CHINA AS AN EMERGING ECONOMIC

POWER
(A Case Study)

HIRA ARSHAD
B.S (Hons) POLITICAL SCIENCE

DEPARTMENT OF POLITICAL SCIENCE

LAHORE COLLEGE FOR WOMEN UNIVERSITY
LAHORE
2010

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In the Name Allah, the Most Beneficent, the Most
Merciful.

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 CHINA AS AN EMERGING
ECONMIC POWER
(A Case Study)

Name: Hira Arshad

Roll no: 61603
Session: 2006-2010

The report is being submitted in partial fulfillment

of the requirements for the degree of

B.S (Hons)
In
Political science

Mrs.Mobina Ali Mrs. Humaira Shakeel

CHAIRPERSON SUPERVISOR

3
 CERTIFICATE
By The Research Supervisor

I certify that the contents and form of report submitted by

Hira Arshad, Roll no. 61630 have had been found
satisfactory and according to the prescribed format. I
recommended that it be processed for evaluation by the
external examiner for the award of degree of B.S (Hons) in
political science.

Signature___________

Name_______________

Designation___________

Stamp _______________

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 DEDICATION

I dedicate my report to my
parents and all those whom I
love.

Hira Arshad

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 ACKNOWLEDGEMENT

First of all, I bow my head before almighty allah, with

humble thanks who enable me to do this hard job and the
holy prophet Hazrat Muhammad (PBUH) who flourished
my thoughts.
I heartily acknowledge my gratitude to my
respected and honorable teachers especially Mrs. Humaira
Shakeel, lecturer political science department, whose kind
treatment and worthy suggestions proved very helpful to
complete this project. I am greatly thankful to my parents
and siblings for their encouragement, love and prayers.
Further more it would be great mistake if I forget admiring
my sincere well wishers, Nouman, Zaima, Amna, Sana,
Zainab and Tahseen for their cooperation and care.
I also thank to the librarians and staff of the
library of LCWU, Punjab Public Library and Quaid-e-Azam
library, Lahore

Hira Arshad

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 TABLE OF CONTENTS

Pg No.

PREFACE IX
LIST OF ABBREVIATIONS XI
LIST OT OF TABLES XII
LIST OF FIGURES XIII

1. ECONOMIC DEVELOPMENT 1-23

i. INTRODUCTION
ii. CORE VALUES OF ECONOMIC DEVELOPMENT
iii. MEANING AND DEFINITION
iv. APPROACHES USED TO MEAURE ECONOMIC
DEVELOPMENT
v. FACTORS INFLUENCING ECONOMIC DEVELOPMENT
a. ECONOMIC FACTORS
b. SOCIAL FACTORS
c. POLITICAL FACTORS
d. ADMINISTRATIVE FACTORS
vi. IMPORTANCE OF ECONOMIC DEVELOPMENT
vii. REFERENCES

2. HISTORICAL BACKGROUND OF ECONOMIC

DEVELOPMENT IN CHINA__ OPEN DOOR
POLICY 24- 56

i. INTRODUCTION
ii. CHINESE COMMUNIST PARTY
iii. ECONOMIC HIOSTORY
iv. FIVE YEAR PLANS

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 v. ANNUAL PLANS
vi. THE EARLY YEARS: (1949-1952)
vii. MAO AND THE ECONOMY
viii. FIRST FIVE YEAR PLAN (1952-1957):
ix. FIRST FIVE YEAR PLAN (1952-1957):
x. GREAT LEAP FORWARD
xi. CULTURAL REVOLUTION:

xii. ECONOMY IN DENG ERA:

xiii. FIFTH FIVE YEAR PLAN (1976-1980):
xiv. ECONOMIC REFORM (1979):
xv. CHINA’S OPEN DOOR POLICY:
xvi. SPECIAL ECONOMIC ZONES (SEZs)
xvii. REFERENCES

3. IMPACTS OF OPEN DOOR POLICY 57-103

i. SIXTH FIVE YEAR PLAN (1981-1985)

ii. THE 7TH FIVE YEAR PLAN (1986-1990)
iii. THE EIGHTH FYP (1991-1995)
iv. THE NINTH FIVE YEAR PLAN (1996-2000)
v. TENTH FIVE YEAR PLAN (2001-2005)
vi. MEMBERSHIP OF WTO
vii. FOREIGN TRADE
viii. ELEVENTH FIVE YEAR PLAN (2006-2010)
ix. VOTING POWER IN WORLD BANK
x. U.S-CHINA TRADE RELATIONS
xi. SINO JAPANESE TRADE RELATIONS
xii. EU-CHINA TRADE RELATION
xiii. MISCELLANEOUS ECONOMIC NEWS OF 2010
xiv. FUTURE OF CHINA’S ECONOMY

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xv. REFERENCES

4. CONLUSION 104-108

BIBLOGRAPHY 109-115

PREFACE

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 In the era of globalization, it is widely recognized that economic
development has become the major driving force in the economic
growth and social development. The world’s main concern today
remains economic development. The sustained economic growth and
expansion of national economies can make a developing country as a
developed country. China is one of the largest economies of the world.
I selected the topic of economic development of china after its
independence for my report while seeing the gradual economic growth
of china. In my report, it is explained that how this country’s economy
emerged as a developed economy emerged as developed economy
and it is still in the process of further development. China’s economic
recovery after 1949, events of great leap forward and Cultural
Revolution, and opening up policies after 1979 played significant role in
china’s economic development. It is also mentioned that what were the
policies and plans which were adopted by china during its journey of
development.
This thesis report consists of four chapters.
In the first chapter, those measurement tools and factors of
economic development are mentioned which are very essential for a
country to become a developed country.
In the second chapter, I have discussed the historical
background of china’s economy, its first five year plan and the
transitional period of china in which it adopted some policies which
were based on norms of capitalism.
In the third chapter, those events, policies, and plans are
debated by which the Chinese economy entered in to a period of high
growth.
Fourth chapter consists on concluding remarks containing
comprehensive debate on the topic.
While doing any research I have used analytical, historical and
descriptive methods of research.

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 Hira Arshad

LIST OF ABBREVIATIONS
PRC : PEOPLE’S REPUBLIC OF CHINA

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NPC : NATIONAL PEOPLES CONGRESS
GNP : GROSS NATIONAL PRODUCT
GDP : GROSS DOMESTIC PRODUCT
PLA : PEOPLE’S LIBERATION ARMY
IMF : INTERNATIONAL MONETARY FUND
GATT : GENERAL AGREEMENT ON TARIFF AND
TRADE
USA : UNITED STATES OF AMERICA
USSR : UNITED STATES OF SOVIET RUSSIA
UK : UNITED KINGDOM
CCP : CHINESE COMMUNIST PARTY
FYP : FIVE YEAR PLAN
FDI : FOREIGN DIRECT INVESTMENT
MFN : MOST FAVOURITE NATION
EEC : EUROPEAN ECONOMIC COMMUNITY
SEZ : SPECIAL ECONOMIC ZONES
EPZ : EXPORT PROCESSING ZONE
IP : INTELLECTUAL PROPERTY
IPR : INTELLECTUAL PROPERTY RIGHTS
EU : EUROPEAN UNION
WTO : WORLD TRADE ORGANIZATION
NAFTA: NORTH AMERICAN FREE TRADE AGREEMENT
ASEAN: ASSOCIATION OF SOUTHEAST ASIAN
NATIONS

LIST OF TABLES

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Table No. Pg No.
Table 2.1
China’s first five year plans
(1953-1980) 29

Table 2 .2
Targets for growth in gross total
Output (1952-1957) 37

Table 3.1
China’s import and export
After opening up 91

Table 3.2
Table of China’s Exports to the World 93

Table 3.3
Table of China’s Imports from the World 94

LIST OF FIGURES

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Figure No. Pg No.

Figure 1.1

Circle of economic activity 7

Figure 2.1

Gross national product and

Industrial production (1949-1980) 52

Figure 3.1

Growth of foreign trade export since 1978 85

Figure 3.2

Voting power of countries

At the World Bank 91

Figure 3.3

World economies in 2030 99

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 CHAPTER NO.1

ECONOMIC DEVELOPMENT

INTRODUCTION:

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 T
here are a large number of books on economic
development because more and more people are taking
interest in this topic. The study of economic development is
one of the most exciting and most challenging branches of the
broader disciplines of economics and political economy.

Economic development can be defined as efforts that seek to

improve the economic well being and quality of life for a community
by creating or retaining jobs and supporting or growing incomes and
the tax base.1

In its broadcast sense, encompasses three major areas.

a. Policies that Governments undertake to meet broad
economic objectives such as price stability, High
employment and sustainable growth. Such efforts include
monetary and fiscal policies, regulations of financial
institutions, Trade and Tax policies.
b. Policies and programs provide infrastructure and services
such as Highways, Parks, affordable housing, crime
prevention, and K-12 education.
c. Policies and programs explicitly directed at job creation
and retention through specific efforts in business
development, business retention and expansion,
Technology transfer and real estate development, The
third category is a primary focus of economic
development professionals. 2

Economic development concerned with the economic, cultural

and political requirements for effecting fast structural and institutional
transformation of whole society in such a way that bring fruitful
economic progress to their population. It works on a system that put
the people in poverty traps and more specifically to cut off these traps.

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This is because, the main goal of economic development is improving
the well being of a community through efforts that entail job creation,
job retention, Tax base enhancement and quality of life.

The term “economic development” is used in a regional sense

means to develop and prosper the regional economy. In the sense,
economic development focuses on the recruitment of business
operation to a region, assisting in the expansion or retention of
business operations with in a region or assisting in the start up of new
businesses with in a region. 3

The term “economic development” “economic growth” and

“economic progress” are mostly consider one and the same thing but if
we analyze deeply, then we come to know that a difference is there
between above terms. The term “economic growth” refers to an
increase in real national income. National income itself is commonly
expressed in terms of a measure of the aggregate output of the
economy called gross national progress (GNP). When the GNP of a
nation raises, what ever the means of achieving the outcome,
economists refer it as economic growth. 4

On the other hand, the term “economic progress” used to judge

the process of economic change. 5

While the term “economic development” implies much more

when we use in relation to a country or an entire economy. It typically
refers to improvements in a verity of indicators, such as literacy rate
and life expectancy, and it implies a reduction in poverty.6
In short we can say that term is reserve for the change in national
income.

The differences seen to be purely arbitrary, as growth and

development usually go side by side. We can use the terms “growth”,

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“Progress”, and “development” to refer the economic change in a
society.

The ultimate function of “economic development” is to provide

comforts, luxurious and satisfied life. In short, to raise the living
standard of the people by increasing the income per head. If the
increase in the National income is counterbalanced by a corresponding
increase in the population of the country, per capita income would
remain unchanged and living standards stagnant. Generally, economic
development is defined in terms of growth of national income in a total
rather than in per capita sense.7. No doubt, for economic welfare,
economic development is a necessary condition.

Micheal P. Todaro is of the opinion, that there are three objectives

of the development. He is of the view that development involves the
things, the physical appearance and progress social, economic and
institutional processes. This is so to achieve the end of having standard
life style. It does not matter that what are the components of better life,
but the following objectives are same in every society.

1. Expansion in production of basic necessities of life and widening

their distribution such as food, shelter, health care and life
protection.
2. Raising standard of living through high incomes, more chances
for employment, higher education. All these things will also
contribute to generate national self respect.
3. Expanding economic and social choices to the people and
reducing their fear. 8

CORE VALUES OF ECONOMIC DEVELOPMENT

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 After seeing the basic objectives of development, it is easy to
conceptualize the core values of development. Gow and some other
thinkers are of the opinion that there are three basic values, which
provides the practical guideline for understanding the inner meaning of
development. The values are:-

1. Sustenance.
2. Self Esteem.
3. Freedom.

These values relate with the fundamental human needs and

necessities, which are necessary in every society, in every time period.
Now let’s see the detail of these three core values of development.

SUSTENNCE: The Ability To Meet Basic Needs:

There are some basic needs without which man can’t survive.
These basic needs include food, shelter, health and protection. If a
man can’t get one of these basic necessities then lives become difficult
for him. A fundamental purpose of every economic activity is to provide
the opportunities to the people to earn their living and gain all their
basic necessities of life. For his reason, we can say that economic
development is a necessary condition for the improvement in the
quality of life that is development. Without a continuous economic
progress in every level, the realization of human potential would not be
possible. Progress in per capita incomes, evacuation of poverty, more
employment facilities give assurance of necessary conditions for
development.

This point gets more prominence in the United Nation’s human

development report of 1994. Amartya Sen asserts in this report.
“Human beings are born with certain potential capabilities. The purpose
of development is to create an environment in which all people expand

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their capabilities and opportunities can be enlarged for both present
and future generations. The real foundation of human development is
universalism in acknowledging the life claims of every one……. Wealth
is important for human life. But to concentrate on it exclusively is wrong
for two reasons. First, accumulating wealth is not necessary for the
fulfillment of some important human choices…… Second, human
choices extend far beyond economic well being.”

SELF- ESTEEM: To Be A Person

The second most important component to have a standard life is

self respect and value of your own personality and not to have a such
kind of personality, and people use you as a disposable material. This
component can see in societies in a form of authenticity, dignity,
respect, honor, gratitude and ego. Development is an essential goal for
every society as it is indispensable way for gaining esteem.

FREEDOM FROM SERVITUDE: To Be Able To

Choose

The third core value for development is the concept of human

freedom. The word freedom is used in a sense of emancipation from
alienating material conditions of life and from social servitude nature,
ignorance, and dogmatic beliefs. When you give freedom to someone
it means that you are giving a wide range of choices to achieve his
ends. This is called a development in society.

L. Arthur Lewis explains the relationship between economic

growth and freedom from servitude. He said:

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 “The advantage of economic growth is not that wealth increases
happiness, but that it increases the range of human choice.”

Wealth can enable a person to have more goods and betters

services 9. Economic activity produces goods and services and creates
incomes, which are used to provide economic development. The whole
cycle of economic struggle is to satisfy human wants. In the words of
Habib Ullah Vaseer, “Human want means the desire to get and use
goods or services, which provide utility”. 10

Figure 1.1
CIRCLE OF ECONOMIC ACTIVITY :

Wants

Satisfaction Man Economic activity

Wealth
(Goods and services)

Source: Habib Ullah Vaseer, Fundamentals of Economics,

(Lahore: Farhan Publishers, 2008). P. 27

MEANING AND DEFINITION

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 Development means change and economic development refers
to the changes taking place in the economic life of the people or we
may also say that economic development is the process of
improvement in living standard of the people

According to Watson:

“Economic development is the expansion and consumption

faster than population growth because of steadily higher productivity of
resources and combination of resources”. 11

According to Higgins:
“Economic development is the permanent rise in the total and
per capita income of the country.” 12

According to M. Saeed Nasir:

“Economic development is the process of lifting a nation’s per

capita consumption, production and income so its people can enjoy the
benefits of improved material well being”. 13

According to Todaro:

“ Development must therefore, be convinced of as a multi-

dimensional process involving major changes in social structures,
popular attitudes, and national institutions, as well as the acceleration
of economic growth, the reduction of inequality, and he eradication of
poverty.” 14

According to Micheal E. Porter:

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 “Economic development is a sustainable wealth creation
process that works with in the frame work of community parameters to
maximize the efficient and effective utilization of community resources
for economic gain for the local population. More simply, the process of
creating wealth for as many people as possible’. 15

According to Meier and Baldwin:

When we consider various definitions in comparison, we find that

Meier and Baldwin have better clarified the meaning of economic
development. According to them,

1. Complex Process:
Economic development is a complex process and a many
sided economic activity in which deep rooted changes takes
place in the economic and social system of the country, just
building of a few factories, roads or schools is not
development.

2. National Income
Real national income rises. Mere increase in money
incomes is not economic development. There must be increase
in production of goods and services.

3. Need long time period:

Increase in national income for one or two years is not
economic development. Income must go on increasing over a
long period of time. Then it can be labeled as a true economic
development.

4. Effects on Economy:

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 Economic development affects the economy two ways.

Firstly, it affects the supply factors and products. New minerals

and water resources are brought in to use. New techniques of
production and material are developed. Due to the use of
machines and new techniques, productivity of labor and land
increases and more goods come to markets. Skills improve and
change in organization of economic activities takes place.

Secondly, development effects demand for goods and services.

Taste and preferences of the people change e.g. demand for
banking facilities increases. Distribution of income is affected
e.g. there may be increase in the gap between rich and poor. 16

THE MEASUREMENT IN ECONOMIC

DEVELOPMENT

Different measures are present in society to estimate the

economic development of a state. Different writers have
suggested different measures of economic development in their
writings. M. Saeed Nasir said in his book that there are number
of measures, which have been used to estimate the economic
development of a country. These measures are:-

1. Increase in real GNP.

2. Increase in real per capita income.
3. Rise in allover well being of the people.
4. Basic needs approach.
5. Human development Index. 17

Dr. S.M. Akhtar gives various measures in his book. He is

of the view that various types of indicators could be used for this

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purpose. Some are: National income, per capita income, rate of
investment, productivity per worker or output per hour of work,
the proportion of labor force engaged in secondary industry,
contribution in industrial goods to the total national income, per
capita consumption of electricity, literacy ratio, and morality
rates and so on. 18

Every thinker and scholar gave different approaches to

measure economic development but there are some measures
on which every thinker and scholar is agreed. That is how
economic development can be generally measured in following
ways:

• GDP (Gross domestic product)

• GNP (Gross National product)
• Rise in per capita income.
• Social indicators.

GDP (GROSS DOMSTIC PRODUCT):

Micheal P. Todaro explains the GDP in following words.

“The Gross Domestic Product (GDP) measures the total value
for final use of out put produced by an economy, by both
residents and non-residents.”

GDP is a measure of National income. It is the total value

of all goods and services produced over a given time period
which is usually “a year” excluding net property income from
abroad. It can be measured either as the total of income,
expenditure or output.19 If there is increase in real GDP over a
long period of time, the economy will be considered than a
strong economic growth. 20

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GNP (GROSS NAIONAL PRODUCT):

“GNP comprises GDP plus the difference between the

income residents receive from abroad for factor services (labor
and capital) less payments made to non-residents who
contribute to the domestic economy”. 21

The GNP is used a measure to summarize index of

relative economic well being of people residing in different
states. The most commonly used measure of economic activity
is GNP. The method to calculate GNP is to aggregate domestic
and foreign value added claimed by a country’s residents
without making deduction for depreciation of the domestic
capital stock. 22In this method, statistics are not always available
but the other methods are comparatively more difficult to apply.
So, we can say that the simplest and most commonly used
measure to judge economic activity is GNP.

A country, whose GNP is rising faster is said to be

developing at a higher rate. If we take GNP as a measure of
economic development, it means we are assuming that
increased use of material goods and services indicate increase
in the warfare and happiness of the people. So, we should make
policies to increase GNP as fast as we can. 23

Many objectives have been raised against this approach. It is

criticized on three points.

• It ignores the problems resulting from development e.g.

people may suffer due to pollution, industrialization and
increase in mass population. After all, production of more
cars means more polluted air.

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 • This method also does not show how the composition of
national output is changing and what is the effect of
development on quality and variety of goods.
• If rate of increase of GNP is equal to the people will take
place. 24

RISE IN PER APITA INCOME :

The third most commonly used measure for economic

development is increase in real per capita income.

Per capita income means how much each individual

receives, in monetary terms of the yearly income that is
generated in their country through productive activities. That is
what each citizen would receive if the yearly income generated
by a country from its productive activities were divided equally
among every one. Per capita income is usually reported in units
of currency per year. While per capita income reflects GNP per
capita income when comparing nations, it is also used to
compare municipalities with in a State. 25

If the rate of growth of income per capita increases over a

long period of time then it would reflect that the country was
moving towards higher standard of living and achieving
economic goals.

SOCIAL INDICATORS:

The third traditional measure of economic development is

an increase in the economic well-being of the people. In this

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method, the economic development to the State is judged by the
capacity of people that too which extent people can afford
material goods or how much they are materially advance. In
words of OKUN and RICHARDSON: “Economic development is
a sustained and secular improvement in the material well-being
which is reflected in increase in goods and services”. 26

In order to judge how the economic life of the people is

being affected by economic development, economists have
started using social indicators. These indicators express the
conditions about health, food, education, employment, housing,
transportation, and life expectancy ifant morality rate, Working
hours, energy consumption, social security and recreational
facilities. With the help of social indicators, we can construct
quality of life index. This index shows if there is any
improvement in conditions of living. 27

FACTORS INFLUENCING ECONOMIC

DEVELOPMENT

Economic development is a process involving lots of

complexities as well as a long procedure which involved lots of
factors. These factors can be categorized as “Economic” and
“non-economic” factors and these factors are further divided in
further determinants. These factors influence the patterns and
rate of development in a country. These important factors and
determinants are as follow:

ECONOMIC FACTORS:

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 No doubt, economic development is incomplete without
economic factors. As economic factors plays an important role in
the development and prosperity of any nation. Rise or fall in total
output is to change in economic development mainly.

Some of the economic determinants are given below:-

NATURAL RESOURCES:

The principle factor which influences the development of

an economy, if a country is rich in natural resources, then a
rapid progress can be witnessed. If the natural resources are
used in a proper way then they can be very beneficial for any
country’s economic conditions. With out using them properly,
they are useless.

We can say that the basic factor affecting development is

the quantity and quality of natural resources which a country
possesses. There includes land, forests, minerals, water, and
power resources, climate ad geographical location. Abundance
of natural resources means the country has more potential for
development. The secret of prosperity of many developed
countries is their natural resources because all these states
possess vast agricultural land. Moreover, the high rate of growth
Iran, Saudi Arabia and many Middle East countries is due to
their mineral resources but as I have mentioned before that just
the existence of resources is not enough. The state must have
the ability to utilize these resources. Many under developed
countries like Sudan, India and Pakistan have rich natural
resources but still they are not developed. 28

CAPITAL FORMATION:
Capital accumulation or capital formation is an important
factor in the economic activity of a state. Capital means the

29
stock of materials, machines, equipments, vehicles, building and
social over heads like roads, canals, power houses, gas and
telephone lines. Capital increases productivity of human labor. It
is with the help of capital goods that country natural resources
can be properly exploited. Capital accumulates when savings
are invested. Capital accumulation leads to expansion in
industry, agriculture, commerce and transport and energy
generation. Although England and Germany have fewer natural
resources, yet they have huge capital which is secret of their
higher incomes.

Most of the developing countries are poor. They do not

have enough savings for investment. So, shortage of capital
continues and development is slow. 29

The stock of capital can be built up and increased through

different resources. The resources are act of saving, capital
market and act of investment.

 The act of saving, the postponing of consumption,

voluntarily or involuntarily so that the fund thus made
available be used for investment
 The capital market involves all financial institution e.g.
banks, (investment as well as development).

 To invest in different economic sections of state is

necessary, but the main hurdle in investment program is
that the businessmen usually hesitate to invest their
resources due to political and social instability in the
country. 30

HUMAN RESOURCES:

30
 The most important factor for the economic development
of any country is the human resources of that country. Perfect
human resources includes educated, efficient, patriotic, skilled,
healthy. All these qualities contribute a lot to economic
development. In contrary, if a state is not doing its best and not
flourishing economically then the major cause of this may be
unbalanced human resources. If a state is over populated,
unemployment, lack of education, lack of patriotism,
unawareness. These things can create crucial problems for
economic development. 31

It is the human being who is the basic cause and source

of all economic activity. Economic development is for human
beings and is undertaken by human beings. Material or physical
resources of a country are helpful only if the population of the
country has the necessary will, skill and technological
knowledge to use their resources. Many under developing
countries of the world have abundance of natural resources but
because of poor quality of human resources, they produce a
limited quantity of out put. So, they remain under developed.
This fact shows that the development not only physical capital
but also human capital is essential. 32

POWER:

The true bases of economic development are hidden in

the power resources. It consists of 2 types of sources.

a. Commercial resources of power, which includes, oil, gas,

coal hydle, thermal electricity and nuclear.
b. Non commercial sources, which include animal power,
fuel, wood, cow dung etc.
The power resources are vital to economic growth of a
country. Its importance has been changing with the passage of

31
time. Before the emergence of industrial revolution, the energy
for operating he machines are mainly supplied by animals,
human activity and blow of wind. But with the passage of time,
as the technology develops, scientific advancement, coal, oil,
gas and water falls are used as principle sources of energy.
Now days, the nuclear power and solar energy are being used
increasingly for generating electricity by developed countries.

TECHNOLOGY

DEFINITION:

“Technology means the body of knowledge and

techniques which can be used to combine economic resources
for the production of goods and services.” 33

Technology also plays an important role in economic

development. Technology means the methods of production.
Improvement in technology makes human labor and capital
goods more productive. For example, invention of engine
brought industrial revolution, tractor has revolutionized
agriculture and computer is multiplying the efficiency of human
activities in all the spheres of life. Japan has successfully used
new technology to achieve high rate of economic growth. All
under developed states lack modern technology improvement in
technology requires scientific research, inventions and
innovations. But this process can’t takes place over night but it
needs long period of time, huge amount of capital and
education. The developing countries should, therefore, import
technology from advanced nation.

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SOCIAL FACTORS:

Special factors have deep influence on the rate of

economic development. Every society has a certain social set
up. It follows a particular family system, occupational structure,
social attitudes, habits, customs and cultural patterns these
things determine their thinking about work, saving, consumption,
working of women and family planning. If these factors are
favorable in a country, it can develop rapidly. Material and
capital are not the most important in economic development.
After all, there are life less thing most important is the attitude of
man. If in a society people believe in merit, there is dignity of
labor are the things which retard development.

POLITICAL FACTORS:

Political factors are not less important. Economic

development can takes place only when there is political
stability. The struggle is making for rapid industrialization. If
illiterate people have an influence over politics then no proper
development can takes place. In contrary, if people in power are
educated or skillful then the process of economic development
can takes place. A popular government can infuse new spirit
among the people and thus create favourable atmosphere for
development activities. Corruption in political and official circles
kills the incentive for work. 34

ADMINISTRATIVE FACTOR:

33
 The administrative factor can be labeled as a pillar for the
economic development of any state. If the administration of a
state works honestly, efficiently and selflessly then it can give a
boost to economic development.

The major set back of fewer developing countries is their

weak and corrupt administration which causes as a hurdle in
the way of economic development. 35

IMPORTANCE OF ECONOMIC
DEVELOPMENT

As far as the economic development is concerned, its

importance is clear from its lots of social and political benefits.
Some people are of the view that a state system not only
revolves around the economic system but also depends upon it.
All the sub-systems of a country works for the economic
prosperity.

It is said that economic development is the fundamental

goal of any state. Government’s ultimate job is to satisfy the
economic well being of the people so that people can utilize the
economic development of the country. 36

Economic development is a main cause of difference

between developed and developing countries. In fact, political
aspect is considered next to it.

As the level of economic development rises, the

percentage share of labor working in primary sector such as
farming, mining, food stuff etc, begins to decline, whereas the
percentage share of working population in secondary sector
e.g. manufacturing proportion of the increases. Moreover, a

34
visible change is also seen in the commerce portion of an
economy e.g. trade, transportation, finance etc. With the change
or increase in the economic, industrialization takes place. The
structure of foreign trade has also been totally changed.

Due to economic development, the traditional techniques

give away to science based automated techniques.

The most important thing which expresses the

importance of the economic development is that with the
development in an economy, there is general urbanization and
the adoption of modern method of thinking, acting, producing
and consuming. 37

The process of economic development ensures that

38
every body gets at least necessities of life.

REFERENCES:

35
1. Jean Watson, Hand book Economic Development, (London:
Charles K. Wilber, 2001) p. 2
2. Http: Ilen Wikipedia. Org/wikil/Economic development.
3. www. iie. Com
4. W.W Rostow, The fine stages of growth, Development and
underdevelopment: The political economy of Global
inequality, (New York: W.W Norton, 2001) p. 123.
5. Dr. S.M. Akhtar, Economic development of Pakistan,
(Lahore: Publishers United Ltd, 2003) p. 1
6. W.W Rostow, Op. cit, pp. 123, 124
7. Dr. S.M. Akhtar, Op,.cit., p. 2
8. Micheal P. Todaro, Stephen C. Smith, Economic
development, (New York: University of the population
Council, 2000) pp. 22, 23.
9. Ibid., pp. 21, 22
10. Habib Ullah Vaseer, Fundamentals of Economics, (Lahore:
Farhan Publishers, 2008) p. 27
11. Jean Watson, Op. cit., p. 4
12. Benjamin Higgins, Economic development; Principles,
problems and policies, (New York: The Oxford University
press, 1990) p. 12.
13. M. Saeed Nasir, Economics of Pakistan, (Lahore: Manzoor
Press, 2008) p. 3
14. Micheal P. Todaro, Economic development, (london:
Longman Group Ltd, 2001) p. 16.
15. Habib Ullah Vaseer, Fundamentals of Economics, (Lahore:
The Urdu Bazar, 2003), p. 78.
16. Ibid., p. 79
17. M. Saeed Nasir, Op. cit., p. 4
18. Dr. S.M Akhtar, op. cit., p. 7
19. Shail Afzal, M. Rafique Tahir, Economics, (Lahore: The
Urdu Bazar Press, 2003) p. 78
20. M. Saeed Nasir, Op. cit., p. 6.
21. Micheal P. Todaro, Stephen C. Smith, Op. cit., p. 47.

36
22. Micheal p. Todaro, Stephen C. Smith, Op. cit., p. 47.
23. Habib UllahVaseer, Op. cit, p. 16.
24. Ibid., pp. 80, 81.
25. http. Ilen. Wikipedi, org/wikil/Per Capita income.
26. M. Saeed Nasir, Op. cit., p. 5.
27. Benjamin Higgins, op. cit., p. 142.
28. M.Saeed nasir, Op. cit., p. 16.
29. Habib Ullah Vaseer, Op. cit., p. 82
30. M. Saeed Nasir, Op. cit., p. 17
31. Ibid., p. 17.
32. Jean Watson, Op. cit., p. 21
33. M. Saeed Nasir Op. cit., pp. 17, 18.
34. K.K. Dewett, Op. cit., pp. 616, 617, 618.
35. M. Saeed NASIR, O. cit., p.20.
36. Ibid., p. 3
37. Ibid., p.4
38. Habib Ullah vaseer,Op, cit., p.76.

37
 CHAPTER NO. 2

HISTORICAL BACKGROUND
OF ECONOMIC
DEVELOPMENT IN CHINA
(OPEN DOOR POLICY)

38
 HISTORICAL BACKGROUND

INTRODUCTION:

C
hina is situated in eastern Asia, bounded by pacific in the
east. The PRC is the third largest country of the world, next to
the Russia and Canada. It has an area of 9.6 million square
kilometers or one fifth of the world’s land mars. The coastline of the
main land externals cover over 18,000 KM, washed by the waters of
Bohai and Hunanghai, the east China and the south China seas. The
Bohai Sea is the inland sea of China. China has more than 5,000 of
shore islands, of these the largest is Taiwan. China is a unique country
sharing boundaries with many countries i.e. Korea, Mongolia, Russia,
Afghanistan, Pakistan, India, Nepal, Sikkim, Bhutan, Burma, Laos and
Vietnam.

PRC is divided in to 22 provinces, 5 autonomous regions, and 3

municipalities directly under the central authorities. This division took
place for administrative purposes. The Total population of China is
1,338,612,698 1 and the capital of China is Beijing, which is considered
as a centre of the country in political, economic and cultural sense.

China is having 56 ethnic groups among which the Han

nationality is the 94percent of the total population of China. The Han
populations live all over the country but their compact communities are
in the Huanghe, Chang jeany and zhujiang valleys and the songhua
Liaohe plain of the North East.2

The Chinese civilization is one of the earliest civilizations of the

world. China has almost 4,000 years of written history. There were
different dynasties in China from 16th century BC till 1911. The
nationalist party of China ruled form 1927 to 1949. We can say that
China’s recovery began under the Kuomintang, or Nationalist party,

39
which ruled from 1927 to 1949. In this era, the party eliminated most of
the foreign spheres of influence and unified the whole country.

THE CHINESE COMMUNIST PARTY (CCP):

Before the Formation of CCP, there was oppression and

exploitation by foreign capitalism, domestic feudal forces. In 1917, the
revolution in Russia inspired the Chinese group of intellectuals
consequently; the May 4 movement took place. This revolution was
totally imperialist and anti feudalist. This movement set basis for
founding CCP. On July 1921, the 1st national congress held in shinghas
and presented clear vision of their ideal regarding democratic
revolution. After 3 revolutionary civil wars, the people’s republic of
China was proclaimed.

ECONOMIC HISTORY:
China is known as an emerging economic super power. The
reason behind its marvelous development is the rapid growth of his
development; China is getting attention of family of nations due to his
economic development. Not only in economy but China is giving his
best in every field, which is the requirement for becoming super power.
Bavy Buzzan asserts that “China certainly presents the most
promising the most promising all round profile” of a potential super
power. Buzan claims that “China is currently the most fashionable
potential superpower” and the one whose degree of alienation from the
dominant international society makes it the most obvious political
Challenger”. 3
The Chinese economy ranks among the 10 largest economies in
the world in absolute terms. The Chinese economy is one of the fastest
growing economies in the world. 4
China becomes economically developed not in one night but
there is a story of hard struggle behind it, which begins right after his
independence in 1949. We can say that economics was the touch

40
stone of Chinese revolution. The leaders of China made the economy
of the state stable and developed by setting specific goals, which they
achieved step by step, through a gradual process.
As economics was the touch stone of Chinese revolution.
Industrialization was the main priority for new government, in order to
bring the PRC among the worlds most developed and advanced
nations. Generally, it is witnessed that progress towards
industrialization is rarely smooth; historical experiences indicate that
the more rapid the progress, the greater the strains originate with in a
society. In formulating the economic politics, the CCP had two goals
i.e. equality and prosperity. The first of thee is idealistic and the second
one is materialistic. Practically, it is very difficult to pursue both
simultaneously. In general, economic policy since 1949 has tended to
emphasize either one or the other. The first tendency was more
pronounced during Mao ze dong’s leadership, the second under Deng
ziaoping’s. However, economic policy under each man’s leadership
has also been characterized by fluctuations between emphasis on one
goal and the other. 5
In 1949, as a result of revolution, when communist party of
China came into power, then the long term goals of Chinese leaders
were to transform China into a powerful socialist nation.
To achieve this goal, industrialization, improvement of living
standards, narrowing of income differences and modern military
equipment was needed. The leaders of CCP worked to achieve these
goals. We can see a difference in economic policies in different eras
but the basic aim was same. Deng Xiaoping, Liu Shaoqi, Zhou Enlai,
were the leaders who emphasized more on economic consideration
rather than political.

FIVE YEAR PLANS:

China’s five year plans, like most of the other countries, do not
try to guide individual enterprises on a daily, monthly or regular basis.

41
That is the task of annual and quarterly plans. Instead of this, five year
plans provide a frame work with in which annuals plans are drawn up
and implemented. They set global targets for social and economic
goals, survey past successes, and enumerate the unresolved
obstacles to further growth; they describe the means for achieving the
goals and a list can be set through debate about the priorities to be
given to different sectors.

ANNUAL PLANS:
Annual plans of China are drawn up the state economic
commission under the supervision of the state planning commission,
which provides guide lines in all long term and short term planning.
Annual plans set the important targets of the year and then the working
of the whole year takes place to achieve these targets. In Chinese
economic history, these five year plans and annual plans have played
a vital role. Following table is giving a brief over view of China’s first
five year plans. 6

Table: 2.1

CHINA’S FIRST FIVE YEAR PLANS (1953-1980):

42
FIVE DURATION MAIN POLICY ACTUAL
YEAR OBJECTIVES RESULTS
PLANS

First FYP 1953-57 Rapid industrialization Achieve goals to

through soviet style some extent.
planning.
Second 1958-62 Stress on tight Voided in 1958 by
FYP financial control and great leap forward
out put quality (1958-1959)
standard.
Third FYP 1966-70 Rapid growth of all Voided by cultural
sectors, especially revolution (1966-
agriculture. 69)
Fourth 1971-1975 Industrial support for Effects of cultural
FYP agriculture; revolution still
reemphasis on small- witnessed
scale industry and
foreign trade.
Fifth FYP 1976-80 Order of priorities: Began on schedule
agriculture, light, restructured in
industry, and heavy (1978-19790
industy.

Source: Fredrick M.Kaplan, Julian M. Sobin, Encyclopedia of China

Today, (London: Macmillan publishers LTD, 1982) p. 157

THE EARLY YEARS: 1949-1952:

43
 After independence, CCP set some tasks regarding economy.
Firstly, to bring the disastrous inflation of new China under control.
Secondly, to rebuild the infrastructure and production faculties which
was destroyed as a result of war.
As far as currency is concerned different regional currencies were
abolished and it was ordered that every one has to use Chinese
currency “Yuan” also known as “Renminbi”. Banks became
nationalized and strictly came under the supervision of CCP. The
economic planning system of the centralized State was inspired by
Soviet Union’s model.
Government fixed the prices of different commodities which
were considered fair at that time and also set some punishments for
those people who violated the rules of government. These all efforts
were done simply to bring the economy in normal working order.

THE FOUNDATION OF SOCIALIST ECONOMY:

The socialist economy, as it was introduced in China in the early

1950s and continued to exist for over 30 years, differs drastically from
liberal market economies. The state controlled the economy by
enforcing a state plan. The CCP’s political task is to establish a
communist society in China, a society which does not allow exploitation
of people by other people a genuinely classless society characterized
by an equal allocation of wealth and opportunities. 7

MAO AND THE ECONOMY:

As has stated, Mao’s analysis of the border region economy had

2 points of focus: the development of the private sector and the growth
of self supporting undertakings run by army and government personnel

44
to supplement the operating and living costs of their units. Since there
was virtually no private industry, the private sector consisted of
agriculture, handicrafts and commerce. Mao defined its primary role as
providing for the people’s livelihood. It functions as a source of support
for the war and for reconstruction. Which it realized through the taxes
paid to the government and trade with the public sector- though
important, was secondary to the task of providing that livelihood. Mao
argued that the only way to raise the living standards of the people was
through the growth of the private sector and it was only by
demonstrating its ability to achieve this practical goal. The party could
generate support for its cause. On this he was unequivocal:
“The primary aspect of our work is not to ask things of the people but
what can we give the people?” Under present conditions in the shaan-
Gan-Ning border region, we can organize, lead and help the people to
develop production and increase their material wealth and on this
basis, we can step by step raise their political awareness and cultural
level. 8

The development of self supporting policies give basis to this

aim by alleviating government demands on the people and work on the
improvement of living standards and working conditions of the people-
Moa had introduced the handicrafts industries, which had fallen in to
decline e.g. textiles. On one hand, self supporting production gave
relief to the government and on the other hand successful undertakings
could eventually be transferred to government control and become
state enterprises.

Over all Mao specifically warned against developing

undertakings which might harm the private sector:

“The economic activities of the army, party and government should

harmonize with the economic activities of the people-Any thing which

45
damages the people’s interest or causes them dissatisfaction is not
allowed.” 9

RURAL TRANSFORMATION: THE LAND REFORM:

In this context, land reform program was introduced for rural

transformation. This land reform considered as most successful rural
transformation. This land reform provided land to poor peasants and
shelter from exploitation; it actually helped to promote the recovery of
rural economy.
On the other hand, the Chinese land lords used all the levers of
social and political powers at their disposal to undermine the land
reform. They were of the view that they were badly exploited by this
reform but land lords were specifically to be allowed to have small plots
to sustain them selves and their family.
Mao agued that they could be used ‘as a labor force of the
country’ while the party could also ‘save and remold them’ Perhaps he
also had in mind their function as a living symbol of the reversal of the
old exploitive class structure. In any event, Mao concluded: “Our task is
to abolish the feudal system, to wipe out the land lords as a class, not
10
as individuals.” The period of balancing economy had achieved its
goals.
The evolution of principles in China with regard to Marxist, Neo
Marxist, and Leninist principles, can be categorized in to 3 stages.

1. The 1920’s up to 1949 saw the following bent:

 Emphasis on nationalism.
 Anti imperialism.
 Rural class struggle and revolutionism.

2- Second stage from 1949 to 1977 saw following turns:

46
  Principle of Revolution by Lenin
 Emphasis on nationalism and anti capitalism
 Anti-imperialism.
 Rural Revolution.
 The Great Leap Forward.
 The Cultural Revolution.
 Neo Marxism.
 Leninist and Stalinist rule.
 Autarky.

3- In 3rd stage, from 1978 to the present, China has witnessed

following:

 Nationalist.
 Dual economy.
 Empowerment of the rural public.
 Open Door Policy.
 Entry in to the Global economic system.
 Shift from Leninist to authoritarian rule.
 Emphasis on basic economic and social sights and not on political
ones. 11

FIRST FIVE YEAR PLAN (1952-1957):

The successful completion by the end of 1952 of basic

economic reconstruction paved the way for CCP leadership to begin
the transition to socialism through a long tern planning of
reconstruction. The ultimate goal of CCP leadership was to achieve the
complete modernization of the backward state. For this purpose,
Chinese leaders followed the soviet model in every respect. The

47
Chinese leader ship became the follower of Soviet Union’s modal right
after its independence.
Soviet Union was that country who took initiative to opt and build
socialism. Moreover, Soviet Union was the Country, who define
socialist system to the whole world and they successfully industrialized
their under develop country.
China however, was still more backward economically and
socially than tsarist Russia had been. The level of industry in China in
1949 was less than half of the Russia in 1917, and by 1952 Chinese
industry amounted to only 25 percent of the soviet level for 1927.
Agricultural production per capital in China in1952 amounted to only 20
percent of that in Soviet Union in 1927. Thus, the economic conditions
for building socialism, or for that matter for carrying out any appreciable
modernization of the country, were far less good in China. None the
less, the Chinese leadership was adamantly determined to undertake
the shift to socialism almost as soon as economic revival had been
completed. One of the vital reasons for this desire rested in the fact
that the Chinese leaders were now in their 50’s and 60’s and they
wanted to see these tasks achieved in their own lifetimes. 12
After making smooth economic base during years (1949-1952)
of restoration of economy, the Chinese mainstream leaders of that time
like Moa Zedong, zhou Enlai and others were ready to make the first
five year economic plan (1953-1957), definitely based on socialist
structure. In this context, in September 1953, the principles of first FYP
were published. The farmers knew that socialism could not be
successful if there is no proper progress of gradual expansion of
economy. For this purpose, they found internalization as a tool.

INDUSTRIAL SECTOR:

The CCP leaders found industrial sector as a key to expand

economy so they work more on it and the priority was given to the

48
heavy industry. The basic aim behind it was to double the industrial
growth during the period of the plan.
By following the soviet economic model, heavy industry was
emphasized and China invested 20 percent of its resources in this
sector. A rapid transfer of technology took place between China and
USSR, and the whole world was of the view that it would have taken
the PRC more than 30 years to achieve technological betterment which
were brought about in to years of soviet assistance. New industrial
areas developed rapidly. 13
58 percent of the money to be invested was designated for
industry, of which 88.8 percent was assigned to heavy industry, 11.2
percent to light industry. By contrast, only 7.6percent of investments
were earmarked for agriculture. The basic premises of the first five year
plan wee modeled almost entirely on soviet experience and were
drawn up with the contribution of the soviet experts and consultant.
Their support played a significant role during this period, especially in
the establishment of previously non-existent sectors of industry, in
machine building, electronics, steel and oil industries. Close to 10,000
soviet experts worked in China during these years, as did hundreds of
engineers form east European countries; and thousands of Chinese
technicians were trained in the Soviet Union. 14
This whole industrialization program was based on an
assumption that mainly it would have to finance China by herself
because in the total amount, for the completion of this five year plan
the soviet assistance is only 3percent and there was no hope for
gaining aid and assistance from the west due to the cold relations
between USA and China.
Chinese found the solution of this problem in agricultural sector.
It means that agriculture can provide the money which was needed in
industrialization. This reason paved the way for agricultural
reconstruction in China. The agriculture sector was not given more
importance initially but after this serious work took place in this sector.
A solid base was created in heavy industry, which includes iron and

49
steel manufacturing, coal mining, cement production, electricity
generation and different machineries. All the above mentioned
industries greatly expanded during this period.

AGRICULTURAL SECTOR:

In 1949 the rough estimate of gross output of agriculture was 33

billion Yuan. In 1952, after the period of 3 year recovery, output of
agriculture raised to 46 billion year. Examination of the long term trend
towards a declining share of output contributed by agriculture in China
fails. However, to reflect the historical and continuing importance of the
sector in economic development, agriculture Continues to provide the
main employment of four fifth of the Chinese population, who are rural
inhabitants. It has provided substantial resources for investment in
industry, as well as meeting its own investment needs and those of
industrial and social development in the country side. This has
15
achieved with a relatively low level of agricultural mechanization. The
sluggishness of agriculture has become a severe drag on Chinese
economic growth.16 Chinese leaders believed that agricultural
modernization is important for economic growth.
During these five years, a number of industrial and mining
enterprises were constructed, including 156 major facilities. Industrial
production increased at an average rate of 19 percent between 1952
and 1957 and the growth of national income rate was 9 percent
annually.
As China gained experience and confidence with the passage of time,
they introduced such variations which meet their necessities. 17

Table: 2.2

50
 TARGETS FOR GROWTH IN GROSS TOTAL OUTPUT
(1952-1957)

SR. SECTOR 1952 1957

NO. ACTUAL PROJECTED
( £ MILLION)
1 Agricultural output 7,050 8,700
2 Industrial output 3,925 7,800
3 Handicraft output 1,075 1,725
Gross total output 12,050 18,225

Source: The state council, the first five year plan (Peking Chinese
language, 1955).

GREAT LEAP FORWARD

By 1957, the main changing in China’s institutional system were
complete and transformation was also seen in the Chinese class
structure i.e. the bourgeois and rich peasantry class had been
dispatched. The primary phase o socialist transformation could be said
to be finished. This could be labeled as the 1st step of China towards
modernization.
During the period of first FYP, industrial production increased in value
form 3.4 billion to 7.8 billion Yuan, i.e. 128 percent, an annual increase
of 25 percent. Steel production had grown form 1.3 million tons in 1952
to 5.3 million in 1957; out put of coal from 66 million tons to 131 million;
electrical power had increased from 7.2 billion kilowatts in 1952 to 19.3
billions in 1957. However the development of agriculture lagged
considerably behind that of industry during this same period increasing
by only 20 percent, an annual growth rate of less then 4percent .18
The imbalance between the industrial and agricultural growth,
dissatisfaction with inefficiency and inflexibility in the decision making
process realized Chinese leaders, that the highly centralized, industry
biased soviet economic model do not match with Chinese interests.

51
 Great Chinese leaders, Deng Xiaoping explained the concept of
socialism and differentiate it from Marxism on June 30, 1984:

“What is socialism and what is Marxism? We are not quite clear about
this in the past. Marx attaches utmost importance to developing the
productive forces. We have said that socialism is the primary stage of
communism and that at the advanced stage the principle of from each
according to his ability and to each according to his needs will be
applied. This calls for highly developed productive forces an over
whelming abundance of material wealth. Therefore, the fundamental
task for the socialist stage is to develop the productive forces. The
superiority of the socialist system is demonstrated, in the final analysis,
by faster and greater development of those forces than under the
capitalist system. As they develop, the people’s material and cultural
life will constantly improve. One of our short comings after the founding
of People’s Republic of China was that we did not pay enough attention
to developing the productive forces. Socialism means eliminating
poverty. Pauperism is not socialism, still less communism.”19
In 1957, there was a shift in authority for economic decision
making to the provincial level, country and local administration. Efforts
were made for “Great Leap” in productions for all sectors of the
economy at once.
In 1958, the CCP launched the “Great leap forward” campaign in
response in response to above problems. The Great Leap Forward
came to be based on a very different development strategy. It was
aimed at accomplishing the economic and technical development of
the country with greater results. The idea behind the leap was to
continue to use source scarce capital and technical knowledge to
develop heavy industry but to parallel this effort with a mass
mobilization of all types of marginal resources. It means to use rural
and urban labor with any difference of male and female. This was so to
begin construction project; to take part in technical innovation; to start
factories that utilized simple techniques and to find and use the
marginal sources of saw materials perforce ignored by central planners

52
concerned with short term cost efficiencies. The party leaders were of
the view that more could be achieved in the second FYP (1958-1962),
if the people could become active and if country resources could be
efficiently used for the simultaneous development of industry and
agriculture.
These perceptions led the CCP to a high mobilization of the
peasantry and public organizations, stepped up ideological guidance of
technical expert and efforts to build a more efficient political system.
Local industry and rural industrialization were to be given support to
centralized planning. Power and responsibilities were to be shifted to
the workers by decentralizing the industrial management. Residential
areas became very important and useful units of urban life in providing
services that facilitated the large scale participation of women in
production out side the home. This program was designed to unite
residence, services, and productive activity with in a single unit. This
thing shows that “the great leap forward” centered on a new economic
system. 20

THE BIRTH OF COMMUNES:

A new institution was introduced in rural areas came in to known

as the rural people’s commune. The commune performs an economic
function to combine industry and agriculture. The communes also work
to perform various domestic services that would specifically enable
women to take part in production out side the home. In this plan, small
scale rural industry was tried to be encouraged. The base of income
was “need” not “effort”. Each commune was planned as a self
supporting community for agriculture, small scale industry, schooling,
marketing, administration and local security.
Women were to participate in production equally with men and
so large refectories and crèches, kinder garters and homes for the
elderly were promoted. The general displeasure with such steps

53
caused this policy to be stopped abruptly after a couple of months. The
policy was both misconvinced and carried out in such a rigorous
manner that it caused huge lose.

PROBLEMS OF THE GREAT LEAP:

The great leap forward was a watershed in Chinese

development strategy and will always be remembered as an economic
failure. It became a cause of disastrous effects in the industrial sector.
A collapse was seen in quality and complete ignorance of customer’s
requirement. A chaos and tension also added when soviet advises
21
suddenly with drawl in 1960. The economic after effects of he great
leap forward were shortage of food, shortage of industry in raw
material, unnecessary production of low quality goods, demoralization
of the peasantry and the qualified people. 22 The idea to develop rural
industry was in itself, creditable and could have achieved important
growth, but it was carried out as a political campaign to achieve targets
for which there was no basis in the affected localities. Lack of
machines, capital and saw materials and seasonal differences in the
implementation of the policy. Following “the great leap forward” there
was 2 year severe starvation which affected all over the country. 23

READJUSTMENT PERIOD: (1961-1965)

After this the government changed the goals of economy and

set new policies by replacing the old ones. Top priority was given to
expand agricultural output to meet the needs of the growing population
because both the first FYP and the great leap forward shared one
common thing and that was to ignore the agricultural sector and neither
strategy put much emphasis on investment of modern technology in
agriculture. Planning, rather than politics once again guided production
decisions, and material rewards rather than revolutionary eagerness

54
became the leading incentive of production. During the re-adjustment
and recovery period of 1961-1965, restoration of economy was
witnessed. An important source of growth was the widening of rural
and small- scale industries, specifically coal mines, hydro electric
24
plants and agricultural machinery plants. There was also a change in
investment in different sectors as the first consideration was the
agriculture, second was high industry and heavy industry on third. The
important change in agriculture was the decentralization of production
decision making. During this adjustment period, economic stability was
revived. After 1961, economic stability was restored. Agricultural output
and industrial output grew at an average annual rate of 9.6percent and
10.6percent annually.

CULTURAL REVOLUTION:

THIRD AND FOURTH FIVE YEAR PLAN:

Just as the economy was beginning to develop, another large

scale disorder took place in the form of the “Cultural Revolution,” This
disruption lasted through out the Third FYP (1966-1970) and Fourth
FYP (1971-1975). In 1967, there was a downfall in the industrial output
value by 13.8percent and 5percent further decrease in he value was
seen in the next year. Furthermore, agricultural production declined by
2.5percent although the production figures for the year 1969 and 1970
showed some increase, they were inflated.25 This show a beginning of
massive economic downfall in China, which was also witnessed in
fourth FYP.
During the era of the fourth FYP, situation got even worse, Most
of the state enterprises stopped production and the conferences stand
meetings for future planning could not held. The annual rate of growth
of industrial and agricultural output dropped to 7.8 percent with industry
declining to 9.1 percent and agriculture to 4 percent. 26

55
 For the proper understanding of the impact of the Cultural
Revolution, it is necessary to clarify that it was not cultural in the usual
sense of the word. It was as much concerned with agriculture, industry
and political thinking as with culture it self. In short, we can label it as a
complete ideological revolution.
In the mid of 1966, the Cultural Revolution was about to began,
launched by Mao ze dong to counter revisionism ,proliferate ideology,
strengthen the foundations of socialism, increase production and to
remove the revisionists and bourgeois from the party bureaucracy. A
lunge disaster was seen in to domestic upheaval. The Cultural
Revolution showed an era of extreme nationalism and isolation with in
China. Enthusiasm for the Cultural Revolution, antipathy to western
influence, and support for revolutionary values reached high intensity,
leading to huge demonstrations that at times spread to Chinese
community all over the world. Senior officials, who were led by Zhou
Enlai, worked very hard to maintain a complete diplomatic isolation.
Anti British riots and demonstrations in Hong Kong were very severe
prominently, but so too were anti soviet, anti British and anti USA
27
demonstrations in China. Initially the Cultural Revolution was a
political uproar and did not make any prominent changes in economic
policies. It affects the economy of modern sector. Agricultural
production stagnated, but mainly the rural areas experienced less
disorder than cities. In industrial sector, production got minimized. This
is mainly due to 3 causes.

1. The 1st cause in reduction of production was the political activity

of students and workers in the factories and mines.

2. The 2nd cause was the lacks of transportation because the trains
and trucks were using to carry the Chinese red guards all cover
the country.

56
 3. The 3rd cause was that factories were instructed by the
revolutionary committees, which includes the party
representatives, the workers and the PLA, who have little
knowledge about the management. Moreover, many intellectual
from different professions were forced to participate in labor or
being jailed which resulted in their abilities being lost to the
enterprise. Consequently, in 1967, 14percent decline in
industrial sector was being witnessed.

Further more, the long lasting effect on the economy was the
shortage of highly educated personnel caused by the closing of
universities. Due to this fact, China’s ability to develop new technology
and absorb imported technology would be limited for years by an inval
in higher education. Seizing some of the leading positions in the party
and the state, Lin Biao and the “Gang of Farer” (Jiang Qing, Zhang
Chuqiao, Yao wen Unan and Wang hogwen) wrought terrifying havor
on the national economy through their so-called “Cultural Revolution.”
28

In 1975, when Deng Xiaoping took a charge of daily working of the

centre, then things turned towards betterment. There was increase in
steel production from 21 million tons of 1974 to 24 million tons and
grain out put went up form 275 million to 298 million tons but in 1976,
after the death of Zhou Enlai, the “Gang of Four” launched a movement
to “Criticize Deng Ziao ping and counter the right deviation trend to
reverse the correct verdict on the cultural revolution” They virtually
caused great loses to the nation’s material wealth. Their disruption of
political life and of economic management undermined economic
activity so seriously that they brought the entire national economy to
the brink of collapse. As political stability was restored, a gradual
development was in motion. They restore the industrial development; a
campaign was carried out to return skilled and highly educated
personnel’s to their jobs from which they had been displaced during the
Cultural Revolution. Foreign contacts were reestablished, universities

57
were re-open. There was increase in investment, including the
contracts with foreign firms for the construction of major facilities for
chemical fertilizer production, steel finishing and oil refining. In this era,
the annual average rate of the industrial output grew at an annual
average rate of 8percent.

ECONOMY IN DENG ERA:

The period between 1978 and 1989 was one of the constant
struggles for Deng and his agenda of necessity, he made many tactical
shifts in policy, but in general, hi strategic goal, out lined in his speech
at the third plenum, was his guiding principle. It was under these
turbulent conditions that Deng began his efforts in 1979 to transform
the economic structure. To do so, he had to reform the party and
change old ways of thinking he advocated free thinking by “Path
breakers” who dared to go against popular thinking and break old
taboos to venture in to new areas, especially foreign economic thinking
and practices; devolution of power to the provinces and local
authorities to allow them to make their own economic decisions and
adoption of western modals and technology. To implement his policy;
he recommended:
“We must learn to manage the economy by economic means. If we our
selves don’t know about the advanced methods of management, we
should learn from those who do, either at home or abroad. These
methods should be applied not only in the operation of enterprises with
newly imported technology and equipment but also in the technical
transformation of existing enterprises. Pending the introduction of a
unified national program of modern management, we can begin with
limited spheres, say a particular region or a given trade, and then
spread the methods gradually to others.” The policy of selective
experimentation became known in the party legislation as the strategic
principle of opening to the out side world. 29

58
FIFTH FIVE YEAR PLAN (1976-1980):

The fifth FYP began in 1976 with the over through of Gang of
four in that year; the national economy began to improve. Excessively
high targets were set and the scale of capital construction, which was
already at the level beyond available resources, was further extended.
All greatly intensified the imbalances in the economy and added to
financial difficulties. Deng Xiaoping was of the opinion that China’s
future depended upon several things. Firstly, by joining the
international economic systems, which have a base of capitalism.
Secondly, by actively participating in the different economic regimes
that revive the Global system gradually, such as the World Bank, the
IMF, GATT. Because of this, Deng and his supporters introduced open
door in 1978. Deng tried his best to use the capitalist system and its
market incentives to bring about immediate improvement in China’s
economy by introducing capitalist practices and trade with the wet,
Despite to isolating China, Deng took above steps which no doubt gave
beneficial results to Chinese economy.

ECONOMIC REFORM (1979):

In December 1978, the party leaders decided to under take a

programme of gradual but fundamental reform of economic system.
They were of the opinion that the old policy of centrally planned
economy had to meet the needs which are important for efficient
economic growth and had resulted in a manner that China had set for
behind from the other nations of the world in industrial sector. The
purpose of this economic reform in not to discard communism but to
make its working according to the Chinese economic needs.
Following are some events of late 1970’s and early 80’s which
paved the way for economic development in China.

59
1. On October 1976, broad ideological debate over priorities in
economic organization, management, and planning; culminates
in arrest of “Gang of four.”
2. On January 1976, Fifth year plan began.
3. On 10 December 1976, second National agricultural conference
held on learning form Dazahi.
4. On 15 February 1977, China sells 80 tons of gold on European
markets; its estimated value was $350 million.
5. On 20th April 1977, China’s first National industrial Conference
convened.
6. On July 1977, a National conference took place on the issue of
foreign trade. China reiterates intention to continue to get
knowledge from west through purchase of foreign technology.
7. On August 1977, a barter agreement was signed between Sino-
Soviet for 1977-1978. Its value estimated at $396 million.
8. On 16 February 1978, Sino Japanese trade agreement was
signed for 8 years (1978-1985). It provided a total trade turnover
of almost $ 20 billion.
9. On 18 March 1978, China’s first national science conference
opens in Beijing.
10. On 3rd April 1978, China signed five year non preferential trade
agreement with EEC; that includes MFN clause, PRC
agreement to set export prices at world market levels. China
became second largest trade out let next to Japan.
11. On 12 August 1978, a ten year treaty of friendship and
economic co-operation was signed between Japan and China.
12. On March, 1979, China launched 10 year plan or economic
development i.e. 1976-1985. First priority was given to
agriculture and light industry.
13. On 30 March 1979, China signed first major international
commercial loan, which includes a five year $175 million loan
from UK and International Banks.

60
14. On May 1979, Chinese foreign trade minister announced
cutbacks in heavy industry expenditures. In that period, priority
was given to light industry and agriculture.
15. On 7 July 1979, a formal trade agreement was signed between
USA and China.
16. On 17 October 1979, France and China signed new economic,
technological and cultural agreements.
17. On November 1979, China announced plans for export of
Chinese skilled and unskilled labor, under contract with foreign
ministers.
18. On December 1979, a wide range of cultural, technological and
economic agreements were signed between China and Japan.
19. On January 1980, US-China trade agreement ratified by USA
congress and China was granted MFN status.
20. On April 1980, China admitted to IMF.
21. On May 1980, China enters into the World Bank.
22. On January 1981, number 17 textile mills in China, begins
selling shares of the enterprise to the workers in order to link the
workers economic interests more closely to those of the
enterprise and reduce the burden of fund raising on the state,
each worker may buy a maximum of five shares at Y50 each
(USA $ 32.50). Shares pay an annul interest of 5.4percent and a
dividend at the end of the year if the enterprise makes a profit.
The shares are not transferable and must be redeemed upon
the owner’s retirement.
23. On February 1981, China discloses that it has all the technology
which is necessary to build medium sized atomic plants using
only domestically produced parts.
24. On May 1981, the bank of China and the USA export import
bank reach an agreement which will allow China to buy $75
million worth of steam generation power equipment and
technology form American companies.

61
 25. On June 1981, China announces plans to liberalize laws in
SEZs. Investors will have the power to set wages and dismiss
workers. 30

CHINA’S OPEN DOOR POLICY:

The initial year of the reform gave such fruitful results in the form
of increasing incomes, more chances of food housing and high rate of
growth in almost all sectors. China’s opening up to the out side world
has been a feature of the economic reform form the start. Form 1949
until 1970’s the country was completely closed to western foreign
investment. International trade continued after 1949, despite American
embargoes, but tightly and centrally controlled but China in the reform
period is a major recipient of direct foreign investment and exporter of
light manufactured goods. The presence of foreign firms and imported
consumer goods brings an exposure to western and Japanese culture
and business practices. International trade increasingly means that
exporters must confirm to international standards of quality, and
domestic producers face import competition. For the planners,
international trade means the world prices influences the domestic
price structure and important decision making of consumers and
enterprises. Such changes have profound political implication too. 31
The evolution of the open policy since 1970’s founded that it has
not proceeded in a simple linear fashion. The rate, extent, forms and
direction of opening have fluctuated over the past years with advances
and retreats which have their origins in economic factors.
Regional interests have also shaped the course of the open
policy. The decentralization of authority to approve foreign trade and
foreign investment contracts has encouraged greater initiative at the
micro economic level. However, it has also led to central loss of control
over foreign exchange. The open policy and reform have clearly
favored the development of the coastal areas. This contrasts starkly
with Mao’s attempts to minimize regional differences. Official,

62
academics and individuals in the inland areas have responded
ambiguously to the rapid growth of the coastal board. On the one hand,
they have supported some attacks upon the SEZ’S. They have also
tried to protect their own industries by blockading products form the
coastal areas. On the other hand, some enterprises, units and
32
individuals have been quick to take advantage of new opportunities.
China’s open policy has along with the domestic economic reforms,
significant distributive consequences for particular social and economic
groups. The open policy involves not only choices about the allocation
of central economic resources but also, and indeed more importantly,
the granting o particular rights and privileges of selected areas, sectors
and social groups. 33

EFFECTS OF THE OPEN POLICY SINCE: (1978)

As a result of open policy of China, the Chinese state has entered a

period of transition. As a central state level, there has also been
proliferation of trading and investment co-operations, the reformist
leadership hoped to remove some of the rigidities inherent in a
centrally and vertically integrated system.
By August 1984, there were over six hundred import/export
companies under the foreign trade co-operation at provincial level. The
ministry of finance also broadened its activities. It has not only had to
devise regulations on finance and taxation for foreign invested
enterprises, but also determined their access to the domestic market. It
has also decentralized some of its functions. In sum, the
34
implementation of the state dealing with foreign economic relations.
The Nature of Chinese economic system became shuffled during
1980’s it would not be accurately described as either a centrally
planned economy or a market economy. Due to open policy, Chinese
state has entered a period of transition. The introduction of market
forces has generated elements of a new market facilitating state. Its
basic features are as follow:

63
 1. It engages itself in profit gaining end risk taking activates.
2. It explains the relation between the economic actors in market
and makes efforts to resolve the disputes of economic nature
with the help of law.
3. Technical and professional personals involved in it.
4. It tries to regulate the market not on micro economic level but on
macroeconomic level.

Above elements can be seen more prominently in the SEZ’s where, the
foreign capital is high.

SPECIAL ECONOMIC ZONES (SEZs)

The most prominent aspect of the open policy is the SEZs. They
are formed in 1979-1981. The 4 main zones, with this reference, were
located with a view to expand the attraction to investment from the
ethnic Chinese living abroad.
Shenzhen, the largest, was located in Guangdong province
immediately adjacent to Hong Kong. Zhuhai was set up beside the
Portuguese enclave of Macau, also in Guangdong. Shantou, in the
north east of Guangdong province was established in an area with
many links with south East Asian Chinese communities and Xiamen
SEZ in Fijian province was intended to attract Taiwanese investors.
Although the Chinese leadership was undoubtedly influenced by
what it knew of export processing Zones (EPZs) set up in other Asian
countries, the SEZs were different. The SEZs like EPZs gave generous
tax concessions and duty free import privileges to foreign investors,
and provided infra structured facilities. However, the SEZs were much
larger, and the greater freedom they gave to enterprises to trade has
also attracted many domestic Chinese enterprises and organizations to
invest there. Initially, the SEZs were set up in the south not only to
capitalize on links with Hong Kong and South East Asia, but to confine

64
the SEZs economic experimentation to locations away from
established industrial areas. The open cities and other open areas
have gradually given new areas access to foreign investment. 35

ECONOMIC POLICIES OF SEZs

1. Special tax incentives for foreign investment in SEZs.
2. Greater independence on international trade activities.
3. Economic characteristics are represented as “4 principles”
a. Construction primarily relies on attracting and utilizing foreign
capital.
b. Primary economic forms are Sino foreign joint ventures and
partner ship as well as wholly foreign-owned enterprises.
c. Products are primarily export oriented.
d. Economic activities are primarily driven by market forces.
SEZs are listed separately in the national planning (including
financial planning) and have province-level authority on economic
administration. SEZs local congress and government have legislation
authority.
Since 1992, the state council has opened a number of border cities
of inland provinces and autonomous regions. In addition, 15 free trade
Zones, 32 state level economic and technological development zones,
and 53 new and high tech industrial development zones have been
established in large and medium sized cities. As a result, a multilevel
diversified pattern of opening and integrating coastal areas with river,
border, and inland areas has been formed in China. 36 After making a
deep analysis of all aspects of economic policy that have been
emerged in China since the death of Mao Zedong has provided some
fundamentally new view point on China’s way of economic
development. The emphasis on such issues as changing systems of
ownership and distribution of sources, self supporting policy and public
participation in economic decision making, all of which became the hall
marks of China’s developmental strategy during the cultural revolution,
has moved out. In its place, arguments have been advanced and

65
evidence combined to show whether the strategy was not working or it
was not implemented properly but despite of these arguments, the
speed and degree of changes in economic policy since 1976 have
clearly shown that, in as far as previous strategy was implemented; it
rested on very brittle fundamentals.
Following figure gives a proper vision about the gross national product
and industrial production form 1949 to 1980.
Figure: 2.1
Gross National Product and Industrial Production
(1949-1980)

GNP
800
Industrial
production

600
Mean

400

200

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
5 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
9 4 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 8
2 9 0 1 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0

Year

Source: Fredrick M.Kaplan, Julian M. Sobin, Encyclopedia of

China Today, (London: Macmillan publishers LTD, 1982), P. 221

66
 Discussion of economic policy in the post Mao period
has, by contrast, given primacy to questions of technological
change, profitability of investment, productivity, the rate of
growth of out put, the role of economic incentives , and the use
of managed market forces. Such considerations have not only
led to the rejection of many of the policies of the 1960’s and
1970’s but also to a reevaluation of the whole process of
development in China since 1949, Questions of principle related
to such things as socialist planning, ownership and methods of
economic administration that have remained relatively settled
since the 1650’s have come under close scrutiny. The result has
been that some of the fundamental problems of development in
China are no longer discussed solely with in the framework of
the centrally-planned soviet model of the five year plan or the
decentralized, mobilization modal of the great leap forward and
Cultural Revolution. 37

67
REFERENCES:

1. www. Indexmundi. com

2. Qi Wen, Zahou Yicheng, China an introduction, (Beijing:
Foreign Language press, 1962) p. 18
3. http://en.wikipedia.org/wiki/CHINA-as-an-emerging-super-
power#CHINA
4. Fleming Christiansen, Shirin Rai, Chinese politics and society
an introduction, (London: harvest wheat sheaf,1996) p. XVI
5. June Tuefel Dreyer, China’s political system, (London:
Macmillan press, 1996) p. 43
6. Fredrick M.Kaplan, Julian M. Sobin, Encyclopedia of China
Today, (London: Macmillan publishers LTD, 1982) p. 157
7. Fleming Christiansen and shirin Rai, Op.cit, p. 185
8. Marc Blecher, China-politics, economies and society (London:
frances pinter publishers, 1986) pp. 9-.47.
9. Judith K. Korn Berg, China. In world politics, (New York: Viva
books pvt Ltd,1982) pp. 66,67
10. Witold Rodzinski, The people’ Republic of China: a concise
political history, (New York: the Free Press. Macmillan
Inc.,1988) p. 31
11. Fredrick M.Kaplan, Julian M.Sobin, Op.cit., p. 158
12. Witold Rodzinski, Op.cit., p. 32
13. Karsten Grummitt, China hand book, (London: Euro monitor
Publications LTD,1985) p. 50
14. Chu-yuan cheng, China’s economic development, growth and
structural change (London: west view press,1989) p. 381
15. Solomon Adler, The Chinese economy, (London: Routledge
and kegan paul,1962) p. 70
16. Witold rodzinski, Op.cit., p. 55
17. http://en.wikipedia.org/wiki/economy-of-the-peoplepercent27s-
Republic-of-CHINA.
18. Fredrick M Kaplan, Julian M. Sobin, Op.cit., p. 158

68
19. Ibid., p. 159
20. Robert L. Worden and Andréa matles savada, Ronald E.Dolan,
CHINA-a country study, (New York: Library of congress, 1988)
pp. 43,44
21. Fleming Christiansen, shrin Rai, Op.cit., p. 210
22. Robert L. Worden, Andrea Matles Sanada, Ronald E. Dolan
Op.cit., p. 218
23. Xu.Dixin, China’s search for economic growth “The Chinese
economy since 1949” (Beijing: New world press,1976) p. 12
24. Ibid., p. 12
25. Fredrick M.Kaplen, Julian M. Son, Op.cit., p. 88
26. Andrew Watson, China’s search for economic growth, The
China’s economy since 1949, (USA: New world press, 1982) p.
22
27. Andrew Watson, Mao Zedong and The political economy of the
border region, (USA: Cambridge university press, 1980) pp.
23,24
28. Ibid., p. 24
29. Michael E.Marti, China and the legacy of Deng Xiaoping ,
(Washington: Brassey’s Inc., 2002), p. 16
30. Fredrick M. Kaplan, Julian M.Sobin, Op.Cit., pp . 163,164,164
31. Robert Ben wick and Paul Wingover, China in 1990’s (London:
Macmillan press LTD: 1999), p. 16
32. Ibid., p. 172
33. Jude Howel, China opens its doors, (New York: Harvestor
Wheat shef/ Lynne Reener, Publishers,1993), p. 182
34. Ibid., pp. 186-188
35. Robert Ben wick, Paul Win grove, Op.cit., p. 173
36. http:wikipedia.org/wiki/special.economic.zones.of.the.peoplepe
rcent27’sRepublic of China.
37. Andrew Watson, China’s new development strategy, (New
York: Academic press, 1982), p. 82

69
70
 CHAPTER NO. 3

RISE OF CHINA
IMPACTS OF OPEN DOOR
POLICY

CHINA :EMERGING ECONOMIC POWER

A
s mentioned in the 2nd chapter, china began to make major
reforms of its economy, since 1979. The Chinese leadership
opted a pragmatic perspective on many socio-economic
problems and the role of ideology was also limitized for making

71
economic policy. In 1980’s the government emphasized on raising
personal income and consumption and introducing new system of
management to help in increasing productivity. In the era of 1980’s,
china also tried to focus on foreign trade as this becomes the most
prominent source of development for Chinese economy. All the first
FYPs contribute a lot for the Chinese economic development. The
success of Chinese FYPs can also be seen in the sixth FYP (1981-
1985).1

SIXTH FIVE YEAR PLAN (1981-1985):

Without giving the same level in terms of technology to the large
population of china and with lack of capital resources, it would be
impossible to touch the status of such type of economic system. After
the end of Cultural Revolution, a series of new strategies witnessed in
Chinese economy which was the need of that time. For partial adoption
the Chinese planners also deeply analyzed the experience of
developed western states. This thing also tells us that the Chinese
hostile attitude towards the capitalist nations turned in to the admiration
after 1976. At that time, when 6th FYP was also formulating, chine was
actively seeking for foreign assistance to establish a firm system of
economic growth. Moreover, china has also adopted the advanced
western technology for its factories and has also solicited long term
credit to pay for it. Foreign investment was highly encouraged in china.
These things help for departure of policy of isolation as the concept of
globalization was emerged in that era of 1980.
The sixth FYP was formulated on the basis of searching for new
economic order and many experimental changes were seen in the
economic system.2
The main idea of this FYP was huge investment in energy
conservation. The major policies of sixth FYP were to modify energy
intensive industries to increase equipment and process efficiency with
technology and cut off the useless apparatus and production
processes, to issue energy consumption standards for energy-intensive

72
products, to provide low interest loans for some energy conservation
projects and the most important policy was to support research
programs and development in energy conservation technologies. 3
According to Chinese government’s official web portal, in early
1980, the state council decided to revise the mid and long term plans.
A meeting was held to compile the 6th FYP. For this purpose, the state
planning commission and other related departments started working on
research and calculation work on the compilation of the plan and
organized related experts to conduct scientific considerations. In
December on the 5th meeting of the fifth NPC approved this plan
officially. As compare to the early FYPs, it was more comprehensive as
it takes the Chinese economy on a road of success and stability. The
main focus in this 6th FYP was to adjust, develop, fix and get better.
Moreover, to limitize the various challenges of economic development.
Following are specific objectives on which the basis of 6 th FYP was
lead down. These objectives are:-
1. To get an average of growth rate five percent for
industrial and agricultural products annually.
2. To keep the market prices stable and to keep the
supply of products according to the growth of
demand.
3. To support the updating of enterprise technology and
to compile the capital necessary to build up the
construction of important projects regarding energy
and communications.
4. To promote the new technological work, to develop
the fields of science, arts and culture and faster the
construction of an ideological and material civilization.
5. To concentrate on defense industry of the state and
also to increase the national defense forces.
6. To raise economic efficiency to increase the revenue
and to work on gradual increase of the expenses of
cultural construction.

73
 7. To develop trade and use the foreign capital for
developing purposes.
8. To notice the alarming growth of population, give
chances of employment to the people and to
gradually improve the social and cultural life of people
in every area of the country.
9. To make efforts for environmental protection. 4

THE IMPLEMENTATION OF SIXTH FYP (1981-1985):

Sixth FYP with the principle of readjustment, restructuring,
consolidation and improving of the economy, the Sixth FYP for national
Socio-economic development was fulfilled or overfilled by 1985.

THE NATIONAL ECONOMY MAINTAINED A HIGH AND

STEADY GROWTH RATE:

During the period from 1981 to 1985, the total industrial and
agricultural output value and per capita national income rose with an
average of 10percent annually. This annual growth rate was steady but
was increasing gradually. The GNP reached up to 778 billion Yuan.
The overall national economy kept a stable growth.

THE MAIN ECONOMIC SECTORS MAINTAINED BETTER

BALANCE:

During this FYP, agriculture, light industry and heavy industry.

All of them grow equally. In early years of PRC, the economic problems
were weak and agricultural base, a shabby light industry a strong
heavy industry and a high accumulation rate. The problems were
solved with the passage of time and different sectors grew with the
passage of time. 5 During this period, the government also support non-
agricultural activities of citizens for example village enterprises in rural

74
enterprises and supported self management for state owned
enterprises and also facilitated for the direct contact between Chinese
and foreign trading enterprises. During this era, the Chinese economy
relied Very much upon the foreign financing and imports. Barriers were
lifted from the foreign trade and relaxation was seen in this era. As far
as the urban economy was concerned, urban economic reforms were
introduced to china with the international economy. Permission was
given to the people to promote the private sector.

SCIENTIFIC, TECHNOLOGICAL, EDUCATIONAL AND

CULTURAL DEVELOPMENT:

The reserve funds for the development of these sectors were

highly increased. Many scientific and technological projects took place
among which 937 received state invention awards. In fact, some of
these award mining projects were of the level of world highest projects.
During this era, the projects of launching carrier rockets to the Pacific
Ocean and under the water were successfully carried out. Moreover,
huge electronic computer named as “Galaxy” was manufactured and
the putting of an experimental communication into a set orbit
succeeded. 6 progress was achieved in infra structure construction and
up dating was in technological sector.
ENHANCEMENT IN NATIONAL ECONOMIC
DEVELOPMENT:
Under the 6th FYP, almost four hundred billion Yuan were newly
invested in fixed assets of enterprises owned by the masses; almost
500 huge projects successfully came to an end. Technological
advancement and renovation of existing industrial enterprises
accelerated gradually every year. With the total investment of 105
billion Yuan, the state enterprises successfully completed more than
100,000 transformation projects. 7

75
 Enterprises were allowed to keep a substantial share of
increases in production. This thing increased the efficiency of the
people and their work help a lot in raising the national economy. In
addition to this the managerial authority within firms was strengthened
and bonuses were granted. 8

FOREIGN TRADE:

In this era, foreign trade and technological exchange entered in

a new phase. On the world export volume ranking, china was on No.
28 in 1980 and in 1984, it jumped to No. 10. 9 World saw a new face of
china and its economy after the implementation of the 6th FYP. The
great achievements obtained in the sixth FYP and laid a solid
foundation for economic development.
It is stated in a Daily newspaper,
“China has successfully adopted strategies that would not only
maintain the tempo of growth, but also provide employment to the bulk
of its population. The Chinese leadership has launched a series of big
projects that serve to provide the infrastructure for future development
and keep the economy growing.” 10
The success of sixth five year plan laid the basis for the seventh
five year plan and new set of goals were set to achieve in this era.

THE 7TH FIVE YEAR PLAN (1986-1990):

After the success of 6th FYP, the 7th FYP of peoples Republic of
China for National, Social and economic development was submitted
by the state council in March 1986. After the detailed discussion and

76
review, the sixth NPC satisfied the 7th five year plan. This plan was
constructed on the basis of 6th five year plan.
Following are some principles on whose line 7 FYP executed:-
1. Importance will be given to the reform and coordinate
economic development with reform.
2. A balance should be maintained between the demand by the
common masses and supply. In equality should not be seen
in this issue. A basic balance should also be created
between national budget, credit and materials.
3. Economic efficiency should be improved, specifically on
product quality, also to handle properly the relations between
efficiency and growth rate, quality and quantity.
4. Modifications should be made according to the changing in
social demand, and the demands in modernization of
economy. Further more, industrial sector should also be
modified.
5. To conduct fixed asset investments, readjust the investment
structure, the construction of the energy, communications,
and telecommunications and raw materials industries should
be accelerated.
6. To focus on the construction of the technical updating,
reforming and extending of existing enterprises.
7. To work the development of sciences and education.
8. To enhance the policy of opening up and to further open up
for the outside world, by combining domestic economic
growth with expanding external economic and technological
exchanges.
9. The common masses of china should enjoy the improved
material and cultural life.
10. To construct both, the socialist ideological civilization and
material civilization equality side by side.
11. To carry on in the spirit of laborious struggle, hard work and
thrift.

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Some goals were also set under this plan for economic
development:
a. To increase the gross national industrial and
agricultural out put by 38 percent within 5 years, or
by an average annual rate of 6.7 percent, gross
agricultural out put by 4 percent a year and gross
industrial output by 7.5 percent.
b. To increase gross national output by 44 percent
within five years, or by an average annual rate of
6.7 percent, gross agricultural output by 4 percent
a year, and gross industrial output by 7.5 percent.
c. Production foals for major industrial and
agricultural products by 1990 were between 425
and 450million tons for grain, 425 million tons for
cotton, 550 billion Kwh for electricity, 1 billion tons
for raw coal, 150 million tons for crude oil and
between 55 and 58 million tons for steel. Freight
volume was set at 9.4 billion tons.
d. Investment in fixed assets was at 1,296 billion
Yuen with fixed assets projected to grow by 600
billion Yuan.
e. To increase total import and export volume by 35
percent within the 5 years while expanding the
scale of foreign investment and advanced
technology. Further goals were set to increase the
actual consumption of both urban and rural
residents by 5 percent a year and at the same time
keeping the normal balance among the national
budget, credit material and foreign exchange.
f. To give awareness about education, Government
implement the nine year compulsory education
scheme, and train five millions professionals, twice
that during the previous planning period. 11

78
 The plain outlines the objectives and
priorities for the next five
Years, within a longer term perspective of
economic and social development. It embodies the
elective aspirations of common masses, as well as
the commitment of government to achieve specific
goals and targets.
The economy enters seventh plan period in
a strong position because of the success of the
sixth plan. The rate of growth of the GDP has
accelerated. The rate of inflation has been kept
under control and the balance of payments has
been successfully managed despite an un-
favorable external environment. The seventh plan
was built on strong foundations. It seeks to
maintain the momentum of growth in the economy.
The principle was opted that economic growth
must be accompanied by social justice and by the
removal of age-old social barriers that oppress the
weak. This is the essence of the concept of
socialism. The plan also seeks to push the process
of economic and technological modernization of
the economy further forward.
In the era of 1080s including 6th FYP and
7th FYP, the Chinese planning system has
encountered the problems of inflexibility and un-
expected responses that have also emerged in
other centrally planned economics. The basic
problem faced by the planners was to specify all
the important needs of the economy. During 1979
to 1980, few reforms were introduced as an
experiment. The success of these reforms paved
the way for the other changing reforms in following
years. All these policies increase the power of the

79
 various economic units and minimize the direct
role of the central planning. By the mid 1980”s
planning still was the government main
mechanism for directing the economy and
correcting imbalance, but its ability to judge and
control the behavior of the economy had been
greatly reduced.

PRICES:
Before the reform period of 1980s the prices of most
commodities were decided by government agencies and were stable.
This is because when production costs or demands for a commodity
altered, then there was no change in prices; normally they failed to
reflect the real values of goods. This became a cause of miscalculation
in much kind of goods. The process of supply and demand is the best
way to judge the possible best prices essential for economic efficiency
and in 1980s, Governments policy was highly advocated. The prices
upon which both buyer and seller mutually agreed. In the mid of 1980s
prices played a prominent role in production and distribution of
commodities in various sectors of the economy. When there was the
centrally planned system in the past, the out put quotas and inputs
were assigned to enterprises but during the wave of change i.e. sixth
FYP and seventh FYP, the incentive to show a positive profit caused
even state owned enterprises to choose inputs and products on the
basis of prices whenever possible. These state owned enterprises
could not alter the amounts or prices of goods, they were required to
produce by the plan, but they could try to increase their profits by
purchasing inputs as less costly as possible.

NATIONAL GOALS:
By 1987, under the 7th FYP the Chinese economy had made
major pace towards achieving modernization and better living
standards of the people. There was also an improvement in the

80
increase in efficiency and productivity by the opening of the economy
to broader trade and collaboration with other countries, the vast use of
the market to intervene commerce and production, and the increased
decision making power of individual economic units.
As China is one of the most populated states in the world so the
most prominent resource of China was its labor force i.e. the largest in
the world. Moreover, the decentralization of management motivate the
participation in planning and decision making of growing numbers of
local and enterprise level managers, planners, administration and
scientists. It also trained future economic leaders for higher
administrative responsibilities. 12

FOREIGN TRADE:
In 1980’s while running the special economic zones, china had
adopted number of reforms to execute its foreign trade e.g.
empowerment of local governments as they have got the power of
examination and approval of foreign trade and exports. As a result, the
old system based on state monopoly, highly centralized administration
with enterprise operations and the state assuming responsibility a
profile and losses has basically been changed in this era which really
boost the Chinese economy. With the steady process, the state has cut
back on mandatory plan s for foreign trade and enterprises, and a
management system which indirectly regulates and controls foreign
trade through custom duties foreign exchange rates, credits and tax
refunds had been put in place step by step.
In 1986, as a formal gesture, China applied for reinstatement as
a signatory state in GATT. This was so, to make its foreign trade
according to practice of International Trade law.
For the sake of trade relations, China actively participates in the
activities sponsored by the Asian Pacific Economic cooperation
organization and still plays significant role in the organization. The
bilateral trade relations between China and the United States, the

81
European Union, Russia and Japan have been constantly
strengthened in this era because not only China wants relations with
these States but these states also want to build economic relations with
China due to its emerging position. 13
Japan, who became the prominent trade partner, accounting for
28.9percent of imports and 15.2percent of exports in 1986. In 1980,
U.S was the second largest source of imports and in 1986; USA
became the third largest over all partners. Western Europe, Germany
also got the status of one of the most important trade partners. Chinese
foreign trade is developing rapidly in terms of its size and importance. 14
A Chinese National English weekly newspaper have published an
article on the significance of china’s foreign trade, which gives a
proper sight that how, much china’s opening policy helped him in
developing rapidly,
“China’s foreign trade has been developing in tandem with the
pulse of the country’s overall economic development. During the first
three decades since the founding of the People’s Republic in 1949,
foreign trade mainly served as minor leverage for the nation’s
economic development… With the country’s reform and opening up
policies implemented in 1978, foreign trade has turned into a major
locomotive during China’s economy forward at a much faster
speed…..corresponding to this rising status is the country’s changing
foreign trade land scape, most notably the export structure and
diversified foreign trade operators… China owes its phenomenal
success in foreign trade development to several reasons, of which two
clearly have played a decisive role. Primarily, it should be attributed to
the country’s reform and opening up, and with this fundamental
national policy shift, China began to increasing make use of external
resources to develop its own economy, drawing foreign investment,
exploring overseas markets and pushing for free trade and regional
economic integration. On the other hand, industrial restructuring and
technological transfer that came with economic globalization during
1980’s and 1990’s offered an opportune moment for China. As a result,
China has emerged as a world workshop in name as well as in reality,

82
processing and manufacturing goods for entire globe. China’s fast
developing foreign trade and economic relations not only have helped
to speed up the country’s economic and modernization drives, but also
benefited the world at large by fueling globe trade growth and driving
economic development around the globe. It proves that the export
oriented strategy is now an integral part of China’s development model”
15

AGRICULTURE:
In 1985, government employed about 63percent of labor force;
proportion of GNP moved to 33percent. Workers productivity became
low because of insufficient supplies of agricultural machinery and other
modern inputs. Domestic agriculture production expanded during
1980’s. This was the result of higher prices through the price reforms
and more privileges were giving to the producers to market their
products. However, the share of food and live animals in total exports
has declined over time. China has become of such products since
1984. 16

INDUSTRY:
During seventh five year plan, government employed about
17percent of labor force but produced more than 46percent of GNP. It
became a fastest growing sector of china. Its annual average growth
was 11 percent from 1952 to 1985. Wide range of technological levels,
many small handicrafts units, and many enterprises using machinery
installed and designed in 1980s. In this era, outdated mining and ore
processing technologies gradually being replaced with modern
techniques. There was a large increase in manufactured goods in the
total exports since mid 80s is largely accounted for by the increase in t
he export in the textile category and the various products category.
These two groups include labor intensive products such as textiles,
apparel, footwear, toys and sporting goods. 17

83
 By the end of 1980’s china have proved himself as an important
state with regard to economy. Although China has adopted some
norms of capitalism regarding economy but also not left the socialism
and still adopted as a strong ideology. Daily Newspaper “Dawn” stated
in this regard.
“China is a new economic model for the world with which its
leaders are trying to prove that a happy blend of two rival social
systems, socialism and capitalism, is possible.” 18
In spite of all above achievements, at the end of 1989, an East
Asian form of recession was also seen in China. At that time, industrial
output growth was quite below the levels of previous years of the
decade. It was called an East Asian type of recession because real
growth of an annum was still positive along with a GNP increase of
4percent. The Policy makers desired to minimize the rate of inflation
that they deemed excessive by tightly controlling credit to enterprises.
Although the government claimed that putting brakes on economic
growth was not intended to reverse the 10 year long process of
economic reform. 19
Although this recession have disturbed the economic process of
China but this was not serious to revise the past policy of china. This
was a recession, which disturbed whole Asia. Despite of all these
facts, we can not neglect the enormous economic development of
China during 1980’s which was achieved due to a proper and long term
planning sixth and seventh five year plan.
The party next met in the fall of 1990 to work on the draft of the
Eighth FYP (1991-1995). China’s tremendous growth in the 1980’s has
resulted in high GDP rates, the new proposals recommended a steady
GDP for 1990’s of only 6percent.

THE EIGHTH FYP (1991-1995):

84
 The policies of Eighth FYP were formulated under the
leadership of Deng Xiaoping. In March, 1991, the NPC in its fourth
session approved the state council’s Report entitled “The ten year lay
out for National economy and social development and 8th FYP. With
this plan, China started a new journey of development. The Chinese
authorities reported success for the plan. In this five year plan, it was
said to focus on following issues:-
• More investment in agricultural sector.
• To focus on basic industries.
• To strengthen the defense establishment.
• To modify the infrastructure.
• To invest on science and technology as they are important
sectors for development.
• To invest highly on education.
• It was also proposed to renovate of state enterprises, prices,
taxation, banking, labor, wages, and investment programs.

For the period of 1991-1095, some basic goals were also set:
• To develop the multi owner ship system, with public ownership
being predominant.
• Deepening of enterprise reform.
• Acceleration of the pace of price reform to solve the dual-track
price system.
• Perfection of macro economic control system by revamping tax
distribution and by strengthening the central bank’s functions,
• To accelerate the reform of the social insurance and housing
systems. 20
In the early 1090’s economy of china again got the potential.
During a visit to southern china in 1992, Deng Xiaoping, made a series
of political declarations, with an aim to reinvigorate the process of
economic reform. Deng stated that in the era of 1990, the most
important goal for china to achieve is to create a socialist market

85
economy. He stresses on the bolder reforms for the Chinese economic
system. 21
He revived flagging industrial and financial progress in the face
of the old guards opposition by declaring. “It is time to prosper! It is
glorious to get rich!” That sentiment has forcefully motivated china,
releasing the initiative and the energy that have made its economy the
fastest growing all over the world. 22
During this period the role of china in the world economy
become more significant and its status changed totally. Its volume of
trade accounted for 2.2percent. China’s trade regime became more
transparent with its desire to join the WTO. More relaxation was seen
on imports with a reduction on a large number of tariff rates.
The development process was highly accelerated in this period
and its ratio of development was much greater than the period of
1980’s. By end of eighth FYP, the GNP reached 5.76 trillion Yuan,
which was 4.3 times greater than of 1980’s.
During this period, in the world ranking, china became the 1st
country with the highest output of coal, cement, positive food stuff,
cotton and cotton fabrics, became 2nd in the outputs of steel and
chemical fiber, and ranked 3rd in the electricity supply.
With a comparison of 7th FYP period, eighth FYP was 4
percentage points higher with the 11percent annual growth.
The total investment in fixed assets in this era, hit 3.89 trillion
Yuan with an annual growth rate of 17.9percent which was 13.6percent
points higher than the seventh FYP. In this respect, investment saw an
annual growth of 22.9percent much higher than the average growth of
last five year plan i.e. 4.1percent.
The infrastructure work was also speed up in this era as 845
large and medium project s of infrastructure were completed and put in
to production, as were 374 technical innovation projects. As far as
transportation was concerned, 5800 kilometers of railway track, 3400
Kilometers of double track lines, and 2600 kilometers of electrified
railway was built. Road tracks were also increased by 105,000
kilometers which includes 1600 kilometers of highway.

86
 During this five year plan, 12 new airports were built. More over,
in technological advancement, many new steps were taken. A huge
amount of telephone switch boards, increased to 58.95 million sets.
Total installed generation capacity was increased to 75 million kilowatts
and an annual electricity supply grew by 9percent.
Industries output value increased at annual growth rate of
4.1percent.
The secondary industry was at a rate of 17.3percent and tertiary
industry at a rate of 9.5percent.
Some important goals were also achieved during this period in
the economic reform system. The new financial system with tax
decentralization at its core and the new tax system with tax
decentralization at its core, and the new tax system with value added
tax as its major element, were set up. A slow and steady process was
also made to separate policy finance and commercial finance. A
system of macro regulation emerged, and the market started to play a
major role in allocation of resources.
For the further acceleration of economic development almost
1,100 cities of country level were opened for the out world and the 3
bonded zones and other a lot of economic zones were set up.
The development of foreign trade was astonishing with a total
trade reached up to US. $ 10.145 trillion at an annual growth rate of
19.50percent which was much higher than the period of 6th five year
plan and the 7th five year plan. The annual export volume was 100
billion Yuan, accounting for three percent of the world’s commodity
trade.
By the end of 8th five year plan, china in to 11th position in the
world ranking for import and export trade.
Some efforts were also made for the well being of the people.
As the Chinese economy flourished, the living standard of the people
also became better per capita income was 1.578 Yuan. Saving deposit
balances in the urban and rural areas reached up to 3 trillion Yuan, 2
trillion, higher than at the end of the previous planning period.

87
 Foreign exchange reserves reached up to the amount of U.S. $
73.6 billion, which was 5.6 times higher than 7th FYP period. Labor
force was increased up to 50 Million, which include an increase of 37.4
Million in Urban areas. Rate of poverty was also decreased which was
really a sign of good change in the society.
As far as population rate was concerned it was controlled during
this period. The growth rate of 1990 was 14.39percent which was
decreased in 1995 with 10.55percent. 23
Foreign investment was allowed in new sectors of Chinese
economy, like in the service centre. The first joint venture was allowed
in the insurance industry. A Japanese company was given the
permission to open a joint venture department store in Shanghai and
the foreign banks were also given permission to open branches in
different cities of the country. A big change was seen during this period
that for the first time in the history of PRC, the Chinese authorities have
agreed to allow a bank of Taiwan to open a branch in China. Special
policies were also made to promote the foreign investment in China.
In the year of 1991, china’s two-way trade notched up a
17.5percent increase to $ 136 billion, along with the net surplus of $
12.5 Billion. In the same year, china reported having accumulated
about $ 40 billion in foreign exchange reserves.
For the purpose of removal of trade barriers, during this period,
the govt. began to take major initiatives. These were also the efforts to
join the General Agreement on Tariffs and trade (GATT) which is the
world’s ruling body on the issue of trade. 24
China has changed rapidly in many different ways and these
changes also have enormous consequences on the global economy.
During that period, china’s economy became a major economic player
in the global economic system. The trade relations of china expanded
all over the world and the products which contain a tag of made in
china flooded the markets of the world’s most important cities that
25
obviously speak for the confidence buyers having in the quality.
China stood out in progress in terms of economy in Asia. Chinese
model has lessons for the other Asian countries that are also labeled

88
as “the third world countries. A daily newspaper stated that “It goes
without saying that china is an extraordinary success story and this
story still unfolding itself. The way it is processing has many lessons for
the third world countries.” 26
We can analyze the success of 8th Five year plan (1991-1995)
with the point that during this period, china’s reform, opening up and
modernization reached a new stage, with GNP reaching up to 5,760
billion Yuan in the end of 1995, which was about five years ahead of
27
target. With all these achievements this period of 8th FYP (1991-
1995) ended and the time comes to plan about 9th Five Year Plan
(1996-2000).

THE NINTH FIVE YEAR PLAN (1996-2000)

The fifth plenary session of the 14th CCP central committee adopted
the proposal on the Ninth Five Year Plan on National Economy and
Social development on September 28, 1995. It was decided generally,
to take the policies of 8th Five year plan in 9th Five Year Plan. Some
basic tasks were set in this plan. These were:
1. To complete the second phase in the modernization drive.
2. To limitize the population growth at 300 million by 2000.
3. To quadruple per capita GNP as compared to 1980.
4. To eradicate the elements of poverty from the society for the
prosperity of common masses.
5. To accelerate the process of establishment of a modern
enterprise system. 28
Some priorities regarding economic development were industrial
restructuring, regional and small town development, and globalization
of economy.
During the making of Ninth Five Year Plan, it was estimated that
the entire chemical industry system will give an out put with an annual
increase of 15percent to reach up to 240 billion Yuan in the end of 9th
Five Year plan. It was also predicted that the added value in industrial

89
sector will make an annual increase of 14percent to reach almost 10
billion Yuan in 2000. 29

IMPLEMENTATION AND ACHIEVEMENTS:

To work for the success of Ninth five year plan (1996-2000) the
common masses of china put their efforts whole heartedly and no
ethnic or racial discrimination was seen during the working. The people
belong to every field of life worked very hard under the umbrella of
Chinese governmental officials, at the end; they also got fruitful results
of their hard work and obtained great achievements in all fields.
The national economy experienced rapid, sound and smooth
development. During these five years, china’s GDP increased
8.3percent annually and reached 8940.4 billion Yuan till 2000. As the
economy continued to grow and economic performance improved
national revenue in 2000 reached 1,338 Billion Yuan an annual
average increase of 16.5percent. The out put of major industrial and
agricultural products now stands in the top ranking of the world’s
economies, and commodity storages were by and large eliminated.

AGRICULTURAL AND INDUSTRIAL DEVELOPMENT

During 9th Five Year Plan focus was put on industrial
restructuring. A tremendous increase was seen in production of grain
and other major agricultural projects and a proper balance was
maintained in total supply and demand, even surplus material was
there during good harvest period.
Some fruitful results were also achieved in eliminating out model
industrial production capacity, reducing excess production capacity and
up grading technology in key enterprises.
Economic restructuring was extensively carried out, and a
specialist market economic structure was preliminarily established.
Some important advanced steps were also taken in the reform oriented
toward the establishment of a modern corporate structure in large and
medium sized state owned enterprises (SOEs). Most key SOEs

90
became corporations, and a considerable number of them were listed
on stock markets inside and outside china. Market progress was made
in endeavors to reduce loss and increase profits in enterprises. The
market system also continued to improve, and the market of production
elements such as capital, technology and labor expanded rapidly. The
role of market enhanced and expanded rapidly for the allocation of
resources. Moreover, the system of finance and taxation, continued to
improve. Some other steps were also taken to strengthen the Chinese
economy. 30

INFORMATION INDUSTRY:
In this period, the per annum increase rate of china’s information
equipment manufacturing and service industries has stayed at over
three times as much as that of the GNP. The gross out put value of
electronic information products manufacture surged from 245.7 billion
Yuan in 1995 to 778.2 billion Yuan in 1999. Due to this tremendous
speed of economic development has laid a foundation for China to
become a large information technological product manufacturer. In
1996 a home made computer brand became a domestic brand having
a prominent share in Chinese market for the first time ever in Chinese
economic history.
China has been able to produce nearly all the computer
components with the exception of CPU and other core parts. These
parts used in various foreign brand computers. As far as the large
computers are concerned, china has become the third country after the
United States and Japan, capable of developing such computer of high
performance. In this period China had made an over all rearrangement
for the development of information industry so as to promote the
formation of several enterprise groups, which have efficiency to
compete internationally and set up an information industry system,
which may grow up independently.

91
 During the Ninth five year plan period, china’s information has
not only made its contribution to the national economy but it also
became a strategic industry promoting re-adjustment of china’s
economic structure. 31

FOREIGN TRADE:
As the time passed, china opened itself more to the outer world.
It’s opening up relations taking shape. The economy grew rapidly and
steadily under reforms of foreign trade. The total volume of imports and
exports reached U.S. $ 474.3 billion in 2000 with that of exports
standing at US $ 249.2 billion, a rise of 69percent and 67percent
respectively over the 1995 figures. The sphere of foreign businesses
gradually became more widened and environment became more
feasible for investment.
Maturity was also seen in the utilization of foreign investment.
Up to US $ 289.4 billion in foreign capital were put in to use during this
period. China’s foreign exchange reserves, reached up to US $ 165.6
billion at the end of the year 2000.

SCIENCE, TECHNOLOGY AND EDUCATION:

The development of science, technology and education was
highly accelerated and other social under takings progressed in a
comprehensive way. A number of goals were achieved in the field of
information technology, material science, engineering and other high-
tech industries. Basic and applied research became more advanced.
Acceleration was also seen in the process of commercializing and
industrializing technological achievements. Some steps were also
taken to strengthen the policy of education. To minimize the rate of
illiteracy in the state a policy was implemented of nine year compulsory
education all over the country. The management system of higher

92
education became better. Common masses were very pleased due to
the increase in university and college enrolment.

PEOPLE’S LIVING STANDARDS:

A gradual improvement was seen in living standards of the
people at the end of 1999 per capita net income of rural dweller and
the per capita disposal income of urban residents reached 2,253, Yuan
and 6280 Yuan respectively. There was rich supply of commodities and
there was also a rise in level of consumption. Moreover, the total retail
sales of consumer goods increased at an average rate of 10.6percent
per annum. A considerable improvement was also seen in housing,
tele-communications, electricity and other aspects of living conditions
for both urban and rural residents. About 30 million people, who were
living comparatively poor lines, got the attention of government and
steps were taken for their betterment. Furthermore, 100percent
increase was seen in personal saving deposits of residents, and rapid
reduction in poverty was seen. One of the basic goals of this plan, to
help 80 million people get out of poverty, was attained. 32
Premier Zhu Rongji was satisfied with the achievement of Ninth
five year plan (1996-2000) and stated that “The people of all
nationalities united and worked hard and made great achievements
during the Ninth five year plan, despite the complicated situation at
home and abroad.”
He called the successful completion of the Ninth five year plan
and the country’s second stage development program a “milestone” in
china’s modernization drive. 33
The achievements of Ninth five year plan laid a solid foundation
for undertaking the 10th five year plan. These tremendous
achievements in economic and social development during the Ninth
five year plan period were hard won victorious over numerous
difficulties. China successfully faced the challenges posed by
unexpected international events. It protected itself from the impact of

93
the Asian financial crises, controlled inflation during the early days of
ninth five year plan period.
Still some numerous problems in the country’s economic life
were there. The principle problems which need great attention of
government were absurd industrial structure and uncoordinated
development of local economies; low overall quality of the national
economy and low competitiveness in the international market-
imperfections in the socialist market economy.
It is said that to cope with above problems, tenth five year plan
will be designed to over come these issues.

TENTH FIVE YEAR PLAN (2001-2005):

The tenth five year plan was the first five year plan of china for
the new century. The year 2001 was considered as a good beginning
for the country’s five year plan for the economic and social
development. Under this plan was expected to grow by 7.4 percent
exceeding 9 trillion Yuan for the first time in history. This proposal of
the CPC central committee was adopted at the fifth plenary session of
the 15th CPC central committee. This proposal for the five year plan
defined objectives, guiding principles and major tasks for china’s
economic and social development. Under this proposal and on the
basis of opinions solicited from all sectors of society, the state council
drew up the outline of the 10th five year plan for national economic and
social development.
In the tenth five year plan, following tasks were set to achieve:-
1. To achieve average economic rate of about 7percent per
annum.
2. To achieve a GDP of 12,500/- billion Yuan by 2005,
calculated at 2000 prices, and per capita, GDP of 9400
Yuan.
3. To increase the number of urban employees and raise the
number of rural laborers transferred to the cities to 40 million

94
 each, there by controlling registered urban unemployment
rates at about 5percent.
4. To maintain the stability in prices and also to maintain the
balance between international revenue and expenditure.
5. To optimize and upgrade the industrial structure and
strengthen the Chinese compatibility in international
scenario.
6. To achieve the GDP growth for the primary, secondary and
tertiary industries at the rates of 13, 51 and 36 percent
respectively.
7. To improve the national economy and social IT levels.
8. To raise the urbanization level and start developmental
projects.
9. To raise research and development funding to more than
1.5percent of GDP and to speed up the technological
progress.
10. To provide more seats in institutions /schools of all levels.
11. To reduce the growth rate of population and limit the
population at no more than 1.33 billion by 2005. 34

FOREIGN INVESTMENT:
Under the policies of tenth five year plan, Chinese government
also takes some measures for enhancement of foreign investment
during this period.
It was said that in its tenth five year plan period china will enter
in a new stage of opening and reform. On gaining WTO access, china
will have opportunity to expand its export. In the mean time, china will
also face a tough challenge of completion in international market.
Proper steps will be taken to utilize the foreign capital. Moreover the
state will regulate government admission and enterprise operation, and
will try to improve the investment environment. The government will

95
take the following steps to enhance the level of foreign investment
introduction.
 Foreign capital introduction will be closely linked with
western development in implementing the western
Development strategy; there will be more opportunity for
foreign investment in many sectors. The government will
encourage foreign invested companies to reinvest in china.
 In order to china’s entry in WTO china will push forward
gradually, the opening of banking, insurance,
telecommunications, domestic and foreign trade and tourism
to the outside world.
 Existing rules and regulations will be re-examined and
revised. To meet the changes, which occur after entering in
to WTO, Chinese government will take some active and
beneficial moves. Laws and regulations on foreign
investment will be revised according to the requirements of
WTO. To raise working efficiency, a new foreign investment
industry policy will be formulated as soon as possible. 35
During these years, efforts should be made to adjust the
patterns of economic development between different industries,
regions, urban and rural areas with emphasis on the industrial
structure. Steps should be taken to stabilize and strengthen agriculture
as the base of the economy, accelerate industrial reform promotion of
IT for the purpose of economic development. Further more, priority will
be given to the development of science, technology and education,
train more skilled personals and to integrate science, technology and
education with the economy.
The basic principle of the tenth five year plan high lights its
strategic vision, broad perspectives and policy principles. It contains
some specific goals and sets more tentative ones adjustable to
structural changes. It emphasis on the point that the role of market
mechanisms should be given full play in the implementation of the plan

96
and economic levers, economic policy and legislation be further
employed in the government control.

ACHIEVEMENTS:
The information shows that the year 2001 considered as a good
beginning for the country’s tenth five year plan (2001-2005) for
economic development. The fast economic growth of the year indicates
a good start. The state economy becomes stable with a fast growth. A
good result was achieved in major sectors, chances of employment
were further enhanced, improvement was seen in living standards of
both urban and rural residents, china’s opening up for the outer world
became more wider, main targets for the economic development had
been achieved, and the key tasks of the tenth five year plan had been
fulfilled. Following is the detail of achievements of china’s tenth fie
year plan:-

ECONOMIC GROWTH:
The efficiency of the economy as a whole has continued to
improve, with profits of industrial enterprises rising 9.3 percent in the
year of 2001. In the end of this five year plan, GDP reached 18.23
Yuan. In the year 2005, the ending year of tenth five year plan, fiscal
revenue exceeded 3 trillion Yuan, which was 523.2 billion Yuan more
than the year of 2004, Import and export volume totalized 1.42 trillion
U.S. $, foreign exchange reserves reached up to 818.9 Billion U.S. $.
In the end of the year 2005, China’s economy grows 9.9percent.

AGRICULTURE AND INDUSTRY:

Encouraging progress has been made in industrial and
agricultural sectors. China’s coal mining industry, which was the only
loss making industry in the industrial sector, is set to become profitable
for the first time in end of his five year plan. Agriculture accounted
12.4percent of the GDP, compared to 47.3percent from industry.

97
Country’s grain production increased by 3.1 percent to 484.01 million
tons. In the industrial sector, state owned companies saw their profit up
to 17.4percent compared to 47.3percent for private enterprises. China
already the world’s biggest producer of many industrial products saw
another double digit growth in many products.

MEMBERSHIP OF WTO:
China’s entry in to the WTO is viewed as a historical event both
in home and abroad. This event will make many changes for china than
the country has been since the opening up policy. There were
generally three basic reasons for china to join WTO.
1. To strengthen economic reforms.
2. To support economic growth through a better allocation
resources.
3. To maintain large inflows of FDI by providing them new
opportunities in service sectors.
The increasing integration of china into the world economy has
been driven by the rapid expansion of its international trade and by
large foreign direct investment inflows. These two trends appear
closely interconnected FDI has been a major determinant of the
opening up of china’s economy. It has strongly contributed to promote
competition in the domestic market and determined the evolution of
foreign trade. 36
China officially became signatory of WTO on 11 December,
2001. On one hand, it gave lots of challenges to china in international
market but on the other hand, it provides lots of opportunities to
Chinese economy to flourish and expand its market.

FOREIGN TRADE:
After the end of first year of this five year plan, china managed
to achieve a 7.9 percent increase in foreign trade and foreign exchange
reserves set new record, which had exceeded 200 billion U.S $. In
the3 meantime china has also continued to work on its reform, regulate

98
market and economic order, and maintain financial stability. With the
constant working and struggle in the end of this five year plan, china’s
foreign trade volume soared by 23.2percent to $ 1,422.1 billion with a
trade surplus of $ 101.9 billion, overseas invested enterprises
accounted 831.7 billion $ of the Chinese trade volume; foreign
investment of China boosted by 25.8.percent in 2005.

Figure: 3.1

Source:http://en.wikipedia.org/wiki/Economy_of_the_People's_Republi
c_of_China#1949.E2.80.931978

LIVING STANDARD OF CHINESE PEOPLE IMPROVED:

In the whole tenth five year plan, china’s progress was
remarkable, to improve living standard of the people. The government
spent 116.8 billion Yuan in 2005 on science, technology, and
education. To survive in natural disasters relief came to 8.9 billion Yuan
to help more then 90 million people, 16.2 billion Yuan were allocated

99
for poverty alleviation and state of poverty reduced by 2.45 million. We
can witness the improved standard of living by the two digit growth in
the sales of cars, electric appliances, jewelry and other consumer
luxury goods. 37

IP ACHIEVEMENTS:
Due to the fast development of science and technology and
economic globalization, china’s intellectual property (IP) system
enforced, which made much progress during the tenth Five Year Plan
(2001-2005). More and more attention is being attached to the IPR in
China and it has become one of the fundamental and important
measures to promote the nation’s modernism. After becoming member
of WTO, China made some laws, which were relevant to IP rights (IPR)
protection. The idea behind this was to provide a strong legal backing.
During the five years, many laws were formulated which were related
to IPR. These laws includes the patent law, law of copy right, law of
trademarks, Rules on customs intellectual property protection etc, and
judicial interpretations were also made for these laws. The government
gives great importance to publicize IP Knowledge and laws. A training
program was conducted at different levels. IPR awareness among
common masses was also enhanced by deciding to celebrate IPR
week, every year in April.
After discussing the policies of 10th five year plan, its
implementation and achievements, it is clear that this plan give more
boost to the Chinese economy and china continued its journey towards
economic development.
On the success of 10th five year plan, Chinese economist liu
Guoguang asserted, “the economic and social achievements china had
made this year mainly to the country’s adherence to the policy of
expanding domestic demand and commitment to a positive fiscal and

100
stable financial policies……..the achievements will lay a solid
foundation for the country’s economic development”. 38
With the end of this plan, framers of next five year plan (2006-
2010) combine on a mission to double the 2000 GDP by 2010.

ELEVENTH FIVE YEAR PLAN (2006-2010):

With the successful end of tenth five year plan, framers went
on a mission to set a new five year plan (2006-2010), which is
obviously on the lines of previous five year plan. While working on the
11th five year plan, at a press conference Ma Kai, minister of the
“National Development and Reform commission (NDRC), highlighted
some of key issues for the 11 th five year plan, which was at that time
under discussion in the NPC. He suggested following the spirit of
previous five year plan. Ma discusses the following points.
• The primary goal must be to build the new socialist country side.
• The structure of industry must be further develop and
strengthen.
• He stressed that, the quality and efficiency of a country’s
economic growth can only be judged by taking both output and
reinvestment into account. 39
While making the 11th five year plan, the senior officials were of
the opinion that China’s economic and social development faces a host
of good opportunities and favorable conditions in the 11th five year plan.
Ku Lin the Deputy Director of the development plan Bureau,
commented about the future 11th five year development program, he
said the following:
 During this plan, the advantage of sufficient labor supply
and a high saving rate can be maintained in china and
the upgrading and diversification of domestic
consumption will create a huge domestic demand.
 The rapid process of urbanization will further stimulate
economic growth, and the enhanced industrial technology

101
 progress will improve the competitiveness of the whole
economy.
 The enhanced institutional reform will paved way for
liberalizing the market entities, make the market more
transparent .this thing will improve the efficiency of the
resource allocation.
 The key objective for this plan includes high economic
growth, accelerating rural development, adjusting the
industrial structure and co-coordinating in regional
development. 40
The following are the basic key tasks, which china has set for the
11th five year plan:-
 To raise the GDP up to 7.5percent annually from 18.2
trillion Yuan in 2005 to 26.1 trillion Yuan in 2010.
 To raise the per capita GDP up to 6.6percent annually
from 13,985 Yuan in 2005 to 19,270 Yuan in 2010.
 To raise the rate of urbanization from 43percent in 2005
to 47percent in 2010.
 To create new jobs in urban areas for 45 million people
during this five year period.
 To increase per capita income of rural and residents up to
5percent annually in 5 years.
 To seep up the development of Chinese domestic trade,
enhance the important function of domestic trade in
leading of production, consumption expansion, increase
of employment opportunities, and promotion of social and
economic development and improvement of people’s
living standard.
It is said that by 2010, china will achieve significant progress in
establishment of a unified, open and orderly modern socialist market
system with well developed legal system improved economic and
social system, regulated order, reasonable structure, enhanced
organization and strong competition to further strengthen the function

102
of domestic trade in driving up consumption, leading production and
improving economic operation efficiency. 41

ACHIEVEMENT :
GENERAL OUT LOOK:

In 2009, GDP raise up to 33,535.3 billion Yuan which was

8.7percent higher than the last year (2008). The value added of the
primary industry, secondary industry and tertiary industry was 3,547.7
billion Yuan, 125,695.8 billion Yuan, and 14,229.8 billion Yuan
respectively.
In the same year, the number of employed people in china was
779.95 million which was 5.51 million more than of 2008.
In the end of 2009, foreign exchange reserves of china were up
to $ 2,399.2 billion and the fiscal revenue went up to 6,847.7 billion
Yuan which was 11.7percent more than the year 2008.
In different sectors of industrial enterprises, the growth of value
added for processing of food from agricultural products 15.9percent for
textile industry 8.5percent, for manufacture of general machinery
11.0percent, for manufacture of special purpose machinery
13.0percent, for manufacture of communication equipment like
computers and other electronic equipment 5.3percent. The value
added for the Hi-tech industry grew by 7.7percent over the previous
year, 2008. 42

IP (INTELECTUAL PROPERTY):
Success in IP during the 10th five year plan laid a solid
foundation for the development in 11th plan. As the economic
globalization is a prominent factor and technological advancement is
taking place day by day and the importance of IPR protection is also
increasing. Changing is taking place in the international system of IPR
protection to meet with the changes of world environment. To enhance
IPR protection is the great need of china’s social economic

103
development and socialist market economic systems, which are
entering in a new phase after many years of careful progress and is an
absolute necessity for china’s opening up and reform. All important
policies and arrangements made by the Chinese government represent
its accurate knowledge about the latest development trend and the
internal working rules of the world economy and also meet the
demands in IP work during this new period for the speeding up
economic development.
China’s IP has made remarkable performance but still there is
much more space for improvement. Although the IP legal system has
been basically established but due to rapid development of the socialist
market economy, there are many imperfections in the practice. 43
In the end of the year 2009 china become the second largest
economy in the world after United States of America. The Chinese
government faces numerous economic development challenges.
These are:
a. Minimizing its high domestic savings rate and
correspondingly low domestic demand through
increase corporate transfers.
b. Sustaining adequate job growth for tens of millions
of migrants and new applicants to the work force.
c. Reducing corruption and other economic crimes.
Process of economic development is faster in coastal areas than
the others and almost 200 million rural labors and their families
have set to urban areas to find work. 44

VOTING POWER IN WORLD BANK

Recently the World Bank has agreed to increase the voting
power china along with some other major countries. Analysts see it as
a start of a gradual but new change in the global economic
governance. China’s stake at the bank in terms of voting power has
gone up from 2.78percent to 4.42percent, ranks it to the third after U.S
and Japan among 186 countries of the world. There is reduction in the
voting power of western nations like Germany, France and U.K.

104
However, U.S power is still untouched and remains the same at
15.85percent and Japan ranks 2nd in this race with 6.84percent.
On this move, china’s finance minister, Xie Kuren stated: “It is
the first in the history of the world bank that a reform of governance
structure is mainly targeted at promoting representation and voices of
developing countries.”
The Chinese economist, Yang Fan said, “The belated move is a good
start in the right direction…….. It is in line with china’s rising economic
power”. 45

Figure: 3.2

Source: Peoples Daily, April 26, 2010

FOREIGN TRADE:
In 1978, when economic reforms and open door policy started,
there has been a sharp rise in china’s exports and imports. Since the
year 1978, the total value of china’s trade grew at an average annual
rate of 15.5percent and annually exports grew at 16.0percent and
imports at 15.6percent.
During the opening up, china was quite unimportant in international
trade. In 1977, china’s total trade volume was $ 14.8 billion, which
accounted for only 0.6percent of world trade. By the early 1990’s the

105
significance of china’s role in the international economy was
transformed and its trade volume accounted for 2.2percent of world
trade. In late 1990’s the dynamic effects of the Asian financial crises
became more apparent and china’s foreign trade faced lots of
difficulties and its total trade went down by 0.4percent. A decrease in
imports by 1.5percent and growth rate of export was 0.5percent. A
rapid growth was seen in 2000 after the recovery from Asian crises. Its
total growth rate increased by 31.2percent and its export and import
increased by 27.8percent and 35.8percent respectively.
In 2007 its export and import reached at $ 1216 billion and $
953.9 billion respectively.
Table: 3.1

CHINA’S IMPORT AND EXPORT AFTER OPENING UP

Period Two-way trade Exports Imports

1981–85 +12.8percent +8.6percent +16.1percent

1986–90 +10.6percent +17.8percent +4.8percent

1991–95 +19.5percent +19.1percent +19.9percent

1996–2000 +11.0percent +10.9percent +11.3percent

2000–05 +24.6percent +25.0percent +24.0percent

2006 +27.2percent +19.9percent +23.8percent

2007 +25.6percent +20.8percent +23.4percent

106
SOURCE:http://en.wikipedia.org/wiki/Economy_of_the_People's_Repu
blic_of_China

The commodities, which china mainly exports, includes

machinery and equipment, textiles and clothing, foot wear, toys,
mineral fuels, plastics optical and medical equipments, iron and steel
and its major export partners are USA, Latin America, EU, Hong Kong,
Japan, Asean, Africa and South Korea.

Table: 3.2

Table Of China’s Exports To The World

(US$ Billion)

E X P OO R 1T 9T93 1 9 94 1 9 95 1 9 96 1 9 9 7 1 9 98 1 9 9 9 2 0 0 0 2 0 0 1

A s i a 5 2 . 62 7 3 . 45 9 2 9 1 . 25 1 0 8 . 29 9 8 . 18 1 0 2 . 85 1 3 2 . 13 1 4 0 . 69

N o r t h Aa 1m 8e. 1r6i c 2 2 . 86 2 6 . 24 28.3 3 4 . 6 40.1 44.39 55 .28 8 7.88

E u r o pe 1 6 . 43 1 8 . 7 2 2 . 98 2 3 . 87 28 .96 3 3 . 43 3 5 .47 45 .48 49.24

L a t i n aA m 1.78
e r i c 2.45 3.15 3.12 4 . 6 1 5.32 5 . 2 7 7 . 1 9 8 . 2 4

107
O c e a an i 1.23 1.72 1 . 9 1.96 2 . 4 2.66 3 . 1 1 3 . 9 1 4 . 0 7

Africa 1.53 1.75 2.49 2.57 3 . 2 4.06 4 . 1 1 5 . 0 4 6 . 0 1

T o t a l 91.7 1 2 1 1 4 8 7. 7 1 5 1 7. 0 18 2.7 1 8 3 1. 7 1 9 4 . 39 2 4 9 . 12 266 .1

 Source: K.C Fung,Hitomi Izaka,” china’s economy in the 21st

century” , June 24- 25, 2002, Hong Kong

The major commodities, which china imports includes machinery

and equipment, oil and mineral fuels, plastic, optical and medical
equipments organic chemicals, iron and steel and its import partners
are Japan, EU, Asean, South Korea, USA, Russia. 46

Table: 3.3

Table of China’s Imports from the World

(US$ Billion)

E X P O mR T 1 f9r o93 1 9 94 1 9 95 1 9 96 1 9 9 7 1 9 98 1 9 9 9 2 0 0 0 2 0 0 1

A s i a 62.6 6 8.77 7 8.05 83 .4 4 8 8 . 4 87.05 1 01 .6 9 1 41 .34 1 47 .1 8

N o r t h Aa 12.0
m e r 7i c 15.74 18.8 18.73 18.31 19.2 21.82 26.12 30.24

E u r e o 23
p .97 25.02 27 .81 27 .6 6 25.75 26.31 32.65 40.78 4 8 . 4
L a t i n aA m 1.93
e r i c 2.25 2.97 3.61 3 . 7 7 2.99 2 . 9 9 5 . 4 1 6 . 7

O c e a an i 2.36 2.92 3.02 3.94 3 . 6 7 3.14 4 . 1 9 5 . 8 8 6 . 2 9

Africa 1 0.89 1.43 1.46 2 . 4 6 1.48 2 . 3 8 5 . 5 6 4 . 7 9

T o t a l 1 0 3 .9 6 1 1 5 .6
2 1 3 2 .0
8 1 3 8 .8 4 1 42.36 1 4 0 .2
4 16 5.72 225.1 243.6 1

108
 Source: K.C Fung,Hitomi Izaka,” china’s economy in the 21st

century” , June 24- 25, 2002, Hong Kong

U.S.CHINA TRADE RELATIONS:

Since the beginning of economic reforms, U. S, China
commercial ties immensely expanded. In 1978, U.S exports and import
with china were $ 72.1 Million and $ 270.67 million respectively. In
2001, these figures grew to $ 26.20 billion and $ 54.28 billions
respectively and it is still increasing day by day. The largest import from
china has been electric machinery, which accounts for almost
20percent of total U.S. imports from china in 2000. Since china’s
accession to the WTO, it put a significant effect on U.S. China trade.

SINO JAPANESE TRADE RELATIONS:

Japan and have deepened their economic ties since china’s
reform policy started in 1978. Japan is china’s largest trading partner,
where as china is Japan’s second largest trading partner. The two
countries together constitute Asian’s largest trading partner. Japanese
exports to china have increased from $ 3.11 billion in 1978 to $ 42.8
billion in 2001 and Japanese imports from china have risen to $ 45.0
billion in 2001, which was $ 1.72 million in 1978.

EU-CHINA TRADE RELATION:

From 1978 to 2001 total trade volume between China and
European Union has increased immensely. In the early 1990s, EU
work against china on the issue of dumping. As china’s economy
grows, the European Union begins to focus on smooth and stable
relations with china. In this reference, EU passed a policy labeled as “A

109
long term policy for China Europe Relations”. Under this policy, EU
tried to have active economic ties with china.
Despite of all this china is facing some serious challenges in
exporting to EU. The main challenge was the use of anti-dumping
duties by the E.U towards China. 47
According to a Chinese daily newspaper, in 2002 total numbers
of anti dumping cases against Chinese by EU were 91. 48
On the eve of the New Year, Chinese president Hu Jintao
delivered a speech in which he expressed his satisfaction about the
working of 2009 and assure hard work for the success of next year.
Some of the important part of his speech is “The year 2009 has been a
very important one in the economic history of the people’s Republic of
China. New and out standing achievements have been made in china’s
reform and opening up and socialist modernization drive.
The people’s living standards have risen and society as a whole
has maintained harmony and stability. China has actively participated
in international Cooperation to deal with such issues as the global
financial crises and climate change, has expanded exchanges and
cooperation with the rest of the world and has made new contributions
to world peace and development…….2010 is the last year for
implementing china’s 11th five year plan. In the up coming new year,
we will unswervingly up hold the great banner of socialism with
Chinese characteristics, further implement the scientific outlook on
development under the guidance of Deng Xiaoping theory, maintain the
continuity and stability of macro economic policy and adopt a
moderately relaxed monetary policy and flexibility based on new
situations, work harder to improve the quality and efficiency of
economic growth, pay more attention to transforming the economic
development pattern, push forward the reform and opening up drive
and further strengthen the vigor and vitality of economic growth. We
will pay more attention to improving people’s livelihoods, considering
both domestic and international situations, striving for stable and
relatively fast economic development and continuing to build a
moderately prosperous society in an all around way”. 49

110
 MISCELLANEOUS ECONOMIC NEWS OF 2010:

1) China and the 10 country association of South East Asian

Nations launched the final stage on 1st January, of the world’s
biggest regional trade agreement. This free trade agreement
covers nearly 1.9 billion people. The deal creates the third
largest regional trading agreement by value after the EU and the
NAFTA, covering countries with mutual trade flows of $ 231
billion in 2008 and combined GDP of about $ 6,000 billion. 50
2) China overtook Germany as the world’s top exporter after
December, 2009, exports jumped 17.7. Percent exports for the
last month of 2009 were $ 130.7 billion. That raised total 2009
exports to $1.2 trillion, ahead of the 816 billion Euros. China’s
new status is largely symbolic but reflects the ability of its
resilient, low-cost manufacturers to keep selling abroad despite
a slump in global consumer demand due to the financial crises.
51

3) According to a daily news paper, in future years, china and India

could reshape the global auto industry and pose a significant
competitive threat in coming years. Chinese and Indian
manufacturers are ramping up quickly. 52
4) In the year 2010, china’s foreign reserves rising sharply. China’s
foreign exchange reserves, by far the largest in the world, raised
by $ 126.5 billion. In the entire last year, China added $ 453.0
Billion to the reserves, $ 35.0 billion more than the increase in
2008. 53
5) International economists are of the view that china easily beat its
2009 growth target after a blistering fourth quarter performance
that set the stage for further monetary tightening and put it on
course to over take Japan to become the world’s second largest
economy. China’s fastest quarterly growth in two years raised

111
 expectations that Beijing will lift interest rates some time in next
few months after a series of smaller steps taken to contain
buoyant lending and present the economy and its market from
over heating. 54

6) This is a news of a daily newspaper that china’s gold output

jumped 11.34 percent to a record of 313.98 tons in 2009, the
China Gold Association said, securing the country’s position as
the worlds largest producer of the yellow metal. 55
7) Chinese government decided to increase aid to farmers to
reduce the economic gap B/W Urban and rural residents,
China’s leadership is increasingly worried about the income gap
brought about by 30 years of market reform that have made a
few cities very rich, but raised tensions among the 900 million
rural residents. It is said to give more facilities to farmer as to
enable them to share the fruits of china’s economic growth.

FUTURE OF CHINA’S ECONOMY

After seeing the rapid, continuous and smooth development in
economy of China, it is clear that with in few years china will beat all
the powerful economies and Yuan (Renimbi) will rule the world.
According to an international report, china is set to become the world’s
biggest economy by 2026, whereas USA and Japan will become 2nd
and 3rd largest economic powers respectively.
In fact, china is currently enjoying the status of most powerful
country in the world along with U.S. when china sneezes, the world
gets a cold. Bill Clinton recognized this fact during his presidential era
and started building economic relation with china, and now his
successor Barak Hussain Obama is looking for ways to work more
closely with the giant nation, with its 1.3 billion people. 56
Price water house coopers also said in its report that by 2030,
the top ten world economies could be china, followed by the United
States, India, Japan, Brazil, Russia, Germany, Mexico, France and

112
Britain. The current 10 economies, economies, 2008 data from the IMF
are the United States, Japan, China, Germany, France, Britain, Italy,
Russia, Spain and Brazil.

Figure: 3.3

Source: China Daily, June 27, 2010

The report also pointed to an increasing share of Global GDP

taken by china, compared to the U.S and EU.
Jim O’ Neill, Chief Global Economist for US investment bank
Goldman Sachs, forecast on November, 2009 that china will over take
the US by 2027, 14 years earlier than a previous Goldman Sachs
forecast of 2041 made in 2003. 57

113
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39. http: // www.gov.cn/english/2006-03/07/content-246929. htm.

40. http: // www.gov.cn/english/2006-01/12/content-156964. htm.

41. http: // www.gov.cn/english/2006-03/06/content-219504. htm.

42. Beijing review, 11 March, 2010.

43. http:// www china.org.cn/English/china/208356-htm.

44. http://wwwcia-gov/library/publications/the-world-fact
book/goes/ch. Html.

45. China daily, 27 April, 2010.

46. http://gn-wiki pedia.org/wiki/economy-of-the-people percent 27s-

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47. http://www.hilbs.hku.hk/working-paper-updates/pdf/wp 1048.
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48. China daily, 28 March, 2002.

49. Global times, 29 April, 2010.

50. Financial times, 3 Janary, 2010.

51. Business Recorder, 11 Jan, 2010.

52. Business Recorder, 14 Jan, 2010.

53. Financial times, 17 January, 2010.

54. Business Recorder, 22 Janaury, 2010.

55. Business Recorder, 29 January, 2010.

56. The National, 1 February, 2010.

57. The Nation, 22 January, 2010.

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CHAPTER NO.4

CONCLUSION

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 In this modern era, it is widely recognized that economic
development has become the major driving force in economic growth
and social development. Now days, the ultimate goal of super power is
economic development. Economic development is the development of
economic wealth of countries or regions for the well being of their
Inhabitant’s Economic development is the source, which has emerged
China as a strong power not only among the third world but among the
nations of the whole world. China has practiced political, administrative
and economic system which has considerably contributed in the past
and has attracted the people of the out side world.

In 1949, China emerged on the map of the world as an

independent state under the leadership of MAO. China under the
umbrella of Communism started its economic journey and have 3 years
(1949 – 1952) for the re stabilization its economy and then the first five
years plan was also made according to the norms of communism. This
was based on rapid industrialization through the soviet style planning,
with the passage of time of time, chicanes leaders realized that their

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necessities are bit different from the Soviet Union. As China gained
experience and confidence with the passage of time. They introduced
Such variations, which met their necessities. During these five years,
numbers of industrial and mining enterprises were constructed.

The great leap forward began in the early days of second five
year plan (1957), whose chairman bring the nation into the quick
forefront of economic development. The great leap forward was based
almost entirely upon a domestic system in which steel was produced
by the people in their own backyard in order to increase steel export.
The great leap forward of 1958 ended with one of greatest famine in
human history. It was soon emerged that steel produced was unless
due to impure nature, bad quality and lack of experience of the makers.
The consequences were extreme from 1959 to 1961, millions of
Chinese died as the result of serious food shortage in the country side.

The 3rd and 4th five year plans were under the shadow of Cultural
Revolution. It was not cultural in the ordinary sense of the world.It was
as much concerned with agriculture, industry and political thinking as
with culture itself in fact it was, completely ideological. Maozedong was
alarmed to see corruption in the younger generation and in the party
bureaucracy, they treated them selfness as superior creators above the
ordinary workers, which was against the spirit of socialism. It was likely
to denied the society into classes and thus class conflict, while
socialism conscience classless society. As far as ideology is
concerned, it met with great success but during the Cultural Revolution
much economic activity was halted with revolution regardless of
interpretation being the primary objective of the country.
The Cultural Revolution failed as the Great leap forward failed.

Deng Xiaoping assumed leadership after the death of Mao Ze

Dong. He proclaimed contours of socialism with Chinese
characteristics, whose salient points were:-
i) Seek truth from facts, thus dealing a fatal blow of dogmatism.

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 ii) The Chinese society will remain the primary stage of
socialism for a long time to come, therefore all types of
ownership is permissible. China will make the most of both
planning and market economy.
iii) The main emphasis, during the primary stage, will be on the
increase in production by modernizing and adopting ever
new science and technology.
iv) Socialism is not distribution of poverty but equitable
distribution prosperity.

In 1980’s, China tried to focus on foreign trade as this become the

prominent source of development because in 1979, opinion was given
that the old policy centrally planned economy had to meet the needs
which important for efficient economic growth. The purpose of this
economic reform is not to discard communism but to make its working
according to the Chinese economic needs.

China’s open door policy gave fruitful result to it and it entered into
a new period of transition. There was also a huge increase in trading
and investment co- operations. The nature of Chinese economic
system became shuffled during 1980’s. It would not be accurately
described as either a centrally planned economy or a market economy.
The most prominent aspect of the open policy was the special
economic zones, which were established to expand the attraction to
investment from the ethnic Chinese living abroad.

Jiang zamin assumed the leadership after Deng Xiao Peng.

Alongwith Zhou Enlai, who has proved to be one of the most
successful economists of the world,. Jiang Zamin took china to ever
grater heights.A good beginning was seen in 2001, with reference to
economy. A good result was achieved in major sectors; improvement
was seen in lining slandered of both urban and rural residents. China’s
opening up for the outer world became wider. Encouraging progress
had been made in industrial and agricultural sectors. Moreover china’s

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entry into the WTO is viewed as a historic event, which paved way for
many new developments. China’s progress was also remarkable in
foreign trade. China had achieved lots of prestige and power in recent
years. China became the second largest economy in the world after
USA. the world bank has also agreed to increase its power. This is a
start of new change in the global economic governance.

With these developments and powerful status, China has to face

lots of challenges and problems. Further more, it is not easy for China
to with this race of economy, because the other athletes are very much
experienced and they may give tough competition to China.

In the future, we see that there are many challenges facing

China in the area of international trade. First, with China’s
competitiveness will –perceive that their producers will not able to
compete with the Chinese exports, either in the third market or in their
own domestic market. The backlash will take the form of an increased
use of anti dumping duties and safeguard. Many countries are using
such trade instruments against China from a variety of countries.

Another challenge facing China is how to manage its trade

relationship with the USA. The United States is the largest economy in
the world, and China’s largest export market as well. A stable and
healthy relationship with the United States is important for China’s
economic development. It is a historical fact that to accept newly
emergent economic power is the difficult process for countries. U.S.A,
E.U and other economic power may perceive China as a potential
economic threat. Managing and smoothing such as relationship should
be an important goal for China.

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