THE RISE OF THE CHINESE ECONOMY

  • Chinese Economy started rising in 1978. It is predicted that by 2040 it will day overtake U.S. as the world’s largest economy.
  • In 1949 People’s Republic of China started, in which China adopted USSR’s ideology that is communism and cancelled USA’s ideology that is capitalism (As China was weak at that time). So, they chose Soviet model under the leadership of Mao.
  • China became an isolated country (no relation with other countries) , Decreased imports because it was short on foreign exchange.
  • Economic Context – Aid from USSR
  • Economic growth was increasing but population growth was also increasing which was not in balance of economic growth.
  • USSR crisis (disintegration) because of which China suffered.
  • Industrial Production was not growing fast enough, international trade was minimal and per capita income was very low.
  • In 1972 (Leader) Premier Zhou Enlai proposed to end the isolation.
  • Then in 1972 China started its relations with US
  • PM of china i.e., Zhou Enlai proposed the ‘four modernizations’ in 1973, in which he told they will increase:
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  1. Industry
  2. Agriculture
  3. Military Power
  4. Science and Technology
  • In 1978, leader i.e., Deng Xiaoping announced the “open door” policy i.e., China opened its doors for foreign trade and investments.
  • China adopted privatization i.e., Market Economy –(no shock therapy).
  • They slowly started moving towards capitalism
  • 1992- privatization of Agriculture
  • 1998 – Privatization of Industries.
  • Trade barriers were eliminated only in Special Economic Zones (SEZs) where foreign investor could set up enterprises.
  • Trade started and tariffs were removed/reduced. Foreign direct investment increased.
  • China became the most important destination for foreign direct investment (FDI).
  • In 2001, China became part of World Trade Organization (WTO).
  • As the economy rose China still faced problems like:
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  1. Unemployment with almost 100 million people looking for job.
  2. Environmental Degradation rose high
  3. Corruption rate also increased
  4. Rise in economic inequality between rural and urban residents and coastal and inland provinces.
  • China is a permanent member of UN.
  • China started having issues with ASEAN, Japan, the US and Russia.