Chinas Ecomic Reforms

Topics: Macroeconomics, Economy of the People's Republic of China, International economics Pages: 7 (2509 words) Published: September 21, 2013
History of Chinese Economy
In 1949 the Communist Party was elected in China their goal was to transform China into a modern socialist nation, which meant to narrow the income difference by increasing the standard of living through industrilsation.The communist party continued to try to achieve this goal throughout the years by taking over certain industries and centrally controlling the overall planning and financial systems. In 1975 the Chinese Government spend about 25 prercent of their GNP to invest into their companies and infrastructure while this seems to be a relatively high percentage the true is that this rate secoryed onlay small amount of resources for the relative seize of the country, for example in 1976 only 16% of the GNP was invested in the US Ecomomie which represented $345 billion dollars, where the 25% of precent invested in China represented only $111billion dollars serving a population 4 times as big as the United States. This led to smaller investment in Argiultar and limited China from producing or importing modern manufacturing equipment which causes the manufacturing plants to be some years behind modern western manufactories. In addition the central government inefficiency to make fast decision and be flexible among the difference region caused China to have a growing imbalance between industrial and argicular growth. In 1957 Mao Zedong noticed that the industries based central model that was adopted by China did not work and shifted greater ecomomical control to the providence governments.

In 1978 Diang Xiapnng the General Secraty of the Communist Party of China (highest postion within the chinesse Goverment) furthered changed the Chinese ecomomic model by opening up the countries for trade. In the past China policy was trying to achieve self suffiency but under Diang Xiapnng forgein trade was regarded as a important source for investment funds and modern technology which increased the value from import/exports from 10 percent of the national income to 35% in 1984. To increase forgein investment four foreign trade zones where established from which Shenzhen, Zuhaimi and Shantou where located near Hong Kong and fourth Xiamen was directly across Taiwan. In addition in 1984 the fourteen largest costal cities such as Shanghai and Guangzhou where to created productive exchanges between foreign firms that have advanced technologies and major Chinese economic networks. Since this transformation the Chinese ecomomie experience a average 10% growth of their GDP every year making it the fastet growing ecomomie in the world. In addition due to this change the ecomomie grew about 12 times the seize since the changes where introduced by Deng Xipong making China the fourth largest ecommie in the world. In addition to the raising investment rate there was also raising saving rate reaching 50 percent of the national GDP in 2005, we will disuss this trend a little bit more later on. During the same time period the net export rate tripled reaching 117 billion dollars or 75 percent of the national GDP. Although during the early expansion period both government and private household spending increased by 46%. In 2005 the household consumption fell sharply presenting only 38% of the national GDP, which is the lowest share of any major ecomomie in the world for example in contrast the United States household consumption accounted for 70% during same time. Other countries such as UK consumer spending accounted for 60% of the national GDP even in Inda it was 61percent and in Japan it was 57% during the same time frame. In addition government spending also declined from an average of 16 % of the national GDP to 14% of the GDP.

Current Status
Due to the recent global resicon the ecomoic growth of China has slowed down in recent years to an average growth rate of 7 % as Chinas ecomomie is now heavily dependend on foreign investment and trade. However expert argue that the recent slowdown in the Chinese ecomoy...
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