The History of China's Economy - Essay Example

History of China’s Economy Name Institution History of China’s Economy Any country must determine its economic policies based on the prevailing economic and political situation for the good of its people. There is no “one best way” of handling economic situations that suits all countries in all economic and political conditions. Decisions made during a political or economic turmoil shape a country’s destiny in the future world economy. Many countries which are forces to recon in the world economy have at one point in their history had to make very unpopular decisions to salvage their economies and ensure their continuity. China is no exception. Her economic resonance is an amazing story. Some people would describe the history of China’s economy as a stupendous saga of transformation of a developing country that had more than a few odds stacked against her to one of the most important nations in the global economy. Illustratively speaking, China's impressive economic performance was the result of a unique blend of rather disparate elements, such as communism, a market - based economy, foreign investment, capital controls, liberalism and political conservatism, that worked well enough to result in an impressive economic performance for over a decade. Managing the coexistence of all these apparently mutually exclusive features was a balancing act that was not easy. However, it demonstrated that it is the context and circumstance prevalent in any nation that should determine its policies and strategies of growth. The economy of the world’s most populous country has undergone many hurdles to be where it is now. In early 19th century, China adopted a market based economic system. This is a system whereby the country produces and consumes all its products within the country. It means that the country is literally self-sufficient as it does not need to import nor export any of the products it produces (Dutta, 2006). China was therefore considered superior as compared to the western countries. In fact the western countries soon started to rely on China for some essential products including tea and silver. As the demand for tea and silver in the western countries grew bigger, the Chinese borders opened for trade with the outsiders. Soon China began to experience trade surpluses. This was a good thing for the economy as the economy was able to fund itself. The then China’s government, guided by the principles of Confucianism, was involved in purely legal trade (Gao, 2008). Soon after, the economy started to experiencing some massive outflow of its currency as many of its citizens were importing opium from the British traders. The British traders, who had not been exporting any wares to the Chinese population started exporting opium into China. The opium was produced in India but exported into China by the British traders in a bid to reduce their trade deficit. These tons of opium would soon cost the country a lot of revenue as its importation was more detrimental than beneficial to the country’s population. The then government, the Qing Dynasty Administration, banned the opium trade in 1939. This move was opposed by many traders and consumers including the locals who had started enjoying opium at cheaper rates (Chan, 2001). The opposition to this move stemmed from many sources. Firstly, the Qing Administration had earlier tolerated the importation of opium since it had benefited from the taxation of the British traders who would import it from India. Secondly, the locals, including senior government officials, greatly profited from the opium trade raking in money from taxes and bribes. In turn, they were not ready to let go of the trade of opium as it was beneficial to them. Thirdly, with the introduction of free trade a few years before, the opium trade had attracted more businessmen including Americans who had introduced opium produced in Turkey. The opium from Turkey was of lower quality than that from India but it was also cheaper. This made it very attractive to the local consumers and soon there was too much opium in supply to the population. With increased supply, the price of opium got lower and more of the locals were interested to consume it. The ban on opium would not go down well with the locals as they were addicted to it. The first opium war erupted in 1839 when the Qing Administration urged the British merchants trading in opium to surrender their opium to be destroyed and compensation made to them. Qing Administration failed to pay the compensation and also banned the merchants from selling opium inside China (Cheung, 2009). The British initiated the opium war in a bid to obtain the full compensation for their destroyed opium. The war lasted 3 years ending in the year 1842 after the British had defeated the Chinese and following the signing of the Treaty of Nanking. The second opium war began in 1856 pitting a combined force of the British and the French forces versus the Qing Administration. The issues surrounding the outbreak of the war included demands by the British government that the Chinese government legalizes the opium trade again. The Qing Administration refused to give in to these demands and a war ensued. China was again defeated in the war which ended in 1860. After the second opium war, China’s economy was had been degraded after spending a lot of its resources on the war. The Qing Dynasty faced more problems with more internal uprisings until its fall. After the fall of this dynasty, China became very unstable both economically and socially until the rise of the Communist China. In late 1940s Mao Zedong took over leadership of the country. Mao was a Marxist-Leninist leader who believed in correct leadership stating that it must come from the masses and go to the masses (Chan, 2001). This means that his rule was both consultative and rational. Mao led China into multilateral trade with less developed economies in the region. He also focused on the empowerment of peasant farmers in China. He also focused on unifying the country and overthrowing the warlords. He also ensured that structures that support education were instituted. One of the most conspicuous events of the Mao era was the Cultural Revolution. Mao had envisioned a new structure of governance which came to be known as New Democracy. He proclaimed that for the country to move forward it had to be based on new politics, new economy and new culture. It is during this regime that he fostered the one child policy in China. This was to curb the outrageous population growth in the country. After the death of Mao, the country continued experiencing more instability. This lasted until later in recent history when Deng Xiaoping, a reformist politician of the Communist Party of China led the country to prosperity. Deng started his campaigns that moved the country towards a market economy immediately after the death of Mao. Although he never held any position of power in the government, he commanded a lot of support from the people of China. He was appointed to the position of paramount leader, which he held between 1978 and 1992 (Deng, 2009). Deng’s economic theories focused more on socialism than communism. This twisted version of economic thinking became known as socialism with Chinese characteristics. Deng’s mission was to open up China to other markets. He worked towards improving the relations of China with other countries. He also focused on modernization of the ways in which things are done. His focus for modernization included in agriculture, industry, the military and science and technology. His views on the economic policy are so liberal that he never used to reject an economic policy simply because it was a policy developed by capitalist countries (Deng, 2009). He channeled the economy into adopting an economic strategy whereby major investments were not made by the government but rather by the local banks, which held moneys from the peasants of the country. This was a deliberate move to economically empower the peasant majority of the country by their moneys working for them while earning them more interest too. These investments were made majorly in the industrial sector and majorly targeting light industries which would produce goods for export. Deng’s era set China onto a path to prosperity as these strategies ensured that the production costs were greatly lowered because the capital belonged to the Chinese people. In turn the country has benefitted from high earnings from exporting the cheaply produced products (Sivers and Desnoyers, 2012). References Chan, A. L. (2001). Mao's crusade: politics and policy implementation in China's great leap forward. Oxford: Oxford University Press. Cheung, T. M. (2009). Fortifying China: the struggle to build a modern defense economy. Ithaca: Cornell University Press. Deng, Z. (2009). China's economy rural reform and agricultural development. Singapore: World Scientific. Dutta, M. (2006). China's industrial revolution and economic presence. New Jersey: World Scientific Pub.. Gao, M. C. (2008). The battle for China's past: Mao and the Cultural Revolution. London: Pluto Press. Gao, M. C. (2008). The battle for China's past: Mao and the Cultural Revolution. London: Pluto Press. Sivers, P., & Desnoyers, C. (2012). Patterns of world history. New york: Oxford university press. Read More