case study 4 understanding a development miracle china

Case Study 4 Understanding a Development Miracle China business deci.pdf

Case Study 4 Understanding a Development Miracle: China business decisions/But China has also adopted active- higher skill and technology content, and it embarked An Extraordinary Performance rom 1978 to 2011, the economy of China dented achievement for 19% of global population China\'s income per cap- s of incr se to 9% a year, an any economy in history, let on its period of rapid growth around 1980, more alone the world\'s most popuióuis nation, with over than a decade before significant trade liberalization. But often overlooked is that/China\'s ita by 2012 was approaching six times what it was in productivity growth was also very high. Moreover, 1978, when reforms began. Growth was three times much of China\'s growth in the 1980s and early 1990s the rate that would be considered respectable by was due to nural township and village enterprises the recent standards of most low-income countries. which had a qhasi-cooperative and quasi-municipally Shina has also experienced the world\'s most owned character. There has been less privatization dramatic reductions in poverty. The World Bank\'s of state-owned enterprises than in most developing most recent estimate is that Just 12% of China\'s countries. In the meantime, countre sin Africa Latin population lives on less than$1.25 per day (27% America, and elsewhere that have most closely fol- below $2 per day). This means that hundreds of lowed the free-market model have generally not done millions fewer people were bving in extreme pov- particularly well. While all schools may find some- erty in a span of just three decades. Reductions in thing in Chinate let them claim it as vindication of extreme poverty in China are far faster and greater their favored development policies, it is also clear than anywhere else in the world that if China were performing dismally, each could (and likely would) find reasons why its own theories, including free-market theory, predicted such a failure Debate on Sources of Success For such a stunning record, the roots of China\'s suc- There have been many special explanations for cess remain a source of disagreementy The Chinese China\'s remarkable success. Many of them contain experience seems to change everything-but does part of the truth, but such dramatic success is more it? And if so, in what ways? Success has a thou- than the sum of these parts. Let us review some of sand fathers, and all the major traditional and new the explanations. China as their most important case in point. China schools of thbught on development want to claim Regional \"Demonstrations.\" The presence of regional \"demonstration\" models, has been is hailed as an example of the benefits of markets, crucial. Japan was emulated\"by other countries trade, and globalization. Yet by conventional mea- in the East Asian region. Hong Kong provided sures, institutions in China remain quite weak. For an additional example for China, as did China\'s example, the World Bank\'s 2013 \"Pase of Doing . Read less

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• 1. Case Study 4 Understanding a Development Miracle: China business decisions/But China has also adopted active- higher skill and technology content, and it embarked An Extraordinary Performance rom 1978 to 2011, the economy of China dented achievement for 19% of global population China's income per cap- s of incr se to 9% a year, an any economy in history, let on its period of rapid growth around 1980, more alone the world's most popuióuis nation, with over than a decade before significant trade liberalization. But often overlooked is that/China's ita by 2012 was approaching six times what it was in productivity growth was also very high. Moreover, 1978, when reforms began. Growth was three times much of China's growth in the 1980s and early 1990s the rate that would be considered respectable by was due to nural township and village enterprises the recent standards of most low-income countries. which had a qhasi-cooperative and quasi-municipally Shina has also experienced the world's most owned character. There has been less privatization dramatic reductions in poverty. The World Bank's of state-owned enterprises than in most developing most recent estimate is that Just 12% of China's countries. In the meantime, countre sin Africa Latin population lives on less than$1.25 per day (27% America, and elsewhere that have most closely fol- below $2 per day). This means that hundreds of lowed the free-market model have generally not done millions fewer people were bving in extreme pov- particularly well. While all schools may find some- erty in a span of just three decades. Reductions in thing in Chinate let them claim it as vindication of extreme poverty in China are far faster and greater their favored development policies, it is also clear than anywhere else in the world that if China were performing dismally, each could (and likely would) find reasons why its own theories, including free-market theory, predicted such a failure Debate on Sources of Success For such a stunning record, the roots of China's suc- There have been many special explanations for cess remain a source of disagreementy The Chinese China's remarkable success. Many of them contain experience seems to change everything-but does part of the truth, but such dramatic success is more it? And if so, in what ways? Success has a thou- than the sum of these parts. Let us review some of sand fathers, and all the major traditional and new the explanations. China as their most important case in point. China schools of thbught on development want to claim Regional "Demonstrations." The presence of regional "demonstration" models, has been is hailed as an example of the benefits of markets, crucial. Japan was emulated"by other countries trade, and globalization. Yet by conventional mea- in the East Asian region. Hong Kong provided sures, institutions in China remain quite weak. For an additional example for China, as did China's example, the World Bank's 2013 "Pase of Doing Busi- archrival Taiwan. Taiwan, Hong Kong, and Sout ness" index ranks China poorly, at No. 96-worse Korea focused on export-oriented industrializatio than Russia, Mongolia, Zambia, or Serbia. Manufac- strategy at a time when world trade was growir tured exports are a key to China's growth, and market rapidly (see the end-of-chapter case studies f incentives have played
• 2. a primary motivational role in Chapters 12 and 13) Solution China is the most populated country of the world irrespective of this it achieves a good growth rate of 9% because of various factors. Growth represents the increase in per capita income of individuals of a nation. Increased growth rate of china shows that per capita income of individuals living in China increases but it does not reflect that income of all the people resides in china increases. Level of poverty in China is also soo huge but by taking various positive measures it reduces the poverty. China is able to reduce poverty level faster as compared to other countries. China hails many countries in the competition of markets, trade and globalisation but also is a major concern for many traditional schools to develop China. China provide cheaper products to various countries and follow centralisation of authorities rather than privatisation. Hong Kong, Tailwan and South Korea emphasis on export-orientation growth in which countries develop themselves by exporting products to other countries. Due to this, these countries knows that labor is supplied at very cheap rates in China so they shifted their branches at china. Establishment of new industries pool various labours towards these branches and thus lead to increase in the wage rates of labor. China follows the policy of one-child norm to control the excessive population. This policy of China's government plays a crucial role in reducing the population. China encouraged formation of rural enterprises, private businesses, liberalized foreign trade and investment, minimise state control over some prices and invested in the industrial production and the education of its workforce. These factors contribute majorly on the growth of China. Remarkable growht of China also came into existence because of reallocation of labor, particularly from agriculture sector to other activities. Policies of China is exactly opposite of many eastern European countries who adopt free-market policy. Along with Central planning, China also introduced transitional institutions side by side which helps it in the growth. China does not abolish the import quotas while it reduces it with margin. China adopted 'dual track' which improves efficiency and output of china. In this policy, China allowed some sectors to be under its control while liberalise other sectors under privatisation. At the time when all countries adopt decentralisation of authority, China keeps all authorities under their hands. This centralisation of authority put various barriers in the growth of China, so recently it adopt conversion of state-owned enterprises in the hands of private sector. Around the late 1970s, China encouraged township and village enterprises which increases the industrial share of China by many folds. This plays eminent role in the development of rural
• 3. areas in China. Therfore, we can say that policies of China is extremely different from all other countries and there exist certain limits on other countries from follow it. China shows that 'real development of a country is possible' and it is not an accident, it completely depends upon the policies adopted and the efficient implementation of it.

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China’s Development Miracle and Development Economics

China Watch Vol. 2, No. 29, July 2022

LIU Shouying [1]

Professor, School of Economics, Renmin University of China

Since the founding of the People’s Republic of China, the long-suffering Chinese nation has made giant leaps—it stood up, became rich, became strong, and achieved the miracle of rapid economic development and long-term social stability. China’s development miracle was not achieved under the guidance of the existing theories of development economics, nor are existing development economics theories sufficient to explain China’s development miracle.

Therefore, the major mission of China’s economics community is to develop innovative theory, based on China’s development miracle, i.e., construct Chinese development economics by making innovations in development theory based on China’s practice. China’s development economics is guided by Xi Jinping’s thought on socialist economics with Chinese characteristics in the new era, and it takes the exploration of the Chinese-style modernization pathway in the more than 70 years since the founding of the new China, and especially in the more than 40 years of reform and opening up. It is committed to basing its theories on the Chinese experience, forming normative analysis with modern methods, promoting the mainstreaming of its theories, and contributing Chinese wisdom and Chinese solutions to the development of countries around the world.

Since the founding of the People’s Republic of China, the long-suffering Chinese nation has made giant leaps—it stood up, became rich, became strong, and achieved the miracle of rapid economic development and long-term social stability. The miracle of China’s development did not follow the development pathways and models designed by Western economists, but followed a unique Chinese-style path, i.e., by an organic combination of the socialist system and the market economic system. Such a combination was unprecedented. Since reform and opening up began in the early 1980s, we have summarized new, dynamic practices in a timely manner, and constantly promoted theoretical innovations. Many important conclusions have been made on major issues in development concepts, ownership, distribution systems, government functions, market mechanisms, macro-controls, industrial structure, corporate governance structure, security of people’s livelihoods, and social governance. The pathway of socialism with Chinese characteristics has created a miracle of development rare in human history; it has expanded the way for lagging countries to modernize, contributing Chinese wisdom and Chinese solutions to human problems, and providing a rich practical basis and unique theoretical resources for innovations in development economics.

• The Miracle of China’s Development Requires the Construction of China’s Development Economics

In just over 70 years, China has created a miracle of rapid economic development and long-term social stability that drew worldwide attention as it transformed from a backward country to a modern country, which has drawn worldwide attention. Especially during the more than 40 years of reform and opening up, China’s economy maintained an average annual growth rate of more than 9% from 1978 to 2019, its per capita GDP has risen from US$220 to US$16,117, and it became the world’s second largest economy after the United States. The achievements of China’s economic growth are unprecedented in the course of human history, and we can speak of “the miracle of China’s economic growth.”

At the same time, the Communist Party of China (CPC), ever since it took power, has been committed to transforming a backward agricultural country into a modern industrial country. Thus, during its rapid economic growth, China also achieved rapid structural transformation, as its industrialization and urbanization advanced rapidly. When the added value of China’s manufacturing sector surpassed that of the United States in 2010, China became the world’s largest manufacturing country. As for China’s urbanization rate, it rose from 17.9% in 1978 to 60.6% in 2019. In just 40 years, China has initially completed the process of industrialization and urbanization that took the developed countries more than 100 years to complete, thereby achieving “the miracle of China’s structural transformation.”

Another commendable achievement has been China’s outstanding contribution to the alleviation of world poverty. The number of China’s people in poverty dropped from 878 million in 1981 to 9.6 million in 2015—this alone amounted to a 67% reduction in the number of impoverished people worldwide. By 2020, China had lifted all of its rural poor and poverty-stricken counties, as defined by current standards, out of poverty, thus successfully fulfilling the great goal of building a moderately prosperous society in a comprehensive manner. This is called “the miracle of China’s poverty alleviation.”

More importantly, China has broken the “Huntington Paradox,” [2] i.e., it has avoided contradictions and conflicts in the process of pursuing modernization, and maintained long-term economic and social stability. China differed from the vast majority of developing countries in having experienced neither incessant social conflict nor instability hampering economic development, nor frequent economic contractions. In its continuous economic growth since reform and opening up, China has achieved a substantial decline in economic contractions and achieved “the miracle of long-term social stability.”

Whether it is long-term stability and continuous change at the political level, economic growth and structural transformation at the economic level, or the eradication of absolute poverty and the all-round development of people at the social level, China has achieved successes that are visible to the entire world. It has explored a unique development pathway for less developed countries to follow in their modernization process. However, China’s development miracle was not realized under the guidance of existing theories in development economics; the existing theories are not sufficient to explain it. Mainstream development economics cannot explain unique aspects and practices in China’s development, such as institutions with Chinese characteristics, the relationship between the government and the market, industrial policies, and institutional testing methods. China is really the world’s largest natural experimental field for development economics, and it has opened up whole new areas in development economics. Therefore, the Chinese economics community’s major missions are to develop innovative theory based on China’s development miracle, explain Chinese-style growth and structural transformation, analyze Chinese-style institutional changes, realize people-centered development, build a modern country, formulate innovative development theory based on China’s practice, and construct a Chinese development economics.

• Typical Facts of China’s Development

First, Chinese-style modernization. Although China’s long, splendid agricultural civilization avoided the Malthusian trap, in which the relationship between man and land is constantly tense, it led a situation in which China was so wrapped up into the countryside that for a long time its ability to become a modernized society was delayed. After the CPC took power, it proposed the constructive goal of transforming China from an agricultural country into an industrial country. Then, through the explorations of the Four Modernizations in the early days of the founding of the New China, and through the development strategies of the early stages of reform and opening up, such as “pioneering a new path of Chinese-style modernization” and “the Three-step Development Strategy,” “the New Three-step Development Strategy,” and the establishment of the “two centenary goals,” China moved closer step by step to socialist modernization. As China entered a new era, the CPC Central Committee, with Comrade Xi Jinping at its core, successively proposed to build a moderately prosperous society in all respects and to embark on a new journey to build a socialist country.

Second, Chinese-style economic growth. Various elements, such as capital, labor, land, and technological progress, have uniquely contributed to Chinese-style growth. The elements would include the following:

• A high savings rate , which brought a high investment rate and high growth, and a large amount of foreign direct investment , which was brought about by the higher returns on capital. These factors further promoted China’s economic growth by stimulating employment and exports, technology spillovers, and so on.
• The relaxation of the household registration system. This has enabled the population to continue to enter the cities from the countryside, and for secondary and tertiary industries to absorb agricultural surplus labor, which has turn improved overall labor productivity, making the demographic dividend one of the main drivers of China’s economic growth.
• The government’s use of China’s unique land system to seek development. Land has become not only an engine for growth, but also a booster for structural change. The government promotes rapid industrialization by using low-cost land to attract investment and accelerates urbanization through the capitalization of land, forming a model of “land-based development.”

As China’s economy has entered a new normal of moderate growth, however, the effectiveness of capital accumulation, the demographic dividend, and the “land-based development” model has diminished. Meanwhile, China has taken advantage of its late-mover advantages to maintain rapid growth in R&D investment, patent output, and the emergence of new products, so that “innovation-driven” has become a national strategy for sustainable development.

Third, Chinese-style structural transformation. Via its unique industrialization path, China leapt from national industrialization to rural industrialization and industrial park-based industrialization, and finally became the “world’s factory.” At the same time, China has a distinctive dual economic structure. Not only does its urbanization have an obvious dual-track feature, but the relationship between urban and rural areas has also undergone a transformation from urban-rural division to urban-rural coordination, and then to rural revitalization and urban-rural integration. The movement of agricultural surplus labor has been an important force for promoting the transformation of the dual structure; the transformation of urban-rural relations from separation to integration was the essential requirement for eliminating the dual structure, and the transformation from traditional agriculture to agricultural industrialization has been the industrial foundation for promoting urban-rural transformation.

Fourth, Chinese-style development pattern. During the planned economy period, China formed a primarily internally circulating, self-sufficient industrial and supply and demand system. However, the lack of market power led to poor circulation in the national economy, and the economy fell into a state of constant shortage. Since reform and opening up, China’s economy has been increasingly dependent on foreign countries; opening up to the outside world made up for the constraint of insufficient domestic demand after the economy expanded and commodities became abundant. After the global financial crisis of 2008, China’s economic aggregate continued to expand, and domestic demand levels rose. However, populism in Western developed countries was on the rise, anti-globalist sentiment intensified, and China’s foreign trade dependence continued to decline. It became historical necessity to build a new development pattern in which “the domestic cycle plays a leading role while the international and domestic cycles boost each other.”

Fifth, human-centered development. Human-centered development is a fundamental pursuit of the CPC and the Chinese government. The primary goal and most important political task of the human-centered development concept has been poverty reduction. The reason why China has achieved large-scale poverty reduction is inseparable from its economic growth, regional poverty alleviation and development, and socialist system with Chinese characteristics. In the process of China’s economic development, there have been rapid growth of residents’ income, changes in the structure of income sources, and structural differences in income growth. Before reform and opening up, there was income egalitarianism, and after reform and opening up, the income gap expanded at high speed and continues to hover. This not only relates to changes of incentive mechanisms from economic transformation, but also stems from the uneven distribution of benefits in economic development and economic transformation. Common prosperity must be achieved under the combined action of internal mechanisms such as property income, the intergenerational transmission of property, and intergenerational transmission of human capital, as well as external mechanisms such as fair and reasonable income distribution. Over the past 70 years since the founding of the People’s Republic of China, the Chinese people’s livelihood has developed by leaps and bounds. The significant improvements in the quality of life of different groups of people and different regions, the significant improvements in the people’s sense of happiness and gain, and the improvements in public services, including infrastructure and social security systems, have all played important roles in this.

• The Uniqueness of China’s Development

First, the Chinese-style economic growth and transformation model. China’s planned economy took the development of heavy industry as the means to achieve the “maximized military and industry” development model. Once the heavy industry and the military industry groups form a strong relationship, they usually have enough ability to influence governmental decision-making and prevent excessive transfer of government resources. In this way, the development goal of national industrialization could be quickly realized. During the economic reforms of the 1980s, China’s early stage of successful transformation was brought about by the dual-track system, the development of township and village enterprises, and the “financial contract system” with separation of rights. Since the mid-1990s, China’s development model has similarity with the “East Asian model,” i.e., under the leadership of the government, high economic growth has been promoted through high levels of savings, high levels of accumulation, and high levels of investment. While achieving rapid growth, China has also encountered various major challenges and issues affecting sustainable development, such as rising income inequality, increased social conflicts, rising debt ratios, and asset bubbles. In the future, it will be necessary to alleviate these issues by comprehensively deepening market-oriented reforms and realizing China’s great transformation.

Second, Chinese-style economic development strategies. Economic development strategy is the key to understanding China’s engine of development and growth. The strategy of prioritizing the development of heavy industry put limited resources into that sector to promote industrialization. This laid a solid foundation for China’s rapid economic growth, enabling China to form a complete industrial system and quickly become a world manufacturing power, but it also resulted in distortions of resource allocation, loss of economic efficiency, and unbalanced economic growth. The strategy of prioritizing the development of heavy industry directly led to an urban-oriented policy, which was the starting point of China’s pathway toward industrialization and an important source of capital accumulation. It created the conditions for accelerating the industrialization process and economic take-off. After reform and opening up, the export-oriented development strategy gradually replaced the import substitution strategy used during the beginning of the reform and became a driving force for industrialization. This strategy interacted with the coastal development strategy and the opening-up strategy, and through continuous reform and opening up and through integration into the global division of labor system, it has promoted domestic reform and enabled China to rapidly become a world manufacturing power. The reform and opening up and the initial development of China’s eastern region, however, brought about the widening of regional disparities. In response, the party and state have proposed successive regional balanced development strategies for the development, rise, and revitalization of the western, central, and northeast regions, in order to achieve the fundamental goal of common prosperity.

Third, Chinese-style institutional changes. Unique institutional choices and institutional changes have played important roles in the realization of Chinese-style modernization and the miracle of Chinese development. Given the semi-colonial and semi-feudal social nature of China in the past, the CPC established the objects, tasks, motivation, nature, future, and transformation of China’s new democratic revolution. After gaining power, it established a socialist system through agricultural and handicraft cooperatives, and through industrial and commercial joint ventures. The planned economic system greatly enhanced national capacity, but it also brought problems such as rigidity and low efficiency. Since the 1980s, China has adhered to a problem-oriented approach, seeking solutions from practice, and developing policies from policy experiments. Under its unique system of political and economic interaction, China has realized the process of open rights reform and institutional modernization, and it has laid the institutional foundation for rapid economic development and long-term social stability. It must be emphasized that the Chinese government has played an important role in economic development. Its effective governance, strong national capacity, and effective promotion of the economy are important features of China’s economic growth model. The top-level planning system with Chinese characteristics, vertical outsourcing between government levels, the top-down talent selection mechanism, China’s unique model for government-market interaction (between local government governance and competition) have created China’s unique development path.

• The Method and Future of China’s Development Economics

China’s development economics is guided by Xi Jinping’s thought on the new era of socialist economy with Chinese characteristics. It takes as its main line the exploration of the Chinese-style modernization path that was followed for the more than 70 years after the founding of New China, especially the more than 40 years of reform and opening up. It seeks to explain the historical logic, practical logic, and theoretical logic of China’s four miracles of development: rapid economic growth, rapid structural transformation, alleviation of poverty, and long-term stability. It systematically summarizes General Secretary Xi Jinping’s thoughts, since the 18th National Congress of the CPC, on development economics in the new era—the new development stages, new development concepts, and new development patterns. It integrates Chinese facts, Chinese cases, and Chinese theories to promote the mainstreaming of Chinese economics.

The methods of Chinese development economics include:

• Taking the big historical view as an analytical perspective. That is, taking Chinese-style modernization as the main line—from the trauma of modern China’s development to the exploration of socialist modernization in the New China, and the four miracles of economic development created by reform and opening up, and then to the new journey of building a modernized country after the building of a moderately prosperous society in all respects. China’s economic development experience should be summarized through historical logic, practical logic, and theoretical logic, in order to form the theoretical system of Chinese development economics.
• Integrating macro- and micro-perspectives on development. Chinese development economics inherits the grand narrative of domestic development economics emphasizing macro-development in order to explain Chinese-style growth and structural change. It strengthens the behavioral impact and performance characteristics of institutional and policy experiments on organizations and various subjects. It pays special attention to people’s development goals and policies as well as development quality and performance, and it genuinely manifests its general aim of “development for the people.”
• Summarizing Chinese experience and refining Chinese theory, based on Chinese practice. Chinese development economics organically combines typical facts, key concepts and categories, theoretical analysis, empirical testing, and characteristic cases in China’s economic development. It strives to build a combination of dynamic Chinese economic development practice and the most systematic, rational economic theoretical frameworks.

Based on the People’s Republic of China’s extraordinary history of more than 70 years since its founding, China is fully capable of achieving sustained economic growth in the next 30 years and building itself into a powerful modern socialist country; it is even more capable of realizing the mainstreaming of Chinese development theory and development economics. On the one hand, China’s development economics should focus on the new era and new journey towards becoming a socialist modernized country. It should expound the scientific connotations of the new development stage, new development concept, and new development pattern, and look forward to the tasks, strategies, and pathways of China’s new journey of comprehensively building a modernized socialist country from a problem-oriented perspective. The key to modernizing the country is to realize the transformation of the society, from a rights-restricted order based on identity rules to an open-rights order that treats all people equally through the benign interaction and balance of politics, the economy, and society. Comprehensively deepen reforms, build a high-level socialist market economic system with Chinese characteristics, and improve the basic system of the market system. Adhere to equal access, fair supervision, openness and order, integrity and law-abiding, form an efficient and standardized market environment with fair competition, and realize the modernization of the national governance system and governance capacity. On the other hand, along with China’s four miracles of development and the even more remarkable economic development achievements of the future, theoretical and empirical research results based on Chinese experience and the Chinese story will surely play an increasingly important role in mainstream development economics theory, and it will ultimately take the lead in the development of the discipline of development economics.

Chinese development economics is committed to the mainstreaming of its theories. It seeks to promote them by forming them through the Chinese experience and forming normative analysis with modern methods, and then contributing Chinese wisdom and solutions to the development of countries around the world. The main directions for development would include: (1) Building the micro-foundation for macro-economic performance. Rather than paying more attention to macro-level issues, it will turn to focus more on micro-level issues such as education, health, and pensions at the individual and family levels. (2) Focusing, from a long-term perspective, on the historical evolution of developed economies and late-developing countries, as well as on the laws, experiences, and lessons learned in the process of economic development. (3) Constructing development theory from convergence to divergence. The successful experience of Chinese-style modernization proves that there is not only one development pathway to achieve modernization. In the future, development economics will explore how to take differentiated paths of modernization based on the national conditions of different developing countries in order to improve the well-being of people in all countries.

Translated by Thomas E. Smith

[1] A longer version of this article was first published in Guanli shijie [Management World] (2022.6).

[2] Translator’s note: Liu alludes to Samuel Huntington’s statement, in his 1968 classic, Political Order in Changing Societies , that “modernity breeds stability, but modernization breeds instability.”

China a Development Miracle

This paper focuses on the development of China’s Economy. It discusses the transformations that China experienced to move forward and become the world’s fastest growing economy. China’s development occurred mainly because they began to focus on manufacturing and exporting. Growth also occurred due to borrowing technology and the skilled and cheap labor force.

INTRODUCTION

Order custom essay China a Development Miracle with free plagiarism report

A Development Miracle China China, officially know as The Peoples Republic of China, is the world’s most populous country with a population of over 1. billion people. The capital of China is Beijing and the president is Hua Jinato. China currently has the world’s fastest developing economy, and it is estimated that from 1978 to 2008 China has grown at a constant rate of approximately 9% a year. In the year 2008, GDP per capita was five times the amount than it was in the year 1978. The People’s Republic of China is also responsible for the most dramatic reduction in poverty, from 53% in the year 1981 to 8% in 2001; about 400 million fewer people are living in extreme poverty(TODARO 2012).

This growth miracle has occurred due to the transformation into a market-oriented economy and also as a result of improving their technology. BODY There have been many speculations as to how China has developed at such a rapid rate and also many conclusions. The case of China is one that is very interesting as there is no particular school of thought or specific development policy that is responsible for rapid growth but rather a combination.

China is a very good example of how policies that implement trade, markets and globalization are highly beneficial as manufactured exports are China’s primary area of focus. Since the 1980’s when china began its transformation into a market-oriented economy it was a very poor country with a per capita income of US $182 and a trade dependence ratio of 11. 2 %; since then China has mad a dramatic transformation. China now has a per capita GDP of US $3,688 and in the year 2009 China became the world’s second largest economy and also the world’s largest exporter of merchandise (LIN 008). Prior to the 1980’s China’s economy was very traditional; only after the liberalization reforms and cultural counter- revolution in the late 1970’s under Deng Xiaoping we begin to see improvement in China’s economy. Rapid growth began in 1980 due to rural township and village enterprises, which had quasi- cooperative and quasi- municipally, owned character. China’s ability to reform its economy very rapidly to become more efficient has also been one of the key factors responsible for rapid growth.

As the industrial revolution began, the catalyst occurred that transformed China from an agrarian society where over 80% of its labor force worked in traditional agriculture, into a society that focused on nonagricultural sectors and manufacturing (LIN 2010). Investors were first attracted to China as they had cheap labor, with high skills and good work habits for its low-income level. In the beginning the manufacturing sector was mainly labor-intensive but later with the introduction of advanced technology it became more capital- intensive.

Since the 1980’s the service sector has dominated and this structural change has been constant. The manufacturing industry is what transformed China, due to external investors. The more producers located in China the greater the benefits for an increasing number of suppliers. Another advantage that China had over other developing nations was the ability to borrow technology. China did not have to invent technology or industries; they simply had to be innovators. The state was able to borrow technology, industries and institutions at low risks and costs from more advanced countries.

Due to globalization and technological advance, there were more market incentives. These market incentives increased trade and GDP. Industrial policies that were implemented helped to ensure that exports of increasingly higher skill and technology content. Accompanying this change in the industrial structure was an increase in the scale of production, the required capital and skill, the market scope, and also the risks (LIN 2008). To be efficient the Chinese had to effectively use technology and labor to reduce the transaction costs.

Some economist claim that the Chinese quasi-capitalism economic model is much more effective than that of the American Laissez- faire model, due to China’s extraordinary growth. However, a major source of China’s growth comes from an influx of capital and the mobilization of labor (THE ECONOMIST, 2009). As more capital, labor and technology is being added to any economy, there is sure to be growth. China’s economy continues to experience tremendous growth as a result of global consumers and also the worldwide demand for products.

An important question always asked is if whether of not other developing countries can follow China’s footsteps and experience massive growth. Each developing country differs from others but as long as they are capable of borrowing technology from more advanced countries, they will be able to advance their industries and experience growth. As long as resources such as capital, labor and technology are used effectively growth is sure to occur. There are many claims as to why China has seen massive economic growth and development.

The main reason for China’s growth is due to its shift from a country focused on agriculture to one that is export-oriented and focused on manufacturing. Another important factor that assisted was the ability to borrow technology from other countries also helped to spark the industrial revolution, which lead to the transformation. China also developed as they had a skilled labor force with very good work habits for its low-income level. What occurred in China is nothing short of a miracle however, as long as the proper policies are implemented at the right time, economic growth and development are sure to occur.

• Todaro , P. & Smith, C. (2012). Economic Development. Eleventh Edition. Pearson enterprises.
• New York, city. Lin, J. (2010). China’s Mircale. Retrieved from: http://blogs. worldbank. org/africacan/china
• Lin, J. (2008). China’s Miracle Demystified. http://siteresources. worldbank. org/DEC/Resources/ChinaMiracleDemystified-Shanghai. pdf
• The Economist (2009). China’s Growth Miracle. Retrieved from: http://www. economist. com/blogs/freeexchange/2009/05/chinese_growth_miracle
• Centre for Policy and Development Systems (2012). China’s Growth: Assessing the Implications.

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China a Development Miracle. (2016, Dec 27). Retrieved from https://phdessay.com/china-a-development-miracle/

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