Market liberalization in the Chinese Economy has brought its huge economy forward by leaps and bounds – but rural China still remains poor, even as its cities increase in affluence.
China’s economy is huge and expanding rapidly. In the last 30 years the rate of Chinese economic growth has been almost miraculous, averaging 8% growth in Gross Domestic Product (GDP) per annum. The economy has grown more than 10 times during that period, with Chinese GDP reaching 3.42 trillion US dollars by 2007. In Purchasing Power Parity GDP, China already has the biggest economy after the United States. Most analysts project China to become the largest economy in the world this century using all measures of GDP.
However, there are still inequalities in the income of the Chinese people, and this income disparity has increased in the recent times, in part due to a liberalization of markets within the country. The per capita income of China is only about 2,000 US dollars, which is fairly poor when judged against global standards. In per capita income terms, China stands at a lowly 107th out of 179 countries. The Purchasing Power Parity figure for China is only slightly better at 7,800 US dollars, ranking China 82nd out of 179 countries.
Economic reforms started in China in the 70s and 80s. The initial focus of these reforms was on collectivizing the agricultural activities of the country. The leaders of the Chinese economy, at that point in time, were trying to change the center of agriculture from farming to household activities. At later stages the reforms extended to the liberalization of prices, in a gradual manner. The process of fiscal decentralization soon followed.
As part of the reforms, more independence was granted to the business enterprises that were owned by the state government. This meant that government officials at the local levels and the managers of various plants had more authority than before. This led to the creation of a number of various types of privately held enterprises within the services sector, as well as the light manufacturing sectors. The banking system was diversified and the Chinese stock markets started to develop and grow as economic reforms in China took hold.
The economic reforms made in China in the 70s and 80s had other far reaching effects as well. The sectors outside the control of the state government of China grew at a rapid pace as a result of these reforms. China also opened its economy to the world for the purposes of trade and direct foreign investment.
China has adopted a slow but steady method in implementing their economic reforms. It has also sold the equity of some of the major Chinese state banks to overseas companies and bond markets during the middle phase of the first half of the 21st century. In recent years the role played by China in international trade has also increased.