...Corruption and China’s Economic Reform in the Early 21st Century by Gregory C. Chow, Princeton University CEPS Working Paper No. 116 October 2005 Acknowledgement: I would like to thank Steven Kou of Columbia University and Yan Shen of Peking University for helpful comments and the Center for Economic Policy Studies at Princeton University for financial support in the preparation of this paper. Abstract Past economic reform of the state sector in China consisted mainly of privatization, of agriculture and of small and medium-size state enterprises, leaving large state enterprises in the control of the state. Current reform consists of making state-owned enterprises and banks more efficient and functioning like private enterprises, and gradual privatization of some large state enterprises. Bureaucrats managing state assets and the selling of assets take advantage of such power to benefit themselves, including embezzlement of public funds and taking bribes from citizens needing their help, as can be found in state enterprises, state-owned commercial banks and in government projects. Reducing the size of the government sector is a basic solution to the corruption problem in China while attention should be paid in the privatization process which can involve corruption. Outline 1. Introduction 2. Review of Past Reform Measures and Current Problems 3. Enterprise Reform Hindered by Bureaucratic Behavior 4. Reform of Banking and Financial System Hindered by Corruption ...
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...How did Deng’s policies lead to a phenomenal growth of the Chinese economy? China began the 20th century with a serious effort to modernize its economy and ended the century with a successful economic modernization. Since the early 1980s, China ranks among the world’s fastest growing economies. Using standards of measurement of the gross domestic product (GDP) based on purchasing power parity, the IMF ranks China’s economy a close third, after only the United States and Russia (Soled, 1993). In 1978, Deng Xiaoping took over the control of the communist party and abandoned the Maoist economic model. Deng Xiaoping is widely regarded as one of the most undisputed leader of all times. He initiated the transformation of the planned economy towards more market-oriented economy and decided to open China up to free market economic reforms and Western style capitalism (Chow, 2001). These reforms were a reversal of the Maoist policy of economic self-reliance. Successful economic development in other parts of Asia including Taiwan, Hong Kong, Singapore and South Korea, known as the four Tigers, demonstrated to the Chinese government officials and the Chinese people that a market economy works better than a planned economy (Soled, 1993). Deng realized that China needed Western technology and investment, and opened the door to foreign businesses who wanted to set up in China (Chow, 2001). China decided to accelerate the modernization process by stepping up the volume of foreign trade...
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...FOOTNOTES Vol. 16, No. 06 The Newsletter of FPRI’s Wachman Center June 2011 THE RISE OF CHINA’S ECONOMY By Thomas G. Rawski Thomas G. Rawski, Professor of Economics and History, joined the University of Pittsburgh's faculty in 1985 after fourteen years at the University of Toronto. His research focuses on the nature and implications of recent developments and long-term changes in the economy of China. He delivered this paper at A History Institute for Teachers, March 19–20, 2011 on “China and India: Ancient Civilizations, Rising Powers, Giant Societies, and Contrasting Models of Development,” held at the University of Pennsylvania. This History Institute was co-sponsored by The Foreign Policy Research Institute’s Wachman Center as well as by three centers at the University of Pennsylvania – Center for East Asian Studies, South Asia Center, and Penn Lauder CIBER (Center for International Business Education and Research). 1 China’s remarkable economic boom, now in its fourth decade, has spawned numerous discussions of “China’s Rise.”2 Beijing’s self-congratulatory slogan “China’s peaceful rise” has advanced this theme. From a historical perspective, however, this terminology seems misplaced. Both the Ming (1368-1644) and Qing (1644-1912) empires occupied key positions in Asian trade and diplomacy. Crude figures compiled by Angus Maddison, author of several sweeping studies of global economic history, show China contributing nearly one-third of global output as late as 1820. The...
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...Topic: China’s financial liberalization Title: China’s financial liberalization and the policy transformation towards openness Author: Xuepan Cheng 4136801 Abstract This paper focused on the research of China’s financial liberalization reform in order to discuss the economic and financial effects casted by financial liberation. Also the article pointed out the current problems of China’s financial system and provided suggestions for implementation. The main argument of policy suggestions for China is to further lower down the financial limits, so that China will be able to build a better foundation for financial liberalization. Also the effective and constant supervision and modification of the financial regulation system is also necessary for maintaining a healthy macroeconomic environment and continuing capital flows. While the economic globalization, and financial liberalization has become a major tendency that attracts a lot of people’s attention in world economic development since the 1980s, the financial liberation and reform has become a necessity for China to develop it’s financial market and economy wellbeing. 1. Introduction China, as one of the fastest expanding economy in the world, is largely owing to the economic globalization, and financial liberalization since the 1980s. Economic globalization refers to the fact that economic resources (goods, capital, labor, technology, information and other transactions) flow from one country to another. This tendency makes...
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...CHINA'S ECONOMY AFTER FIFTY YEARS: RETROSPECT AND PROSPECT Thomas G. Rawski University of Pittsburgh September 1999 As the People's Republic of China celebrates its fiftieth anniversary, economists look back on a remarkable kaleidoscope of events and policy shifts that, despite episodes of vast suffering and waste, have brought enormous material benefits to China's teeming masses. The economy inherited by China's new Communist leaders in 1949 was overwhelmingly agrarian, ravaged by twelve years of warfare, and wracked by hyperinflation. Despite the strains imposed by China's participation in the Korean War, the new government quickly resolved difficult short-term economic obstacles and embarked upon a long-term process of socialization and development. China's experience of socialist planning, which roughly coincides with the period from 1949 until the death of Mao Zedong in 1976, left a mixed economic legacy. Like other socialist regimes, China's new leaders poured resources into activities and industries linked to the expansion of national power. Production of steel, machinery, and building materials multiplied prodigiously. China succeeded in fabricating nuclear and thermonuclear weapons. Although these advances relied initially on technical and financial support from the Soviet Union and its East European allies, China's success in penetrating new industries and mastering new technologies following the withdrawal of Soviet aid demonstrated that a succession of Five-Year...
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...Can institutional reform provide a sufficient explanation for China’s rapid economic development over the past three decades? What needs to happen in order for growth and development to be maintained in the future? The People’s Republic of China is the world’s fastest growing economy following the economic and institutional reforms from 1978 which signaled the beginning of an economy in transition. This shift from a centrally planned system to a market oriented economy resulted in an overall improvement in China’s living standards and productivity. Since then, China has extensively engaged in a range of international organisations and agreements, such as, the participation in the World Trading Organisations, as well as increasing their level of foreign trade and investment, formation of rural enterprises and private businesses, financial flows and globalisation. These are the fundamental reasons for China’s rapid economic growth over the last three decades. There are various definitions of economic growth, however, according to WebFinance (2012) economic growth is referred to the “increase in a country's productive capacity, as measured by comparing gross national product (GNP) in a year with the GNP in the previous year”. Prior to 1978, China’s average annual growth was at a low 6% and with negative declines of up to -27% in 1961. Since the reforms, GNP has been positive and steadily increasing with fewer ups and downs (Hu and Khan, 1997). The Chinese economy has been averaging...
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...Discuss how and why China’s relations with the world economy change after 1993? The economic reforms of China, called “open doors policy” starting in 1978 with Deng Xiaoping –the leader of the Communist Party of China (CPC) - marked the beginning of a new era where China initiated to open its economy to the world. (Nolan, 2005) In 1992, during his Southern tour, Deng Xiaoping introduced the term of “Socialist Market economy” to describe Chinese economy and in 1993 the term was added to the Constitution, which means that socialism was still the basis of the economical system but that the State also protected the market economy from now on and therefore was ready to go international. This essay will discuss to which extent 1993 was the changing year for China’s international economic relations. Naughton (2007) refers to the 1990s reform in China as a “reform with losers” meaning that at this point, Chinese economy was moving towards a transformation to capitalism. They started to strengthen the institutions of market economy and began to privatize the State sector. The State-owned Enterprises (SOE) reform - specifically the “grasping the big, letting go of the small” strategy - was aimed to improve the efficiency and corporate governance of the State companies by keeping the key resources (such as infrastructure construction, telecommunications, financial services, energy and raw materials) (GENG, X., YANG, X. and JANUS, A. 2009) and the big companies and let go the...
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...Recent years in all countries the products of China’s industry are commonly used; electronic devices, toys, textile, products are some of them. Until very near future China was not well known by people; although it had an important position in the global economy. For hundreds of years the general policy of China had aimed protecting its culture, so it tried to avoid improving relationships with foreign countries. For centuries China have had pure culture. But after the communist regime in China, there occurred lots of policy change especially in economy. Till 1949, China was trying to feed only its own nation, the productivity is sufficient for itself; afterwards China speed up its productivity. That is surprising for the rest of the world. In lots of sectors China’s products start to be sold; so everyone think about an important question: “How did China develop so rapidly?” The answer is not single because development requires a continuous and successive process. Through this process China have passed some stages successfully, one of these stages is political reforms and as a result economic reforms. In order to better understand the success of Chinese economy today first the process of political development that China has passed through should be analysed. *Teng-hui (1995) reports the political reforms of China from 1930’s till 1990’s.For two thousand years China was administrated by an emperor. It did not have a democratic regime. Between 1937 and 1945 there...
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...Journal of Economic Literature 2011, 49:4, 1076–1151 http:www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.1076 The Fundamental Institutions of China’s Reforms and Development Chenggang Xu* China’s economic reforms have resulted in spectacular growth and poverty reduction. However, China’s institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve the “China puzzle,” this paper analyzes China’s institution—a regionally decentralized authoritarian system. The central government has control over personnel, whereas subnational governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. China’s reform trajectories have been shaped by regional decentralization. Spectacular performance on the one hand and grave problems on the other hand are all determined by this governance structure. ( JEL O17, O18, O43, P21, P25, P26) 1. Introduction hinese economic reforms, which have been in flux for three decades, have more than doubled China’s economic growth, from an average of 4.4 percent annually before 1978 to an average of 9.5 percent after 1978. * University of Hong Kong and WCU–SNU. The first draft of this paper was written at Hong Kong University of Science and Technology (HKUST) when I was visiting there. The hospitality and generous support of HKUST are greatly appreciated. Comments from participants in conferences and seminars at the China...
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...China’s Economic Growth 1978-2025: What We Know Today about China’s Economic Growth Tomorrow Views of the future China vary widely. While some believe that the collapse of China is inevitable, others see the emergence of a new superpower that increasingly poses a threat to the U.S. This paper examines the economic growth prospects of China over the next two decades. Extrapolating past real GDP growth rates into the future, the size of the Chinese economy surpasses that of the U.S. in purchasing power terms between 2012 and 2015; by 2025, China is likely to be the world's largest economic power by almost any measure. The extrapolations are supported by two types of considerations. First, China’s growth patterns of the past 25 years since the beginning of economic reforms match well those identified by standard economic development and trade theories (structural change, catching up, and factor price equalization). Second, decomposing China’s GDP growth into growth of labor and other variables, the near-certain information available today about the quantity and quality of Chinese laborers through 2015, if not several years after, allows inferences about future GDP growth. Short of some cataclysmic event, demographics alone suggests China’s continued economic rise. If talent is randomly distributed in the world population and if agglomeration of talent is important, then the odds are strongly in China’s favor. Introduction The rapid economic growth of China since the...
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...Property rights, defined p. 3 p. 3-4 II. III. p. 5-6 The Chinese Model p. 6-8 Evolution vs. Big Bang, and the employment of ambiguous property rights Current p. 8-11 China, mid-transition and the functionality of ambiguous property rights in transition Future China, post transition, and does one size fit all? p. 11-12 IV. V. Conclusion Bibliography p. 13 p. 14-15 2 Introduction China’s remarkable and unmatched growth of the past decades, regardless of it ambiguous property rights and a relatively weak legal framework, have puzzled governments and economists to date. The contrast between China’s transitional economy and those in Eastern Europe and the former Soviet Union could not be more striking. Whereas the transition of the latter two has been a struggle and have sparked recession, China’s transition has brought about an economic boom and its gradual reform path has challenged the belief that gradual reform and public ownership cannot work as a transitional strategy. This paper aims to analyse the Chinese Model of economic transition with a focus on the structure of property rights in the system, primarily in the rural sector. First, a brief historic background of China and its course towards transition is provided, after which property rights and the various approaches to them are examined. I will then explore what system China currently employs, whether or not this has been effective, if it is sustainable and if it is to set a precedent...
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...apparent to many of China's leaders that Economic reform was necessary. By 1978 " Chinese leaders were searching for a solution to serious economic problems produced by Hua Guofeng, the man who had succeeded Mao Zedong as CCP leader after Mao's death" (Shirk 35). As Susan L. Shirk describes the situation in The Political Logic of Economic Reform in China, restoring the CCP's prestige required improving economic performance and raising living standards. After the communist take over the country, Mao contained his emphasis on moral force by demanding that Chinese citizens demonstrate what he referred as "correct consciousness". It is noteworthy that shirk feels that the Chinese communist party leaders saw economic reform as a way to regain their and their party moral virtue even after Mao's death thus, paradoxically, by demonstrating their expertise in a moral political area of competence, the leaders of CCP felt they could demonstrate how they were serving the people. To a great extent, the issue of economic reform became politicized as the issue was used as a means by Deng Xiaoping to attain the leadership of the Chinese Communist Party. "Reform policies became Deng's platform against Hua for post-Mao leadership" (Shirk 36). Given this history of economic reform, it is evident that "under the present system economic questions are necessarily political questions" (Dorn 43). China was "still a state in which the central government retain[ed] the dominant power in economic resource allocation...
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...China Economic Reform and Opening: Some Evidents from Guangdong Province In the late 1970s, China still a developing country three decades after a revolutionary regime change in 1949, was in dire need of systemic change. The decade-long debacle of the Cultural Revolution had just ended, leaving the economy dormant and the people physically and emotionally drained. At that time the new idea of opening the country to global contacts and influences after three decades of partly self-imposed isolation seemed a no less drastic measure to China’s leaders than the original policy of economic and social closure. Other new ideas were emerging as well. Deng Xiaoping, the chief architect of China’s openpolicy and economic reforms launched in 1978, outlined a fundamentally new approach to gradual societal change. Special zones established in 1979 and special economic zones were named in 1980. Before 1979, all the import and export products has to go to HK before enter in China. China was one of the fastest growing economies in the 1980s. The average annual growth rate of GDP for China from 1980-90 was 9.5%. The corresponding growth rate for the world as a whole was 3.1 percent (World Bank 1992, 221,. table 2). The growth rate for China in 1992 was 12.6 percent. The rapid growth in China is obviously related to its relentless pursuit of economic reform, which has unleashed productive forces previously suppressed by rigid central planning. One particularly important component of...
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...The impact of financial liberalization reform on economic growth: an empirical survey on China Introduction: In the past few decades, financial liberalization would be a main driving force and trend on countries’ financial reform. It aims to eliminate restrictions on financial markets and financial institutions, both domestically and internationally (Financial Liberalization). Thus, as a benefit of financial liberalization, a surge of competition and innovation was awakened in the US and rapid spread to other advanced economies’ financial market between 1970s and 1980s. As a result, banks had become bigger and financial intermediation was cheaper (Anon. 2007). However, an excessive freedom could encourage financial institutions to take unnecessary risks on lending business which would lead to financial crisis. The current great economic recession was caused by a new financial instrument crisis, subprime crisis which started from developed economies which had high level of financial liberalization. Therefore, to some extent, financial liberalization is risky in the process of financial reform. China had conducted its financial reform for more than 30 years. It had benefited from financial liberalization to accelerate capital accumulation. Now, it has the world’s most valuable banks and has the largest foreign exchange reserve. But, in general, Huang et al. (2010) stated that China’s financial reform is still focus long on quantitative growth but short on qualitative growth in...
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...CHINA’S NEW CONCEPT FOR DEVELOPMENT Jiyao Bi1 INTRODUCTION In the first 20 years of the 21st century China is entering a new development stage to comprehensively build a prosperous society and to accelerate its modernization drive. China views these two decades as a period of great strategic opportunity which should be pursued vigourously. From an international perspective, peace and development remain the central themes of our era, and China is working to achieve this peaceful environment for development. From a domestic perspective, 25 years of economic reform and opening up have laid a solid basis for development, and China has achieved favourable conditions to accelerate development. However, opportunities are always accompanied by challenges. A key challenge for China is to adopt new thinking and ideas for development and make a new breakthrough in reform, so as to tightly grasp and make a full use of this opportunity to further promote its modernization drive. I. CHINA’S DEVELOPMENT TRENDS AND ISSUES China has experienced rapid economic growth since the late 1970s when economic reform and opening policies was initiated. From 1978 to 2004, China’s GDP grew by a yearly average of 9.5 per cent, the highest levels of GDP growth in the world. China has successfully maintained its sustained and rapid economic growth in recent years by improving and strengthening macro-control policies. Confronted with the external shocks of the Asian financial crisis of 1997–1998 and...
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