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China's Economhy - The Successful Transition to a Market Economy

9 important questions on China's Economhy - The Successful Transition to a Market Economy

Why has China's transition to a market economy been more successful than the transition of Eastern European countries to the market system?

China adopted a gradual and incremental strategy (first economy, then politics). Eastern Europe initiated major political and economic reforms side by side.
The initial conditions of China were more favorable; it was less industrialized, had a less tightly planned economy and its people had a long history of individual entrepreneurship.
The Eastern European countries had a largely bureaucratic reform process, China's transition had an entrepreneurial style and the reform strategies were carried out with flexibility and pragmatism.

China started with an agricultural reform; the household responsibility system. What did this reform entail?

The communes returned the control of the land to the townships. The latter leased it to the community members. Initially, the members would sell a portion of their crops to the state, who sold it to urban dwellers for a lower price (and subsidizing the difference). The rest of the crops were sold privately by the community members at farmer's markets.

What was the effect of the household responsibility system?

The agricultural productivity rose and the rural income increased. This in turn led to an increase of township and village enterprises (TVEs), which became the driving force of China's economy.

What were the contributions of the non-state TVEs (township and village enterprises) to the economy?

Created new jobs
Provided cheap consumer products to meet rising demand
Contributed to regional development

After the initial reform period in which reforms were incremental, the fifty-article "decision" was adopted to reform China's economic structure. This is considered a "Big Bang" reform (i.e. not incremental). Why was this necessary?

Reforms in the areas of taxation, banking, finance and foreign exchange are interrelated and could therefore not be handled gradually, but had to be dealth with in one time.

China put economic reforms before political reforms and was successful. Describe why Russia was less succesful in transforming into a market economy because of putting political reforms before economic reforms.

In Russia, vital reform measures were delayed and often bogged down by politics and polemics.

The author says that China's economy increasingly looks like a convential mixed economy. What does this mean?

China's government controls big industries, while leaving many light and consumer-oriented economic activities to a competitive market place.

(In the latr 1970s when the reforms started, state-owned industry accounted for over 70% of China's GDP, by 2000 this was already down to only 24%).

How can you tell that central planning has become far less important for the Chinese economy?

By the reduced economic role of the government. For example:

The share of government expenditure declined from 32% of GDP in 1978 to 18% in 2006.
The propotion of industrial output from the state sector declined from 77% in 1978 to 33% in 1996.

Why has the term Five Year Plan changed into Five Year Program?

To indicate the changing nature of the Five Year Plan/Program. The FYP is no longer about true central planning. It has become more like an indicative plan or a rough indicator of the government policy direction.

The question on the page originate from the summary of the following study material:

Understanding contemporary China | 9781588268440 | Robert E Gamer

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China's Economhy - The Successful Transition to a Market Economy

9 important questions on China's Economhy - The Successful Transition to a Market Economy

Why has China's transition to a market economy been more successful than the transition of Eastern European countries to the market system?

China started with an agricultural reform; the household responsibility system. What did this reform entail?

What was the effect of the household responsibility system?

What were the contributions of the non-state TVEs (township and village enterprises) to the economy?

After the initial reform period in which reforms were incremental, the fifty-article "decision" was adopted to reform China's economic structure. This is considered a "Big Bang" reform (i.e. not incremental). Why was this necessary?

China put economic reforms before political reforms and was successful. Describe why Russia was less succesful in transforming into a market economy because of putting political reforms before economic reforms.

The author says that China's economy increasingly looks like a convential mixed economy. What does this mean?

How can you tell that central planning has become far less important for the Chinese economy?

Why has the term Five Year Plan changed into Five Year Program?

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