Social Market Economy after 1976 in China - Essay Example

Discuss the commonalities and differences between communist economy 1976 and social market economy after 1976 in China. Communist economy and social market economy are two different kinds of economies. As they stand at two different extremes, there are no conspicuous similarities between these two. Prior to 1976 the economic system prevailed in China was communist economy. According to this system, the means of production was completely controlled by the government. After 1976, the scenario changed and China adopted the characteristics of a social market economy. Under this system government approved the private ownership of means of production. As means of production are handled by the government before 1976, there was always the intervention of government in whatever is done. But with the emergence of socialist market economy, the role of the government shrank into making laws. Under communist economy people were reluctant to work as they were deprived of owning property and the developments that the country received under such a system was too little. When people were allowed to have private property, the made the best use of the resources and this period witnessed the thriving of the Chinese economy. In the communist economy, it was the government that controlled the market mechanism but under social market economy the market forces such as supply and demand took the place of government. When the communist economy tried to bring everything under the control of the government without any consideration to its citizen, the social market economy envisages at the formation of a welfare state in which individuals are given priority in all the aspects. Communist economy was upheld only by a simple majority of China, but social market economy has been welcomed by all category of the society. 3. How did China become an industrialised economy with in the last four decades? An economy becomes industrialised only when an agrarian society turns into industrial society with social change and economic development. The endeavour China made to reach its destination of a developed economy has been in its culmination for the last couple of decades. In all the areas, the performance of China was spectacular. The first and foremost factor that can be attributed to the success of China in this arena is the rapid expansion of international trade. International trade was accelerated as a result of gradual and incremental trade reforms and opening up of the economy for international trade. As a result, the Foreign Direct Investment increased. China being a vast country had resources in abundant. Moreover the labour also was cheaper as compared to other developing countries. The decision to use the resources properly helped the development of domestic industries. China’s factory outputs vary from cotton textiles to railway locomotives, jet planes and computers. As the largest economy in terms of population, there is greater demand for commodities in China. In one hand it is a good market for foreign companies and on the other a good supplier as well. The amount china spend in the area of education is huge. The well educated works being more productive contribute towards the industrialisation of the country. The amount China invests for research and development is really note worthy. Advanced technologies help it to produce commodities cost efficiently. Chinese products has got good demand world wide as these products are competent to the products of other industrialised countries. However, it is the decision of the government to open up the economy for foreign countries that helped the fast industrialization. 4. Write a critical note on China’s SOE reforms. The state owned enterprises in China were capable of producing a wide range of consumer goods domestically. The commodities so produced were capable of satisfying the local demands sufficiently. However it had more drawbacks than these advantages. The persons who were at the top of the party were the ones who controlled these enterprises. Since most of them were corrupted it was not fully operational as expected. The growth rate that China exhibited during this period was not consistent though it was noticeable in the beginning. Experts are of the opinion that the Chinese industries were most inefficient those days. The inputs were not efficiently transformed into outputs, the quality of the products was poor and there were also instances of mismatch between supply and demand. The investments made were locked up in inventory due to inefficient utilisation of inventory. Due to the under utilisation of fixed asset, average cost per unit increased. The process of industrialisation was not balanced that there was a regional imbalance as undeveloped areas were numerous. To end the vicious effects of these enterprises, government allowed public participation. If the government paid more attention to enterprises managing those who were at the top of it, the plan would have borne fruit as it did in the beginning and still China would have the features of a communist country. Today China is a nominal communist country that practices capitalism. 7. Critically analyse Chinese government’s poverty reduction programs. Recent statistics show that the investment rate in China is nearing almost 50% currently. In the last two decades the development of Chinese economy was so rapid. The growth of per capita income of no country is as fast as that of China. It is an extra ordinary achievement for such a huge country like China that has tremendous regional differences. In the meantime there has been remarkable reduction in the rural poverty population of China. According to the statistics of China’s national poverty line, the rural poverty line has come down from 250 million in 1978 to 28.2 million in 2002. There has been an aggregate reduction of 88.7% in just two and a half decades. Though poverty has been irradiated to a great extend, all these programs were not a success. The government provided the people with subsidised loan for poor people and this program included 592 counties in China and 74 counties in Tibet. But unfortunately these subsidised loans failed to reach the hands of the needy people. These funds were misused to township projects completely deviating from the purpose for which they have been launched. Another important program was Food for Work Program. People were given food for work that is done on infrastructure development by the individuals. This scheme as well had some drawbacks that the works allotted to the households were not in best interest of them. Moreover, the local authorities who were in charge of this scheme were interested in developing other projects that gave them political gratification and monitory benefits. However, other poverty alleviation programs in China Agriculture Tax Reform, Grain for Green etc. were relevant to the requirements of the rural population that these programs addressed almost all the important aspects of poverty. The designs of all the poverty alleviation programs were consistent with the national policies. So they could achieve the goals, for which they had been devised. Read More