China’s Economic development till present

Abstract:It was the period of 1869 when the china’s economy stagnated. From 1949 to today economy annually grew by 4-10 percent . It was all resulted from the level of sovereignty and due to the nature of global economic development. It was after 1949 the communist in China regained sovereignty fully and which helped them to overtake fully the Chinas domestic economy from Chinese and foreign investors. Chinese economic development was due to 2 factors : less militarily imperialism and more conductive to non western development countries

IntroductionPeople’s Republic of China came into power in 1949 that lead to bringing up of development policies that increase the economic growth rate to 4% till 1978 [1] that was highest during that time among developing countries of the world. After China adaptation of post –Mao economic reforms in 1978 the economic growth per capital grow from 8-10 % annually that was highest in development of economic growth[2]. All these economic growth was due to domestic factors that includes PRC( Peoples Republic of China) highest savings rates, policies of economic development ,controlled govt. investments, Chinese Confucian culture.

Also the factors like large number of healthy ,literate and motivation of low wage workers played important role in the growth of Chinese economic development. Global factors include foreign investments, foreign loans, global trade opportunities, export zones , investment by Chinese specially from Hong Kong and other richer part of China , and the success of exported economic developed countries like Japan , South Korea, Singapore and Taiwan.[3]

|Before 1980 |Imperial China under Qing Dynasty : major economic power 32% of world economy[4] | |1800-1860 |Chinese economy stagnation | |1860-1949 |Chinese economy grew less than 1 percent annually[5] | |1949 |China economy shrunk to 5 % and was seen as the poorcountry of the world , many times even called “Sick man of Asia” with | | |annual per capita income of US $ 50 [6] | |2004 |Third largest world economy after USA and Germany[7] |

chart 1; Chinese economic situation Source: own studies based from book Naughton p.50

China Economic development from 1800- 1949

European industrialization led the global economy from 1800 until 1949 with many European colonization . Different European countries lead to the colonization of Asia, Africa and Middle East. These non-Western countries lost their sovereignty and the opportunity to carry out economic for their domestic benefit. China, Thailand, and Japan in Asia, Ethiopia in Africa, and Afghanistan, Iran and Turkey in the Middle East able to keep their nominal independence. These situations created opportunities for Western countries to develop economically .

There were international markets for products, such as tea and silk, and with that these western countries developed industrially and militarily . For successful economic development, a country needs to have sovereignty to keep control of its economy and foreign trade. When there was a plan for economic development in a non-colonized countries , it often was part of an overall effort at “defensive modernization,” to keep the country from becoming a colony.

Only few non-European countries able to manage to keep their independence until World War II, only Meiji Japan and Ottoman Turkey were able to also carry out successful economic development. China Qing tried carried out economic development, but was failed in some part of its country because of the unequal militarily treaties made China semi-sovereign, that becomes obstacles in the Chinese economic developments efforts. China(Imperial) for many carried out in the city of Guangzhou the international trade by allowing foreigners to buy tea, silk, ceramics, and other Chinese products that lead to high European demand .

Chinese were having very little demand for foreign goods results in the foreign merchants had to pay in silver specie for purchases of Chinese products specially tea and silk ( till 1800). After the India’s colonisation by British East India Company that found opium, grown in British-controlled India, has high demand in China. opium trade helps in creating high levels of tax revenue for the British controlled government in and with that money helps in completing the demand of silk and tea in Europe .Qing Chinese got alarmed by the high demand of opium in China , with large number of addicts, controlling with that the huge corruption also started with the banned trade of this product at the loss of Chinese silver specie .

Then the Chinese emperor sent commissioner Lin Zexu to stop this trade of Opium asked the merchants for opium destruction then first opium war started in 1839 to protect future sale of opium which provide 15% of income to British colonial govt in India . [8]The British won Opium War first from 1839-1842and then from 1856 to 1860 . Chinese loss was about 28 million silver taels per yr till 1897 on the opium purchase . In 27 yrs they loose 800 Chinese silver taels that is 30 percent of the Chinese govt. budget (90 million).[9] Chinese lost taxes on the trade of opium as a result of the deprived of the right to raise tax on import of opium.

Like in fully sovereign countries the tax on the luxury or dangerous goods are the main income of the country. British sales of opium to China was more than European purchases of Chinese tea and silk, that led to outflow of Chinese silver specie.[10] This loss of Chinese silver affected Chinese traditional economy as silver coinage were more expensive to copper coinage. All these factors made difficult for Chinese Govt to initiate its economic development .

In the yr 1897, foreign loans needed to pay the 1895 Japanese indemnity that created annual government deficit of 20 million taels that was 20 percent of the Chinese government budget. As the Chinese Govt was preventing from raising the tariffs by inequality of treaties by buying opium from British with high tariffs .Chinese govt took large amount of foreign loans to build railways and to give concessions to foreign lenders that lead to the loses for existing Chinese own style western enterprises that lead to Chinese first nationalist movement in the country. The revolution lasted till 1911 and after that Republic of China took more foreign loans to fulfil itsfinancial deficits .From 1900 to 1949 Chinese govt took foreign loans to pay new foreign loans and it is about 40 % of their yearly loans on foreign loan interest payments. Chinese govt. were also prevented from providing tariffs for Chinese industries. Chinese Economic development 1949-1978

Chinese communist Government start using its full sovereignty and control all over China and its economy. The Government started reconstruction of economy if China with land reforms and taking ownership of all the sectors of the China economy such as energy sector, railways, Shipping, agriculture sector, heavy industry, financial sector and communication sector. Government took control of foreign trade and tariff distribution and eradicate production of opium that lead to its addiction and also decrease of the problems like homelessness ,poverty and corruption that was widely in the previous Chinese Govt. Foreign traders, real estate investors, missionaries, and residents in China their tax-free investments in China even their homes in China.

After 1949 Chinese brought a new currency and stopped paying on foreign loans. These new laws and brought confidence among Chinese society and political system run for the benefit of the local people.They also use land reform economic reconstruction in the cities, using a state-planning economic system that was based on the Soviet model. The Chinese government took control of big enterprises and industries financial sector, and began to channel investment into economic development. Soon economic growth rate in the Chinese economy was about 4 percent per capita from 1949 to 1978.

Eevn though there were massive failures, especially the tragic loss of about 30 million Chinese lives “Great Leap Forward” during 1958-60, and the social destruction during the Cultural Revolution of 1966-76. but despite all of China’s developmental problems, by 1978 the World Bank reported tha China’s economic growth rate was faster than that of India and many more poor countries with developing powers.TheChinese government’s policies had vastly improved the education ,health and life expectancy of most Chinese [11] Chinese Development after 1978

In 1978, after the death of Chinese leader Mao Zedong, Deng Xiaoping and pragmatic Chinese reform leaders began to reform China’s planned economy into a market economy and opened China to foreign trade, foreign investment, foreign technology, and export-led development. China’s goal was to develop a carefully planned, closely regulated but marketized economy that helps in fast-growing global economy. After 1978,

Chinese government continued to own most of major Chinese industrial energy, mining, manufacturing, and financial services. Private control of agricultural land was possible through leases for farmers, and free market was opened to small business people Foreigners were participate in joint ventures with Chinese companies and to open wholly-owned companies under Chinese regulations In 1978, the Chinese economy grown dramatically with higher percentage of the economy has moved to the ownership of Chinese and foreign joint venture investors and foreign private enterprises.

Control over largest Chinese economic sectors, such as communications, transportation, energy, manufacturing, and financial services, were still in the hands of the Chinese government. China’s economy grow at an average annual rate of 8-10 percent annually till 1978.High rate of economic growth continues, China is estimated to become the largest economy in the world by about 2020 in terms of purchasing power. Till now China has been able to achieve its economic successes without giving up significant areas of sovereignty.

China has kept its major industries and its financial sector largely under its ownership and continues to make its currency nonconvertible that make China the largest recipient of direct foreign investment in the world, second largest foreign exchange reserves in the world after Japan (about $1 trillion), and is the manufacturing “workshop” for the world. Most analysts, however, believe that China will be able to continue to grow at about 8 to 10 percent until at least 2020

———————–[1] HU,pp.103-131 , World bank 1978, Wang 2000[2] HU,pp.103-131 , World bank 1997, Wang 2000[3] World Bank 1997[4] Maddison 1998[5] Maddison 1998,p.39[6] Naughton p.50[7] Naughton ,p3[8] Owen,p.Vi[9] Liang,p.52[10] Naughton,p.30[11] World bank 1978