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An Overview of the Chinese Economy in the Past 30 years, Some Experiences and Lessons for
Government and Businessmen
An Overview of the Chinese Economy in the Past 30 years, Some Experiences and Lessons for
Government and Businessmen
Dr. Hongjun Zhao Professor of Economics and Development
Shanghai University of International Business and Economics
May 12, 2013
Topics
How did China Make its Economy Successful since 1978?
How did government and businessmen interact well with each other in this process?
Some experiences and lessons for government and foreign businessmen
2
Why did China make so much progress?
Backward advantage
Open up policy
Decentralization
Government’s good policy
Citizen and peasants can choose their occupation, making their economic decision relatively freely
How did the government make these work?
Government realized that if there were no economic reform, China will still lag behind, even fall apart like the Former Soviet Union, East European Countries
Policies and Institutions matter Household Responsibility System was launched since 1978
Town Village Enterprises (TVE) promotion Act have been passed since 1983
Urban financial reform, exchange reform, foreign trade reform, real estate reform ect since 1986
Fiscal decentralization since 1994
Market-oriented+ Government-supported
Domestic Wars
0
50
100
150
200
250
300
246-
237
156-
147
66-5
7
25-3
4
115-
124
205-
214
295-
304
385-
394
470-
479
560-
569
649-
658
739-
748
829-
838
917-
926
1000
-100
9
1090
-109
9
1180
-118
9
1270
-127
9
1356
-136
5
1438
-144
7
1528
-153
7
1618
-162
7
1704
-171
3
1794
-180
3
1884
-189
3
numbers of domest i c war
Why was Chinese government so strong to do so?
merchants
Government
Peasants
Bureaucrats
Meritocrats
Schools/University
merchants
Confucianism dominated
Favorable geography for agriculture
II. How did Government and businessmen interact well with each other since 1978?
In Chinese history, government suppresses businessmen and business activity all along the Chinese history
– Businessmen have to go out of city or town to trade with each other
– Businessmen’s property tax was raised by at least 50% since the W. Han
– Business activities, such as trading, with aim of maximizing profit were not encouraged
– why so?
The rank of businessmen in society was the lowest one
Very important goods such as salt, iron, wine were monopolized by government
Only one social upward mobility
Government deregulated planning economy since 1978
Household Responsibility System was launched since 1978
– Peasant becomes the “real” farmer, extra produces are their own surplus, therefore profit
– Peasants could sell their produce surplus to market
– Town and village could set up enterprises, TVE promotion Act have been passed since 1983
– Rural banks relaxed their loan requirements to peasants, and TVE
Double-track pricing system
1981, extra production of oil was permitted to export at international price
1983, extra production of petroleum and coal could be sold out to private dealers
1984, extra production of industrial materials could be sold out at 20% price mark-up
1985, extra production of industrial materials could be sold out at market price
1988, price ceiling was imposed in industrial materials
1989, the price of most products was marketized
Market-oriented Institutional Reforms
Urban financial reform, more banks available
Exchange reform, managed fluctuation
The monopolized Foreign trade system was marketized
More FDI, joint-ventures were welcome
Fiscal decentralization since 1994
Every city, province could make their own economic decision relative independently
Government-Business Interaction
Infrastructure Investment, helping G provide public service, earning profit
Made in China, contributing to consumption, manufacturing, employment, earning profit
Service in China, research, consulting, training, purchasing
Government and business relation in the new times
Peasantsmerchants
Government
Peasants
Bureaucrats
Meritocrats
Schools/University
workers
Business,merchants dominated
Favorable geography for agriculture
III. Some Experiences and Lessons for Government and Businessmen
Joint-ventures are more preferred to wholly foreign-owned enterprise
Well government-business relationship is welcome everywhere
Paying more attention to Chinese governmental and industrial guidelines
Localization is one of the very important strategies for Chinese market
“Made in China” faces more competition
Service in China is one of the good choice for investment in China