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Development Factors in The Rise of China’s Economic Power

Erkaim Dzhunushova

Department of International Relations, Ala-Too International University

INT 154: Basic Foreign Language (Academic Writing)

Malika Abdulbakieva

March 20, 2023

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Introduction

“It took China less than 70 years to emerge from isolation and become one of the world's

greatest economic powers.” (Harrison & Palumbo, 2019)

“In 1978, China was one of the poorest countries 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.” (Zhu, 2012, 103)

“China at the end of 1976 was in a deep economic and socio-political crisis. The causes

of this crisis were the great nationalist militaristic politics of Mao Zedong, the spontaneous

politics of the "Great Leap Forward" and the "cultural revolution" of Mao. The years from 1966

to 1976 were the "lost decade" that threw the country back and brought the Chinese economy to

the brink of collapse.” (Shutenko, 2022)

“According to a study by economist Angus Maddison, China was the world's largest

economy in 1820, accounting for an estimated 32.9% of global GDP. However, foreign and civil

wars, internal strife, weak and ineffective governments, natural disasters (some of which were

man-made), and distortive economic policies caused China's share of global GDP on a PPP basis

to shrink significantly. By 1952, China's share of global GDP had fallen to 5.2%, and by 1978, it

slid to 4.9%.” (Maddison, 2019)

“Since the introduction of economic reforms, China’s economy has grown substantially

faster than during the pre-reform period, and, for the most part, has avoided major economic

disruptions. From 1979 to 2018, China’s annual real GDP averaged 9.5%. This has meant that on

average China has been able to double the size of its economy in real terms every eight years.”

(Maddison & Meza, 2019)

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“China's rising economic power is one of the great success stories of the latter half of the

20th century. Thirty years of economic reform have produced staggering results, lifting hundreds

of millions of Chinese from abject poverty. By the end of 2005 a national economic output of

$2.26 trillion sent China soaring past France, Britain and Italy to become the world's fourth-

largest economy (after the United States, Japan, and Germany) and third largest exporting nation

(after the United States and Germany). In recent years China's economy, growing at 10%

annually, has surpassed the size of Germany's; the global slowdown of 2009 is expected to

reduce growth to a still respectable 6-8%.“ (Rauch & Chi, 2010, 102)

“Measured in U.S. dollars using nominal exchange rates, China's GDP in 2018 in

nominal U.S. dollars was $13.4 trillion, which was 65.3% of the size of the U.S. economy,

according to estimates made by the IMF. China's 2018 per capita GDP in nominal dollars was

$9,608, which was 15.3% of the U.S. per capita level.” (Maddison, 2019)

But what factors have contributed to the development of China as an economic power?

Body

“Deng Xiaoping took over control of the Communist Party of China (CPC) in 1978. He

was responsible for initiating reform of the planned economy to move towards a more market-

oriented economy. In a sense, the change in policy can be interpreted partially as a continuation

of the ‘four modernizations’ (of agriculture, industry, defense, and science and technology)

announced by Premier Zhou Enlai in 1964, but interrupted by the Cultural Revolution.” (Chow,

2018, 93)

Agriculture

“Reform of Chinese agriculture under the commune system initially occurred in 1978 and

1979, when commune leaders in some regions discovered through examples initiated by farmers
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that they could fulfill their output quotas by reorganizing the commune internally. In essence,

each farm household was assigned a piece of land and was held responsible for delivering a

given quantity of a specified product so the commune could satisfy its procurement requirement.

After fulfilling the delivery quota, the farm household was free to keep the remaining output for

its own consumption or for sale in the market. This ‘household responsibility system’ (HRS) has

the economic characteristics of private farming in a market economy. It amounted to each farm

household leasing a piece of land and paying a fixed rent in the form of the output quota. The

subsequent rapid increases in agricultural output and farmers’ incomes provided support for this

system.” (Chow, 2018, 94)

Enterprises

“Enterprises are the second important production unit. The Chinese People’s Congress

adopted elements of reform for state enterprises in September 1980. At the opening of that

session, vice-premier Yao Yilin, chairman of the State Planning Commission, announced that

experiments giving state enterprises more autonomy and market competition would be greatly

expanded. The major elements of industrial reform in the early years included some autonomy

regarding the use of retained profits, production planning, sales of output, experimentation with

new products and capital investment; adoption of an ‘economic responsibility system’ by

assigning identifiable tasks to low-level units within an enterprise and paying them according to

productivity; increasing the role of markets; streamlining the administrative system at the local

level for state enterprises under local control; and encouragement of collectively owned

enterprises. ” (Chow, 2018, 97)

Price reform
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“An important component of the CCCP’s October 1984 decision on economic reform

was reform of the price system. The main objective was to decontrol administratively determined

prices gradually, and allow prices to be determined by market forces, which would help state

enterprises receive the correct signals for their economic calculations in the choice of inputs and

the planning of outputs.” (Chow, 2018, 100)

Foreign trade and investment

“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 had increased to 25 percent

of GDP and, by 1998, to 37 percent.” (Chow, 2018, 104)

“Foreign investment-the second component of the open-door policy-was promoted

through the opening of different regions of China. In 1982, the now well-known Shenzhen

economic zone bordering Hong Kong was created. Foreign investors could set up factories there

to take advantage of inexpensive skilled labor and pay them at market-determined wage rates,

unlike the rates prevailing in other parts of China. Investors also received special tax breaks. In

less than a decade, Shenzhen developed from a piece of farmland to a modern city. Soon other

economic zones and special areas were created for the convenience of foreign investors. Foreign

investment increased from an annual rate of less than US$1 billion in 1978 to nearly US$30

billion in 1998.” (Chow, 2018, 104)

“As a result of the reforms implemented, China has increased its per capita income by 25

times- as a result, more than 800 million Chinese have been lifted out of poverty and destitution.

China achieved the fastest growth of a major economy in world history and showed the fastest

growth in living standards. Under Xiaoping's leadership, China abandoned the ideological

constraints of the past and adopted a policy based on practicality and experience under the motto
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of "reform and opening up." Xiaoping restored internal stability and economic growth to China

after the disastrous excesses of the Cultural Revolution. PRC acquired a rapidly growing

economy, improved living standards, greatly expanded personal and cultural freedoms, and

strengthened ties with the world economy.” (Shutenko, 2022)

References

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Chow, G. C. (2018). China’s 40 Years of Reform and Development. ANU Press.

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Chow, G. C. (2018). China’s 40 Years of Reform and Development. ANU Press.

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https://www.jstor.org/stable/j.ctv5cgbnk.14

Chow, G. C. (2018). China’s 40 Years of Reform and Development. ANU Press.

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https://www.bbc.com/news/business-49806247
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Implications for the United States. Every CRS Report.

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Rauch, J. N., & Chi, Y. F. (2010). The Plight of Green GDP in China. Consilience, 3(1),

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