Theme II 2b_ Transformation of East Asian Economies (China, 1978-2000)

Theme II 2b: Transformation of East Asian Economies (China, 1978-2000) 1 It doesn’t matter whether the cat is black or white, as long as it catches mice Deng Xiao Ping during a speech at the 1962 Communist Youth League 1 https://www.chinadaily.com.cn/china/2014-08/21/content_18462132_15.htm

Remarks 1. The gapping problem in this set of notes is the length of LOAs, examples and its analysis. None of them should be this long 2. Some of the analysis might be a bit similar. 3. Some of the LOAs might be similar to each other (esp for Open-Door Policy)

Criteria for Significance 1. Transition from central planning command economy to a socialist market economy. 2. Integration into the global economy (Since for China, its economy was closed under Mao’s leadership) 3. Economic growth (Characterised by high growth rates and other economic indicators) Problems of Maoist Economy 2 1. Due to the inherent flaws of Mao’s central economy, their economic activities were planned by planners who possessed inadequate and inaccurate information. Consequently, with most of the plans and activities ill-informed and unsound, they hindered productivity and industrial efficiency. Hence China’s industries were undermined and China’s economic growth handicapped. These issues served as impetus for Deng to introduce sweeping changes. a. Failure to formulate sound policies were evident as there were frequent shifts in production. By 1956, 90% of the rural population were in 485,000 collective farms. This was reduced to 26,000 communes in 1958 but then expanded into 74,000 communes in 19644. These constant shifts fostered a state of uncertainty among local administrators as well as among workers and peasants, disrupting production. This loses potential revenue and diminishes the agriculture sector’s ability to achieve economic growth. b. SOE’s primarily used to fulfil the government’s production and distribution objectives. As a result, there were no monetary incentives owing to the lack of competition and any profits were to be handed to the government. Combined with poor management led by unqualified party cadres, SOEs were prone to poor performance. As a result, being the economic units in industrial enterprises, their failures would significantly hinder the industrial sector to contribute to China’s GDP and hence economic growth to only 20% 2. Furthermore, Mao’s economic policies were envisioned with ideologic