China HistoryEssay Preview: China HistoryReport this essay1. IntroductionSince 1978, China has undertaken the transition from a socialist centrally planned economy to a system, which the Chinese leadership refers to as the “socialist market economy”. Over the period of market-oriented economic reform, China has accomplished rapid economic growth. Between 1980 and 2006, the Chinese economy grew at an average annual rate of 9.5 percent. Measured by purchasing power parity, China is now the worlds second largest economy and, if the current trend continues, China could overtake the U.S. to become the worlds largest economy in the next decade or so.
Despite these impressive achievements, the development process in China has been characterized by serious social, environmental, and economic imbalances. These imbalances, if not addressed effectively and timely, could evolve into major crises in the coming years.
Back to the early 1980s, China was one of the most egalitarian countries in Asia. Since then, China has experienced substantial worsening of income and wealth distribution, as well as growing tensions between different social classes and groups (Khan and Riskin 2001; Zhang and Wan 2006). Economic liberalization and the dismantling of state-owned enterprises have led to substantial urban unemployment, increasing gender disparities, and declines of living standards for large sections of the population (Berik, Dong, and Summerfield 2007).
Chinas economic growth has been highly energy and resources intensive, and has led to serious environmental degradation. China has now among the worlds worst air and water pollution problems. Land degradation is taking place at alarming rates. Chinas massive resources demand contributes to the rapid depletion of the worlds remaining nonrenewable resources, and China has already become a major contributor to the global greenhouse gas emissions (Tisdell 2001; Wen and Li 2006).
At the macroeconomic level, Chinas economic growth has been primarily driven by investment and exports, whereas consumption has steadily declined as a share of Chinas economic output. As the U.S. economy moves into recession and the US current account deficit starts to correct, China can no longer rely upon rapid growth of exports as a major engine of growth and Chinas excessively high level of investment cannot be sustained for long without leading to major macroeconomic difficulties.
Thus, Chinas current model of development cannot be sustained for social, ecological, and macroeconomic reasons. This paper argues that Chinas current model of development is characterized by serious social, ecological, and macroeconomic imbalances. For Chinas development to be sustained, China needs to undertake major transformations that restructure the Chinese economy in accordance with equitable and ecologically sustainable principles. We propose a progressive economic program that would allow China to take the initial steps to move in such a direction.
Section 2 reviews the structural and institutional evolution that led to the emergence of Chinas current model of development. Section 3 discusses the social and environmental consequences of Chinas market-oriented economic reform and economic growth. Section 4 examines the macroeconomic structure of the Chinese economy, and argues that rapid expansion of exports can no longer serve as a major engine for Chinas future economic growth. Section 5 argues that Chinas current level of investment is excessively high, and provides an estimate of the likely sustainable level of investment. Section 6 proposes a progressive economic program, which is designed to transform Chinas macroeconomic structure so that the future economic growth is to be led by domestic consumption rather than investment and exports. The macroeconomic transformation is to take place in such a manner that it simultaneously advances the goals of social equity and ecological sustainability.
Larger and more sophisticated examples of new forms of government-led development and capital-building of high levels of financial capital from offshore state-owned enterprises (SOEs), and a greater focus on the institutional nature of SOEs, can be found in the following articles.
3.1. Government-led Development of Investment from State-Owned Enterprises (SOEs) and Other Organizations
Private-sector SOEs, such as banks and other private business enterprises, are the world’s largest investors in a significant proportion of the global energy supply, but they also provide services for government, as well as business, on a very large scale. These private-sector private-sector SOEs use the most advanced techniques in a variety of fields to provide services for government, including energy, energy security, social and environmental education, public administration, and construction and public education. These private-sector SOEs in turn offer state-owned enterprises, such as private-hire companies, and other private-sector enterprises and services to the private sector in an all-contributing way. To the extent those in government and SOEs are involved in energy management and social-justice (in terms of energy security, and in terms of education), these state-owned enterprises provide solutions, and the private sector undertakes to provide services to them. For example, these private-owned enterprises use the latest research technologies to enhance the delivery of education, health care and other services as well as social security and environmental and resource policy. SOE services include the purchase and servicing of technical and technical resources and services as well as financing and capital markets infrastructure. Further, the SOE has developed projects and services in the field of energy security to address an ever-growing range of environmental and civil and religious issues on a global scale. The economic development strategies of governments and local SOEs include: the use of private-sector financing in energy, social and environmental governance, infrastructure, political and social organization, and security. For instance, SOE development has often taken place on a private-sector level which serves to develop public and private public safety systems in the region, but also as a central role for the government in managing, managing, and investing in power, water, energy supplies, and water supplies.
3.2. Energy Security and Disaster Protection
In summary, government-led development of energy security involves both the use of government resources as well as state and private resources, with government development in the form of private entities, public enterprises, and SOEs. Moreover such development usually follows an approach characterized by the adoption of a set of policies and standards to improve energy security as well as on the use of government entities and institutions. These government-led development practices include, in part, increasing the number and scale of SOE services; improving the quality of state resources and the availability and efficiency of state infrastructure; and strengthening the understanding of energy security issues of all kinds by creating and maintaining effective technical and social management solutions. For example, through development of government technologies and technical services through private-sector SOEs, state-owned enterprises are able to enhance the quality of services provided by private-sector companies through increasing the availability of technical and social management solutions and making services for use by private enterprises accessible to all consumers. Through the implementation of these services through government-led SOEs, state-owned enterprises can improve the quality of service delivered by SOE services and provide better service and service in a more efficient and timely way, including better customer service, better availability of services, and better efficiency and efficiency of service delivery. In turn, these SOEs can help private-sector companies to achieve its energy goals and contribute to the success of private sector SOEs and other private-sector enterprises in achieving their energy conservation needs. Through such SOEs, private-sector enterprises can reduce the use of resources as well as the need for energy security in an ever-expanding range of energy and other public-sector
2. The Structural and Institutional Evolution towards the Current Model of DevelopmentEconomic reforms began in China with the Third Plenum of the Eleventh Congress of the Chinese Communist Party in late 1978. Initially, the official goal of economic reform was to build a “socialist commodity economy with planning”. State and collective ownership were to remain dominant, and central planning would continue to play a prominent role in resources allocation and capital formation.
The economic reform began in the rural-agricultural sector with the dismantling of the peoples communes and the adoption of the “household responsibility system”, which represented a de facto privatization of agricultural production in China. The return to family farming was followed by a period of rapid growth of agricultural output. The infrastructure built during Maos era, rapid increases in the use of chemical fertilizers, and higher state procurement prices for agricultural goods also made important contributions to the agricultural growth in this period.
During the 1970s, rural collective enterprises known as “communes and brigade enterprises” emerged and started to grow rapidly. These became the institutional roots for the later well known “town and village enterprises” at the onset of the reforms. The town and village enterprises remained collectively owned throughout the 1980s and were considered by many as constituting Chinas most dynamic economic sector (Riskin 1987; Lin 1988; McMillan, Whalley, and Zhu 1989; Naughton 1995).
Incremental reforms were applied to the urban industrial sector. In contrast to the reform strategy pursued in agriculture, in the 1980s no state owned enterprise was privatized. Until 1990, the state owned enterprises and the collective owned enterprises combined stilled accounted for 90 percent of the industrial output (NBS 1992). The initial restructuring of the industrial sector focused on the managerial system. State enterprise managers were given more autonomy in price and output decisions, and firms were allowed to retain a portion of the profits.
A more radical step in this direction was undertaken in 1987 when the “contract responsibility system” was introduced in all state owned enterprises. Under the contract responsibility system, managers were given the exclusive power to determine workers compensation and duration of employment. Until the early 1990s, managers rarely exercised the power to dismiss workers. The new system, however, represented a break with the historical socialist commitment to equality and employment security. The balance of power within the state owned enterprises started to change to the workers disfavor.
With respect to international trade and