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Assignment 6: Transition Processes - Essay Example

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At least prior to the onset of the global recession, many countries around the world joined the bandwagon in transiting their economies toward a freer market structure characterised by privatisation, liberalisation of prices, expansion of international trade, and attraction of…
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Assignment 6: Transition Processes
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Download file to see previous pages China and Russia make for a good comparison because both were previously centrally planned (or command and control) type economies to an extreme degree in the form of communism and have taken steps for transition in the completely opposite direction that permits private enterprises. Both are also the two largest transitional economies (Liua et al, 1998). However, there are also significant structural differences including the political context and framework of the transitions (Aslund & Prime, 2008).
China starting moving towards a more market oriented economy since late 1978, and this began when it decollectivized agriculture, which then yielded enormous gains in production (Economy Watch, 2009). Before 1978, its “industrial output was dominated by large state-owned enterprises (SOEs)” (ibid). Other features of the transition have been the decentralization of control generally, and the creation of special economic zones with the aim of attracting foreign investment. These conditions spurred the growth of the private sector including light manufacturing. The banking system also diversified and a stock market was developed. China’s transition has been marked by rapid economic growth, especially in the 1990s following the 1992 ‘adjustment programme’. Based on GDP-PPP, China’s economy is already the second largest in the world and is on course to become the largest (SOURCE). The share of SOEs in GDP has been declining since transition began, and the situation now is that the state firms that remain, are no longer entirely state-owned either. The distribution of wealth in China however is not even. The benefits of investment and consumerism have been concentrated in its western cities while large rural areas remain poor.
In Russia, the transition began with Gorbachev’s perestroika (economic restructuring) program and was followed by Yeltsin’s reforms and the more extreme ‘shock therapy’ of Gaidar. It ...Download file to see next pagesRead More
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