History tuition

Global economy: China outline 1st

The agricultural reforms were more important than export-oriented reforms in

brining about China’s economic development from 1979 to the 1990s. How
far do you agree with the statement?

Intro
China began to observe its rapid economic development during the Dengist era,
overcoming the problems of the Maoist years which had left its economy
technologically backward, impoverished and suffering from severe shortages in food
production. As China has grown at such a phenomenal pace between the 1980s and
1990s, it eventually gained widespread international recognition as a significant
player in the global economy with tremendous potential. While agricultural reforms
were the first of the reforms implemented, the wealth generated from it was limited.
China’s economic development can be attributed to its export-oriented reforms that
brought about rejuvenation of the Chinese economy as it encouraged other domestic
reforms to support its export-oriented programs.

Body
1. China’s Export-Oriented Reforms (EOR) supported by the Open Door Policy was the
main driving force behind the growth of the Chinese economy throughout the 1980s.
- The Open Door Policy was meant to draw in foreign sources, bring in foreign
technology, foreign goods and foreign learning for modernizing the Chinese
economy. It acted as a fundamental ground to Deng’s economic policies such as the
4 modernizations and development of the Special Economic Zones (SEZs).
- Sino-US rapprochement: In 1979, US and China signed a trade agreement that
granted China most-favoured-nation (MFN) trading status. It ended China’s isolation
and trade barriers with the outside world tumbled. Western influence grew in China
during the 80s, along with foreign trade and influx of foreigners. Sino-US trade rose
from $1100m to $4500m.
- SEZs were set up for economic development and they became China’s chief
industrial outlets where China’s main export industries and foreign-owned companies
were located. The SEZs were given regional autonomy and granted special tax
concessions for commercial activities. In 1984, 14 costal cities were opened. The
SEZs played a significant role in nurturing the export-oriented economy by
generating foreign trade and rapid development. Between 1981 and 1991, Chinese
exports grew by over 500% and inward FDI quadrupled.
As such, China’s EOR strongly stimulated its economic growth in the 1980s.

2. Moreover, the sustaining of the rise of the Chinese economy through the 1990s
was achieved through the extension of its EOR, which not only continued to generate
growth in itself, but also continued to encourage other privatization measures to
support the growth.
- In the 1990s, a number of border cities and all capital cities of inland provinces
were opened. In the early 1990s, there were 15 free-trade zones and 53 new high-
tech industrial development zones. By 2000, there were 124 SEZs in China in total,
employing around 18m people. These areas generated foreign exchange through
exporting products and importing advanced technologies, acting as ‘radiators’ in
speeding up inland economic development.
- Industrial reforms of State-Owned Enterprise (SOE): More than 50% of SOE were
unprofitable and inefficient. In 1997, the government allowed diverse forms of
ownership of SOE and announced plans to sell, merge or close vast majority of SOE,
calling for increased privatization. SOE reform restructured unproductive SOE and
financially troubled state-run banks. As SOE were forced to participate in market
competition with private enterprises, more efficient, high-performing SOE emerged.
- GDP growth averaged 9.7% in the late 1990s.
History tuition
Global economy: China outline 1st

TRANSITION: China’s Export-Oriented Reforms were so successful that it could

achieve a phenomenal economic growth within 2 decades and become one of the
major economic giants of the world with its immense yet unveiled potential.
However, it must be acknowledged that the agricultural reforms did play its role in
laying foundations for further economic growth, being China’s very first reform.
3. It must be recognized that the agricultural reforms – the Household Responsibility
System (HRS) – did help to alleviate the falling supply and transformed China to a
major exporter of agricultural products.
- The HRS replaced the communes of the Maoist era. This was a successful policy
which led to great benefits within a short period of time. Although farmers still had to
pay taxes and meet local quotas, they were allowed to sell their surplus production in
local markets and earn profits. Through the system, farmers were rewarded for their
individual efforts and enterprising spirits. Morale, work enthusiasm and
resourcefulness increased due to material incentives injected by the HRS. China saw
an immediate increase in quantity and quality of its agricultural output.
- From 1980-4, the gross annual agricultural output grew by 8%. The average income
per capita doubled. In 1984, it moved from importer of soybeans to exporter. By
1996, China became the largest grain producer in the world. With the increased
purchasing power of an average peasant, the standard of living rose rapidly.
Increased flow of food and agricultural products to urban areas helped reduce the
chronic food shortage in the socialist economy.

4. [DOWNPLAY THE HRS] However, there were limitations to the wealth generated
from the agricultural reforms, therefore rending it as a less pivotal factor that
accounts for China’s economic growth.
- HRS’s farms were too small to be economically viable in the long run. Rise in grain
production declined and the rural economy began to stagnate again.
- There was a decline in the amount of arable land in the long run, contributing to the
fall in income of an average peasant. This in turn resulted in a massive migration of
rural population to cities.
- The Chinese government heavily subsidized farmers but failed to pass the increase
in prices paid on farmers to consumers in urban areas, hence causing budget deficit
(unsustainable in the long run)