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"TheRiseofChina'sEconomy"byOverholt,WilliamH.BusinessEconomics,Vol.29,Issue2,April1994|OnlineResearchLibrary:Questia

Articleexcerpt
China'seconomicsuccess,incontrasttothatoftheSovietUnion,isdueto
profoundlydifferenteconomicandpoliticalstrategies.Chinahasemphasized
areaswherelimitedgovernmentinvestmentswouldproducerapidgrowth
andjobgeneration.Farmsweregivenbacktothefarmers,foreigninvestment
wasencouraged,andprioritywasgiventolightandmediumindustrywhere
limitedinvestmentresultedinasurgeinoutput.Politically,reformwas
dividedintomanageablephasestodeveloppopularsupport.
MORETHANANYothercountry,Chinahasstoodatthepinnacleofworld
technologyandincomeforthepast2000years.Butforthepasttwocenturies
Chinahasexperiencedweaknessabroadandfragmentationathome,andits
peoplehavelivedinunspeakablepoverty.Aslateastheearly1980s,more
than100millionChinesehadtosubsistonanannualincomethatwasless
thanthecostofagooddinnerinNewYork.
Allthisisbecomingathingofthepast.TheChineseeconomictakeoffthat
beganwiththeimplementationofDengXiaoping's1979economicreform
planiseliminatingsuchpovertyataratepreviouslylimitedtoSouthKorea,
Taiwan,HongKongandSingapore.BeforeChinaaccomplishedthisfeat,
virtuallyanyobserverwouldhavejudgedsuchrapidgrowthtobeimpossible
foranationcomprisingonefifthoftheworld'spopulationandan
exceedinglydiverseeconomy.
China'seconomicsuccesshasnotbeenconfinedtoraweconomicgrowth.By
1991foreigntradehadrisento$166billion,signifyingthatChinahadmoved
fromautarkytobeingoneoftheworld'smajortradingpowers.China's
exportsclimbedfromamere$14.8billionin1979to$85billionin1992.Not
onlydidexportsrise,buttheyalsobecamemoresophisticatedin1985
manufacturedgoodscomprisedonlyhalfofChina'sexports,whereasby1991
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"TheRiseofChina'sEconomy"byOverholt,WilliamH.BusinessEconomics,Vol.29,Issue2,April1994|OnlineResearchLibrary:Questia

theycomprisedmorethanthreequartersofallexports.
In1992aloneforeigninvestorspoured$11.2billionintoChinaandsigned
agreementsfor$57.5billionoffutureinvestments.By1993thesenumbers
wereapproaching$20billionand$100billion,respectively.Attheendof
1991,ithad37,215foreignfundedenterprisesthatwereproducing$12.05
billionofexports,orjustunder17percentofthenation'stotalexports.In
1992alone,thegovernmentapprovedanadditional47,000foreign
investmentprojects.Inflation,althoughperiodicallyaseriousproblem,
peakedatonlyhalfthelevelsexperiencedbySouthKoreainthelate1970s
andonehundredthofthelevelsexperiencedinPolandandtheformerSoviet
Union.
THEBASISOFSUCCESS:CHINAVERSUSTHESOVIETUNION
ThedifferencesbetweenChineseandSovietperformancederivefrom
profoundlydifferenteconomicandpoliticalstrategies.MuchoftheWesthas
longbelievedamyththatChinaisanimpoverishedversionoftheSoviet
Unionandmustinexorablefollowthelatter'sfailuresbecause,afterall,both
werecommunistcountries.Onthecontrary,Chinahasbeenfollowinga
modelofdevelopmentmoresimilartoSouthKoreathantoitsformerly
communistbedfellows.BasedonanalysisofneighboringAsiancountries,
includingmostnotableSouthKorea,Taiwan,HongKongandSingapore,
China'sstrategyofdevelopmenthasbeendistinctivelyAsian.Forthe
Westernshopper,thereisverystraightforwardevidence.Inmajordepartment
storestheshoes,shirts,sweatersandtoysthatoncecarriedlabelssaying
"MadeinKorea"or"MadeinTaiwan"nowmostlysays"MadeinChina."
Virtuallynonesay"MadeinRussia."
Fromthelessonsoftheneighboringsmallcountries,then,DengXiaoping
andhiscolleaguesderivedsuperiorstrategiesinfourareas:economics,
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"TheRiseofChina'sEconomy"byOverholt,WilliamH.BusinessEconomics,Vol.29,Issue2,April1994|OnlineResearchLibrary:Questia

politics,administration,andfinancialmarkets.
ECONOMICS
FollowingtheexamplesoftheNewIndustrializingEconomies,Chinagave
prioritytoindustriesandsectorswherelimitedgovernmentinvestments
wouldproducerapidgrowth.First,Beijinggavethefarmsbacktothe
farmers,generatinghugeincreasesinproductivity,income,andoutputwith
negligiblestateinvestmentthestate'srolewaslargelylimitedtoissuinga
legalrulingandusingtheexistingadministrativeapparatustoenforceits
decisions.

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