very specific individuals.

can move mountains and change history, both for the better and for the worse. Therefore, it is not always fair to blame something on lazy people or some general processes that no one can control. The right person at the right time and in the right place can change history. Remember Jobs, Geitz, Trump, Elon Musk, Napoleon, Peter the Great and many others.

Fine. Let's look at the specific steps and actions that led China to success. There weren't that many steps.

Reducing the role of the state in the economy

The first steps were to reduce the role of government in the economy. Paradoxical for a supposedly communist/socialist country. This is not the first example where one can see a direct correlation between economic growth and the general prosperity of the people after the role of the state in the economy has been reduced.

The correlation is direct, even at the tax level.

. This also includes all licenses, obstacles to business, inspections, registrations and everything else. Any bureaucracy harms the economy, and the destruction of this bureaucracy gives the economy a second wind. Officials add nothing to GDP.

Once you cut taxes, like Trump did just recently, you leave more money for businesses and people, and that's a plus for the country.

Joint ventures with foreigners

The state began to encourage the merger of local firms with foreign ones. China's main problem then was its backwardness in technology and knowledge from the West; two things were urgently needed: money and technology.

I worked there for some time.

This Russian economic game simulates everything quite well. Why in the game did players-politicians think of making a special place for profitable production - Uzbekistan, zeroing out duties and reducing taxes to 5%? And all the players guessed to move all game production there, but in reality, it turns out that it is not clear to anyone what harm can be caused by high duties and taxes.

At least one region in the country should be preferential, where taxes and duties are low. China is full of such special economic zones, and no one will suddenly cancel this policy tomorrow, so they invest there.

Example with low taxes from the game

Why, even in the game, ordinary people successfully modeled and used this, sometimes even young people understand everything perfectly.

Well, in reality, this is not clear to anyone.

What other restrictions are there on economic activity?

Taxes;
Fees;
Licensing;
Checks;
Problematic labor legislation;
Crime;
Lack of government stability and predictability.

There is no need to talk about predictability, stability and predictability of Russia. Russia is famous in the international arena for the fact that absolutely no one in the world is able to calculate the next step of the Russian Federation.

This may be good for some things, but not for the economy.

Crime is also a very serious factor.

If there is even the slightest crime, even the smallest, then this is a huge negative factor for investment in the country. And what can we say about countries where crime is at the highest level. Where it is sometimes difficult to distinguish an official from a bandit and it is unclear who came to you to demand something from you.

Respect for private property also goes into this point. In China there is a death penalty for corruption, but in Russia what do they do with corrupt officials?

Promoted?

There are also interesting things, for example. It is known that excess and Massive alcohol consumption increases crime, reduces ability to work, etc. In China, of course, they also drink, but by Russian standards this is a child’s level. True, there are exceptions here, for example There's a lot of drinking in South Korea, even more than Russians, you will be surprised, but the economy there is ok.

Export orientation

I wrote about this here:

Disadvantages of the Chinese system

The world is lucky to have people like the Chinese.

A billion people with zero claims and minimal ambitions who do not know how and do not like to fight. Everyone has been mocking the Chinese for centuries. The British mocked in the Opium Wars, the Mongols mocked, the Japanese mocked. The Russians bullied many times, biting off pieces along with everyone else during the Russian Empire. For centuries, China has been pressed, used and squeezed out, the people there are so downtrodden and submissive, but you can do anything with them, which is what was done.

But the people are now awakening to a national consciousness that has never completely died. For all their downtroddenness and outward modesty, such a population and such a sample, of course, gives rise to geniuses.

Appetites are growing.

China has long since changed and the West is penetrating deeper and deeper.

Nowadays, many Chinese women in cities are so proud and arrogant that even Russians and Ukrainians can learn from them how to be TPs. The people fell in love with money and there was no communism left there.

However, all these tons of production have greatly, greatly polluted the atmosphere; this is a huge and real problem.

In the cities it’s almost impossible to breathe, everyone wears masks.

Due to the one-child policy, the population is aging, world money is also not endless, and it has all been in China for a long time. Global investors are the smartest people in the world, they are very nervous and have enormous paranoia.

If something suddenly happens tomorrow, for example the Chinese government does something (of course, there are few chances, since they don’t like multi-move moves and forks), or for example, data about a slowdown in growth comes out, then trillions of dollars will be taken out of China in the same way as they were taken there, in a matter of days. Capitalists are not interested in anything other than the rate of growth of capital in this world.

Now the growth there is 7% and they have long been starting to slowly transfer the money to other places. You may increasingly notice clothing and food produced in Vietnam, Turkey and even Russia. There is less space, all the fatty pieces have already been sawed off and eaten, competition is growing. And if 10-30 years ago foreign markets were ready to digest billions of tons of cheap and bad Chinese products, foreign markets are also not bottomless, they are filling up, and people increasingly prefer quality and many are willing to pay for quality. And “made in China”, as you know, is a guarantee of price, but not quality.

The guarantee of quality is Germany, whose economy has been doing well for many years.

Look at the dollar-yuan exchange rate over 10 years.

Now it's 1 dollar = 6.8 yuan. See what's happening?

China strengthened the currency until 2013, now it is weakening again. This is a signal that there may be problems with exports, although the trade balance does not seem to be falling. The exchange rate greatly affects the trade balance and the same Trump said a billion times that China likes to play with the exchange rate. (China, china, china)

If export earnings fall, you simply weaken the currency. What Russia did after the fall in oil prices to balance the budget.

Since 2013, the yuan has been weakening, and this is a bad sign for the economy. They are trying to rebuild it to accommodate domestic demand and in many ways this is successful, but even now, and never really, the Chinese could not be real leaders in terms of innovation, the United States has always beaten them because the core of the US political and economic system is better. China can catch up and be one step behind the leader, but as you know, the Chinese adapt and copy, they rarely come up with something really new, although of course they come up with something and much more than many other countries, but from the United States in this regard they are lagging behind. Although after writing this I wanted to test my thoughts.

The check refuted me:

2014, China is the first in the number of applications for scientific patents.

However, according to grants (approval of the application, as I understand it) The USA is in the lead. As you can see in the top, Japan and South Korea are countries with a fate similar to China and a leap in development, but Korea and Japan are still very different from China.

Thousands of guns from the north, loaded with nuclear warheads, are aimed at Seoul.

They don't have much fun there.

But in Japan everything is pretty normal, except for the giant government. debt and the risk of flooding and destruction from the next volcanic eruption, plate shift or some other crap, but overall in Japan and Korea the situation is many times better than in China.

Russia manages, even with relatively weak support for science, to hold sixth place in the world in terms of the number of patents, which inspires some hope, but of course it’s sad, since one can only imagine what would happen in Russia if ever history, the state gave normal money for science, or if there were a large private business in the Russian Federation that would support this science.

Science in China, by the way, is strongly supported by business.

Another problem with China is the whole core of their ideology and government. Yes, most Chinese don’t give a damn about power, they are used to living in a gigantic system of suppression, they have much more experience than the Russians and they are not fools, but the government has complete control and can stumble at one moment and lose everything. In China, there is wise leadership at the highest level, China is ruled by geniuses after Mao, that is why they managed to outplay everyone, however, everyone makes mistakes.

Some ships in some wrong seas?

Any desire to return some islands?

Tibet? Chinese firewall? Executions?

And a bunch of other terrible things that are happening in China have been pushing smart Chinese out of the country for decades. The scale of the brain drain is colossal; Russia has never even dreamed of it. All smart Chinese have been in the USA, Europe and Canada for a long time.

They will never return, and they take away not only their brains, but also usually a lot of money. Half of Canada has been bought up by the Chinese, half of the west coast of the USA belongs to the Chinese. But don't think that this is being bought by Chinese capital in the sense of the Chinese government.

This is bought by individual Chinese who raised it in China; this loot has nothing to do with China. It's like buying apartments in Miami by you know who. The same situation is happening in China, but only hundreds of times larger.

Russia with her (and mine, in this blog) Constant talk about thieves and bad government is nothing compared to China. There, too, everything is rotting from the inside and much is rotten. I have Russian friends who went to China to study, we talked. I can’t tell you what nasty things he told me about. The man returned home.

If you think that there is censorship in Russia, write something bad about their government on the Chinese Internet and we will see how quickly you will have problems. The problems are quiet, and no media will cry for you later, simply no one will know about it. I would never be able to create such a blog in China and write such things, for example talking about the shortcomings of China in comparison with the USA.

Although it is still possible to raise a lot of money in China, although not everything is absolutely terrible there, and the country is still actively developing and is already a world leader, there are problems there too. I just wrote the last point for this purpose, so that you don’t think that China is ideal. Don’t mix the economy and power of China and ordinary Chinese into a heap. You don’t mix up, for example, the authorities of Russia/Ukraine and the people of these countries?

If, for example, the Russian authorities have 80 yards of dollars in US treasury bonds (UPD, not anymore, hooray!) and the country is supposed to be rich, this has nothing to do with ordinary people. For the average Chinese, China is far from ideal. They are still poor, the competition is enormous, there is work, but there is not enough normal work. Although incomes are growing, in Russia people still have more money and assets, each individual.

The censorship there is cruel, the living conditions are disgusting, the ecology is bad.

I would look at those who greatly admire China, how much they would like to be born Chinese in this day and age. Oh, I'd like to see it.

All the loot in China is the loot of foreigners, who can withdraw it at any time, or the loot of the government, which is not so kind and fluffy. And in general, if they don’t do something urgently about the environment, it will simply become impossible to breathe there.

If anyone thinks that the United States will start a war with China, then it is obvious that such a war is not beneficial to anyone. Their economies are highly dependent on each other, and even considering how Trump scolded China, they stupidly won’t let him fight with it, and he himself does strange things, leaving various partnerships that were previously created clearly against China.

The United States is addicted to cheap Chinese goods like a drug, and without the United States China will very quickly come to a complete end.

All supposed US/China tensions are being blown up by the media, it's a political game.

By the way, it’s quite interesting that sanctions against the Russian Federation are also a political game for the United States, but there was a way to protect yourself from this. How?

It was necessary to release as much American money into the country as possible; this is a clear guarantee that the United States would not be able to do anything with the Russian Federation economically, if it were 5-10% of trade turnover.

That is, guaranteed protection from the United States is the presence of American money in the country in large quantities. American money has the most powerful (most powerful) in the world of lobbying and this would be an ideal defense. This is exactly what China did, tying itself to the United States with thin threads, perhaps not even consciously.

That's all. The article is already a little outdated and I have some mistakes. I later returned to this article several times and improved it, but did not completely rewrite it. In any case, I'm glad you found it interesting to read.

You will find my other articles about economics in a special section.

Just four decades ago, a country like China had a rather weak, lagging economy. The economic reforms that have taken place over the years, which have made the country's economy more liberal, are considered to be the Chinese economic miracle. The rate of economic growth over the past 30 years is incredible and amazing: on average, the country's GDP increased by 10% per year, and GDP per capita grew by 9%. Today, China occupies a leading position among world economies. Let's consider how this country managed to achieve such indicators, how the economic miracle happened, what were its reasons and what was the situation that preceded it.

China in the middle of the twentieth century

After the end of World War II, China stood at a crossroads and did not know what to choose: a liberal capitalist or, following the example of the great power of the USSR, a socialist path of development. The civil war that rocked the country until 1949 led to the separation of the island of Taiwan and the creation of the People's Republic of China, led by Mao Zedong.

With the advent of the Communist Party, the painful construction of socialism begins: the nationalization of property and the implementation of agrarian reform, the implementation of five-year plans for economic development... Accepting help from the USSR and focusing on the political and economic system of its socialist neighbor, China is industrializing the economy. Sometimes we had to resort to tough and uncompromising methods.

"Great Leap" to nowhere

However, after 1957, relations between China and the USSR cooled, and Mao Zedong, who did not share the views of the then Soviet leadership, decided to implement a new program, called the “Great Leap Forward.” The goal of the ambitious program was to dramatically develop the economy, but the new direction turned out to be unsuccessful and had tragic consequences both for the people and for the Chinese economy as a whole.

In the 60s, the country experienced severe famine, cultural revolution and mass repression. Many government instruments ceased to function, and the communist party system collapsed. But in the early 70s, the government set a course for restoring party organizations and improving relations with the United States. After the death of the “Great Helmsman” Mao Zedong in 1976, the country found itself in a difficult economic situation, unemployment increased, and a card system was introduced.

Since the end of 1976, Hua Guofeng has become the head of China. But the actual reins of power are taken by Deng Xiaoping, a politician who fell into the millstones of the Cultural Revolution and was restored to the post of Vice Premier of China in 1977.

Decisive plenum

Considering the Great Leap Forward program to be largely erroneous, Deng Xiaoping, relying on the support of the Communist Party, began implementing a program to modernize the economy. In 1978, at the next plenum of the Communist Party, the course towards a socialist market economy was officially proclaimed, which would combine two economic systems: planned-distributive and market.

The new government path is called the reform and opening up policy. Xiaoping's liberal reforms are based on the gradual transition of economic structures to market ones and the preservation of the communist system. assured that all transformations will take place under the leadership of the Communist Party, and the dictatorship of the proletariat will be strengthened.

Highlights of transformations and reforms

Briefly speaking about the new reforms, the Chinese economy should be focused on export production and massive attraction of investment. From this moment on, the Celestial Empire proclaims itself a country open to expanding ties with other states, which has attracted foreign investors. And the liberalization of foreign trade and the creation of special economic zones for foreign entrepreneurs led to an unprecedented increase in export indicators.

First of all, Xiaoping reduces state control over many sectors of the economy and expands the management functions of business leaders. The development of the private sector was encouraged in every possible way, and stock markets appeared. Serious changes affected the agricultural sector and industry.

Four stages

During the entire reform of China's economy, four temporary stages can be distinguished, carried out under a certain slogan. The first (from 1978 to 1984) stage, implying transformations in rural areas, the creation of special economic zones, had the following slogan: “The basis is a planned economy. Addition: market regulation.”

The second (from 1984 to 1991) stage is a shift in attention from the agricultural sector to urban enterprises, expanding their field of activity and independence. Market pricing is being introduced, the social sphere, science, and education are undergoing reforms. This stage is called “Planned Commodity Economy”.

The third (from 1992 to 2002) stage took place under the slogan “Socialist market economy.” At this time, a new economic system is being formed, implying further development of the market and defining the instruments of macro-regulation of state control on a new basis.

The fourth (from 2003 to the present day) is designated as the “Stage of Improving the Socialist Market Economy.”

Transformations in the agricultural sector

The Chinese economic miracle began with the transformation. The essence of the agrarian reform was the abolition of the then existing people's communes and the transition to family contracting with a single collective property. This meant the transfer of land to Chinese peasants into ownership for a period of up to fifty years, and part of the products received from this land was given to the state. Free pricing for peasant products was also introduced, and market trade in agricultural goods was allowed.

As a result of such transformations, agriculture received an impetus for development and emerged from stagnation. The new established system of collective ownership and family contracting qualitatively improved the living standards of peasants and helped solve the food problem.

Transformations in industry

The economic system of industrial enterprises was almost freed from directive planning; they were supposed to be turned into self-sustaining enterprises with the possibility of independent sales of products. Large strategic enterprises remain under the control of the state, while medium and small enterprises are given the right not only to manage their business, but also to change their form of ownership. All this contributed to the fact that the state focused on improving the situation in large state-owned enterprises and did not interfere with the development of the private sector.

The imbalance in the production of heavy industry and consumer goods is gradually decreasing. The economy is beginning to turn toward increased production of goods for domestic consumption, especially since China’s large population contributes to this.

Special economic zones, tax and banking systems

By 1982, as an experiment, some coastal regions of China declared themselves special economic zones, and after the 1984 plenum, a total of 14 cities were approved as special economic zones. The purpose of forming these zones was to attract foreign investment in Chinese industry and the development of new technologies, accelerate the economic development of these regions, and bring the country's economy to the international stage.

The reforms also affected the tax, banking and currency systems. Value added taxes and a single income tax for organizations are being introduced. The central budgets began to receive a larger share of revenues thanks to a new distribution system between local administrations and the central government.

The country's banking system was divided into state-owned banks pursuing the government's economic policy, and other financial institutions on a commercial basis. Foreign exchange rates now began to float freely, which was regulated only by the market.

The fruits of reforms

The Chinese economic miracle began to manifest itself in the late 80s. The results of the transformations had a qualitative impact on the lives of ordinary citizens. Unemployment rates are reduced by 3 times, retail trade turnover doubles. The volume of foreign trade by 1987 increased 4 times compared to 1978. Billions of dollars of foreign investment were attracted, and by 1989 there were 19,000 joint ventures.

Speaking of China, it manifested itself in a decrease in the share of heavy industry and an increase in the production of consumer goods and light industry. The service sector is expanding significantly.

It was amazing at its unprecedented growth rates: 12-14% in the early 90s. During these years, many experts spoke about the phenomenon of the Chinese economic miracle and predicted China's role as an economic superpower of the 21st century.

Negative consequences of reforms

Like any coin, Chinese reforms had two sides - positive and negative. One of these negative aspects was the threat of inflation, which followed as a side effect of increased labor productivity after reforms in the agricultural sector. Also, as a result of the price reform, the situation in the industrial sector worsened. Unrest began, resulting in student demonstrations, as a result of which Secretary General Hu Yaobang resigned.

Only in the early 90s, the course proposed by Deng Xiaoping to accelerate and improve the economic environment helped overcome the overheating of the economy and create systems for controlling inflation and the country's development.

Chinese economic miracle and its reasons

So, now about the reasons. Studying the phenomenon of China's economic miracle, many experts put forward the following reasons for the economic recovery:

The effective role of the state in economic transformations. At all stages of reforms, the country's administrative apparatus adequately responded to the tasks of economic modernization.
Significant labor resources. Demand in the Chinese labor market is always greater than supply. This allows wages to be kept low while productivity is high.
Attracting foreign investment in Chinese industry, as well as in high-tech industries.
An export-oriented development model that made it possible, through foreign exchange earnings, to increase the knowledge intensity of the economy and the development of the latest technologies.

However, China's main economic progress was the abandonment of “shock therapy” and the gradual formation of a market mechanism, which improved the economy through effective market regulation.

China today

What have China's four decades of wise reforms led to? Let's look at the main economic indicators below. Today's China is a powerful nuclear and space power with modern industry and developed infrastructure.

Some numbers

Over the three quarters of 2017, China's GDP reached about 60 trillion yuan. This amounts to 6.9% in annual terms. The increase in China's GDP in 2017 is 0.2% compared to the previous year. The share of the agricultural, industrial and service sectors in GDP is increasing by an average of 5-7%. In 2017, the growth trend in innovative and high-tech sectors of the economy continues.

In general, despite a slight slowdown in growth rates, the Chinese economy (it is quite difficult to briefly describe this phenomenon) today retains the potential for long-term growth and continues structural reforms.

Forecasts for the development of the Chinese economy

Having created a market mechanism in the economy, the Chinese government plans to further improve it, while showing the advantages of socialism. However, experts make both optimistic and pessimistic forecasts for the development of the Chinese economy. Some are confident that it will be difficult to confront the growing economic, political and social problems while maintaining communist power. Growing emigration to developed countries and the gap between rich and poor can reduce the effectiveness of government and the role of the party. In contrast to them, other experts argue that, after all, a hybrid of socialism and the capitalist market is possible due to the originality of the Chinese nation and the mentality unique to it. All that remains to be said is that time will put everything in its place.

According to the latest official information, the growth of China's economy has developed so rapidly that today everyone unanimously confidently declares that China's economy has become the second in the whole world! The question of what explains the rapid growth of China's economy is not too difficult in the modern world, since after analyzing market prices and purchasing power parity of this country, it immediately becomes clear that China must necessarily lead the world rankings.

How can we explain the rapid growth of China's economy?

World experts in the field of economic development argue that the growth rate of China's economy has increased so much recently that even exchange rates, especially the dollar, cannot in any way affect the fluctuation of the Chinese economy in a leading position in the world. Some of them are of the opinion that soon this country will even be able to surpass Japan’s GDP in terms of financial indicators.

More recently, the director of the State Administration of Foreign Exchange of China announced that it was his country that became the owner of the second economy in the world. But, despite this, he noted that the Chinese government is ready for the fact that after the economic situation in the country grows, China will have to experience some slowdown in such a rapid trend in the development of the national economy.

But, despite the speech of a representative of the Chinese government, it is still impossible to say with certainty that the country will be able to surpass the economy of Japan, which has held a leading position in the world for four decades. Today it is clear that purchasing power parity is a clear indicator that China is, in fact, the second largest economy in the world. The reason why it has not yet been officially said that this particular country is one of the leaders of the world economy is that at the moment China’s economic indicators are constantly underestimated.

Rapid growth: China's economy

Today, in the comparative table, China's GDP has almost reached Japan's GDP: $4.900 trillion versus $5.080 trillion. As for Chinese economists, they say that in order for their country to finally be able to surpass Japan in the world ranking of economic development, it is necessary to eliminate the main obstacle, which is the yen.

According to a United Nations report, it is China, together with India, that will become the areas where the most rapid economic growth will occur. In addition, it should be noted that the main thing that explains the rapid growth of China’s economy is that the country’s government itself has set such a promising goal for itself. Without a doubt, Chinese officials have achieved clear success towards achieving their final goal: already in 2010, the Chinese economy became the third largest in the world. Today, the trend towards rapid and explosive growth is increasingly increasing.

Thus, economic growth was 8%, as planned by the Chinese government. At the same time, industrial production increased by as much as 11%, as previously promised by China's Minister of Industry.

Despite the fact that during a constantly developing economy, China was acutely threatened by recession, it nevertheless managed to maintain quite impressive rates of growth of the national economy. The government began to improve the state of the economy by adopting a special economic stimulus package and a sharp increase in bank lending.

Today, the rapid growth of China's economy is planned due to an increase in foreign trade turnover, especially exports, by 15%. Due to China's rapid economic growth, the unemployment rate in other countries is increasing. In addition, for the same reason, other countries are losing their influence in the world market. That is why financial experts predict that in the near future:

China faces numerous trade-related disputes;
the Chinese government will have to answer for violations of free trade rules;
The Chinese government will have to combat economic overheating, which consists of rapid influx and growth of the money supply.

The violations of free trade are already known today: Beijing is forcing its American counterparts to sell books, films and music exclusively in cooperation with Chinese state-owned companies.

But, despite some problems that appear in the Chinese economy, the government is successfully managing to combat them. Thus, the expected results have already been observed recently, that is, consumers are increasing their spending. According to official information, the Chinese government plans to increase consumption by its population in order to transform the national economy into an engine of economic growth.

In addition, it should be noted that the government is currently implementing a large-scale program for government stimulation of GDP growth. Thus, it prepares the entire economy of the country for very strict structural reforms that can liberate the economy from the role of exports and investments in them. In the future, it is planned to increase investments abroad in order to ensure sufficient profitability of its foreign exchange reserves. In addition, the government is determined to purchase securities owned by commodity companies.