China's Economic Reforms (Essay Sample)

China's Economic Reforms Name Professor Course Date China's Financial Reforms. China is one of the world largest economies; the country has been going through an extensive economic revolution since 1979. The economic makeover in china for period 1979 to date, were due to government intervention in financial and banking system. The Chinese government initiated significant reforms in the country economic system which has been a key to transformation in the Chinese economy (Caprio, 1994). The reform courses of action were based mainly on three economic pillars, finance banking and industry. The reforms targeted areas in the economy that include: restructuring banking system by cleaning-up of loans that have no impact on the economy and injection of resources on the major banks; liberalization of the financial sector by opening up competition with other countries and finally tightening financial regulation through strict supervision. The reform path has lead china to shift from an agriculture based economy to an economy focusing on manufacturing and service industry, from high birth rate and short life expectancy to low birth rate and high life expectancy, from a closed economy to an open economy (Burdekin, 2005). All this new development is as a result of government initiated and involvement in the radical reforms formulated in 1979. Deng Xiaoping beliefs were the basis of the reform, which started that socialism does not cause poverty but prosperity. Thus, Chinese socialist government enacted reforms that have not only seen the country rising, but also maintaining its economic strength. China has again become one of the world's major economic powers with the maximum potential. In the 22 years following reform and opening-up in 1979, China's economy developed at an outstanding pace, and that thrust was maintained into the early years of the 21st century. Financial and banking reforms were part of the five year strategy for economic progress, which has been applied in twelve phases. The 2011 to 2015 is the twelfth phase under implementation. The reforms have spurred china's economic growth and development since their implementation. Like other Asian economic giants before it, china's GDP has grown from $150 per capita to $ 1284 per capita.(Deweaver 2012) China's industrial production has also transformed from low wages production to advanced production of sophisticated products such as automobiles, pharmaceuticals and computers. Financial reforms in China present a distinctive opportunity to survey the fundamental associations in the midst of economic welfare, institutional contribution, political involvement, and societal forces significance transforming county's economy. The Chinese economic changeover has experience important structural transformation at the nation and industrial levels, these transformations have extensive implications on the structure of economic well being and communal life in the country. Gradualism and constancy were the key foundations of the economic reforms and persist to be also for the current government of the Chinese people. The Chinese government gives precedence to economic reform as it is the main frame of sociopolitical development. The leadership acknowledges that it is impractical to achieve whatever thing in a country to be facing political strife. Any hasty preface of markets wherever there is neither a civilization nor the traditions to deal with the introduced market can have shattering effects. With the economic reforms taking deep roots in china's growth, china is deemed among the most excellent social transformations in history of human economic progress. Stock market is one of the major beneficiaries of the economic reforms in china, reform policies are the blue prints in stock market growth (Credy, 2006). The Chinese stock exchange market experienced tremendous growth since 1979; its success path took many countries more than a century to achieve. Today's Chinese stock amounts to 1,377 registered companies, 72 million shareholders and over 3,700 billion Yuan. The Chinese stock market is also a vital player in china's financial reform policies. Stock market has upheld the improvement of state corporations and the transformed their structure, this has enabled an unwavering transition involving the two systems. The strength of china's stock market is the key component in the realization of system transition in major state corporations. Shanghai Stock market and Shenzhen Stock market had a market value worth $1 trillion in 2007, thus making china's stock market the third largest in Asia. The switch also has encouraged standard and small-sized state enterprises to implement the shareholding scheme, thus resolving the nearly all significant issues during the change from a planned economy to a more revolutionized market economy. Citizens have also benefited at large in the transformation between banking and state corporations, they can now invest directly in the stock market by buying and selling shares (Lingling 2012). Such transformation does not only bestow purchasing power to Chinese population but also leads to tremendous economic progress in China as a nation. Industrial production is another area positively revolutionized by financial reforms, before economics banking and financial reforms, manufacturing was largely inactive and the communist system of governance offered little incentive for expansion in value and efficiency. With the enactment of the double price system and a better self-sufficiency for project managers, industrial productivity enlarged to a great extent. Industrial competitions were on fair grounds. Overseas enterprises and Enterprises competed successfully with publicly owned enterprises. Reforms changed the sector. Comprehensive privatizations abridged the market divide of the Township Enterprises and publicly owned enterprises and amplified the private enterprise share. In the year 2005, the state share had already reduced from 81% in 1980 to 15%; this is a clear indication that the foreign investment plays a vital role in china's industrial economy. From almost an industrial down the stroll in 1970s, China at present can be regarded as the world's leading producer of concrete steel, large ships and clothes, it also the world's major automobile market (Caprio, 1994). Chinese steel productivity increased in fourfold since implementation of banking and financial reforms, in the 21st century steel industry output, rose from 128.5 million tons of steel to 418.8 million tons that are equal to one-third of world's production. With reforms advocating for less government interference in production, productivity of the workforce in most Chinese steel industries surpass Western workforce productivity. Implementations of reforms began in 1975, Chinese vehicle production increased from to 1.1 million in 2000 as compared to 139,800 in 1979. It further rose to 9.35 million by 2008. The increase was more prominent in Light industries; textile's firms were the most eminent beneficiaries of reduced government involvement. In 2005 textile export accrued to 24% of total world export as compared to 4.6% in the 1980s, that is an 18-fold increase. The upward spiral in productivity is the outcome of the elimination of barriers in Chinese market and increased open competition. With such policies as the backbone of economic reforms, industrial firms increased from 377,300 to over 7.5 million between 1979 to 2000, this were 2004 economic census result, but it excluded firms with yearly sales lower than 5 million Yuan. The census counted over 1.33 million enterprises in China, Jiangsu and Zhejiang provinces reported more industrial firms than countrywide firms in 1980s. The reforms agenda has elevated china to stand taller among economic giants like South Korea, Taiwan and Japan. The Chinese have accomplished a measure of openness that is unique among large and heavily populated nations, despite factors such as stiff competition from foreign produce in nearly every sector that drives the economy. Foreign involvement facilitated to a greater, the degree in increased quality, technological know-how and standards, particularly in Chinese heavy industry (Shangquan, 1996). China's economic spiral due to reforms supports the claim that globalization significantly increases prosperity for underdeveloped countries. All the way through the reform era, the government played a central role by reducing tariffs and removing trade barriers. Tariffs rates were reduced from 56% to 15% during the financial reform period, in 2001, nearly less than 40% of foreign goods were under tariff and bottleneck procedures such as licensing and quotas were reduced. The early stages of reforms faced had protectionist's policies but still smuggling persisted. When Chinese decided to join the WTO, it settled to greatly harsher state of affairs than other underdeveloped countries. The gross domestic product has increased from 10% to over 60% due to open Trade with other countries impacted by reform policies, this was due to the establishment of free trade zones and export processing zones, like the shanghai trade zone. China remains to be the country with such growth despite its large size. Financial reforms have substantially increased trade surplus in China, the surplus is considered by other countries as a threat to their job. The financial and banking reforms have augmented disparity radically within China. In spite of speedy economic growth and development which has practically eradicated poverty in china's cities and further reduced it to the highest degree in countryside of china (Alen, 2008). Gini coefficient remains to above 0.45 if the growth is compared to United States and Latin America; the people living standard remains high. Inequality in people's living standard despite ec...