Policies and Strategies of Growth in China - Case Study Example

Running Head: Policies and Strategies of Growth Student Name Student Number Unit Title/Number Policies and Strategies of Growth Due Date Unit Coordinator Abstract This paper illustrates the truth of the fact that the context and circumstances prevalent in any nation determine its policies and strategies of growth. To have a clear illustration of the truthfulness of the statement, the paper considers a case study of China and as the crucial choice in exploring parts of the paper’s research scope. It also characterizes the existing circumstances prevalent in China’s political, economic, social, history, and health care among other aspects that determine policies and strategies of growth patterns and problems in China. The paper also summarizes how the Chinese government wants to adjust their growth strategies while at the same time introducing some of the key features of the policymaking process and some of the institutional and political economy problems and how such circumstances influence policies and strategies of growth. China’s exemplary economic growth and development are associated with better policies and strategies for growth in the eve of reforms that called for different paths to economic growth. China is in constant pursuit of adjusting its growth patterns as reflected in the country’s 12th five-year plans (5YPs). China’s policies seek to re-balance strategies of growth towards consumption and services while at the same time upgrading its industrial structure (He & Louis 2008, p. 21). To achieve these plans, China understands the need for an extensive set of reforms, policies and strategies, which face strong influence of the prevailing circumstances within the country. However, the greatest challenges in achieving these objectives include those of an institutional and political economy nature (Hughes 2002, p. 112). By looking ahead, it is more likely that China will meet its growth targets through appropriate policies and reforms, but it is not clear how rapidly the nation will re-balance its pattern of growth. Introduction China, and other countries like India are leading the shift in the center of economic gravity towards Asia, and the economic projections of economies across the globe and various market industries have become increasingly dependent on sustained demand in the two Asian giants. The basis of the continued success in growth is on the policies and good strategies of growth. China’s history indicates that its growth trajectories are not sustained on autopilot (Cheung 2008, p. 42). The prevailing circumstances are favorable for developing policies and strategies of growth to enable the country deal with the emerging issues and meet future challenges with ease. Additionally, the country’s 12th five-year plans (5YPs) reflect its visions and objectives for growth (Louis 2012, p. 1). However, in the pursuit of adjusting growth and development strategies, both economic and political economy perspectives provide a complex and difficult situation. However, this does not pose any serious challenge for China since its prevailing circumstances are favorable. In terms of policies, opening up and gradual market-oriented strategies of growth in China are a combination of a strong role of the government in channeling the nation’s resources to facilitate industrialization and investment. Indeed, China’s growth over time remained particularly industry and investment-oriented (Derek, et al 2008, p. 4). This allows the country for sustained growth with less macro stress. The country’s political, social, economic, and demographic aspects among other prevailing circumstances are favorable in valuing growth and development as a cultural factor. Current Growth Patterns of China China has seen rapid growth and development in recent decades. The country combined rapid growth in economy while pursuing substantial improvements in the living standards of its citizens, alleviating poverty, improving its health care, and improvement of education indicators through proper policies and strategies. China entered its reform process in a different path that had initial condition that had a relatively good ‘raw input’ that came in abundance through its citizen’s education health, wide spectrum of formal industrial companies, relatively homogeneous society, very low gender imbalance, and political and social priming (Louis 2012, p. 2). This offered China with a major support for growth during the reform period. However, the country’s economy was not in a good condition since most of its production factors were strongly misallocated and thus the country indicated low total factor productivity (TFP). Additionally, in 1978, China opened up and gradual market-oriented reform and strategy became vital in realization of its impressive industrialization and growth performance. The country also encouraged and subsidized savings for companies, forfeited dividend from state owned enterprises, and provided cheap credit for industries to facilitate underprized inputs such as energy, resources, land, and the environment (Peter & Patrick 2004, p. 5). Such policies also ensured that the government managed exchange rates to see investment reach a very high share of GDP. Under these policies, industrial companies increasingly recorded profits and benefited parts of the government whether directly or indirectly (Louis 2012, p. 2). Thus, a development of the constituency and demography favored the maintenance of growth patterns ensued. Finally, the reform period saw had a gradual sequence of reforms and policies for better infrastructure, general effectiveness in economic governance, and reasonable health and education. Institutional and Political Economy China’s policymaking process and development of strategies for growth have been successful in delivering impressive growth and development and the widely discussed industry-heavy lines. The characteristics of China’s policymaking process relate to its political and economic governance, aspects of policymaking process, and formulation and implementations of policies (Louis 2012, p. 19). Firstly, China’s political governance is centralized with politicians and civil servants undertaking similar career track while at the same time maintaining political accountability. Secondly, the country’s economy has an active managerial role in resource mobilization, explicit encouragement of industry and investment while at the same time being centralized with limited fiscal autonomy. Thirdly, the aspects of policymaking process adopted by China have a strong directive planning coordinated by NDRC. Finally, formulation and implementation of reforms remains solely the role of central government with the application of experimental reforms and strategies of growth using pilot project (Louis 2012, p.19). The table above indicates how the prevailing circumstances in china influence the process of formulating policies and strategies of growth to ensure economic development and prosperity. Social Aspect The social setting of China, just like any other nation, determines the policies and strategies of growth in the country. In essence, the concept of policy and strategy formulation connotes a deliberate and managed process of change. The changes in the social strata of China recorded from the Mao Zedong’s rule in 1967 after the formation of rural people’s communes saw the rise of the vast rural areas that reverted to ways that are more traditional (Keyser 2003, p. 312). Moreover, even extensive changes occurred when the Chinese came with radical reforms to emulate the Soviet style of administration and ministries and management of SOEs. This resulted in the beginning of a process of institutional change that consequently led to profound implications for central control and bureaucratic planning. Furthermore, the near explosion in technology that brought in telecommunication and access to foreign people exposed the Chinese society to foreign knowledge, cultural values, and dramatic alteration of the general social discourse (John & Xue 2005p. 12). This in return led to the Chinese governments to alter its policies and strategies to meet the alteration of its social strata. Between the period of the 1980s and 1990s, China faced a number of daunting internal economic problems that opposed its political and social prosperity. These obstacles result from the need of the newly affluent and advanced technology and knowledge to empower the society and the unexpected institutional adjustment that is necessary to build, support, and control a stable social dimension of the society (Li & Chen 2002, p. 61). Additionally, the rapid but socially disruptive change and shift from state-owned to private enterprises and an expanding market economy resulted in the realization of an ever-larger class of entrepreneurs in the Chinese nation. In hi-tech manufacturing for instance, China is becoming a global leader. However, the costs of this economic growth and development are huge. Among the costs identified corruption, massive unemployment, a rising crime rate, uncontrolled urbanization, and overpopulation. Just like in any other nation where economic successes accentuate social inequities and environmental degradation, these social vices become great obstacles for China’s development and growth (Kuijs & Tao 2006, p. 9). The head of corruption for instance has come to plague China’s policies and strategies of growth. Such social costs created an intensive debate about the country’s top priorities and successful resource allocation, but the debate about corruption and the rule of law is one of the most concerns than any other social vice. Influential political leaders and businesspersons use corruption as a means of attaining power, use personal relationships and connection to shelve their vices, and fail to appreciate the fact that corruption is pervasive and corrosive. With such influence in power through corruption, the corrupt leaders seek to find their way to achieve authority to influence policies and strategies of growth, eventually altering such policies. This will eventually lead to loss of cohesion and the unifying commitment to safeguarding the public interest. There is also the aspect of Chinese views of social instability. Chinese executives acknowledge that policies and strategies of growth over the past two decades played a role in intensifying social unrest and redefined the composition, interests, and attitudes of the nation’s complex social strata. An evidence of this statement is the increased and growing gap between the rich and the poor, low levels of education, and poor rates of unemployment. There is also the fact that the support of the Chinese system by farmers, ordinary workers, demobilized soldiers, and other ‘weakened’ groups continues to wane. Additionally, according to Li (2002, p. 21), the original social strata of China continue to disintegrate and a new class continues to take shape and becoming even more influential and stronger (John & Xue 2005, p. 930). As a result of this social change, the Chinese Communist Party (CCP) continues to lose its original social face and foresees uncertain future with five elements of the Chinese society: the peasants, urban workers, demoralized soldiers, intellectuals, and minority religious groups. To avoid such social instabilities, the Chinese introduced policies and strategies of growth according to the prevailing social circumstances. Among the most pronounced policies and reforms, include reducing taxes in the rural areas, offering subsidies to farmers, increasing the prices of farm produce while at the same time providing for their ready market, and lowering the costs of farm inputs (Derek, et al. 2008, p. 4). Furthermore, the government discouraged rural-urban migration by generating employment opportunities in the rural areas by setting up industries. Finally, the Chinese authorities embraced the bottom-up system in its policies and strategies of growth. This initiative emanated majorly from the rural dwellers of china after privatization of SOEs (George & Zhang 2003, p. 31). This was easily adopted as the Chinese people felt ownership of the process entirely as it was their original wish. This resulted in Chinese government leasing land to peasant farmers and thus the improved productivity. This clearly indicates how social elements of a country can determine its policies and strategies. The Washington Consensus In 1990, John Williamson identified the success and praise for East Asian economic management into and came up with a development of “Ten Commandments” known collectively as the Washington Consensus to guide policymaking in Latin America to resemble that of East Asia (Wing 2004, p. 10). However, although the commandments are viewed to be a resemblance of East Asia, research indicates that they do not apply to the China’s way of policymaking. The core of this point is that the Washington Consensus promised that for a developing country to implement conservative macroeconomic and liberal macroeconomic policies to put more powers and roles of the private sector at the expense of the public interest in resource allocation, then that country should be in pursuit of sure high and sustained growth. From the nature of its politics and social status, China has been on a different path to safeguard the interests of the public in its policies and strategies of growth (Wing 2004, p. 11). Conclusion This paper illustrates the truthfulness of the statement that it is the context and circumstances prevalent in any nation that should determine its policies and strategies of growth. Based on China’s context and circumstances through its history, the reform period, its social, political, and economic circumstances over time, the paper indicates how such aspects influence the path of policies and strategies adopted by the country. The paper also illustrates why the Washington Consensus and its prescriptions do not apply to China in its policymaking process. Reference List Cheung, S. (2008). “The Economic System of China,” paper presented at the 2008 Chicago Conference on China’s Economic Transformation, July 14‐18. Derek, H., Ravi, K. and Xiaobo. Z. (2008). China’s Growth Strategies. Cornell University, Retrieved 7th August 2013, http://www.arts.cornell.edu/poverty/kanbur/China'sGrowthStrategies.pdf George, T., Zhang, P. & Zhang, L. (2003). The Reform of Chinese State-Owned Enterprises Through Employee Ownership of Stock and Participation in Management. Pennsylvania: Pennsylvania State University, Retrieved 7th August 2013, http://cog.kent.edu/lib/TseoPeng-zhuLihai.pdf He, J. and Louis, K. (2007). Rebalancing China’s Economy: Modeling a Policy Package. Working Paper, China Research, World Bank. Hughes, N. (2002). China’s Economic Challenge. Armonk NY: M.E. Sharpe. John, W. and Xue, L. (2005). 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