The Chinese economic reform (simplified Chinese: 改革开放; traditional Chinese: 改革開放; pinyin: Gǎigé kāifàng, literally Reform and Opening) refers to the program of economic reforms called "Socialism with Chinese characteristics" in the People's Republic of China (PRC) that were started in December 1978 by reformists within the Communist Party of China (CPC) led by Deng Xiaoping(Dell D6400 battery).
China had one of the world's largest and most advanced economies prior to the nineteenth century,[1] while national product per capita remained average in global terms.[2] The economy stagnated since the 16th century[2] and even declined in absolute terms in the nineteenth and much of the twentieth century, with a brief recovery in the 1930s. (Dell HF674 battery)
Economic reforms taking advantage of market principles began in 1978 and were carried out in two stages. The first stage, in the late 1970s and early 1980s, involved the decollectivization of agriculture, the opening up of the country to foreign investment, and permission for entrepreneurs to start up businesses. However, most industry remained state-owned(Dell N3010 battery). The second stage of reform, in the late 1980s and 1990s, involved the privatization and contracting out of much state-owned industry and the lifting of price controls, protectionist policies, and regulations, although state monopolies in sectors such as banking and petroleum remained. The private sector grew remarkably, accounting for as much as 70 percent of China GDP by 2005(Dell Inspiron N4010 battery),[4] a figure larger in comparison to many Western nations[citation needed]. From 1978 to 2010, unprecedented growth occurred, with the economy increasing by 9.5% a year. China's economy became the second largest after the United States. The conservative Hu-Wen Administration more heavily regulated and controlled the economy after 2005, reversing some reforms. (Dell INSPIRON 1100 battery)
The success of China's economic policies and the manner of their implementation has resulted in immense changes in Chinese society. Poverty was reduced. Incomes and income inequality increased, leading to a backlash led by the Maoist New Left. In the academic scene, scholars have debated the reason for the success of the Chinese 'dual track' economy(Dell Inspiron 1200 battery), and have compared them to attempts to reform socialism in the Eastern Bloc and the Soviet Union, and the growth of other developing economies.
For 2010, China was ranked 140th among 179 countries in Index of Economic Freedom World Rankings, which is an improvement from the preceding year.
Chinese economy prior to reform
During the 1930s, China developed a modern industrial sector, which stimulated modest but significant economic growth(Dell Inspiron 1420 battery). Before the collapse of international trade that followed the onset of the Great Depression, China’s share of world trade and its ratio of foreign trade to GDP achieved levels that were not regained for over sixty years.[3]
The economy was heavily disrupted by the war against Japan and the Chinese Civil War from 1937 to 1949, after which the victorious Communists installed a planned economy(Dell Inspiron 1464 battery).[3] Afterwards, the economy largely stagnated and was disrupted by the Great Leap Forward famine which killed between 30 and 40 million people, and the purges of the Cultural Revolution further disrupted the economy. Urban Chinese citizens experienced virtually no increase in living standards from 1957 onwards, and rural Chinese had no better living standards in the 1970s than the 1930s(Dell Inspiron 1564 battery).[6] One study noted that average pay levels in the catering sector exceeded wages in higher education.[7]
The economic performance of China was poor in comparison with other East Asian countries, such as Japan, South Korea, and even rival Chiang Kai-shek's Republic of China. The economy was riddled with huge inefficiencies and malinvestments, and with Mao's death, the Communist Party of China (CPC) leadership turned to market-oriented reforms to salvage the failing economy. (Dell Inspiron 1764 battery)
Course of reforms
Famous billboard of Deng in Shenzhen, one of the most successful Special Economic Zones created by his reforms.
Economic reforms began after Deng Xiaoping and his reformist allies ousted the Gang of Four Maoist faction. By the time Deng took power, there was widespread support among the elite for economic reforms(Dell Inspiron 1564 battery). As de facto leader, Deng's policies faced opposition from party conservatives but were extremely successful in increasing the country's wealth.
1978–84
Deng's first reforms began in agriculture, a sector long neglected by the Communist Party. By the late 1970s, food supplies and production had become so deficient that government officials were warning that China was about to repeat the "disaster of 1959" - the famines which killed tens of millions during the Great Leap Forward. (Dell Inspiron 1764 battery) Deng responded by decollectivizing agriculture and emphasizing the Household-responsibility system, which divided the land of the People's communes into private plots. Farmers were able to keep the land's output after paying a share to the state. This move increased agricultural production, increased the living standards of hundreds of millions of farmers and stimulated rural industry. (Dell Inspiron 1520 battery)
Reforms were also implemented in urban industry to increase productivity. A dual price system was introduced, in which state-owned industries were allowed to sell any production above the plan quota, and commodities were sold at both plan and market prices, allowing citizens to avoid the shortages of the Maoist era(Dell Inspiron 1521 battery). Private businesses were allowed to operate for the first time since the Communist takeover, and they gradually began to make up a greater percentage of industrial output.[11] Price flexibility was also increased, expanding the service sector.[12]
The country was opened to foreign investment for the first time since the Kuomintang era. Deng created a series of special economic zones for foreign investment that were relatively free of the bureaucratic regulations and interventions that hampered economic growth(Dell inspiron 1525 battery). These regions became engines of growth for the national economy.[12]
1984–93
During this period, Deng Xiaoping's policies continued beyond the initial reforms. Controls on private businesses and government intervention continued to decrease, and there was small-scale privatization of state enterprises which had become unviable. A notable development was the decentralization of state control(Dell inspiron 1526 battery), leaving local provincial leaders to experiment with ways to increase economic growth and privatize the state sector.[13] Township and village enterprises, firms nominally owned by local governments but effectively private, began to gain market share at the expense of the state sector.[14] Conservative elder opposition, led by Chen Yun(Dell Inspiron 1720 battery), prevented many major reforms which would have damaged the interests of special interest groups in the government bureaucracy.[15] Corruption and increased inflation increased discontent, contributing to the Tiananmen Square protests of 1989 and a conservative backlash after that event which ousted several key reformers and threatened to reverse many of Deng's reforms(Dell Inspiron 2000 battery).[16] However, Deng stood by his reforms and in 1992, he affirmed the need to continue reforms in his southern tour.[15] He also reopened the Shanghai Stock Exchange closed by Mao 40 years earlier.
Although the economy grew quickly during this period, economic troubles in the inefficient state sector increased. Heavy losses had to be made up by state revenues and acted as a drain upon the economy.[17] Inflation became problematic in 1985, 1988 and 1992(Dell INSPIRON 2600 battery).[16] Privatizations began to accelerate after 1992, and the private sector surpassed the state sector in share of GDP for the first time in the mid-1990s. China's government slowly expanded recognition of the private economy, first as a "complement" to the state sector (1988) and then as an "important component" (1999) of the socialist market economy(Dell INSPIRON 3800 battery).[18]
1993–2005
The Lujiazui financial district of Pudong, Shanghai, the financial and commercial hub of modern China
In the 1990s, Deng forced many of the conservative elders such as Chen Yun into retirement, allowing radical reforms to be carried out.[15] Despite Deng's death in 1997, reforms continued under his handpicked successors, Jiang Zemin and Zhu Rongji(Dell INSPIRON 4000 battery), who were ardent reformers. In 1997 and 1998, large-scale privatization occurred, in which all state enterprises, except a few large monopolies, were liquidated and their assets sold to private investors. Between 2001 and 2004, the number of state-owned enterprises decreased by 48 percent.[14] During the same period, Jiang and Zhu also reduced tariffs(Dell Inspiron 5000 battery), trade barriers and regulations, reformed the banking system, dismantled much of the Mao-era social welfare system, forced the PLA to divest itself of military-run businesses,[19] reduced inflation, and joined the World Trade Organization. These moves invoked discontent among some groups, especially laid off workers of state enterprises that had been privatized(Dell INSPIRON 500M battery).[20]
The domestic private sector first exceeded 50% of GDP in 2005 and has further expanded since.[21] However, some state monopolies still remained, such as in petroleum and banking.[22]
2005–present
The conservative Hu-Wen Administration began to reverse some of Deng Xiaoping's reforms in 2005. Observers note that the government adopted more egalitarian and populist policie(Dell INSPIRON 5100 battery)s.[23] It increased subsidies and control over the health care sector,[24] halted privatization,[5] and adopted a loose monetary policy, which lead to the formation of a U.S.-style property bubble in which property prices tripled.[25] The privileged state sector was the primary recipient of government investment, which under the new administration, promoted the rise of large "national champions" which could compete with large foreign corporations. (Dell INSPIRON 510M battery)
Economic performance since reform
China's nominal GDP trend from 1952 to 2005. Note the rapid increase since reform in the late 1970s.
China's economic growth since the reform has been very rapid, exceeding the East Asian Tigers. Economists estimate China's GDP growth from 1978 to 2005 at 9.5% a year. Since the beginning of Deng Xiaoping's reforms, China's GDP has risen tenfold(Dell INSPIRON 6000 battery).[26] The increase in total factor productivity (TFP) was the most important factor, with productivity accounting for 40.1% of the GDP increase, compared with a decline of 13.2% for the period 1957 to 1978—the height of Maoist policies. For the period 1978–2005, Chinese GDP per capita increased from 2.7% to 15.7% of US GDP per capita, and from 53.7% to 188.5% of Indian GDP per capita. Per capita incomes grew at 6.6% a year. (Dell INSPIRON 600M battery)Average wages rose sixfold between 1978 and 2005,[28] while absolute poverty declined from 41% of the population to 5% from 1978 to 2001.[29] Some scholars believed that China's economic growth has been understated, due to large sectors of the economy not being counted.[30]
[edit]Impact on world growth
China is widely seen as an engine of world and regional growth(Dell Inspiron 6400 battery).[31] Surges in Chinese demand account for 50, 44 and 66 percent of export growth of Hong Kong, Japan and Taiwan respectively, and China's trade deficit with the rest of East Asia helped to revive the economies of Japan and Southeast Asia.[31] Asian leaders view China's economic growth as an "engine of growth for all Asia"(Dell INSPIRON 7000 battery).[32]
Reforms in specific sectors
After three decades of reform, China's economy experienced one of the world's biggest booms. Agriculture and light industry have largely been privatized, while the state still retains control over some heavy industries. Despite the dominance of state ownership in finance, telecommunications, petroleum and other important sectors of the economy(Dell INSPIRON 700M battery), private entrepreneurs continue to expand into sectors formerly reserved for public enterprise. Prices have also been liberalized.[33]
Agriculture
Production of wheat from 1961 to 2004. Data from FAO, year 2005. Y-axis: Production in metric ton.
During the pre-reform period, Chinese agricultural performance was extremely poor and food shortages were common.[34] After Deng Xiaoping implemented the household responsibility system, agricultural output increased by 8.2 percent a year(Dell Inspiron 710m battery), compared with 2.7% in the pre-reform period, despite a decrease in the area of land used.[34] Food prices fell nearly 50%, while agricultural incomes rose.[35]
A more fundamental transformation was the economy's growing adoption of cash crops instead of just growing rice and grain.[35] Vegetable and meat production increased to the point that Chinese agricultural production was adding the equivalent of California’s vegetable industry every two years. Growth in the sector slowed after 1984(Dell INSPIRON 8200 battery), with agriculture falling from 40% of GDP to 16%; however, increases in agricultural productivity allowed workers to be released for work in industry and services, while simultaneously increasing agricultural production.[36] Trade in agriculture was also liberalized and China became an exporter of foodstuffs, a great contrast to its previous famines and shortages(Dell INSPIRON 8600 battery).[37]
Industry
In the pre-reform period, industry was largely stagnant and the socialist system presented few incentives for improvements in quality and productivity. With the introduction of the dual price system and greater autonomy for enterprise managers, productivity increased greatly in the early 1980s.[38] Foreign enterprises and newly formed Township and Village Enterprises(Dell INSPIRON 9100 battery), owned by local government and often de facto private firms, competed successfully with state-owned enterprises. By the 1990s, large-scale privatizations reduced the market share of both the Township and Village Enterprises and state-owned enterprises and increased the private sector's market share. The state sector's share of industrial output dropped from 81 percent in 1980 to 15 percent in 2005(Dell INSPIRON 9200 battery).[39] Foreign capital controls much of Chinese industry and plays an important role.[14]
From virtually an industrial backwater in 1978, China is now the world's biggest producer of concrete, steel, ships and textiles, and has the world's largest automobile market. Chinese steel output quadrupled between 1980 and 2000, and from 2000 to 2006 rose from 128.5 million tons to 418.8 million tons, one-third of global production(Dell INSPIRON 9300 battery).[40] Labor productivity at some Chinese steel firms exceeds Western productivity.[40] From 1975 to 1992, China's automobile production rose from 139,800 to 1.1 million, rising to 9.35 million in 2008.[41] Light industries such as textiles saw an even greater increase, due to reduced government interference. Chinese textile exports increased from 4.6% of world exports in 1980 to 24.1% in 2005. Textile output increased 18-fold over the same period(Dell Inspiron 9400 battery).[42]
This increase in production is largely the result of the removal of barriers to entry and increased competition; the number of industrial firms rose from 377,300 in 1980 to nearly 8 million in 1990 and 1996; the 2004 economic census, which excluded enterprises with annual sales below RMB5 million, counted 1.33 million manufacturing firms(Dell Inspiron E1505 battery), with Jiangsu and Zhejiang reporting more firms than the nationwide total for 1980.[43] Compared to other East Asian industrial growth spurts, China's industrial performance exceeded Japan's but remained behind South Korea and Taiwan's economies.[44]
Trade and foreign investment
Global distribution of Chinese exports in 2006 as a percentage of the top market.
Scholars find that China has attained a degree of openness that is unprecedented among large and populous nations", with competition from foreign goods in almost every sector of the economy(Dell Inspiron E1705 battery). Foreign investment helped to greatly increase quality, knowledge and standards, especially in heavy industry. China's experience supports the assertion that globalization greatly increases wealth for poor countries.[43] Throughout the reform period, the government reduced tariffs and other trade barriers, with the overall tariff rate falling from 56% to 15%(Dell Inspiron Mini 9 battery). By 2001, less than 40% of imports were subject to tariffs and only 9 percent of import were subject to licensing and import quotas. Even during the early reform era, protectionist policies were often circumvented by smuggling.[45] When China joined the WTO, it agreed to considerably harsher conditions than other developing countries.[46] Trade has increased from under 10% of GDP to 64% of GDP over the same period(Dell Latitude D400 battery).[47] China is considered the most open large country; By 2005, China’s average statutory tariff on industrial products was 8.9 percent. For Argentina, Brazil, India, and Indonesia, the respective percentage figures are 30.9, 27.0, 32.4, and 36.9 percent.[48]
China's trade surplus is considered by some in the United States as threatening American jobs. In the 2000s, the Bush administration pursued protectionist policies such as tariffs and quotas to limit the import of Chinese goods(Dell STUDIO 1450 battery).[32] Some scholars argue that China's growing trade surplus is the result of industries in more developed Asian countries moving to China, and not a new phenomenon.[32] China's trade policy, which allows producers to avoid paying the Value Added Tax (VAT) for exports and undervaluation of the currency since 2002, has resulted in an overdeveloped export sector and distortion of the economy overall, a result that could hamper future growth(Dell Vostro 1400 battery).[49]
Foreign investment was also liberalized upon Deng's ascension. Special Economic Zones (SEZs) were created in the early 1980s to attract foreign capital by exempting them from taxes and regulations. This experiment was successful and SEZs were expanded to cover the whole Chinese coast. Although FDI fell briefly after the 1989 student protests, it increased again to 160 billion by 2004. (Dell Vostro 1500 battery)
Services
Shanghai Stock Exchange (SSE)
In the 1990s, the financial sector was liberalized.[51] After China joined the World Trade Organization (WTO), the service sector was considerably liberalized and foreign investment was allowed. Restrictions on retail, wholesale and distribution were ended.[52] Banking, financial services, insurance and telecommunications were also opened up to foreign investment. (Dell XPS GEN 2 battery)
China's banking sector is dominated by four large state-owned banks, which are largely inefficient and monopolistic.[54] China's largest bank, ICBC, is the largest bank in the world. The financial sector is widely seen as a drag on the economy due to the inefficient state management.[55] Non-performing loans(Dell XPS M1210 battery), mostly made to local governments and unprofitable state-owned enterprises for political purposes,[56] are a big drain on the financial system and economy, reaching over 22% of GDP by 2000, with a drop to 6.3% by 2006 due to government recapitalization of these banks. In 2006, the total amount of non-performing loans was estimated at 160 billion USD(Dell XPS M1330 battery).[57] Observers recommend privatization of the banking system to solve this problem, a move that was partially carried out when the four banks were floated on the stock market.[58] China's financial markets, the Shanghai Stock Exchange and Shenzhen Stock Exchange, are relatively ineffective at raising capital, as they comprise only 11 percent of GDP(Dell XPS 1340 battery).[59]
Due to the weakness of the banks, firms raise most of their capital through an informal, nonstandard financial sector developed during the 1980s and 1990s, consisting largely of underground businesses and private banks.[60] Internal finance is the most important method successful firms use to fund their activities. (Dell XPS M1530 battery)
Government finances
Foreign currency reserves and gold minus external debt based on 2010 data from CIA Factbook
In the pre-reform era, government was funded by profits from state-owned enterprises, much like the Soviet Union.[61] As the state sector fell in importance and profitability, government revenues, especially that of the central government in Beijing(Dell XPS M170 battery), fell substantially and the government relied on a confused system of inventory taxes. Government revenues fell from 35% of GDP to 11% of GDP in the mid-1990s, excluding revenue from state-owned enterprises, with the central government's budget at just 3% of GDP.[62] The tax system was reformed in 1994 when inventory taxes were unified into a single VAT of 17% on all manufacturing(Dell XPS M1710 battery), repair, and assembly activities and an excise tax on 11 items, with the VAT becoming the main income source, accounting for half of government revenue. The 1994 reform also increased the central government's share of revenues, increasing it to 9 percent of GDP.[63]
Reasons for success
Scholars have proposed a number of theories to explain the success of China's economic reforms in its move from a planned economy to a socialist market economy despite unfavorable factors such as the troublesome legacies of socialism(Dell XPS M1730 battery), considerable erosion of the work ethic, decades of anti-market propaganda, and the "lost generation" whose education disintegrated amid the disruption of the Cultural Revolution.[64] One notable theory is that decentralization of state authority allowed local leaders to experiment with various ways to privatize the state sector and energize the economy.[13] Although Deng was not the originator of many of the reforms, he gave approval to them(Dell XPS M2010 battery). Another theory focuses on internal incentives within the Chinese government, in which officials presiding over areas of high economic growth were more likely to be promoted. Scholars have noted that local and provincial governments in China were "...hungry for investment" and competed to reduce regulations and barriers to investment to boost economic growth and the officials' own careers(Dell Latitude E5400 battery). A third explanation believes that the success of the reformists are attributable to Deng's cultivation of his own followers in the government.[65] Herman Kahn explained the rise of Asian economic power saying the Confucian ethic was playing a "similar but more spectacular role in the modernization of East Asia than the Protestant ethic played in Europe".(Dell Latitude E5500 battery)
China's success is also due to the export-led growth strategy used successfully by the Four Asian Tigers beginning with Japan in the 1960s - 1970s and other Newly industrialized counties.[67]
The collapse of the Soviet Bloc and centrally planned economies in 1989 renewed impetus in the China to further reform its economy in a different course to avoid the same fate(Dell Latitude E6400 battery).[68] China also wanted to avoid the Russia under Boris Yeltsin with ad-hoc experiment with market capitalism which resulted in the rise of powerful oligarchs, corruption and loss of state revenue which exacerbated economic disparity.[69]
Effect on inequality
Gini-coefficient of national income distribution around the world (dark green: <0.25, red: >0.60)
The economic reforms have increased inequality dramatically within China. Despite rapid economic growth(Dell Latitude E6500 battery) which has virtually eliminated poverty in urban China and reduced it greatly in rural regions and the fact that living standards for everyone in China have drastically increased in comparison to the pre-reform era, the Gini coefficient of China is estimated to be above 0.45, comparable to many South American countries.[70]
Increased inequality is attributed to the disappearance of the welfare state and differences between coastal and interior provinces, the latter being burdened by a larger state sector(Dell Inspiron Mini 12 battery).[71] Some Western scholars have suggested that reviving the welfare state and instituting a re-distributive income tax system is needed to relieve inequality,[72] while some Chinese economists have suggested that privatizing state monopolies and distributing the proceeds to the population can reduce inequality. (Dell XPS M140 battery)
Comparison to other developing economies
The development trends of Chinese and Indian GDP (1950-2003).
China's transition from socialism to a socialist market economy has often been compared with economies in Eastern Europe that are undergoing a similar transition. China's performance has been praised for avoiding the major shocks and inflation that plagued the Eastern Bloc.[74] The Eastern bloc economies saw declines of 13 to 65% in GDP at the beginning of reforms(Dell XPS 13 battery), while Chinese growth has been very strong since the beginning of reform.[75] China also managed to avoid the hyperinflation of 200 to 1,000% that Eastern Europe experienced.[76] This success is attributed to the gradualist and decentralized approach of the Chinese government, which allowed market institutions to develop to the point where they could replace state planning(Dell XPS 16 battery). This contrasts with the "big bang" approach of Eastern Europe, where the state-owned sector was rapidly privatized with employee buyouts, but retained much of the earlier, inefficient management.[77] Other factors thought to account for the differences are the greater urbanization of the CIS economies and differences in social welfare and other institutions(Dell XPS 1640 battery).[78] Another argument is that, in the Eastern European economies, political change is sometimes seen to have made gradualist reforms impossible, so the shocks and inflation were unavoidable.[79]
China's economic growth has been compared with other developing countries, such as Brazil, Mexico, and India. GDP growth in China outstrips all other developing countries, with only India after 1990 coming close to China's experience(Dell XPS 1645 battery).[80] Scholars believes that high rates of investments, especially increases in capital invested per worker, have contributed to China's superior economic performance.[80] China's relatively free economy, with less government intervention and regulation, is cited by scholars as an important factor in China's superior performance compared to other developing countries. (Dell XPS 1647 battery)
Legacy and criticism
The government retains monopolies in several sectors, such as petroleum and banking;[5] the inefficient state banking system has a large number of non-performing loans[57] and loose monetary policy has caused an asset bubble which threatens economic stability. The recent reversal of some reforms have left some observers dubbing 2008 the "(Dell Latitude 131L battery)...third anniversary of the end of reforms".[5] Nevertheless, observers believe that China's economy can continue growing at rates of 6–8 percent until 2025,[82] though a reduction in state intervention is considered necessary for sustained growth by some.[83]
Despite reducing poverty and increasing China's wealth, Deng's reforms have been criticized by the Chinese New Left for increasing inequality and allowing private entrepreneurs to purchase state assets at reduced prices(Dell Latitude C400 battery). These accusations were especially intense during the Lang-Gu dispute, in which New Left academic Larry Lang accused entrepreneur Gu Sujung of usurping state assets, after which Gu was imprisoned.[84] The Hu-Wen Administration has adopted some New Left policies, such as halting privatizations and increasing the state sector's importance in the economy(Dell Latitude C500 battery), Keynesian policies that have been criticized by many Chinese economists who advocate a policy of deregulation, tax cuts, and privatization.[73]
Other criticisms focus on the effects of industrialization on public health and the environment. Scholars believe that public health issues are unlikely to become major obstacles to the growth of China’s economy during the coming decades, and studies have shown that air quality and other environmental measures in China are better than those in developed countries(Dell Latitude C510 battery), such as the United States and Japan, at the same level of development.
The May Fourth Movement (traditional Chinese: 五四運動; simplified Chinese: 五四运动; pinyin: Wǔsì Yùndòng) was an anti-imperialist, cultural, and political movement growing out of student demonstrations in Beijing on May 4, 1919, protesting the Chinese government's weak response to the Treaty of Versailles(Dell Latitude C540 battery), especially the Shandong Problem. These demonstrations sparked national protests and marked the upsurge of Chinese nationalism, a shift towards political mobilization and away from cultural activities, and a move towards populist base rather than intellectual elites.
The broader use of the term "May Fourth Movement" often refers to the period during 1915-1921 more usually called the New Culture Movement(Dell Latitude C600 battery).
Background
Following the Xinhai Revolution in 1911, the Qing Dynasty was overthrown. This marked the end of thousands of years of powerful imperial rule, and theoretically ushered a new era in which political power rested with the people. However, the reality was that China was a fragmented nation dominated by warlords(Dell Latitude C610 battery), who were more concerned with their own political powers and private armies than national interests. The Chinese Beiyang government was occupied with suppressing internal affairs, and did little to counter the influence exerted by imperialist foreign powers. The Beiyang government made various concessions to foreigners in order to gain monetary and military support against their rivals(Dell Latitude C640 battery).
Defeats by foreign powers and the presence of spheres of influence inflamed a sense of nationalism among the emerging middle class and cultural leaders. Leaders of the New Culture Movement believed that traditional Chinese values were responsible for the political weakness of the nation. This created a rather peculiar situation(Dell Latitude C800 battery), in which Chinese nationalists called for a rejection of traditional values and the selective adoption of Western ideals of science and democracy.
Shandong Problem
Main article: Shandong Problem
China had entered World War I on the side of the Allied Triple Entente in 1917 with the condition that all German spheres of influence, such as Shandong [Shantung], would be returned to China; although in that year, 140,000 Chinese labourers (as a part of the British army, the Chinese Labour Corps) were sent to France. (Dell Latitude C810 battery) The Versailles Treaty of April 1919 awarded German rights in Shandong Province to Japan. The representatives of the Chinese government put forth the following requests:
the abolition of all privileges of foreign powers in China, such as extraterritoriality
the cancelling of the "Twenty-One Demands" with the Japanese
the return to China of the territory and rights of Shandong, which Japan had taken from Germany during World War I.
The Western Allies dominated the meeting and paid little heed to the Chinese representatives' demands. Britain and France were primarily interested in punishing Germany(Dell Latitude C840 battery). Although the United States promoted Woodrow Wilson's Fourteen Points and the ideals of self-determination at the conference, Wilson was unable to advance these ideals in the face of stubborn resistance by David Lloyd George, Georges Clemenceau and the U.S. Congress. American advocacy of self-determination at the League of Nations was attractive to Chinese intellectuals(Dell Latitude CPI battery), but the failure of the United States to follow through was seen as a betrayal. Chinese diplomatic failure at the Paris Peace Conference became the incident that touched off the outbreak of the May Fourth Movement, and became known as the "Shandong Problem".
Protest
On the morning of May 4, 1919, student representatives from thirteen different local universities met in Beijing and drafted five resolutions:
to oppose the granting of Shandong to the Japanese under former German concessions.
to draw awareness of China's precarious position to the masses in China(Dell Latitude CPX battery).
to recommend a large-scale gathering in Beijing.
to promote the creation of a Beijing student union.
to hold a demonstration that afternoon in protest to the terms of the Treaty of Versailles.
Protestors dissatisfied with the Treaty of Versailles for China
Tsinghua University students burn Japanese goods.
On the afternoon of May 4 over 3,000 students of Peking University and other schools gathered together in front of Tiananmen and held a demonstration(Dell Latitude D410 battery). The general opinion was that the Chinese government was "spineless".[1] They voiced their anger at the Allied betrayal of China and the government's inability to secure Chinese interests in the conference. A boycott of Japanese products during this period was advocated, which boosted the domestic Chinese industry slightly.[citation needed] Throughout the streets of China(Dell Latitude D420 battery), students packed the streets to protest China's concession to Japanese demands. During these demonstrations, students also insisted on the resignation of three Chinese officials involved in these proceedings. After burning the residence of one of the three despised officials, student protesters were arrested and severely assaulted(Dell Latitude D430 battery).[2]
They shouted out such slogans as "Struggle for the sovereignty externally, get rid of the national traitors at home", "Do away with the 'Twenty-One Demands'", and "Don't sign the Versailles Treaty".
The next day, students in Beijing as a whole went on strike, and students in other parts of the country responded one after another. From early June, in order to support the students' struggle, workers and businessmen in Shanghai also went on strike(Dell Latitude D500 battery). The center of the movement moved from Beijing to Shanghai. In addition to students, a wide array of different groups also publicly displayed disagreement with the Chinese government. The lower class was also very angry at the current state of affairs, such as mistreatment of workers and perpetual poverty of small peasants. Chancellors from thirteen of China's tertiary institutions initiated the rescue of student prisoners(Dell Latitude D505 battery). Congregations such as media outlets, citizen societies, and chambers of commerce offered their support for these students. Merchants further illustrated support for the students by resisting tax payments if China's government remained obstinate.[3] In Shanghai, these May Fourth events culminated into general strikes by merchants and workers that nearly devastated the entire Chinese economy(Dell Latitude D510 battery).[2] Under intense public outcry, the Beiyang government had to release the arrested students and dismiss Cao Rulin, Zhang Zongxiang and Lu Zongyu from their posts. Also, the Chinese representatives in Paris refused to sign on the peace treaty: the May Fourth Movement won the initial victory. However, this move was more symbolic than anything else(Dell Latitude D520 battery). Japan still retained control of the Shandong Peninsula and the islands in the Pacific it had obtained during World War I. Even though these protests and marches did not manage to achieve all their objectives, the partial success of the movement exhibited the ability of China's various social classes to successfully collaborate, an ideal that would be admired by both Nationalists and Communists(Dell Latitude D600 battery).[2]
[edit]Birth of Chinese Communism
This unreferenced section requires citations to ensure verifiability.
For many years, the orthodox view in the People's Republic of China was that after the demonstrations in 1919 and their suppression, the discussion became more and more political. People like Chen Duxiu and Li Dazhao shifted more to the Left and were among the leading founders of the 1921 Communist Party of China(Dell Latitude D610 battery), whilst other intellectuals, such as the Anarchist writer and agitator, Ba Jin also took part in the movement. Originally voluntarist or nihilist figures like Li Shicen and Zhu Qianzhi made similar turns to the Left as the 1920s saw China become increasingly turbulent.
According to this view:
The May Fourth Movement was a thoroughly anti-imperialist and anti-feudal revolutionary movement. Young students acted as its pioneers. The Chinese working class went up on the political stage, and functioned as the main force in the later period of the movement(Dell Latitude D620 battery). Li Dazhao, Chen Duxiu and other intellectuals directed and promoted the development of the movement, and played leading roles in it. On the local level, future Communist Party leader Mao Zedong rallied opposition against Hunan's warlord Chang Ching-yao.
The May Fourth Movement covered more than 20 provinces and over 100 cities of the country. It had a broader popular foundation than the Revolution of 1911. Its great contribution lay in arousing the people's consciousness and preparing for the unity of the revolutionary forces(Dell Latitude D630 battery).
The May Fourth Movement promoted the spreading of Marxism in China, and prepared the ideological foundation for the establishment of the Chinese Communist Party. The October Revolution pointed out the direction for the Chinese revolution. The May Fourth Movement, which took place after the October Socialist Revolution, was a part of the world's Proletarian Revolution(Dell Latitude D800 battery).
The May Fourth Movement served as an intellectual turning point in China; it was a seminal event that radicalized Chinese intellectual thought. Western-style liberal democracy had previously had a degree of traction amongst Chinese intellectuals, but after the Versailles Treaty (which was viewed as a betrayal of China's interests), lost much of its attractiveness(Dell Latitude D810 battery). Woodrow Wilson's Fourteen Points, despite being rooted in moralism, were also seen as Western-centric and hypocritical.
Many in the Chinese intellectual community believed that the United States had done little to convince the imperialist powers (especially Britain, France, and Japan) to adhere to the Fourteen Points, and observed that the United States itself had declined to join the League of Nations; as a result they turned away from the Western liberal democratic model(Dell Latitude D820 battery). Marxism began to take hold in Chinese intellectual thought, particularly among those already on the Left. It was during this time that communism was studied seriously by some Chinese intellectuals such as Chen Duxiu and Li Dazhao.
Some historians[who?] have speculated that Chinese history might have taken a different course at this time had the United States taken a stronger position on Woodrow Wilson's Fourteen Points and self-determination(Dell Latitude D830 battery). The United States was not a major imperialist power and was in a relatively strong position to take an anti-imperialist stance; however, it did not do so. As a result, China turned its attention to utilizing other political tools that could potentially resolve many of the nation's issues. These tools subsumed the concepts of Marxism and Leninism(Dell Latitude 2100 battery).
[edit]Historical significance
Scholars rank the New Culture and May Fourth Movements as significant turning points, along with the abolition of the civil service system in 1905 and the overthrow of the monarchy in 1911. Participants at the time, such as Hu Shi, referred to this era as the Chinese Renaissance because there was an intense focus on science and experimentation(Dell Latitude 2110 battery).[4]
The challenge to traditional Chinese values, however, was also met with strong opposition, especially from the Kuomintang (nationalists). From their perspective, the movement destroyed the positive elements of Chinese tradition and placed a heavy emphasis on direct political actions and radical attitudes, characteristics of the emerging Chinese Communist Party(Dell Latitude E4300 battery). On the other hand, the Communist Party viewed the movement more favorably, although remaining suspicious of the early phase which emphasized the role of enlightened intellectuals, not revolution.[5] In its broader sense, the May Fourth Movement led to the establishment of radical intellectuals who went on to mobilize peasants and workers into the Communist party and gain the organizational strength that would solidify the success of the Communist Revolution. (Dell Vostro 1310 battery)
[edit]Criticism
Chinese Muslims refused to follow the May Fourth Movement. Instead, they taught both modern, western education such as science, along with traditional Confucian literature and Classical Chinese languages with Islamic education and Arabic in their schools. They merely incorporated the new instead of destroying the old and replacing it. (Dell Vostro 1320 battery)
Chiang Kai-shek, as a nationalist, and Confucianist, was against the iconoclasm of the May Fourth Movement. He viewed some western ideas as foreign, as a Chinese nationalist, and that the introduction of western ideas and literature that the May Fourth Movement wanted was not welcome. He and Dr. Sun Yat-sen criticized these May Fourth intellectuals for corrupting morals of youth. (Dell Vostro 1510 battery)
The Kuomintang party, under Chiang Kai-shek's rule, carried out the opposite agenda of the May Fourthers, he started the New Life Movement, against western values, instead promomoting Confucianism and making it more Chinese. The Kuomintang purged China's education system of western ideas, introducing Confucianism into the curriculum(Dell Vostro 1520 battery). Education came under the total control of state, which meant, in effect, the Kuomintang party, via the Ministry of Education. Military and political classes on the Kuomintang's Three principles of the people were added. Textbooks, exams, degrees and educational instructors were all controlled by the state, as were all universities. (Dell Vostro 2510 battery)
[edit]Neotraditionalism vs. Western Thought
Although the May Fourth Movement did find partial success at removing Chinese traditional culture,[citation needed] there were still proponents who steadfastly argued that China's traditions and values should be the fundamental foundation of the nation. From these opponents of Western civilization derived three neotraditional schools of thought: national essence(Dell Vostro 1014 battery), national character, and modern relevance of Confucianism. Each school of thought denounced the western values of individualism, materialism and utilitarianism as adequate avenues for the development of China. Each school possessed specific objectives. The "national essence" school sought to discover aspects of traditional culture that could potentially serve the national development of China(Dell Inspiron 1410 battery). Such traditional aspects consisted of various philosophical and religious practices that emerged parallel with Confucianism. Most particularly, China imported Buddhism, a religion from their neighboring country of India. Under the “national character” school, advocates promoted the traditional family system, the primary target of the May Fourth Movement(Dell Vostro 1015 battery). In this school, reformers viewed their Western counterparts as shells without morals. Finally, the modern relevance of Confucianism revolved around this notion that Confucian values were better than Western ones. Due to the fact that western culture primarily concentrated their efforts on rational analysis(Dell Inspiron 1088 battery), China’s neotraditionalist disputed that the concept was misguided especially in the realistic, altering milieu of the world. Most importantly, these three neo-traditionalist thoughts gave no consideration to the individual, which was the main theme of the May Fourth Movement(Dell Inspiron Mini 1012 battery).
China had one of the world's largest and most advanced economies prior to the nineteenth century,[1] while national product per capita remained average in global terms.[2] The economy stagnated since the 16th century[2] and even declined in absolute terms in the nineteenth and much of the twentieth century, with a brief recovery in the 1930s. (Dell HF674 battery)
Economic reforms taking advantage of market principles began in 1978 and were carried out in two stages. The first stage, in the late 1970s and early 1980s, involved the decollectivization of agriculture, the opening up of the country to foreign investment, and permission for entrepreneurs to start up businesses. However, most industry remained state-owned(Dell N3010 battery). The second stage of reform, in the late 1980s and 1990s, involved the privatization and contracting out of much state-owned industry and the lifting of price controls, protectionist policies, and regulations, although state monopolies in sectors such as banking and petroleum remained. The private sector grew remarkably, accounting for as much as 70 percent of China GDP by 2005(Dell Inspiron N4010 battery),[4] a figure larger in comparison to many Western nations[citation needed]. From 1978 to 2010, unprecedented growth occurred, with the economy increasing by 9.5% a year. China's economy became the second largest after the United States. The conservative Hu-Wen Administration more heavily regulated and controlled the economy after 2005, reversing some reforms. (Dell INSPIRON 1100 battery)
The success of China's economic policies and the manner of their implementation has resulted in immense changes in Chinese society. Poverty was reduced. Incomes and income inequality increased, leading to a backlash led by the Maoist New Left. In the academic scene, scholars have debated the reason for the success of the Chinese 'dual track' economy(Dell Inspiron 1200 battery), and have compared them to attempts to reform socialism in the Eastern Bloc and the Soviet Union, and the growth of other developing economies.
For 2010, China was ranked 140th among 179 countries in Index of Economic Freedom World Rankings, which is an improvement from the preceding year.
Chinese economy prior to reform
During the 1930s, China developed a modern industrial sector, which stimulated modest but significant economic growth(Dell Inspiron 1420 battery). Before the collapse of international trade that followed the onset of the Great Depression, China’s share of world trade and its ratio of foreign trade to GDP achieved levels that were not regained for over sixty years.[3]
The economy was heavily disrupted by the war against Japan and the Chinese Civil War from 1937 to 1949, after which the victorious Communists installed a planned economy(Dell Inspiron 1464 battery).[3] Afterwards, the economy largely stagnated and was disrupted by the Great Leap Forward famine which killed between 30 and 40 million people, and the purges of the Cultural Revolution further disrupted the economy. Urban Chinese citizens experienced virtually no increase in living standards from 1957 onwards, and rural Chinese had no better living standards in the 1970s than the 1930s(Dell Inspiron 1564 battery).[6] One study noted that average pay levels in the catering sector exceeded wages in higher education.[7]
The economic performance of China was poor in comparison with other East Asian countries, such as Japan, South Korea, and even rival Chiang Kai-shek's Republic of China. The economy was riddled with huge inefficiencies and malinvestments, and with Mao's death, the Communist Party of China (CPC) leadership turned to market-oriented reforms to salvage the failing economy. (Dell Inspiron 1764 battery)
Course of reforms
Famous billboard of Deng in Shenzhen, one of the most successful Special Economic Zones created by his reforms.
Economic reforms began after Deng Xiaoping and his reformist allies ousted the Gang of Four Maoist faction. By the time Deng took power, there was widespread support among the elite for economic reforms(Dell Inspiron 1564 battery). As de facto leader, Deng's policies faced opposition from party conservatives but were extremely successful in increasing the country's wealth.
1978–84
Deng's first reforms began in agriculture, a sector long neglected by the Communist Party. By the late 1970s, food supplies and production had become so deficient that government officials were warning that China was about to repeat the "disaster of 1959" - the famines which killed tens of millions during the Great Leap Forward. (Dell Inspiron 1764 battery) Deng responded by decollectivizing agriculture and emphasizing the Household-responsibility system, which divided the land of the People's communes into private plots. Farmers were able to keep the land's output after paying a share to the state. This move increased agricultural production, increased the living standards of hundreds of millions of farmers and stimulated rural industry. (Dell Inspiron 1520 battery)
Reforms were also implemented in urban industry to increase productivity. A dual price system was introduced, in which state-owned industries were allowed to sell any production above the plan quota, and commodities were sold at both plan and market prices, allowing citizens to avoid the shortages of the Maoist era(Dell Inspiron 1521 battery). Private businesses were allowed to operate for the first time since the Communist takeover, and they gradually began to make up a greater percentage of industrial output.[11] Price flexibility was also increased, expanding the service sector.[12]
The country was opened to foreign investment for the first time since the Kuomintang era. Deng created a series of special economic zones for foreign investment that were relatively free of the bureaucratic regulations and interventions that hampered economic growth(Dell inspiron 1525 battery). These regions became engines of growth for the national economy.[12]
1984–93
During this period, Deng Xiaoping's policies continued beyond the initial reforms. Controls on private businesses and government intervention continued to decrease, and there was small-scale privatization of state enterprises which had become unviable. A notable development was the decentralization of state control(Dell inspiron 1526 battery), leaving local provincial leaders to experiment with ways to increase economic growth and privatize the state sector.[13] Township and village enterprises, firms nominally owned by local governments but effectively private, began to gain market share at the expense of the state sector.[14] Conservative elder opposition, led by Chen Yun(Dell Inspiron 1720 battery), prevented many major reforms which would have damaged the interests of special interest groups in the government bureaucracy.[15] Corruption and increased inflation increased discontent, contributing to the Tiananmen Square protests of 1989 and a conservative backlash after that event which ousted several key reformers and threatened to reverse many of Deng's reforms(Dell Inspiron 2000 battery).[16] However, Deng stood by his reforms and in 1992, he affirmed the need to continue reforms in his southern tour.[15] He also reopened the Shanghai Stock Exchange closed by Mao 40 years earlier.
Although the economy grew quickly during this period, economic troubles in the inefficient state sector increased. Heavy losses had to be made up by state revenues and acted as a drain upon the economy.[17] Inflation became problematic in 1985, 1988 and 1992(Dell INSPIRON 2600 battery).[16] Privatizations began to accelerate after 1992, and the private sector surpassed the state sector in share of GDP for the first time in the mid-1990s. China's government slowly expanded recognition of the private economy, first as a "complement" to the state sector (1988) and then as an "important component" (1999) of the socialist market economy(Dell INSPIRON 3800 battery).[18]
1993–2005
The Lujiazui financial district of Pudong, Shanghai, the financial and commercial hub of modern China
In the 1990s, Deng forced many of the conservative elders such as Chen Yun into retirement, allowing radical reforms to be carried out.[15] Despite Deng's death in 1997, reforms continued under his handpicked successors, Jiang Zemin and Zhu Rongji(Dell INSPIRON 4000 battery), who were ardent reformers. In 1997 and 1998, large-scale privatization occurred, in which all state enterprises, except a few large monopolies, were liquidated and their assets sold to private investors. Between 2001 and 2004, the number of state-owned enterprises decreased by 48 percent.[14] During the same period, Jiang and Zhu also reduced tariffs(Dell Inspiron 5000 battery), trade barriers and regulations, reformed the banking system, dismantled much of the Mao-era social welfare system, forced the PLA to divest itself of military-run businesses,[19] reduced inflation, and joined the World Trade Organization. These moves invoked discontent among some groups, especially laid off workers of state enterprises that had been privatized(Dell INSPIRON 500M battery).[20]
The domestic private sector first exceeded 50% of GDP in 2005 and has further expanded since.[21] However, some state monopolies still remained, such as in petroleum and banking.[22]
2005–present
The conservative Hu-Wen Administration began to reverse some of Deng Xiaoping's reforms in 2005. Observers note that the government adopted more egalitarian and populist policie(Dell INSPIRON 5100 battery)s.[23] It increased subsidies and control over the health care sector,[24] halted privatization,[5] and adopted a loose monetary policy, which lead to the formation of a U.S.-style property bubble in which property prices tripled.[25] The privileged state sector was the primary recipient of government investment, which under the new administration, promoted the rise of large "national champions" which could compete with large foreign corporations. (Dell INSPIRON 510M battery)
Economic performance since reform
China's nominal GDP trend from 1952 to 2005. Note the rapid increase since reform in the late 1970s.
China's economic growth since the reform has been very rapid, exceeding the East Asian Tigers. Economists estimate China's GDP growth from 1978 to 2005 at 9.5% a year. Since the beginning of Deng Xiaoping's reforms, China's GDP has risen tenfold(Dell INSPIRON 6000 battery).[26] The increase in total factor productivity (TFP) was the most important factor, with productivity accounting for 40.1% of the GDP increase, compared with a decline of 13.2% for the period 1957 to 1978—the height of Maoist policies. For the period 1978–2005, Chinese GDP per capita increased from 2.7% to 15.7% of US GDP per capita, and from 53.7% to 188.5% of Indian GDP per capita. Per capita incomes grew at 6.6% a year. (Dell INSPIRON 600M battery)Average wages rose sixfold between 1978 and 2005,[28] while absolute poverty declined from 41% of the population to 5% from 1978 to 2001.[29] Some scholars believed that China's economic growth has been understated, due to large sectors of the economy not being counted.[30]
[edit]Impact on world growth
China is widely seen as an engine of world and regional growth(Dell Inspiron 6400 battery).[31] Surges in Chinese demand account for 50, 44 and 66 percent of export growth of Hong Kong, Japan and Taiwan respectively, and China's trade deficit with the rest of East Asia helped to revive the economies of Japan and Southeast Asia.[31] Asian leaders view China's economic growth as an "engine of growth for all Asia"(Dell INSPIRON 7000 battery).[32]
Reforms in specific sectors
After three decades of reform, China's economy experienced one of the world's biggest booms. Agriculture and light industry have largely been privatized, while the state still retains control over some heavy industries. Despite the dominance of state ownership in finance, telecommunications, petroleum and other important sectors of the economy(Dell INSPIRON 700M battery), private entrepreneurs continue to expand into sectors formerly reserved for public enterprise. Prices have also been liberalized.[33]
Agriculture
Production of wheat from 1961 to 2004. Data from FAO, year 2005. Y-axis: Production in metric ton.
During the pre-reform period, Chinese agricultural performance was extremely poor and food shortages were common.[34] After Deng Xiaoping implemented the household responsibility system, agricultural output increased by 8.2 percent a year(Dell Inspiron 710m battery), compared with 2.7% in the pre-reform period, despite a decrease in the area of land used.[34] Food prices fell nearly 50%, while agricultural incomes rose.[35]
A more fundamental transformation was the economy's growing adoption of cash crops instead of just growing rice and grain.[35] Vegetable and meat production increased to the point that Chinese agricultural production was adding the equivalent of California’s vegetable industry every two years. Growth in the sector slowed after 1984(Dell INSPIRON 8200 battery), with agriculture falling from 40% of GDP to 16%; however, increases in agricultural productivity allowed workers to be released for work in industry and services, while simultaneously increasing agricultural production.[36] Trade in agriculture was also liberalized and China became an exporter of foodstuffs, a great contrast to its previous famines and shortages(Dell INSPIRON 8600 battery).[37]
Industry
In the pre-reform period, industry was largely stagnant and the socialist system presented few incentives for improvements in quality and productivity. With the introduction of the dual price system and greater autonomy for enterprise managers, productivity increased greatly in the early 1980s.[38] Foreign enterprises and newly formed Township and Village Enterprises(Dell INSPIRON 9100 battery), owned by local government and often de facto private firms, competed successfully with state-owned enterprises. By the 1990s, large-scale privatizations reduced the market share of both the Township and Village Enterprises and state-owned enterprises and increased the private sector's market share. The state sector's share of industrial output dropped from 81 percent in 1980 to 15 percent in 2005(Dell INSPIRON 9200 battery).[39] Foreign capital controls much of Chinese industry and plays an important role.[14]
From virtually an industrial backwater in 1978, China is now the world's biggest producer of concrete, steel, ships and textiles, and has the world's largest automobile market. Chinese steel output quadrupled between 1980 and 2000, and from 2000 to 2006 rose from 128.5 million tons to 418.8 million tons, one-third of global production(Dell INSPIRON 9300 battery).[40] Labor productivity at some Chinese steel firms exceeds Western productivity.[40] From 1975 to 1992, China's automobile production rose from 139,800 to 1.1 million, rising to 9.35 million in 2008.[41] Light industries such as textiles saw an even greater increase, due to reduced government interference. Chinese textile exports increased from 4.6% of world exports in 1980 to 24.1% in 2005. Textile output increased 18-fold over the same period(Dell Inspiron 9400 battery).[42]
This increase in production is largely the result of the removal of barriers to entry and increased competition; the number of industrial firms rose from 377,300 in 1980 to nearly 8 million in 1990 and 1996; the 2004 economic census, which excluded enterprises with annual sales below RMB5 million, counted 1.33 million manufacturing firms(Dell Inspiron E1505 battery), with Jiangsu and Zhejiang reporting more firms than the nationwide total for 1980.[43] Compared to other East Asian industrial growth spurts, China's industrial performance exceeded Japan's but remained behind South Korea and Taiwan's economies.[44]
Trade and foreign investment
Global distribution of Chinese exports in 2006 as a percentage of the top market.
Scholars find that China has attained a degree of openness that is unprecedented among large and populous nations", with competition from foreign goods in almost every sector of the economy(Dell Inspiron E1705 battery). Foreign investment helped to greatly increase quality, knowledge and standards, especially in heavy industry. China's experience supports the assertion that globalization greatly increases wealth for poor countries.[43] Throughout the reform period, the government reduced tariffs and other trade barriers, with the overall tariff rate falling from 56% to 15%(Dell Inspiron Mini 9 battery). By 2001, less than 40% of imports were subject to tariffs and only 9 percent of import were subject to licensing and import quotas. Even during the early reform era, protectionist policies were often circumvented by smuggling.[45] When China joined the WTO, it agreed to considerably harsher conditions than other developing countries.[46] Trade has increased from under 10% of GDP to 64% of GDP over the same period(Dell Latitude D400 battery).[47] China is considered the most open large country; By 2005, China’s average statutory tariff on industrial products was 8.9 percent. For Argentina, Brazil, India, and Indonesia, the respective percentage figures are 30.9, 27.0, 32.4, and 36.9 percent.[48]
China's trade surplus is considered by some in the United States as threatening American jobs. In the 2000s, the Bush administration pursued protectionist policies such as tariffs and quotas to limit the import of Chinese goods(Dell STUDIO 1450 battery).[32] Some scholars argue that China's growing trade surplus is the result of industries in more developed Asian countries moving to China, and not a new phenomenon.[32] China's trade policy, which allows producers to avoid paying the Value Added Tax (VAT) for exports and undervaluation of the currency since 2002, has resulted in an overdeveloped export sector and distortion of the economy overall, a result that could hamper future growth(Dell Vostro 1400 battery).[49]
Foreign investment was also liberalized upon Deng's ascension. Special Economic Zones (SEZs) were created in the early 1980s to attract foreign capital by exempting them from taxes and regulations. This experiment was successful and SEZs were expanded to cover the whole Chinese coast. Although FDI fell briefly after the 1989 student protests, it increased again to 160 billion by 2004. (Dell Vostro 1500 battery)
Services
Shanghai Stock Exchange (SSE)
In the 1990s, the financial sector was liberalized.[51] After China joined the World Trade Organization (WTO), the service sector was considerably liberalized and foreign investment was allowed. Restrictions on retail, wholesale and distribution were ended.[52] Banking, financial services, insurance and telecommunications were also opened up to foreign investment. (Dell XPS GEN 2 battery)
China's banking sector is dominated by four large state-owned banks, which are largely inefficient and monopolistic.[54] China's largest bank, ICBC, is the largest bank in the world. The financial sector is widely seen as a drag on the economy due to the inefficient state management.[55] Non-performing loans(Dell XPS M1210 battery), mostly made to local governments and unprofitable state-owned enterprises for political purposes,[56] are a big drain on the financial system and economy, reaching over 22% of GDP by 2000, with a drop to 6.3% by 2006 due to government recapitalization of these banks. In 2006, the total amount of non-performing loans was estimated at 160 billion USD(Dell XPS M1330 battery).[57] Observers recommend privatization of the banking system to solve this problem, a move that was partially carried out when the four banks were floated on the stock market.[58] China's financial markets, the Shanghai Stock Exchange and Shenzhen Stock Exchange, are relatively ineffective at raising capital, as they comprise only 11 percent of GDP(Dell XPS 1340 battery).[59]
Due to the weakness of the banks, firms raise most of their capital through an informal, nonstandard financial sector developed during the 1980s and 1990s, consisting largely of underground businesses and private banks.[60] Internal finance is the most important method successful firms use to fund their activities. (Dell XPS M1530 battery)
Government finances
Foreign currency reserves and gold minus external debt based on 2010 data from CIA Factbook
In the pre-reform era, government was funded by profits from state-owned enterprises, much like the Soviet Union.[61] As the state sector fell in importance and profitability, government revenues, especially that of the central government in Beijing(Dell XPS M170 battery), fell substantially and the government relied on a confused system of inventory taxes. Government revenues fell from 35% of GDP to 11% of GDP in the mid-1990s, excluding revenue from state-owned enterprises, with the central government's budget at just 3% of GDP.[62] The tax system was reformed in 1994 when inventory taxes were unified into a single VAT of 17% on all manufacturing(Dell XPS M1710 battery), repair, and assembly activities and an excise tax on 11 items, with the VAT becoming the main income source, accounting for half of government revenue. The 1994 reform also increased the central government's share of revenues, increasing it to 9 percent of GDP.[63]
Reasons for success
Scholars have proposed a number of theories to explain the success of China's economic reforms in its move from a planned economy to a socialist market economy despite unfavorable factors such as the troublesome legacies of socialism(Dell XPS M1730 battery), considerable erosion of the work ethic, decades of anti-market propaganda, and the "lost generation" whose education disintegrated amid the disruption of the Cultural Revolution.[64] One notable theory is that decentralization of state authority allowed local leaders to experiment with various ways to privatize the state sector and energize the economy.[13] Although Deng was not the originator of many of the reforms, he gave approval to them(Dell XPS M2010 battery). Another theory focuses on internal incentives within the Chinese government, in which officials presiding over areas of high economic growth were more likely to be promoted. Scholars have noted that local and provincial governments in China were "...hungry for investment" and competed to reduce regulations and barriers to investment to boost economic growth and the officials' own careers(Dell Latitude E5400 battery). A third explanation believes that the success of the reformists are attributable to Deng's cultivation of his own followers in the government.[65] Herman Kahn explained the rise of Asian economic power saying the Confucian ethic was playing a "similar but more spectacular role in the modernization of East Asia than the Protestant ethic played in Europe".(Dell Latitude E5500 battery)
China's success is also due to the export-led growth strategy used successfully by the Four Asian Tigers beginning with Japan in the 1960s - 1970s and other Newly industrialized counties.[67]
The collapse of the Soviet Bloc and centrally planned economies in 1989 renewed impetus in the China to further reform its economy in a different course to avoid the same fate(Dell Latitude E6400 battery).[68] China also wanted to avoid the Russia under Boris Yeltsin with ad-hoc experiment with market capitalism which resulted in the rise of powerful oligarchs, corruption and loss of state revenue which exacerbated economic disparity.[69]
Effect on inequality
Gini-coefficient of national income distribution around the world (dark green: <0.25, red: >0.60)
The economic reforms have increased inequality dramatically within China. Despite rapid economic growth(Dell Latitude E6500 battery) which has virtually eliminated poverty in urban China and reduced it greatly in rural regions and the fact that living standards for everyone in China have drastically increased in comparison to the pre-reform era, the Gini coefficient of China is estimated to be above 0.45, comparable to many South American countries.[70]
Increased inequality is attributed to the disappearance of the welfare state and differences between coastal and interior provinces, the latter being burdened by a larger state sector(Dell Inspiron Mini 12 battery).[71] Some Western scholars have suggested that reviving the welfare state and instituting a re-distributive income tax system is needed to relieve inequality,[72] while some Chinese economists have suggested that privatizing state monopolies and distributing the proceeds to the population can reduce inequality. (Dell XPS M140 battery)
Comparison to other developing economies
The development trends of Chinese and Indian GDP (1950-2003).
China's transition from socialism to a socialist market economy has often been compared with economies in Eastern Europe that are undergoing a similar transition. China's performance has been praised for avoiding the major shocks and inflation that plagued the Eastern Bloc.[74] The Eastern bloc economies saw declines of 13 to 65% in GDP at the beginning of reforms(Dell XPS 13 battery), while Chinese growth has been very strong since the beginning of reform.[75] China also managed to avoid the hyperinflation of 200 to 1,000% that Eastern Europe experienced.[76] This success is attributed to the gradualist and decentralized approach of the Chinese government, which allowed market institutions to develop to the point where they could replace state planning(Dell XPS 16 battery). This contrasts with the "big bang" approach of Eastern Europe, where the state-owned sector was rapidly privatized with employee buyouts, but retained much of the earlier, inefficient management.[77] Other factors thought to account for the differences are the greater urbanization of the CIS economies and differences in social welfare and other institutions(Dell XPS 1640 battery).[78] Another argument is that, in the Eastern European economies, political change is sometimes seen to have made gradualist reforms impossible, so the shocks and inflation were unavoidable.[79]
China's economic growth has been compared with other developing countries, such as Brazil, Mexico, and India. GDP growth in China outstrips all other developing countries, with only India after 1990 coming close to China's experience(Dell XPS 1645 battery).[80] Scholars believes that high rates of investments, especially increases in capital invested per worker, have contributed to China's superior economic performance.[80] China's relatively free economy, with less government intervention and regulation, is cited by scholars as an important factor in China's superior performance compared to other developing countries. (Dell XPS 1647 battery)
Legacy and criticism
The government retains monopolies in several sectors, such as petroleum and banking;[5] the inefficient state banking system has a large number of non-performing loans[57] and loose monetary policy has caused an asset bubble which threatens economic stability. The recent reversal of some reforms have left some observers dubbing 2008 the "(Dell Latitude 131L battery)...third anniversary of the end of reforms".[5] Nevertheless, observers believe that China's economy can continue growing at rates of 6–8 percent until 2025,[82] though a reduction in state intervention is considered necessary for sustained growth by some.[83]
Despite reducing poverty and increasing China's wealth, Deng's reforms have been criticized by the Chinese New Left for increasing inequality and allowing private entrepreneurs to purchase state assets at reduced prices(Dell Latitude C400 battery). These accusations were especially intense during the Lang-Gu dispute, in which New Left academic Larry Lang accused entrepreneur Gu Sujung of usurping state assets, after which Gu was imprisoned.[84] The Hu-Wen Administration has adopted some New Left policies, such as halting privatizations and increasing the state sector's importance in the economy(Dell Latitude C500 battery), Keynesian policies that have been criticized by many Chinese economists who advocate a policy of deregulation, tax cuts, and privatization.[73]
Other criticisms focus on the effects of industrialization on public health and the environment. Scholars believe that public health issues are unlikely to become major obstacles to the growth of China’s economy during the coming decades, and studies have shown that air quality and other environmental measures in China are better than those in developed countries(Dell Latitude C510 battery), such as the United States and Japan, at the same level of development.
The May Fourth Movement (traditional Chinese: 五四運動; simplified Chinese: 五四运动; pinyin: Wǔsì Yùndòng) was an anti-imperialist, cultural, and political movement growing out of student demonstrations in Beijing on May 4, 1919, protesting the Chinese government's weak response to the Treaty of Versailles(Dell Latitude C540 battery), especially the Shandong Problem. These demonstrations sparked national protests and marked the upsurge of Chinese nationalism, a shift towards political mobilization and away from cultural activities, and a move towards populist base rather than intellectual elites.
The broader use of the term "May Fourth Movement" often refers to the period during 1915-1921 more usually called the New Culture Movement(Dell Latitude C600 battery).
Background
Following the Xinhai Revolution in 1911, the Qing Dynasty was overthrown. This marked the end of thousands of years of powerful imperial rule, and theoretically ushered a new era in which political power rested with the people. However, the reality was that China was a fragmented nation dominated by warlords(Dell Latitude C610 battery), who were more concerned with their own political powers and private armies than national interests. The Chinese Beiyang government was occupied with suppressing internal affairs, and did little to counter the influence exerted by imperialist foreign powers. The Beiyang government made various concessions to foreigners in order to gain monetary and military support against their rivals(Dell Latitude C640 battery).
Defeats by foreign powers and the presence of spheres of influence inflamed a sense of nationalism among the emerging middle class and cultural leaders. Leaders of the New Culture Movement believed that traditional Chinese values were responsible for the political weakness of the nation. This created a rather peculiar situation(Dell Latitude C800 battery), in which Chinese nationalists called for a rejection of traditional values and the selective adoption of Western ideals of science and democracy.
Shandong Problem
Main article: Shandong Problem
China had entered World War I on the side of the Allied Triple Entente in 1917 with the condition that all German spheres of influence, such as Shandong [Shantung], would be returned to China; although in that year, 140,000 Chinese labourers (as a part of the British army, the Chinese Labour Corps) were sent to France. (Dell Latitude C810 battery) The Versailles Treaty of April 1919 awarded German rights in Shandong Province to Japan. The representatives of the Chinese government put forth the following requests:
the abolition of all privileges of foreign powers in China, such as extraterritoriality
the cancelling of the "Twenty-One Demands" with the Japanese
the return to China of the territory and rights of Shandong, which Japan had taken from Germany during World War I.
The Western Allies dominated the meeting and paid little heed to the Chinese representatives' demands. Britain and France were primarily interested in punishing Germany(Dell Latitude C840 battery). Although the United States promoted Woodrow Wilson's Fourteen Points and the ideals of self-determination at the conference, Wilson was unable to advance these ideals in the face of stubborn resistance by David Lloyd George, Georges Clemenceau and the U.S. Congress. American advocacy of self-determination at the League of Nations was attractive to Chinese intellectuals(Dell Latitude CPI battery), but the failure of the United States to follow through was seen as a betrayal. Chinese diplomatic failure at the Paris Peace Conference became the incident that touched off the outbreak of the May Fourth Movement, and became known as the "Shandong Problem".
Protest
On the morning of May 4, 1919, student representatives from thirteen different local universities met in Beijing and drafted five resolutions:
to oppose the granting of Shandong to the Japanese under former German concessions.
to draw awareness of China's precarious position to the masses in China(Dell Latitude CPX battery).
to recommend a large-scale gathering in Beijing.
to promote the creation of a Beijing student union.
to hold a demonstration that afternoon in protest to the terms of the Treaty of Versailles.
Protestors dissatisfied with the Treaty of Versailles for China
Tsinghua University students burn Japanese goods.
On the afternoon of May 4 over 3,000 students of Peking University and other schools gathered together in front of Tiananmen and held a demonstration(Dell Latitude D410 battery). The general opinion was that the Chinese government was "spineless".[1] They voiced their anger at the Allied betrayal of China and the government's inability to secure Chinese interests in the conference. A boycott of Japanese products during this period was advocated, which boosted the domestic Chinese industry slightly.[citation needed] Throughout the streets of China(Dell Latitude D420 battery), students packed the streets to protest China's concession to Japanese demands. During these demonstrations, students also insisted on the resignation of three Chinese officials involved in these proceedings. After burning the residence of one of the three despised officials, student protesters were arrested and severely assaulted(Dell Latitude D430 battery).[2]
They shouted out such slogans as "Struggle for the sovereignty externally, get rid of the national traitors at home", "Do away with the 'Twenty-One Demands'", and "Don't sign the Versailles Treaty".
The next day, students in Beijing as a whole went on strike, and students in other parts of the country responded one after another. From early June, in order to support the students' struggle, workers and businessmen in Shanghai also went on strike(Dell Latitude D500 battery). The center of the movement moved from Beijing to Shanghai. In addition to students, a wide array of different groups also publicly displayed disagreement with the Chinese government. The lower class was also very angry at the current state of affairs, such as mistreatment of workers and perpetual poverty of small peasants. Chancellors from thirteen of China's tertiary institutions initiated the rescue of student prisoners(Dell Latitude D505 battery). Congregations such as media outlets, citizen societies, and chambers of commerce offered their support for these students. Merchants further illustrated support for the students by resisting tax payments if China's government remained obstinate.[3] In Shanghai, these May Fourth events culminated into general strikes by merchants and workers that nearly devastated the entire Chinese economy(Dell Latitude D510 battery).[2] Under intense public outcry, the Beiyang government had to release the arrested students and dismiss Cao Rulin, Zhang Zongxiang and Lu Zongyu from their posts. Also, the Chinese representatives in Paris refused to sign on the peace treaty: the May Fourth Movement won the initial victory. However, this move was more symbolic than anything else(Dell Latitude D520 battery). Japan still retained control of the Shandong Peninsula and the islands in the Pacific it had obtained during World War I. Even though these protests and marches did not manage to achieve all their objectives, the partial success of the movement exhibited the ability of China's various social classes to successfully collaborate, an ideal that would be admired by both Nationalists and Communists(Dell Latitude D600 battery).[2]
[edit]Birth of Chinese Communism
This unreferenced section requires citations to ensure verifiability.
For many years, the orthodox view in the People's Republic of China was that after the demonstrations in 1919 and their suppression, the discussion became more and more political. People like Chen Duxiu and Li Dazhao shifted more to the Left and were among the leading founders of the 1921 Communist Party of China(Dell Latitude D610 battery), whilst other intellectuals, such as the Anarchist writer and agitator, Ba Jin also took part in the movement. Originally voluntarist or nihilist figures like Li Shicen and Zhu Qianzhi made similar turns to the Left as the 1920s saw China become increasingly turbulent.
According to this view:
The May Fourth Movement was a thoroughly anti-imperialist and anti-feudal revolutionary movement. Young students acted as its pioneers. The Chinese working class went up on the political stage, and functioned as the main force in the later period of the movement(Dell Latitude D620 battery). Li Dazhao, Chen Duxiu and other intellectuals directed and promoted the development of the movement, and played leading roles in it. On the local level, future Communist Party leader Mao Zedong rallied opposition against Hunan's warlord Chang Ching-yao.
The May Fourth Movement covered more than 20 provinces and over 100 cities of the country. It had a broader popular foundation than the Revolution of 1911. Its great contribution lay in arousing the people's consciousness and preparing for the unity of the revolutionary forces(Dell Latitude D630 battery).
The May Fourth Movement promoted the spreading of Marxism in China, and prepared the ideological foundation for the establishment of the Chinese Communist Party. The October Revolution pointed out the direction for the Chinese revolution. The May Fourth Movement, which took place after the October Socialist Revolution, was a part of the world's Proletarian Revolution(Dell Latitude D800 battery).
The May Fourth Movement served as an intellectual turning point in China; it was a seminal event that radicalized Chinese intellectual thought. Western-style liberal democracy had previously had a degree of traction amongst Chinese intellectuals, but after the Versailles Treaty (which was viewed as a betrayal of China's interests), lost much of its attractiveness(Dell Latitude D810 battery). Woodrow Wilson's Fourteen Points, despite being rooted in moralism, were also seen as Western-centric and hypocritical.
Many in the Chinese intellectual community believed that the United States had done little to convince the imperialist powers (especially Britain, France, and Japan) to adhere to the Fourteen Points, and observed that the United States itself had declined to join the League of Nations; as a result they turned away from the Western liberal democratic model(Dell Latitude D820 battery). Marxism began to take hold in Chinese intellectual thought, particularly among those already on the Left. It was during this time that communism was studied seriously by some Chinese intellectuals such as Chen Duxiu and Li Dazhao.
Some historians[who?] have speculated that Chinese history might have taken a different course at this time had the United States taken a stronger position on Woodrow Wilson's Fourteen Points and self-determination(Dell Latitude D830 battery). The United States was not a major imperialist power and was in a relatively strong position to take an anti-imperialist stance; however, it did not do so. As a result, China turned its attention to utilizing other political tools that could potentially resolve many of the nation's issues. These tools subsumed the concepts of Marxism and Leninism(Dell Latitude 2100 battery).
[edit]Historical significance
Scholars rank the New Culture and May Fourth Movements as significant turning points, along with the abolition of the civil service system in 1905 and the overthrow of the monarchy in 1911. Participants at the time, such as Hu Shi, referred to this era as the Chinese Renaissance because there was an intense focus on science and experimentation(Dell Latitude 2110 battery).[4]
The challenge to traditional Chinese values, however, was also met with strong opposition, especially from the Kuomintang (nationalists). From their perspective, the movement destroyed the positive elements of Chinese tradition and placed a heavy emphasis on direct political actions and radical attitudes, characteristics of the emerging Chinese Communist Party(Dell Latitude E4300 battery). On the other hand, the Communist Party viewed the movement more favorably, although remaining suspicious of the early phase which emphasized the role of enlightened intellectuals, not revolution.[5] In its broader sense, the May Fourth Movement led to the establishment of radical intellectuals who went on to mobilize peasants and workers into the Communist party and gain the organizational strength that would solidify the success of the Communist Revolution. (Dell Vostro 1310 battery)
[edit]Criticism
Chinese Muslims refused to follow the May Fourth Movement. Instead, they taught both modern, western education such as science, along with traditional Confucian literature and Classical Chinese languages with Islamic education and Arabic in their schools. They merely incorporated the new instead of destroying the old and replacing it. (Dell Vostro 1320 battery)
Chiang Kai-shek, as a nationalist, and Confucianist, was against the iconoclasm of the May Fourth Movement. He viewed some western ideas as foreign, as a Chinese nationalist, and that the introduction of western ideas and literature that the May Fourth Movement wanted was not welcome. He and Dr. Sun Yat-sen criticized these May Fourth intellectuals for corrupting morals of youth. (Dell Vostro 1510 battery)
The Kuomintang party, under Chiang Kai-shek's rule, carried out the opposite agenda of the May Fourthers, he started the New Life Movement, against western values, instead promomoting Confucianism and making it more Chinese. The Kuomintang purged China's education system of western ideas, introducing Confucianism into the curriculum(Dell Vostro 1520 battery). Education came under the total control of state, which meant, in effect, the Kuomintang party, via the Ministry of Education. Military and political classes on the Kuomintang's Three principles of the people were added. Textbooks, exams, degrees and educational instructors were all controlled by the state, as were all universities. (Dell Vostro 2510 battery)
[edit]Neotraditionalism vs. Western Thought
Although the May Fourth Movement did find partial success at removing Chinese traditional culture,[citation needed] there were still proponents who steadfastly argued that China's traditions and values should be the fundamental foundation of the nation. From these opponents of Western civilization derived three neotraditional schools of thought: national essence(Dell Vostro 1014 battery), national character, and modern relevance of Confucianism. Each school of thought denounced the western values of individualism, materialism and utilitarianism as adequate avenues for the development of China. Each school possessed specific objectives. The "national essence" school sought to discover aspects of traditional culture that could potentially serve the national development of China(Dell Inspiron 1410 battery). Such traditional aspects consisted of various philosophical and religious practices that emerged parallel with Confucianism. Most particularly, China imported Buddhism, a religion from their neighboring country of India. Under the “national character” school, advocates promoted the traditional family system, the primary target of the May Fourth Movement(Dell Vostro 1015 battery). In this school, reformers viewed their Western counterparts as shells without morals. Finally, the modern relevance of Confucianism revolved around this notion that Confucian values were better than Western ones. Due to the fact that western culture primarily concentrated their efforts on rational analysis(Dell Inspiron 1088 battery), China’s neotraditionalist disputed that the concept was misguided especially in the realistic, altering milieu of the world. Most importantly, these three neo-traditionalist thoughts gave no consideration to the individual, which was the main theme of the May Fourth Movement(Dell Inspiron Mini 1012 battery).
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