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The Reform toward Market Economy in China

Dr. Yin Chen 尹晨Associate Professor

School of Economics, Fudan University

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30 years of reform and open-up

• On Dec. 18, 2008, China held a meeting in Beijing to celebrate the 30th anniversary of its reform and opening-up drive, which turned the once poverty-stricken country into the world's 3rd largest economy

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30 years of reform and open-up

• Communist Party of China's (CPC) leaders Deng Xiaoping and Chen Yun at the 3rd Plenary Session of the 11th CPC Central Committee in Beijing held from December 18 to 22, 1978

• In that meeting, the important decision of reform and opening up policy was made.

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Main content

• How did planned economy come into being?

• Planned economy was inefficient

• Main steps of China’s reform

• Main aspects of China’s reform

• Gradual transition vs. shock therapy

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1. How did planned economy come into being?

• Choice of heavy-industry-oriented development strategy (HIODS)

• Alternatives of capital accumulation

• Shortage of resources

• The adoption of planned economy

• Achievement

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1.1. Choice of heavy-industry-oriented development strategy (HIODS)

• Heritage

• Industry as a symbol of power

• Necessity for security

• Demonstration of Soviet Union

• Choice of HIODS

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1.1.1 Heritage

• After 8-year anti-Japanese war and 4-year civil war, at the founding of the People's Republic of China in 1949, the Chinese government inherited a war-torn agrarian economy

• 89.4% of the population resided in rural areas • Industry consisted of only 12.6% of the national

income• No complete industrial system• Nearly no heavy industry

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1.1.2 Industry as a symbol of power• At that time, for most

countries, especially developing countries, a developed heavy-industry sector was the symbol of the nation's power

• Steel and oil refining, chemical and plastics, industrial machinery, mass transit (railways, airlines, shipbuilders) , mining

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1.1.3 Necessity for security

• Korean War broke out in 1950

• With the resulting embargo and isolation from Western nations, to develop domestic heavy industries, particularly military industries, became a necessity for China’s national security

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1.1.4 Demonstration of Soviet Union

• The Soviet Union's outstanding record of nation building under planed economy in the 1930s, when Western market economies experienced the Great Depression, provided the Chinese leadership with a very good example

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1.1.5 Choice of HIODS

• After recovering from the Korean War in 1952, the Chinese government set heavy industry as the priority sector of economic development and chose heavy-industry-oriented development strategy (HIODS)

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1.2. Alternatives of capital accumulation

• HIODS demanded huge amount of capital

• Theoretically, there were three alternatives of capital accumulation:

• War or colonial governance

• Foreign capital inflow

• Foreign trade

• Domestic accumulation

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1.2.1 War or colonial governance

• Great Britain, Spain, Portugal, and etc., accumulated capital by war and colonial governance in history

• On the contrary, China has long been a victim of war and colonial exploitation since 1840s, nearly every industrialized country had invaded China

• So the first choice was impossible in the 1950s

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1.2.2 Foreign capital inflow

• In the 1950s and 1960s, Japan, South Korea, Singapore and some other Asian countries or regions got huge amount of foreign capital inflow with which achieved good economic development

• As the result of Korean War, no capital flowed into China from the 1950s to 1970s from Western World

• In the early 1950s, China got some loans from Soviet Union. But soon after the worsening of bilateral relationship, loans from outside were suspended

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1.2.3 Foreign trade

• As the result of Korean War, China’s trade with western countries was limited, with Hong Kong as the only transit center

• Soon after the worsening of bilateral relationship, trade between China and Soviet Union drop sharply

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1.2.4 Domestic accumulation

• No capital from outside

• The only choose was domestic capital accumulation

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1.3. Shortage of resources

• However, in the early 1950s, the Chinese economy was faced with shortage of resources:

• Economic surplus was small and scattered due to the nature of a poor agrarian economy

• Foreign exchange was scarce and expensive because of embargo and that exportable goods were limited and primarily consisted of low-priced agricultural products

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1.4. Planned economy

• Plans and administrative controls replaced markets

• State enterprises under plan

• Farmers under plan

• Consumptions under plan

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1.4.1 Plans and administrative controls

• Since non-priority sectors were competing with the priority sectors for the low-priced resources, plans and administrative controls replaced markets as the mechanism for allocating scarce credit, foreign reserves, raw materials, and living necessities, ensuring that limited resources would be used for the targeted industries and projects

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Puppet

• Every action was under direct control

• Puppet-like economic units: firms, workers, farmers, households

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1.4.2 State enterprises under plan

• Few non-state enterprises• The state enterprises were like puppets under

plans and control• They had no autonomy of employment, plan of

production, supplies of inputs, marketing of products, and disposal of profits

• Inputs were allocated into manufacturing firms by the state under plan, and state took all of output

• The same happened in commercial firms

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1.4.3 Farmers under plan

• State plan also shaped the evolution of farming institutions in China

• Factory-like communes began to be established in rural areas in the late 1950s, where farmers worked together and got hour-based salary

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Farming worker

• Farmers became farming workers, and had no property of land, tools, and gains

• Hour-based salary

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Farmers’ dining hall

• Ate in communes’ dining hall

• No autonomy in consumption

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1.4.4 Consumption under plan

• In cities, with low-price input (food, cotton, wage, necessities) and high-price industrial output, profit was invented and accumulated

• Kornai: plan economy= shortage economy

• Shortage in necessities led to coupon system

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Food Coupon

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1.4.4 Consumption under plan

• People living in cities bought nearly everything, including living necessities such as crops, edible oil, cloth, watch, bicycle, etc., by both money and coupons

• People could not buy anything only with money

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1.5 Achievements of Planned Economy

• Set up a comprehensive heavy-industry system within 20 years

• Steel works, tankship, oil well, dam, railway, rocket, satellite

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2. Planned economy was inefficient

• Low allocative efficiency

• Low technical efficiency

• Low rate of total factor productivity growth

• The only way out was reform

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2.1. Low allocative efficiency

• In China, capital was relatively scarce and labor was abundant

• Therefore, the comparative advantages of the Chinese economy lie in labor-intensive sectors

• Guided by market forces, profit incentives would have induced entrepreneurs to adopt capital-saving and labor-using technologies and to allocate more resources to labor-intensive industries*

• HIDOS and planned economy had low allocative efficiency

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2.2. Low technical efficiency

• Managers had no incentive for using resources economically

• Workers had little incentive to work efficiently

• Farm workers had a low incentive to work

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2.2.1 Low incentives for managers

• Because profits ceased to be a yardstick of efficiency, managers had no incentive for using resources economically

• Overstaffing, underutilization of capital resources, and overstocking of inventories were popular in China's state enterprises

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2.2.2 Low incentives for workers

• No bonus

• Little difference of wages

• Since income was not related to effort, workers had little incentive to work efficiently

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2.2.3 low incentives for farmers

• Farming workers

• Little difference of hour-based salary

• Farming workers had a low incentive to work because the link between reward and effort was weak

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2.3. Low rate of total factor productivity growth

• Total factor productivity grew by only 0.5 percent between 1952-81, a quarter of the average growth rate of 19 developing countries (World Bank), even much lower than developed countries

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2.4 The only way out was reform

• China’s income per capita in 1978 was under $100

• More and more people were discontented with the status quo: 1976 Tian’an Men Square Event

• The only way out was to reform

• Reformists defeat the conservatives after Mao’s death with the support of people in 1976

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The 3rd-up of Deng Xiaoping

• Communist Party of China's (CPC) leaders Deng Xiaoping and Chen Yun at the 3rd Plenary Session of the 11th CPC Central Committee in Beijing held from December 18 to 22, 1978, during which the important decision of reform and opening up policy was made.

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3. The main steps of China’s reform towards market economy

• The reform was originated from the agricultural sector

• Reform towards market economy then turned into cities

• All-round reform accelerated from 1992

No one had a well-designed blueprint for China’s reform

“Crossing a river by feeling for the stones.”

------Deng Xiaoping, chief designer of China’s reform

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3.1. The reform was originated from the agricultural sector

• Replacement of commune with HRS

• Full official recognition of HRS

• End of commune

• Amazing performance

• A reform from bottom to top

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3.1.1 Replacement of Commune

• Efficiency of commune was low

• Trial and secret reform by farmers in Xiaogang Village, Anhui province, in 1978

• Household responsibility system （ HRS ） **

• A year later Xiaogang Village brought out yields far larger than other neighboring collectives

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Pioneers in Xiaogang village• In December 1978, 18 farmers

in Xiaogang village, east China's Anhui Province, signed a secret agreement with blood fingerprint to divide commune-owned farmland into pieces for household contract.

• If some of them were put into jail for the contract, other members promised to feed the children of those who were caught to 18 years old.

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HRS 家庭联产承包责任制

• Commune leased land to households

• Gains went to: national procurement quota, collective rent, and household-take residual

• So what you did was closely related to what you got. Farmers worked more, they got more residual and more income

• Incentive compatible

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3.1.2 Full official recognition of HRS

• After several years of debate, full official recognition of the household responsibility system as a nationally acceptable farming institution was eventually given in late 1981

• By the end of 1983, 98 percent of agricultural collectives in China had adopted the new system

• In 1993, the government allowed the lease contract to be extended for another 30 years after the expiration of the first 15-year contract

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End of Commune

• In 1980, Xiangyang County of Guanghan City in Sichuan Province set up a County Government and dropped the name of "People's Commune" from its title

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End of Commune

• An aggregate of more than 56,000 communes was cancelled by June 1985.

• County governments and village committees were set up to take place of the egalitarianism communes, thus separating government functions from rural economic organizations

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New farming unit

• Farmers are reaping in their contracted fields, using reaping machines

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3.1.3 Amazing performance

• China’s cropping sector experienced an amazing 42.2% growth of output in the years 1978-84

• Nearly no deference of weather or agricultural technologies between 1976-84

• Half of the growth, over 20% growth, was driven by productivity change brought about by this institutional reform – Lin Yifu

• As the first step of China's rural economic reform, the system has enhanced farmers' enthusiasm in production and liberated rural production forces.

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3.1.4 A reform from bottom to top

• It was created by farmers at roots

• Then got official recognition from authority and spread to the nationwide

• A reform from bottom to top

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3.2. Reform then turned into cities

• Government initiated• First stage (1979-83): several important

experimental initiatives• Second stage (1984-86): introduction of profit tax

and dual-track system• Third stage (1987-92): contract responsibility

system• Last stage (1993-present): modern corporate

governance system

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3.2.1 Government-initiated reform

• Unlike the farming institutional reform, reforms of state enterprises in urban areas were initiated and pushed by the government

• From top to bottom

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3.2.2 First stage (1979-83)

• The intentions were to enlarge enterprises’ autonomy and introduce incentives into traditional planed system

• Several important experimental initiatives included: profit retention, performance-related bonuses, production out of mandatory state plans

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3.2.3 Second Stage (1984-86)

• Profit tax

• Dual-track price system

• Bankruptcy and layoff

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Profit tax

• From 1983, profit remittances to the government were replaced by profit tax

• Enterprises could dispose of profit after tax

• Strong economic incentive for managers

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Dual-track price system

• In 1984, the government allowed state enterprises to sell output in excess of quotas at negotiated prices legally, thus establishing the dual-track system

• The price of output within quotas was determined by state, and price of output beyond quotas was determined by market

• Since China was in “Shortage economy” at that time, market-determined prices were higher

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Jumping into the sea 下海 • Seeing business opportunities within the dual-

track system, many people, especially government employees and those from State-run factories or institutes, quit their jobs to open their own businesses. -Corruption

• "Jumping into the sea" was often used to refer to the phenomena of people breaking away from the constraints of a planned system to embrace the market economy

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First Bankruptcy of SOE

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First Bankruptcy of SOE

• China began liquidating financially insolvent companies in 1984, when the city of Shenyang in Liaoning Province in north China became a pilot city to make trials on enterprise restructuring reform

• On August 3, 1986, The Shenyang Explosion-Proof Equipment Factory was formally declared bankrupt by the city government.

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Be laid off and get re-employed" ( 下岗再就业 ) (xiagang zai jiuye)

• As the result of bankruptcy, lifelong jobs or "iron-rice bowls" of workers were lost

• In the 1990s, China began restructuring its enterprises through bankruptcy and merger

• No official statistics show how many workers were laid off during that period, but experts estimate the number to be in the tens of millions.

• Meanwhile, the government offered occupational training, small loans and preferential tax policies to help most of the affected workers find new jobs or start their own businesses

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3.2.4 Third stage (1987-92)

• Formalization and wide adoption of contract responsibility system, which attempted to clarify the authority, incentives, and responsibilities of enterprise managers by legal contracts between state and managers (award or forfeit)

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3.2.5 Last Stage (1993-present)

• Introducing the modern corporate governance system to the state enterprises (shareholders convention, board of directors, CEO, board of supervisors, independent directors, foreign strategic institutional shareholders)

• For now more than half of the key state-owned enterprises and more than 90 percent of the medium and small ones have carried out joint stock system reforms.

• In each stage of the reform, the government's intervention was reduced further and the state enterprises gained more autonomy

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3.3. All-round acceleration of reform since 1992

• Deng Xiaoping’s tour to the south

• Official push

• WTO Entry

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3.3.1 Deng Xiaoping’s tour to the south

• 1989 Tian An’men Square Event

• Ideological debate blocked further reform: Is market economy a symbol or patent of capitalism?

• Deng Xiaoping’s tour to the south of China and a series of lectures

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3.3.1 Deng Xiaoping’s tour to the south

• "Practice of a planned economy is not equivalent to socialism because there is also planning under capitalism; Practice of a market economy is not equivalent to capitalism because there are also markets under socialism," ——Deng

• China’s characteristic: Market economy under the socialist political framework

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3.3.2 Official push

• In March 1993, "socialist market economy" was actually incorporated into the Chinese constitution

• Market economy is the basic economic institution and mechanism of resource allocation under socialist system

• Official push resulted in an all-round acceleration of reforms thereafter

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3.3.3 WTO Entry

• China's Protocol on the Accession to the WTO was passed at the Fourth Ministerial Conference in Doha, Qatar, November 10, 2001

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Openness

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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

贸易开放度 投资开放度 经济开放度

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Openness

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年份

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GDP中国 增长率 GDP美国 增长率 GDP世界 增长率

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4. The main aspects of the market-oriented reform

• Resource allocation mechanism reform

• Development of non-state enterprises

• Development of Special Economic Zones (SEZs)

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4.1. Resource allocation mechanism reform

• Investment

• Commodity market

• Capital market

• Foreign trade

• Foreign investment

• Human resource market

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4.1.1 Composition of Source of Investing Funds in China’s Fixed Assets (1981-2007, %)

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4.1.2 Commodity market

• In 1984, the government introduced the dual-track price system

• In 1992, the government decided to allow the market to act as the prime force in resource allocation

• Consumer and producer products whose prices are made by the market currently account for 95.6 percent and 91.9 percent respectively of the total retail sales in these two categories.

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4.1.3 Capital market

• Shanghai and Shenzhen Stock Exchange

• Unexpected performance

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Shanghai and Shenzhen Stock Exchange

• In 1990, Shanghai re-established a stock market• In 1991, another stock exchange was set up in She

nzhen• At the beginning, Stock exchanges were re-introdu

ced in China only as an experiment to reform the bank-based financial system, and to find a new channel of funding for SOEs

• Unexpected performance

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Unexpected performance

• Today, stock exchanges have become part of everyday economic life in China, with over 70 million investors

• Investors for A shares with RMB: mostly individual domestic investors, domestic mutual funds, QFII (Qualified Foreign Institutional Investor)

• QFIIs include: JP Morgan Chase, UBS, Nomura, ING, HSBC, Deutsche Bank, Citigroup, Morgan Stanley, Goldman Sachs

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Investors in Shanghai and Shenzhen Stock Exchange

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Unexpected performance

• Now, the Shanghai and Shenzhen stock exchanges have more than 1500 listed companies (SOEs, private enterprises, foreign invested enterprises)

• More Chinese companies are listed in foreign stock exchanges: H share (listed in HK Stock Exchange), N share, L share, and S share

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Listed companies in two exchanges

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Unexpected performance

• During the past decade, the ratio of capitalization (total market value of stocks to GDP) rose from nearly zero in 1990 to 51% in 2000, helping improve allocation of financial resources in the economy

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Unexpected performance

• Timely information exposure, more and more strict auditing standards, more transparency

• Improving corporate governance: formal shareholder convention, board of directors, and independent director

• More M&A through capital market

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4.1.4 Foreign trade

• Reducing administrative barriers and tariff

• The categories of import/export commodities subject to licensing controls have been greatly reduced

• The goal is automatic registration system rather than qualification approval system

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Foreign trade volume of China (1980-2008)

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Foreign trade dependency ratio

• In 1996, China's total foreign trade volume accounted for 35.5% of its GDP. Now, it accounts for nearly 70% of the GDP (Over-estimation, processing and assembling Trade )

• In 1978, China's share of global trade was less than 1%; 2005, China’s export account for 6.5% in the global export, and China’s import account for 5.9% in the global import , both ranked 3rd in the world.

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4.1.5 Foreign investment

• Inflow of foreign investments

• National Treatment

• Capital outflow

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First Joint Venture Company

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First Joint Venture Company

• On April 10, 1980, the Beijing Aviation Food Co. Ltd., the first joint-venture company on the Chinese mainland was approved by the government, providing an air-catering service for the flights between China and the United States.

• Civil Aviation Administration of China (CAAC) held a 51% share and Maxim's Catering Ltd., Hong Kong's largest food and beverage corporation and restaurant chain, possessed 49%

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Capital inflow

• When China began to open to the world, most of the foreign investments were from Hong Kong and Chinese people overseas

• With the improvement of investment hardware and software, the foreign investors expand to multinationals of Japan, the US and EU

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FDI into China (1984-2006)

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National treatment

• China has gradually extended "National Treatment" to all foreign invested enterprises (FIEs)

• Now domestic enterprises complain about Super-national treatment given to FIEs

• For example, the FIEs don’t have to pay business income tax in the first 3 years, and business income tax rate of the fourth and fifth year is cut half. But domestic companies do not have this favorable treatment

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Capital outflow

• Huge foreign exchange reserve

• Qualified domestic institutional investors (QDII)

• Merger and acquisition (IBM & Lenovo)

• China Investment Corp. invested in Blackstone, JP Morgan, etc.

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4.1.6 Human resource markets

• Specialized markets of entrepreneurs and managers (brain hunters)

• Labor market (graduates)

• Migrant workers

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Migrant worker• Reforms in rural areas freed over hundreds of millions

of peasants from farm work. • At first, about 63 million of these former farmers were

given jobs in village-run enterprises that mushroomed in 1980s.

• A policy change in 1984 allowed them to find jobs in cities. After China decided to move to a market economy in 1992, the massive migration of rural laborers started.

• The rapid inflow of investors created many construction, factory and mining jobs, most of which urbanites considered too tiring or dirty.

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Migrant worker ( 农民工 ) (nong mingong)

• The number of migrants workers grew from 60 million in 1992 to 120 million in 2003 and 210 million in 2008

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Migrant worker

• Due to the 2008 financial crisis, over 20 million migrant workers lay off or cannot find jobs

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4.2 Development of non-state enterprises

• Township and village enterprises (TVEs)

• Private business

• Foreign invested enterprises

• Two unexpected effects

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4.2.1. Private business

• From a taboo topic to an important role

• Performance

• Official recognition

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From a taboo topic to an important role

• For ideological reasons, at the beginning of reform, private business was related to exploiting class and capitalism

• Now private business is playing a more and more important role in China

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First Privately Owned Restaurant

• Located in downtown Beijing, Yue Bin Restaurant (literally "to make customers happy") was set up in 1980 by Liu Guixian and her husband Guo Peiji, both of who were chefs

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Performance

• At the end of 2007, there were more than 1.6 million private enterprises, employing 20.9 million workers

• In coastal provinces, like Zhejiang, Jiangsu, Fujian, the output of private firms contributes to over 70% of local GDP

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Official recognition

• The status and economic contribution of private enterprises received official recognition in the 9th National People’s Congress held in March 1999 (in reversion of constitution, respect the contribution of private business)

• Now some of private entrepreneurs can be accepted into the Communist Party, which is the party in power

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4.2.2. Two unexpected effects

• Pressure and example effect for SOEs

• Rectifying the misallocation of resources

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Pressure and example effect for SOEs

• Non-state enterprises are the real players in the markets, having to survive in competition

• As a result, the non-state enterprises were more productive than the state enterprises

• Non-state enterprises exert pressure (as competitors) and example effects (as successful survivor) on the state enterprises

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Rectifying the misallocation of resources

• Profit maximization induced most non-state enterprises to adopt labor-intensive technology to concentrate on labor-intensive industries, like textile, clothing, shoes, food, toy, and etc

• Therefore, the industrial structure of non-state enterprises was more consistent with the comparative advantages of China's endowments

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4.3. Development of Special Economic Zones (SEZs)

• Establishment of the SEZs

• Pioneer work

• Performance

• Demonstration role

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Establishment of the SEZs

• In the early 1980s, four SEZs, Shenzhen, Zhuhai, Shantou and Xiamen were established in southeast coastal China, neighboring Hong Kong and Macao

• In 1988, Hainan Island, China's second largest offshore island, was made the country's fifth and largest SEZ

• Following Deng's 1992 tour, the government declared the opening of the Yangtze River Delta, spearheading the move was the opening of Pudong in Shanghai as a SEZ

• In 2006, Binhai New Area becomes the latest SEZ

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First Special Economic Zone- Shenzhen

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Shanghai Pudong

• The financial zone in Pudong New Area, Shanghai. In 1990, the Chinese government declared to develop and open Pudong, Shanghai

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Tianjin Binhai

• June 2006, Tianjin Binhai New Area into a national integrated package of reform experimental zone, following the Shenzhen Special Economic Zone, Pudong New Area, another boost regional development of new economic growth points

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Pioneer work

• A series of policies in the early years of the SEZs were labeled "special" because they were considered "unorthodox" under the planned economy

• SEZ is like a laboratory, what did in SEZs was pioneer work towards market economy in China, like issuing shares, attracting HK and foreign investment, bonus, employment contract, layoff, and etc

• Those policies which led to good performance spread to the whole nation

• Even some reform failed or did not have good result, since SEZ was a limited area, the influence was limited as well

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Performance

• Taking Shenzhen as an example• Shenzhen, a former fishing village, is now a

modern city rivaling Beijing and Shanghai• Shenzhen’s GDP reached US$27 billion in 2002 ,

ranking 4th in China• Shenzhen now ranks first in income per capita in

China

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Demonstration role

• More important is the pioneer and demonstration role for the rest of China, paving the way for all-round reforms to market economy

• It is because of the successful experiences the SEZs had in their early stages that China decided to establish the socialist market economic system in 1992

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5. Gradual transition vs. shock therapy

• Comparison between two reform approaches

• Problems of gradual reform to market economy

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5.1. Comparison between two reform approaches

• Russia and eastern European Countries’ "shock therapy" approach

• “J-curve” of "shock therapy" in theory

• “L-curve” of "shock therapy" in fact China’s evolutionary approach

• China’s upward growth curve

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5.1.1 “Shock therapy" approach

• Under Jeffery Sachs’s blueprint, a comprehensive, top-down "shock therapy" approach characterized the transition in Eastern Europe and the former Soviet Union

• Reform from planned economy to market economy, from state owned system to private system carried out over one night

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5.1.2 “J-curve” of "shock therapy" in theory

• Some costs, like industrial restructure, bankruptcy of non-performing firms, and the resulting unemployment, would caused economic decline

• However, when the economic institution and the property right system finished restructuring, the economy would recover and begin to grow

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5.1.3 “L-curve” of "shock therapy" in fact

• However, the transition costs were too high, living standards of majority of people declined too fast and too much

• The wealth went to minority of people• The government encounters a legitimacy crisis when

the results of reforms are so dreadful• The leadership can not be able to hold a consensus on

the course of further reforms, and political instability is likely to follow

• Instead of a "J-curve," the result of "shock therapy" may be a big "L-curve"

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L-curve performance

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Is transition a killer?

• “Is transition a killer?” — 《 World Development Report 1996 》

• Brainerd’s explanation （ 1998 ）is unemployment, poverty, tension and alcoholism.

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5.1.4 China’s evolutionary approach

• No blueprint, crossing the river by feeling for the stones

• An evolutionary, experimental, trial-and-error, and bottom-up approach

• First experimental work, and then spread the successful policies

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Gradualism and stability

• Gradualism and stability were the foundations of the Chinese reform and continue to be so for the present leadership of the country

• They acknowledge that it would be impossible to accomplish anything in an environment of political unrest.

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5.1.5 China’s upward growth curve

• In China’s gradual reform, the state still had control over the old planned system, so there was no sharp decline in those sectors

• At the same time, an incremental market economy grew rapidly with surpluses and new stream of resources allocated to the more efficient sectors

• The reforms benefit the majority of people• During the reform process, state, enterprises, and

people have had sufficient time to make adjustments to the new market system with little instability

• The economy has maintained strong growth throughout the whole process

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Aggregate GDP

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2008 Top ten GDP -CIA

美 CIA2009 年 1 月 28 日修改发布 2008 年世界各经济体 GDP

排行 国家   GDP   

NO 音素文字 方块字 （ million dollar ）

— World 世界 78,360,000

—  European Union 欧盟 18,930,000

1  United States 美国 14,330,000

2  Japan 日本 4,844,000

3  China (PRC) 中国 4,222,000

4  Germany 德国 3,818,000

5  France 法国 2,978,000

6  United Kingdom 英国 2,787,000

7  Italy 意大利 2,399,000

8  Russia 俄罗斯 1,757,000

9  Spain 西班牙 1,683,000

10  Brazil 巴西 1,665,000

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Growth rate

• From 1978 to 2007, China’s annual economic growth had averaged 9.67%, far exceeding the 3.3% world average over the corresponding period

• The country has jumped to 3rd place in the world in terms of total economic volume.

• In 1978, China's GDP accounted for only 1% of the world economy, whereas its share rose to above 5% in 2007.

• China now contributes to more than 10% of global economic growth and more than 12% of global trade expansion.

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1978-2007 Engel Coefficient of Chinese Households

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5.2 Problems of gradual reform to market economy

• Easy first, difficult later, later and later (Never?)

• Corruption

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Summary

• There were some reasons for the choice of planned economy, whose efficiency was low

• Compared with the “Big-bang” approach of reform, China’s gradual transition was more successful, even with some problems

• Faced with challenges, China is determined to accelerate an all-round reform towards market economy

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Reference Readings

• Justin Yifu Lin, 1992, Rural Reforms and Agricultural Growth in China, The American Economic Review, Vol. 82, No. 1 (Mar., 1992), pp. 34-51.

• Sachs, J., and W. T. Woo, 1994. Structural Factors in the Economic Reforms of China, Eastern Europe, and the Former Soviet Union, Economic Policy 18: 101-45.

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Thank you!econpostdoc@fudan.edu.cn