A lot of writers have written a lot about the economy of China in the past and so many writer are still doing the same yours truly, I’m not exempted but the truth is a country with such a large economic growth should be a talk of the world. If the People’s Republic of China can hold a military strength that matches their economic strength, then we might have a new world power. I am not discussing China’s military power here.
China has risen from a poor developing country to a developed economic power, some people refer to China as the second economic power after the United States while some people argue this but china has proven to be a power to reckon with. They have become U.S biggest partner with a total trade of about $5 Billion in 1980 to about $659.8 billion in 2018. Although, the economic growth of china has raised several eyeballs with some U.S policy makers saying china is using unfair trade practices, this has not been proven right.
Source: pxfuel.com
China 1950 – 1979 (Before the Reform)
In the early 1950s, all china household farms were made a large commune by a central government, all large scale investment were taken control by the central government. In other to grow industrialization in china, the government invested in human capital and at such barred every form of unnecessary import except from goods that could not be made in china (Maybe you have wondered why you buy a lot of made in china goods, it is because they invested physical and human capital while producing local good majorly). Although, this distorted the economy.
Under the leadership of Chairman Mao Zedong, he still continued to maintain the central planned economy. In 1978, most Chinese producing industries were owned by the central government (That’s why most publicly traded company have china in their names like China merchants bank. Do not be surprised, it is a private owned bank currently.) The Chinese government says that during the year 1953 to 1978, China economy GDP grew by 6.7% although a lot of people argue this saying china exaggerated production level for political reasons.
China Economy Reform and Growth till Date
After a long while of centralizing power in all sectors, the Chinese government allowed their farmers to start selling few of their product in a free market at the price given to them by the government after which the government created economic zones along the coast so as to attract investors from foreign nations so as to boost export and import only high technological things not produced in china. Also, the government decided to decentralize some sectors which included trade. Various enterprises were allowed to be controlled by provincial and local governments rather than the central government and the state planning. The government also allowed citizens to create their own businesses. Soon, state controlled prices on goods were eliminated which started to create room for trade liberation which was the major breakthrough for china. Trade barrier removal enabled competition and encouraged foreign direct investment.
Since the implementation of the Economic reform, China has experienced an increase in GDP up to 9.5% from 1979 – 2018. In 2010, there were said to be 445,244 foreign direct investment employing about 55.3 million workers which is about 16% of china urban workforce.
