The road to China’s economic growth

Over the past three decades, we have seen China grow, change and develop. We have seen difficult times, and we have seen improvement in the economy. We have seen millions of people lifted out of poverty, cities with modern facilities are being constructed; and we have witnessed the hosting of the Beijing Olympic Games, and the Shanghai Expo, which scored a world record as the most expensive events ever hosted in these categories.

China is changing, and more so, with enormous speed. Some twenty years ago we could probably not even imagine that so many people from around the world would come to visit this country, and moreover, to live here. We cannot say that the world economic recession did not hit China at all, however if compared to many other countries, the effect it had on China was very small. In some ways, China has become a “safe haven” for many people around the world, especially in times of economic crisis.

Evidently, therefore, the question that comes to mind is this: how were these rapid economic and general state of development achieved in a country that only few decades back, some could barely think of it as a traditional society?

The answer apparently lies in Deng Xiaoping’s famous statement: “It does not matter whether the cat is black or white, as long as it catches mice”. This little phrase is probably the key to understanding such rapid economic development in the country.

Modern cities are key aspects of China's economic growth

And so, our story begins in 1978, with Gaigekaifang, (改革开放) literally translated “reform and opening”. The goal of the reform was to turn the country’s economy into a market economy that was capable of generating strong economic growth. The reform was divided into several steps. The first step, which was taken in the late 1970s and early 1980s, was the decollectivization of agriculture in the country, and opening the country to foreign investment. The second part of the reform included lifting of price controls in the country and other substantial steps. During this time, special economic zones were created in some parts of China, which meant that there were regions in the country where economic laws were oriented towards a freer economy than in other parts of the country. This among other things revolved around a policy which allowed for the trading of a wider range of goods in the area, to lower taxes for the foreign investors. One of the most famous places with this economic orientation in China is Shenzhen – it has developed from a small village to a city with a population of over 10 million within 20 years. The other three biggest economic zones are Zhuhai and Shantou located in Guangdong Province, Xiamen in Fujian province and Hainan. Some of the other major coastal cities for foreign investment are Dalian, Qingdao, Tianjin, Shanghai, Ningbo and others. All of these areas are very open to foreign investment.

Currently, there are also policies being designed to “go west”. This means that the less developed, western part of the country will be more open to foreign investment as well. In 2008, foreign investment in these areas reached 7.4 billion USD in the middle part and 6.6 billion USD in the west part of China, representing growth rates of 12.8 percentage points, according to the Chinese Ministry of Commerce, reported the People’s Daily.

It was during this time of increasing economic development, that China got the nickname “workshop of the world”. Production became one of the main activities in the country, and China began to produce and export anything and everything, beginning from clothes and toys, continuing now with certain types of technology, earth minerals and so on. This was when the “made in China” label became famous. Importers could buy a lot, and for a relatively cheap price in China. Moreover, many began to invest in the country. This is something that obviously has a reason. There was suddenly a new emerging market in the world that was worth investing in. China is attracting more and more attention in the world because of the economic development, and also because of the responsibility that comes with it.

China is now the second-largest economy in the world and largest in its region. The Chinese Yuan is playing a more crucial role on the East Asian market, as well as on the global scene. Over the past thirty years, China has developed an annual average growth rate of 9.8 percent — triple the world average, reported Xinhua News Agency. China’s GDP soared from 360 billion Yuan ($53 billion) in 1978 to 24.95 trillion Yuan ($3.7 trillion) in 2007. During the ongoing economic crisis, many are turning to China as a place of hope.

There are still a number of problems that need to be overcome in the country though, such as the existing gap between the poor and the wealthy in the country, and the fact that the East part of China is much more developed than the West part of the country. However, if we look at the big picture, and the tempo of growth, these are, perhaps, problems that would be overcome.
During celebrations marking the 30th anniversary of economic reforms in China, Hu Jintao said that despite the fact that the situation looks very promising, China should continue to concentrate on economic development and diversification. “We must adhere to the correct direction of reform and opening up so as to build a system that is full of vigor, highly efficient, more open and has a favorable environment for scientific development,” he said, reported CNN.com.

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