China’s economy has seen many changes and has experienced many reform strategies, to expand and improve in the best and most effective way possible. Different leaders of China have implemented these different strategies after many years of economic turmoil and despair, until the economy started showing signs of improvement and growth. These reform strategies include; an Open Policy, De-collectivising, and Special Economic Zones.
Deng Xiaoping, the leader of the communist party lead China towards the answer for all their economic problems, the implementation of a partial market economy. Foreign Policy in China was all about ideological and strategic issues, until the implementation of the economic reforms. Through the introduction of these reforms China has been able to open up its economy to the rest of the world, encouraging investment and trade and resulting in massive growth for China and its economy.
Globalisation is the worldwide movement toward economic, financial, trade, and communications integration (the process of the worlds markets coming together.) Through reform strategies, China’s economy has begun interacting with other countries’ economies. China’s Foreign Direct Investment (FDI) and Opening stock exchanges are examples of reform strategies aimed at the financial and trade factors of globalisation. Increased FDI and opening the Shanghai Stock Exchanges were feasible through China’s ‘Open Policy 1979’. Through this ‘Open Policy’ strategy, which aimed at the deregulation of trade, China found new economic relationships and trade paths. This strategy was effective in the way in which China used external economies to grow its own. It was also effective in the way it expanded its financial resources and mediums to create high levels growth and investment.
After the implementation of the Open Policy there was an increase in Gross domestic Product (GDP) and FDI. Many other countries invested into China Economy and this generated a lot of income within the Chinese economy, Raining GDP. This increase in GDP also affected China’s Human Development Index (HDI), another Economic indicator. Chinas Standard of living increased and so did its life expectancy. These improvements in China’s economy prove this strategy to be effective.
Even before the ‘Open Policy’ of 1979, China’s economic reforms began in 1978, with the agriculture sector. The threat of another famine, (seen in the period of ‘The Great Leap Forward’) caused the Chinese government to drastically change the policies surrounding that particular economic sector. Through this new reform strategy, Deng Xiaoping de-collectivised the agricultural sector. Collectivism is the practice or principle of giving a group priority over each individual in it. Meaning Deng Xiaoping changed the values of the country to not look after the group as a whole but start to focus on the individual in certain circumstances. This increased agricultural production and stimulated the rural industry of china. After the success of the agricultural reform, other industries were also undergoing drastic economic changes. This increased productivity, encouraged private businesses and again, saw huge increases in FDI (sometimes increases of hundreds of billions of $US). As FDI began, the Chinese economy was becoming more and more exposed to the rest of the world economic patterns (as seen in globalisation). Policies continued and incentives were implemented, encouraging high levels of foreign investment and the globalisation of China’s growing economy.
By de-collectivising the economy, responsibility triggered motivation and incentive which drove the economy to growth and success. GDP and FDI grew also effecting HDI positively, similar to the strategy of the ‘Open Policy.’ However by de-collectivising the economy, China saw huge increases in inequality, and the GINI index moved closer to 1.
High incentives such as special taxation, interdependence and trade priorities drove China to the implementation of Special Economic Zones in 1980. This was a way in which China could have guaranteed trading partners that they could still have some control over. These Special Economic Zones (SEZ’s) allowed trading between different nations, with special interest rates, tariffs and insure a priority over other nations. SEZ’s was one of the first steps China took in trading with other countries.
Through special economic zones, preferential regulations were put in place to attract FDI. This influx of funds gave china’s economy the resources it needed to grow to what is now the second largest economy in the world. GDP and HDI also grew at substantial rates. Consumer Price Index (CPI) increased due to the increased demand for products. Through these indications this strategy was effective for Chinas economy. However the Chinese government did loose quite substantial amounts of power to this strategy. Changed laws, meant that interaction with other economies would increase interdependence. This meant there was only so much China could do to change and manipulate its economy.
China has implemented many Strategies over many years to try to grow and improve its economy. Globalisation consumed China’s economy, and shaped and moulded it into an extremely strong and impressive economy. Many of these strategies were very effective towards the growth of GDP, FDI, and HDI. Though these reforms brought success and growth there were parts of China’s economy that didn’t improve. After the reform strategies there was an increase in inequality and a loss of government control. Other aspects include the effects of industrialisation on public health and the environment. These issues have been neglected through the economic reforms of China.
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