Download China`s Economic Development since 1949

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China’s Economic Development since 1949 - Outline.
Sarah Maude
1949
Period of strict political control and isolation from the most of the world (Russia gave
support until 1961).
1953
1st “5 Year Plan”aimed at boosting heavy industry.
1958 - 61 The Great Leap Forward. All productive assets under state control. Completion of
collectivization of land and establishment of rural communes. Backyard
industries in the
villages had to produce iron and steel. Economic disaster and
famine.
1960s to 70s Third Front Policy, moving some strategically important manufacturing
industries
inland (especially to Sichuan), away from the east and
vulnerability to invasion.
1966-76The Cultural Revolution. Economic stagnation.
1978
Deng Xiao Ping era of “opening up”. Economic reforms included
• opening up to trade with the outside world
• encouraging inward investment
• increasing exports
• decollectivization of farmland - household responsibility system
• allowing private enterprises , TVIs (Town and Village Enterprises) and joint
ventures with foreign companies.
1978-83 Household Responsibility system spread, whereby village land was divided into
plots for
use by families and farmers were allowed to sell produce on the open market.
Productivity and rural incomes increased.
1979 Primary and primary processed goods 75% of exports.
1980s growth of the Township and Village Enterprises (TVEs), industries in the countryside.
1980 onwards China started opening up areas for foreign businesses, starting with the first
4
SEZs - all on south east coast - Shenzen; Zhuhai, Shantou and Xiamen.
Favourable
policies on land leasing, taxes and labour regulations attracted
investment from the
overseas Chinese diaspora and MNCs. Wages were higher
than elsewhere in China.
1984 14 other coastal cities were “opened”, including Dalian.
By late 1990s SEZs and various sorts of development zones mushroomed across the
country.
Rapid industrialisation was aided by government investment in energy production,
heavy industry (like iron and steel) and transport infrastructure. Move towards a free market
economy.
Late 1980s
early restructuring if SOEs.
Early 1990s - start of the urban based growth model and policies.
1991 First McDonalds in Beijing.
1997 Reforms in response to Asian Financial Crisis.
1998 Peoples’Liberation Army (PLA) ordered to dismantle its vast business empire.
More moves to restructure SOEs.
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21st Century…..
Principal exports shifted from cheap manufactured goods to higher value, high tech
goods.
2000 Western Development Strategy begun to narrow the economic gap between east and
west
(see map below).
2001 China joins WTO
2003 Northeastern Revitalization Strategy began.
2004 Rise of Central China Strategy began.
2006 Government admits that pollution has degraded the environment to a critical level.
2008 Government stimulus package to avoid the economy slowing due to world financial
crisis.
2009 95% of exports were manufactured goods.
2011 China overtakes Japan to become the world’s second largest economy.
2012 Shanghai Free Trade Zone in Pudong. This pilot scheme started in September. (1)
2014 2014 Economy growth target 7.5%
Outward investment will overtake inward investment soon (FT 25/6/2014)
2010 Per capita GDP RMB 29,992 (about $4,837) 79 times higher than 1978 when reforms
began.
1978- 2010 China’s GDP grew 9.99% pa on average.
In the last year GDP rose 7.3%. Industrial production rose 8.6%. Unemployment 4.1%
(“Economist”financial data 5/4/2014).
Source: ”The Economist”(2)
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Current activities and issues.
• Worries that Chinese economy may be slowing down. In June several provinces
(including in the NE) unveiled mini stimulus measures (Heilongjiang - railways,civil
aviation and water
conservancy). (Global Times 26/6/2014)
“The economy remains reliant on investment in infrastructure, real estate and factory
equipment”(FT 15/6/2014) but a shift to domestic consumption from export
orientated
growth is expected.
• Looming debt crisis. Rising individual, business and local government debts, especially
those involving “shadow banking”(financial activity that exists outside the formal sector;
a major source for SMEs).
• China is becoming less attractive to foreign MNCs as costs rise, scandals are enjoyed in
the media (like GSK) and local companies are more competitive. However, local firms
still struggle to compete with big multinationals with their global brands and outsourcing.
• China is now buying up assets in developed and developing countries and is moving
production to places where costs, particularly labour, are low and they can get
preferential trade deals (eg Myanmar, Cambodia and African countries).
• Fast growing consumer market will increasingly drive growth.
• Luxury goods producers have been hammered by Xi Jinping’s crackdown on corruption.
• Labour force - shrinking due to fall in birth rate (China Daily 18/01/2013). Wages are
rising and there are an increasing number of disputes, particularly in Guangdong (Pearl
River Delta).
• Growing disparities in wealth and welfare provision - rich/poor, rural/urban, between
regions.
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•
There are many Chinese MNCs. Haier is now one of the largest household goods
makers in the world (and its owned by its staff). The largest private sector conglomerates
are buying all or part of foreign firms (eg Club Med).
Structure of the Economy % of GDP
Source
World Bank (3)
1992
2002
2012
Agriculture
21.8
13.7
10.1
Industry
43.5
44.8
45.3
32.7
31.4 - - -
34.8
41.5
Manufacturing
Services
44.6
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“Grey Economy”
But what is the value of the “grey” (informal) economy? This is impossible to asses
accurately so it goes unreported. It is not taxed or regulated. It includes the “incomes” of tens
of millions of rural households (in kind, not money) and migrant workers in the informal
sector in cities.
Five year plans.
Strategies for the nation’s economic and social development, begun in 1953.Renamed
“Guidelines”from the 11th Plan (2006).
12th Plan (Guideline) 2011-2015
• seeks to achieve more balanced growth and development, focussing attention on the
environment, livelihoods and administrative reforms.
• aims to improve the quality of growth and lay the foundations for a “moderately
prosperous country”.
• Investment priorities include environmental protection and energy use (including target
for non fossil fuel consumption to increase to 15%of nation’s total).
• seeks to improve people’s livelihoods, social infrastructure and safety nets and to tackle
rising inequality, including by shifting development inland.
• Curb excessive house price rises and build affordable housing.
• Intensify anti-corruption measures.
• Goals indicate a significant reduction of in the role of the state.
Critics ask if there is the political will to ensure the targets are met, especially concerning
“green growth”. Will local governments implement the measures?
11th Plan (Guideline) 2009-2010)
Strategies concern the scientific content of development and and building a “harmonious
society”, putting people first.Shift of emphasis from growth first to sustainable development.
There is more emphasis on the service sector. Tasks include building the “new socialist
countryside”, the structural upgrading of “big” industry and job creation.
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Planning Regions and Strategies toward more balanced development
More detail can be found in…..
General
http://www.bbc.co.uk/news/world-asia-pacific-13017882
http://www.theguardian.com/world/interactive/2012/mar/23/china-decade-change-interactivetimeline
http://devdata.worldbank.org/AAG/chn_aag.pdf
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Economic
Barry Baker “World Development”New Internationalist 2011. Pages 51-54
Cameron Dunn “Superpowers”Philip Allen Updates, 2010 Pages 52-58.
Shanghai Free Trade Zone in Wall Street Journal (1)
http://online.wsj.com/news/articles/SB10001424052702304795804579100640245613408
The Economist “Building the Dream”Special Repost on China”April 19th 2014 (2)
Sarah Maude July 2014