Progress of Economic Reform in the People's Republic of China

Progress of Economic Reform in the People's Republic of China

Progress of Economic Reform in the People's Republic of China

Progress of Economic Reform in the People's Republic of China

Excerpt

New national administrations have come to power in the People's Republic of China and the United States in recent years. Although the emphasis of my essay is on economic reform in China, it may be noted that the two new administrations have many similar policy objectives. Furthermore, their perceptions of the basic difficulties confronting their respective economies have much in common.

Each administration hopes to reduce the role of government and, especially, the role of the central government. Both administrations have tried to restrain the growth of expenditures by the central government. Although President Reagan has only been able to slow the growth of federal expenditures, the Chinese government actually reduced central government expenditures between 1979 and 1981. In 1979 central government expenditures were 127 billion yuan; in 1980 expenditures were reduced by 6 billion to 121 billion yuan. Expenditures in 1981 were reduced significantly to 109 billion yuan, for a reduction of 18 billion yuan in just two years. The deficit, which exceeded 10 billion yuan in 1979 and 1980, was reduced to about 3 billion yuan in 1981. (In 1979 and 1980 the official exchange value of the yuan was approximately 65 cents; by 1981 the yuan exchange value was 59 cents.)

The new administrations believe in supply-side economics. They have put their faith in increasing incentives for both work and savings in efforts to get their sluggish economies moving. Each has been concerned with the slow growth of productivity in recent years. China has significantly increased incentives for its agricultural population, which accounts for 70 percent of its population of 1 billion. China has also experimented with reducing taxes on enterprises, just as the 1981 tax changes in the United States made significant reductions in . . .

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