Outline the Strategies Used in China to Promote Growth and Development.

Economic growth is the increase in value of goods and services produced by an economy, where high income and living standards leads to an increase in aggregate demand. Economic development is the change in structure of an economy in order to promote growth. The Chinese economy has implemented many strategies and reforms to achieve their high economic development and constant fast growth.

1. 1949-1978 (Great Leap Forward/Big Push)

The Great Leap Forward was Mao Ze Dong’s attempt to modernize the Chinese economy by developing the agriculture and industry. It wasn’t successful because of political reforms to overthrow the communist party. There was a lack of trade, the heavy industries were inefficient, there were shortages of resources, little to no worker motivation, and poor quality in goods and services. The positive aspects include no unemployment since workers were allocated jobs and there was no inflation since prices were fixed, but the reform was a failure since there were more negatives. (Trueman)

2. 1978-2000

After Mao’s death, Deng Xiaoping led China towards a socialist market economy instead of the planned economy. A reform on the agriculture system proved to be very successful; a “non-rural farming system” was implemented, and rural farmers could decide what to produce, which resulted in an increase in food production by 30% and rural income by 15% per year.

Another beneficial strategy was the “Open Door” policy, which set up Special Economic Zones in southern coastal provinces to attract foreign trade and investment. China was integrated into the global economic market through offering low tax rates, cheap labour and less regulation. This was very successful since standards of living were improved, and trade with other countries allowed them to enjoy an increase in imports as well as exports.

The decentralization of State Owned Enterprises (SOEs) was very successful, since the government’s role in the allocation of resources was decreased, moving China to a market oriented economy. This policy increased technical efficiency and production and increased economic growth. The rapid economic development had negative effects of severe environmental degradation, as there was too much investment in construction and industry. (Reform) (Wang) (Socialist market economy helps China's economic development, 2009)

3. Global Financial Crisis & Economic Stimulus Plan

The “Chinese Economic Stimulus Plan” was launched in 2008-09 to minimize the impact of the Global Financial Crisis (GFC). The RMB 4 trillion (US $586 billion) stimulus package focused on increasing affordable housing, easing credit restrictions, lowering taxes and putting more public investment into infrastructure development.

Even though it has been criticized that pumping excessive investments into the economy that was over-capacitated was a bad strategy, the Chinese economy was recovering by the end of 2009, as shown by the World Bank’s raised growth forecast from 6.5% to 7.2%. This shows that the stimulus package was a successful strategy in slowly bringing the economy back from the struggles of recession. (China Economic Stimulus Program, 2011)

4. China’s Membership of the WTO

China was admitted as a member of the World Trade Organisation (WTO) at the Doha Conference in 2001, and it attracted many beneficial changes such as having access to the world market and increased foreign investment. Even though this will lead China to a high economic growth, joining the WTO also leads to high unemployment and structural changes in domestic industries. China also needs to follow trade rules set by the WTO, including intellectual property rights, which China has broken the law in the past. This strategy has both negative and positive consequences, but ultimately China has benefited more than suffered. (Chow, 2001)

5. Revaluation of the Renminbi

In 2005, China abandoned its peg fixed exchange rate against the US and moved towards a managed peg against its trade index. The RMB is often said to be undervalued to give Chinese exports and import substitutes more internationally competitive, as the flexible prices across economies assisted the People’s Bank of China in controlling monetary conditions and inflation. This has been a successful policy because it kept balanced exchange rates. It made the Chinese Yuan more flexible over time, allowing for a healthier financial system and stable economy. (Riley, 2011)

6. One Child Policy

The “One Child Policy” was first established in 1979 and is still ongoing today; it has both positive and negative economic effects. One benefit is that it reduces government spending for healthcare services and retirement benefits due to the reduction in population size. This decreased unemployment as well, but because many families wanted more than one child, it led to an increase in migration. The subsequent decrease in the Chinese labour force is an issue, and there are many however the Chinese government has stated that the policy is consistent with the population growth plan and will continue indefinitely. (Rosenberg, 2011)

China’s success in terms of economic growth and development has been the result of the above strategies; China is now the world’s fourth largest economy and is the fastest growing. Even though there are worsening environmental issues, the amount of reduction in poverty and constant growth show China’s strong development. This shows that the many strategies that China has undertaken to promote economic growth and development has mostly been successful despite the few negative consequences. (Economy of the People's Republic of China, 2011)


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  • Chow, G. (2001). The Impact of Joining WTO on China's Economic, Legal and Political Institutions. New Jersey: Princeton University.
  • Economy of the People's Republic of China. (2011). Retrieved 2011, from Wikipedia: http://en.wikipedia.org/wiki/Economy_of_the_People%27s_Republic_of_China Reform. (n.d.). Retrieved 2011, from Index to China: http://index-china.com/main/business/reform.php
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  • Rosenberg, M. (2011, March). China One Child Policy. Retrieved 2011, from About Geography: http://geography.about.com/od/populationgeography/a/onechild.htm
  • Socialist market economy helps China's economic development. (2009). Retrieved 2011, from China Daily: http://www.chinadaily.com.cn/business/2009-08/29/content_8632752.htm
  • Trueman, C. (n.d.). The Great Leap Forward. Retrieved 2011, from History Learning Site: http://www.historylearningsite.co.uk/great_leap_forward.htm
  • Wang, Z. Reforming State-Owned Enterprises in China: Two Decades of Struggles. Michigan: University of Michigan.