RISE OF THE CHINESE

ECONOMY
 Currently, China is the 2nd largest economy in the world, however it is projected
that it will overtake the United States as the world’s largest economy by 2040.
It’s economic integration in the region makes it the driver of East Asian Growth,
which gives it enormous strength in the region.
The strength of its economy, a huge population of about 1.4 billion, land
masses, resources, regional location and political influence adds to its power in
significant ways.

Countries with highest GDP

1) USA : $19.39 trillion.

2)China : $12.01 trillion.
3) Japan : $4.87 trillion.  
4) Germany : $3.68 trillion. 
5)UK : $2.62 trillion.
6) India : $2.61 trillion
BRIEF HISTORY OF CHINA
• The Qing dynasty which ruled China was
weak and inept. It failed to industrialize
China and face foreign aggressors.
• Many people were dissatisfied with this an
wanted to see China rise on the global scale
which led to the formation of the Nationalist
party in 1912. It was led by Sun Yat- Sen.
• 1912- Republic of china established
MAO’S LIFE
o Mao moved to Beijing at the age of 17 and worked as a library assistant in the
University of Beijing.
o It was here that he came to know about the communist revolution in Russia and
was deeply influenced by it.
o In 1921, he came one of the first members of the Chinese Communist Party.
o Even though the Communist party grew in strength, the nationalist party still
remained in power
o Sun Yat-Sen, leader of the Nationalist Party, in 1923 decided that it was
best for China if the two parties cooperated
o In 1925, Sun Yat-Sen died and was succeeded by Chiang Kai-Shek. This was a
turning point as he was more conservative and started a violent purge of the
communist.
o This fueled Mao to led an army of peasants against the Nationalist but he was
defeated.
o The communist army retreated to the Jiangxi district where Mao
established the Soviet Republic of China.
• In 1934, Chiang Kai-Shek gathered his troops and surrounded the
communist occupied areas which forced Mao and his troops to retreat
•During this retreat ‘The Long March’, only 30,000 of the original 100,000
survived.
•1937, the Japanese Imperial Army invades China
• The nationalist and communists form a temporary alliance to deal with the
situation.
•But after the war things went back to the way they were and the Chinese
Civil War broke out in 1945.
• Chinese Communist Revolution (1945-1949). The nationalist were defeated.
•Military struggle for control of China between the Communist Party under
Mao Zedong and the Nationalist Party under Chiang Kai-Shek.
• Chiang Kai-Shek and the nationalists moved to modern day Taiwan
CHINA UNDER MAO
 The Communist Party of China was formed in 1921. It
was under Mao Zedong's control in 1927.
 Eventually, Mao led a revolution, and the communist
party obtained control in 1947. They followed the
example of the soviet model of development
through heavy industry with surpluses extracted
from peasants.
 Consumer goods were left to secondary importance. In
the sino-soviet split of the 1950's, Mao split from
traditional Marxism-Leninism and developed Maoism,
the Chinese interpretation of communism.
Mao was upset with the Soviet leader Khrushchev's
position of peaceful coexistence between the
communists and capitalists. The Maoists started a
strong communist tradition, instituting the Great Leap
Forward and the Cultural Revolution.
The Great Leap Forward (1958-61) was instituted to help
transform China into a heavy industrialized society. However, this
was largely considered to be a failure and many Chinese starved to
death. In the cultural revolution, Mao overthrew his enemies and
millions of people were killed or persecuted. 
Mao attacked his opponents for taking the capitalist road and
largely succeeded in suppressing their proposed policies until his
death in 1976. After Mao’s death, advocacy of various reforms
became more acceptable.
MODEL OF ECONOMIC
DEVELOPMENT UNDER MAO
After the inception of the People’s Republic of China in 1949, it was
under the leadership of Mao and its economy was based on the Soviet
model.
The economically backward communist China chose to sever its link
with the capitalist word and fell back on its own resources and for a
brief period, Soviet advice and aid.
The model was to create a state-owned heavy industries sector from
the capital accumulated from agriculture. As it was short of foreign
exchange that it needed in order to buy technology and goods on the
world market, China decided to substitute imports by domestic goods.
This model allowed China to use its resources to establish the
foundations of an industrial economy on a scale that did not exist
before. Employment and social welfare was assured to all citizens, and
China moved ahead of most developing countries in educating its
citizens and ensuring better health for them.
The economy also grew at a respectable rate of 5-6 per cent. But
an annual growth of 2-3 per cent in population meant that
economic growth was insufficient to meet the needs of a growing
population.
Agricultural production was not sufficient to generate a surplus for
industry. Its industrial production was not growing fast enough,
international trade was minimal and per capita income was very
low.
CHINESE COMMUNIST PARTY
(CCP)
 The Communist Party of China (CPC), also
referred to as the Chinese Communist
Party (CCP), is the founding and ruling political
party of the People’s republic of China.
 The Communist Party is the sole governing party
within mainland China, permitting only 8 other,
subordinated parties to co-exist, those making up
the United Front.
 It was founded in 1921, chiefly by Chen Duxiu
 and Li Dazhao.
 It also controls the world's largest armed forces,
the People’s Liberation Army.
However, China kicked off it’s journey from economic isolation to
becoming the world’s factory. That landmark meeting kicked off on
Dec. 18, 1978

The US played a key role in helping transform an impoverished

nation into a major trading nation, removing export controls for a
wide range of its advanced technology to China.
Now, China has grown into a $14.5-trillion economy—the world’s
second-largest—and a rival whose technological prowess alarms
the US.
Reforms under the new communist system:

-Took land from warlords and turned them into communes.

-Promoted the status of women
-Doubled school population to increase the country’s literacy.
-Increased access to health to increase life expectancy of the people
CHINA UNDER DENG
XIAOPING
 After Mao's death, the ideals of China shifted under
Deng Xiaoping to a form of "market socialism."
 He instituted changes in the economic system
where they developed what he considered to be
socialism with Chinese characteristics. He decided to
use policies that had been shown to be effective and
followed less the ideologies of the earlier leaders.
He instituted the "Four Modernizations",
describing agriculture, industry, science and
technology, and the military. Deng is commonly
credited as the person who turned China into the
economic world power that he is today. He opened
up China to the outside world and
industrialized successfully. 
 ECONOMIC REFORMS OF
1978
Between 1949 and 1976, under Mao Zedong’s 毛泽东 leadership, the
Chinese Communist Party (CCP) implemented socialist economic
policies.
One important early sign of the new atmosphere was the
announcement in 1977 that entrance examinations for China’s
universities (which had been attacked and closed down during the
Cultural Revolution) would be reestablished.
Deng Xiaoping returned to power, and in December 1978 the famous
four-character policy gaige kaifang , a reform of the economic system
and an opening up to the outside world, was promulgated.
Beyond the strong signal that the reforms were intended to remedy
some of Mao’s mistakes, it was not clear exactly what the slogan would
entail in practice.
Indeed, even in the early 21st century the specifics of the reforms
are still the subject of substantial disagreements within the CCP
leadership.
However, there can be no doubt that the reforms since 1978
generally have succeeded in both the system reform aspect,
marked by the decollectivization of agriculture and the dismantling
of Soviet-style central planning in industry.
And the opening-up aspect, leading to China’s entry into the World
Trade Organization (WTO) in 2001.
It is also beyond doubt that the reforms have resulted in rapid
economic growth (by the official statistics, an average annual
growth of real gross domestic product of 9.7 percent between 1980
and 2009).
However, it is also true that in the early 21st century many
Chinese people remain desperately poor, and the reforms continue
to be incomplete and controversial.
By 1978, the then leader Deng Xiaoping announced the ‘open
door’ policy and economic reforms in China. The policy was to
generate higher productivity by investments of capital and
technology from abroad.
 China followed its own path in introducing a market economy.
The Chinese did not go for ‘shock therapy’ but opened their
economy step by step.
The privatization of agriculture in 1982 was followed by the
privatization of industry in 1998.
Trade barriers were eliminated only in Special Economic Zones
(SEZs) where foreign investors could set up enterprises. In
China, the state played and continues to play a central role in
setting up a market economy.
The new economic policies helped the Chinese economy to
break from stagnation.
SEZ
oA special economic zone (SEZ) is an area in which the business
and trade laws are different from the rest of the country. SEZs are
located within a country's national borders, and their aims include
increased trade balance, employment, increased investment, job
creation and effective administration.
oThe first four special economic zones were created in 1980 in
southeastern coastal China and consisted of what were then the
small cities of Shenzhen , Zhuhai, and Shantou and Xiamen.
oEncouraged by the zones’ success, the Chinese government in
1984 opened 14 larger and older cities along the coast to 
foreign trade and investment. These “open” cities offered foreign
investors much the same incentives as in the special economic
zones, but their corporate income taxes were higher.
IMPACT OF THE ECONOMIC
POLICIES
-Privatization of agriculture led to a remarkable rise in
agricultural production and rural incomes. High personal savings in
the rural economy lead to an exponential growth in rural industry.
-The Chinese economy, including both industry and agriculture,
grew at a faster rate. The new trading laws and the creation of
Special Economic Zones led to a phenomenal rise in foreign trade.
-China has become the most important destination for foreign
direct investment (FDI) anywhere in the world. It has large
foreign exchange reserves that now allow it to make big investment
in other countries.
China’s accession to the WTO in 2001 has been a further step in its
opening to the outside world. The country plans to deepen its
integration into the world economy and shape the future world
economic order.
CONSEQUENCES OF THE
REFORMS
Poverty plummeted
In 1981, just three years after Deng’s reform project was launched,
almost 90% of Chinese people lived in extreme poverty by the
definition of the World Bank. By 2013, that number had dropped to
less than 2%.

 Incomes skyrocketed
Per capita GDP grew by nearly 24 times from 1978 to 2017.

Shift from agriculture to industrialization

In 1980, agriculture was a larger part of the Chinese economy than
industry (e.g. construction and manufacturing) and services (e.g.
healthcare and education). Now, agriculture makes up less than 10%
of the economy.
People moved to the cities
With a shift away from agriculture, Chinese people moved to cities in droves. The
share living in rural areas, which barely budged from 1960 to the late 1970s, fell
sharply after 1978.

Where people worked changed

In 1979, Shenzhen, the manufacturing hub just across the border from Hong Kong,
had less than half a million people. In 1980, it became China’s first special economic
zone, allowing foreign investment into the city. It is now one of the world’s biggest
cities, with more skyscrapers built there in 2016 than the US and Australia combined.

People had fewer children

Deng oversaw the introduction of China’s one-child policy, which was introduced to
reduce the birth rate as China’s population neared 1 billion. The one-child policy
likely led to a significant reduction in births.
CO2 emissions increased
China’s immense environmental challenges are a result of the
rapid growth set off by Deng’s reforms. The amount of CO2
emitted per capita has increased more than seven-fold since the
1970s. Today’s leaders will need to be as radically open to change
as Deng to tackle this problem.
 RESENTMENT

Throughout 1982–85 the CCP carried out a “rectification”

campaign designed to restore morals to its membership
and weed out those who did not support reform. This
campaign highlighted the increasing difficulties inherent in
maintaining discipline and limiting corruption at a time of
rapid change, when materialistic values were being
officially propogated.

By 1989 popular disaffection with the CCP and the government had
become widespread. Students—eventually joined by many others—
took to the streets in dozens of cities from April to June to demand
greater freedom and other changes. Government leaders, after
initial hesitation, used the army to suppress this unrest
TIANANMEN SQUARE
MASSACRE, 4 JUNE, 1989
TH
Tiananmen Square is located in the center of Beijing, the capital of
China.
Hu Yaobang, a former Communist Party leader, dies. Hu had worked to
move China toward a more open political system and had become a
symbol of democratic reform. 
Thousands of mourning students march through the capital to
Tiananmen Square, calling for a more democratic government.
In, May 1989, nearly a million Chinese, mostly young students, crowded
into central Beijing to protest for greater democracy and call for the
resignations of Chinese Communist Party leaders deemed too
repressive.
 For nearly three weeks, the protesters kept up daily vigils, and
marched and chanted. Western reporters captured much of the drama
for television and newspaper audiences in the United States and Europe.
On June 4, 1989, however, Chinese troops and security police
stormed through Tiananmen Square, firing indiscriminately into
the crowds of protesters. Turmoil ensued, as tens of thousands of
the young students tried to escape the rampaging Chinese forces.
Other protesters fought back, stoning the attacking troops and
overturning and setting fire to military vehicles.
Reporters and Western diplomats on the scene estimated that at
least 300, and perhaps thousands, of the protesters had been
killed and as many as 10,000 were arrested. An official death toll
has never been released.
 THE TANK MAN
• The politically-charged image -- of a sole,
unarmed protester blocking a line of tanks
during a 1989 government crackdown in
Tiananmen Square

• The image -- and any mention of the massacre

itself -- is banned in China
 PRESENT DAY CHINA
While the Chinese economy has improved dramatically, not everyone in China
has received the benefits of the reforms.
Unemployment has risen in China with nearly 100 million people looking for
jobs. Female employment and conditions of work are as bad as in Europe of the
eighteenth and nineteenth centuries.
Environmental degradation and corruption have increased besides a rise in
economic inequality between rural and urban residents and coastal and inland
provinces.
However,
Regionally and globally, China has become an economic power to reckon with.
The integration of China’s economy and the inter-dependencies that this has
created has enabled China to have considerable influence with its trade
partners.
Today the Chinese economy is the second largest in the world and
although it experienced massive growth in that 35-year span,
authorities have taken a new approach to the economy called the
“new normal.” To avoid overheating the economy, authorities are
conducting a managed slowdown, which has seen growth gradually
slow year after year since 2010. The economy is projected to grow
6.3% in 2019, which is nothing to sniff at, but is a far cry from the
over 10% annual growth seen not too long ago.
1978: Chinese Communist Party launches reforms backed by the recently rehabilitated
veteran leader Deng Xiaoping, two years after death of communist leader Mao Zedong. China
starts the “household-responsibility system” in the countryside, giving some farmers
ownership of their product for the first time. 
1979: Most urban families ordered to limit family size to one child to stem population growth.
Diplomatic relations with the United States normalized. 
1980: Southern city Shenzhen is made the first “special economic zone” to experiment with
more flexible market policies and in a matter of years it is transformed from a fishing village
into a manufacturing and shipping powerhouse. 
1986: Student-led protests against corruption and political control spread in Beijing and other
cities. The unrest leads to the dismissal in 1987 of Hu Yaobang, the reformist Communist
Party chief seen as too liberal by Deng and Party elders. 
1988: Economic turbulence stirs public discontent. Bank runs and panic buying are triggered
by rising inflation that peaks at over 30 percent in cities. 
1989: Anti-government protests spread as other Communist states topple. The Communist
Party sends troops to crush mass student-led protests on the nights of June 3-4, killing
hundreds around Beijing’s Tiananmen Square. Sweeping campaign against dissent launched. 
1990: The Shanghai Stock Exchange, the first ever stock market in Communist China, opens. 
1992: Deng tours southern China to press for faster economic reforms and quell the influence
of Party conservatives opposed to market liberalization. This sparks a fresh wave of market
growth and some political relaxation. 
1997: Deng dies in February. His successor is Jiang Zemin. Former British colony
Hong Kong returns to Chinese rule in July. 
1999: In May, Chinese protesters surround and stone the U.S. embassy in Beijing
and attack U.S. consulate offices elsewhere in the country after NATO forces
bombed China’s embassy in Belgrade during the war against Serbia. 
2001: China joins the World Trade Organization in November. 
2002: The Communist Party of China permits entrepreneurs to become members. 
2003: National People’s Congress endorses Hu Jintao to succeed Jiang as
president. SARS breaks out around the country in spring and summer. China’s first
manned space flight blasts off from Gobi desert in October. 
2005: China sweeps past Britain, France and Italy to become the world’s fourth-
largest economy. China frees the yuan from a dollar peg, letting it float within a
tightly managed band. 
2006: Two great but controversial projects, the Three Gorges Dam and a railway
to Tibet, are completed. China’s foreign currency reserves, already the world’s
biggest, top $1 trillion. 
2008: Beijing hosts hugely successful Summer Olympic Games, illustrating
China’s arrival on world stage.
Hence, its outstanding issues with Japan, the US, ASEAN, and
Russia have been tempered by economic considerations. It hopes
to resolve its differences with Taiwan, which it regards as a
renegade province, by integrating it closely into its economy. Fears
of China’s rise have also been mitigated by its contributions to the
stability of the ASEAN economies after the 1997 financial crisis. Its
more outward looking investment and aid policies in Latin America
and Africa are increasingly projecting it as a global player on the
side of developing economies.
MIXED ECONOMY

Mixed economy is that economy in which both government

and private individuals exercise economic control.” –Murad.

It is a golden mixture of capitalism and socialism. Under this system there is

freedom of economic activities and government interferences for the social
welfare. Hence it is a blend of both the economies. The concept of mixed economy
is of recent origin. 
Mixed economy is that economy in which both public and private sectors
cooperate.
 TYPES OF MIXED ECONOMY
The mixed economy may be classified in two categories: 

Capitalistic Mixed Economy: 

In this type of economy, ownership of various factors of production remains
under private control. Government does not interfere in any manner. The main
responsibility of the government in this system is to ensure rapid economic
growth without allowing concentration of economic power in the few hands. 

Socialistic Mixed Economy: 

Under this system, means of production are in the hands of state. The forces of
demand and supply are used for basic economic decisions. However, whenever
and wherever demand is necessary, government takes actions so that basic
idea of economic growth is not hampered. 
 MIXED ECONOMY IN
CHINA
China combines market forces with the power of the state to drive the
economy. Scholar Zhang Weiwei argues that while China’s economic model
is not perfect, it is performing more effectively than its Western
counterparts.  
The model is officially called the "socialist market economy," which is essentially a
mixed economy, a mixture of the "invisible hand" of the market force and the "visible
hand" of the state.

China has largely established the socialist market economic system over the past
four decades, and the system has, in relative terms, the efficiency of resource
allocation in a market economy and the capacity for macro-regulation in a socialist
country.
In fact, the Chinese economy has three engines: the central
government, local governments and enterprises. 
The central government is responsible for strategic planning and
ensuring overall political and economic stability; local governments
compete with each other via taxation, land policies and other
policies to create business-friendly environment; and enterprises
are the driving force in pushing forward the economy. 
So the "three-in-one model" is a typical part of the Chinese
economic model.
DEVELOPMENTAL
ADMINISTRATION
An important feature of the mixed economy model may be
described as "development administration," in contrast with public
administration.
For instance, every five years, China produces a Five-Year Plan
through extensive consultations at all levels of the Chinese
government and society – an example of "consultative democracy"
of which China is very proud. Every year, the Communist Party of
China (CPC) holds an annual economic conference, usually held in
November. The event is part of a series of institutionalized
discussions on economic policies, which create expectations and
demand.
A typical Five-Year Plan in China catches the attention of the vast
majority of the Chinese society, from private firms to state-owned
enterprises to individual shareholders. China’s fast growth is
definitely inseparable from these regular and predictable cycles of
CHINA IS PROJECTED TO
OVERTHROW USA AS THE
WORLD’S LARGEST ECONOMY BY
2040