China's Obsession with Growth

By Eom, Kevin | The New Presence: The Prague Journal of Central European Affairs, Autumn 2009 | Go to article overview

China's Obsession with Growth


Eom, Kevin, The New Presence: The Prague Journal of Central European Affairs


Since Deng Xiaoping's economic reforms in 1978, China has moved cautiously away from a centrally planned economy. The shift toward a market-oriented economy coupled with conditions conducive to growth prior to its reforms entailed immense economic evolution, and the Chinese economy still remains bullish even in the midst of the global recession.

What is the source of its economic potency, and is China's obsession with growth sustainable in the long run?

From Reform to Growth

The "dual-track" strategy constitutes the core of China's reforms. This strategy allows market and planned tracks to coexist in the pricing system, the enterprise ownership structure, and other areas such as urban and housing reform.

Goods and services were allocated at both market and state-controlled prices based on a cost-plus principle, while the state price was adjusted incrementally until its convergence with the market price. The proportion of planned production of output decreased gradually, steadily liberalizing sectors of the economy. Likewise, both state-owned enterprises (SOEs) and non-state sectors, including private, semi-private enterprises, and foreign joint ventures, drove the high-speed Chinese economy forward. Furthermore, special economic zones (SEZs), mostly the coastal regions, were granted institutional autonomy. Such autonomy allowed for rapid growth, while the interior provinces grew sluggishly.

As a whole, Chinese economic reforms have been widely regarded as a success. Four factors have played a particularly critical role in China's progress according to Wing Thye Woo, Professor of Economics at University of California, Davis, and Yuan Zheng Cao, Deputy Director of the Institute for Economic Systems Management.

China's initial economic structure and conditions were well suited for generating growth. The country's surplus agricultural labor force as well as the absence of large macroeconomic imbalances and a severe external debt crisis--unlike Russia and Poland--allowed China to develop its economy by revitalizing the idle agricultural sector through township and village enterprises (TVEs).

Meanwhile, China's smooth integration into the global economy accelerated the movement of labor into highly productive industries, enabled its purchase of cutting-edge technology, and essentially attracted foreign direct investments.

The high savings rate (23 percent of disposable income in China versus 21 percent in Japan, 18 percent in Taiwan, and 8 percent in the United States (World Bank, 1990)) reduced inflation by preserving macroeconomic balance and social stability.

Lastly, the two disastrous leftist campaigns, the Great Leap Forward (1958-62) and the Cultural Revolution (1966-76) politically exhausted the central party and provided Deng Xiaoping with the power to decentralize economic policy-making.

Challenges and Sustainability

Even with more than two decades of double-digit GDP growth (average growth of 10.3 percent from 1987 to 1997 and 9.5 percent from 1997 to 2007), China still faces structural and social challenges.

"In the big picture, a lot of people are very poor," says Kenneth Rogoff, Professor of Economics at Harvard University. "Coastal regions have been served but the interior of China is still very poor. The big challenge in China is to help spread the middle class across China. Having a more domestic-oriented economy would be very helpful."

Joseph Stiglitz, Professor at Columbia University and Nobel Laureate in Economics, agrees that disparate development and regional income inequality ought to be fixed. He further addressed China's need to find the right opportunities for investment: "The answer [to Chinese economic recovery] is not more consumption ... it's more investment on climate change and for poverty reduction." Growth fueled by the consumption-oriented market loses its momentum quickly; its contribution to the fall of the US economy should send a message to the rest of the world that support for long-term benefits needs encouragement. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

China's Obsession with Growth
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.