Posted by admin on May 3, 2012
After 1949, when China became the People’s Republic of China under the Communist Party and Mao, the Asian country has experienced major changes in economy. Especially since 1978, China has made a lot of progress, and the most recent economic data, such as China’s GDP 2011, show that the communist country is one of the top import and export traders worldwide. The reason for China’s success can be found in the structural changes made throughout the last decades of the twentieth century.
- Privatization instead of collectivization
When the leader of the Chinese Revolution Mao Zedong died in 1976, the new Chinese leadership began to introduce the first alterations of the economic system. Whereas Mao believed in the collectivization of land, the new leader Deng Xiaoping initiated a mixed-economy, which included the privatization of land, and thereby led to a greater productivity. Another step that was taken was the support of private enterprises and the promotion of foreign investment. State-owned enterprises and central planning were reduced gradually.
- Overcoming the crisis
These reforms led to a huge economic success in the 1990s when Asia was affected by a financial crisis. Thanks to its reserves, China did not become as affected as other neighboring countries, but also had to cope with a huge drop of its export. It was more the internal difficulties, e.g. the loans in the financial system and the layoffs and unemployment resulting from the changes of the state-owned enterprises, which led to a slower economic growth. But despite these problems, China’s economy grew at a rate of approximately 10 percent every year between 1990 and 2004. With that, it is the fastest growing economy worldwide. But it should be noted that the high growth is also a necessity because China has to generate up to 15 million new jobs for the people entering the job market every year. The success of China’s economy is therefore balanced against the challenges which the country has to cope with internally.