Institutional Reforms- Economic Development in China

Institutional Reforms- Economic Development in China

Institutional Reforms- Economic Development in China

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Institutional reforms

Institutional reform refers to making adjustments to the principal managing structures in a society. Such adjustments include straining of judges, police officers, lawyers or streamlining the judiciary systems. Institutional reforms target both short term and long term changes. Reforms result from conflicts brought about by systematic and structural problems. By adopting transitional justice element, reforms ensure accountability and prevent the occurrence of abuse. Institutional reforms include justice-related and economic-related measures. Institutional reforms aim at acknowledging citizens and building trust between rights holders and institutions. In a developing state, strengthening institutional frameworks help to sustain development in all sectors. Institutions interact with other organizations, institutions and agencies at the same level.

Economic reforms and development in China

The republic of china is the world’s largest exporter and second largest importer of goods.  It is an emerging and developing economy that gets income from export of manufactured goods. It is a significant importer of raw materials. The country manufactures basic goods and exports manufactured goods to other countries of the world. Large state owned enterprises dominate the Chinese economy.

 In terms of economic development, the republic of China lagged behind during the first half of the 20^th century. It practically had minimal economic influence in the world. Economic reforms adopted by the country have generated significant and stable growth in consumption, living standards and investment. Currently, it is among the world’s leading economic powers with the largest potential. Overall living standards in china are of a fairly well-off society. Economic reforms lifted masses of people out of poverty. Provinces in the coastal region are more industrialized and developed than the rural regions. Rural populations and immigrant workers are yet to fully benefit from these reforms (Warren 2005, p.68).

 China’s economy is developing at an exceptional rate since the beginning of reforms and opening up. The economic growth momentum has been firm since the second half of the 20^th century going into the 21^st century. Since 2004, the Chinese government has improved and strengthened its macro control leading to the economy embracing the best development period. The gross domestic product (GDP) has risen steadily in recent years. Economic restructuring has steadily increased the GDP up to tenfold since 1978. The foreign trade in china is growing faster than its GDP. Economic growth originates from vast state investment in infrastructure and heavy industry. The private sector is expanding from export to light industry creating a remarkable impact to growth. During the beginning of the 21^st century, masses of private companies collapsed and closed down following the global financial crisis. The government expanded the public sector to fill the vacuum left by the collapse. The government also allowed multinational corporations to use china as an economic platform. This positions the country as a leading competitor to other export-led economies in Asia. To increase productivity, china insists on initiating new management systems and raising individual income and productivity.

In the first half of the 20thn century, China faced a fragile economy accompanied with civil wars, constant external invasions, continuous revolutions and restorations. The 20^th century revolution saw the Chinese economy’s transformation into a communist state. The communist government transported all foreign and hard currency out of the country. This worsened the already failing economy. The communist government formed the People’s Republic of China. This government made enormous efforts in creating new industries and economic growth.

Economic reforms implementation was carried out in a gradual approach. Use of tight budgets and reduced money supply substantially reduced the economic inflation. This was done at the cost of the public sector by use of campaigns in the early 1950s. The campaigns targeted capitalists by imposing charges allowing the government to punish capitalists by inflicting fines (Chen 2009, p. 89). The communist government took charge of the banking system in the country bringing all currency under centralized control. It established trade associations that regulated prices of commodities. It collected revenues from the agricultural sector and this boosted the government revenues. The communist government ruined the country’s infrastructure including the highways and railroad system by mid1950s. It brought the agriculture and industrial sectors to a near standstill by directly controlling the sectors (Eckstein 1976, p.293).

The revolutionary spirit led the communist leaders to repossessing privately owned land. This did away with landlords and redistributed the land to peasant households. The following years saw the Republic China undergo a period of economic stability. The agriculture and industrial sector came back to normal with labor productivity increasing. In early 1970s, radical reforms took place in the Chinese economy (Eckstein 1976, p.293). The leadership opted for pragmatic ways in dealing with socioeconomic problems. Implementation of capitalists’ economic aspects took place. Economic reforms began in banking, finance, industrial, fiscal, agricultural and labor systems. (Lippit 1987, p.56). The government achieved the expansion of areas that could fair well with foreign investment. This opened up the coastal cities and regions for foreign investment. These areas had favored taxations and were friendly to foreigners (Wu 2006, p.88). All these attracted international capital to china and saw the economic development of the coastal areas.

 China adopts a “five-year-strategy” targeting economic development. All the five-year-plans have been beneficial to the country’s economic reforms. The 9^th five-year-strategy (1996-2000) has been outstanding and has seen the successful transition into the 10^th five-year-strategy (2001-2005). The 10^th five-year-strategy targeted the sustenance of a fairly rapid economic growth, strategic restructuring and improving the economic growth. The strategy targets to double the 2000 GDP by the year 2010 (Warren 2005, p.68). This 10^th five-year-plan aims at substantially perfecting the socialist market economy and transforming the public enterprises to modern developed ones. The strategy aspires to improve the value of life and increase annual growth among both rural and urban residents.  In 2005, the Fifth Plenum approved the 11^th five-year-strategy (2006-2010) that has built a harmonious society through fair wealth distribution and improved social welfare. This resulted in the economic growing at 10% per year during the 1990s to 2004 (Prasad 2004, p.229). This has been the highest growth rate in the world. Such high growth generates millions of jobs annually needed by the huge population.

Agriculture and industry are the key sectors in the economy. The sectors employ more than 70 percent of the whole labor force and contribute 60 percent of GDP. The industry sector has seen the advancement of technology, labor productivity and income. Agricultural output has been threatened by weather changes while the industrial section gets most influences from the government. The inconsistency of the two sectors has formed a social economic difference between the urban and the rural areas (Wu 2006, p.88). China is the largest rice producer in the world. It is also a prime source of cotton, wheat, corn, tobacco, peanuts and soybeans. Most industrial and mineral products come from china. Such industrial products include cotton cloth, antimony and tungsten. Most cotton yarn, crude oil, coal and other industrial products are a Chinese produce. Mineral resource in china, although partially developed are among the richest in the world.

The republic of China has built advanced engineering plants that can produce sophisticated equipments like satellites and nuclear weapons. They also acquire such facilities from foreign countries since most of their factories are rather ill-equipped. The technological level and quality standards of the country are still not up to standards (Chen 2009, p 89).

The government of china has a body that manages the economy using commissions, ministries, administration, corporations and bureaus that are under the state council. These organizations supervise all significant economic sectors. Specialized departments operating under the state council administer several economic aspects. These departments operate through subordinate offices from provincial to local levels. There is extensive consultation and negotiations while making economic policies. Implementation of policies and economic plans is through direct and indirect control mechanisms.

The government of China directly influences consumer spending although income level and commodity prices play a role too. The state council manages foreign exchange by controlling access to foreign currency needed for imports. The private sector dominates the small and middle sized industries but the government still plays a crucial part in controlling large industries. The government accounts for a third of the GDP. Foreign owned companies are strong economic pillars while State Owned Enterprises (SEOs) control the public sector.

The 1990s saw a continuous rapid economic growth in china. Increased inflation rate accompanied this rapid growth. The financial crisis spread throughout Asia negatively affecting Chinese foreign investment and exports’ growth at a significant extent. The country’s enormous reserves and stable currency insulated it from the regional financial crisis. The economic growth started slowing with increasing unemployment rates due to internal problems. This resulted from the gradually increasing human population, adverse loans and massive layoffs (Bramall 2009, p.215).

The republic of China has had impressive economic development in the past two decades. Major economic hurdles has been modernizing the banking sector and reforming the state sector. Masses of state-owned enterprises (SEOs) got inefficient and losses were inevitable. The government managed to implement measures that made the majority of SEOs start recording profits (Knight 2012 ,p.20).

Conclusion and recommendations

The speed of growth is within the target range. The growth is slowing down at a stable rate. Recent measures have been implemented aiming at further economic stability in china. The government is handling relations aimed at maintaining a steady and robust economic growth. The government has adjusted the economic structure and managed inflation expectations. The country should intensify anticipatory adjustments in order to respond to new economic developments and problems in recent times. The government should make efforts to encourage consumer demand. Expansion in effective investment should be encouraged so as to stabilize external and local demand as well as bolster the real economy.

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