Will the current crisis bring an end to the Chinese miracle? by ProQuest


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									     Economics Update                                                                               WEI ZHANG

     Will the current crisis bring an
     end to the Chinese miracle?
     As early as the 1950, the Asian tigers –               capital equipment that China could not itself
     Singapore, Hong Kong, Taiwan and South Korea           have produced. Chairman Mao died in a
     – began to experience rapid growth rates, of           timely way, just as globalisation was really
     around 8–9 per cent per year, and kept this up         taking hold. This provided a cheap fast way
     for several decades. By the 1980s, there was a         to catch up.
     real need for restructuring in these countries.
     Growth slowed as they began the process of             Access to world markets for both Chinese
     developing their service sectors. In China, this       private sector producers and government
     time of rapid growth started much later, in the        officials allowed exports to grow.
     1970s. But it continued for longer. The Chinese
     government was able by its policies to make         Between 1978 and 2007, China’s average annual
     even higher growth rates – around 10 per cent –     growth rate was 9.5 per cent. But trade grew by
     sustainable over a longer period. This is the       a spectacular 18 per cent per year and exports
     Chinese miracle.                                    by 23 per cent, both averages. It has been
                                                         estimated that export growth contributed 30 per
                                                         cent of GDP growth. This growth was fuelled by
                                                         surplus labour. China still has limitless numbers
                                                         of people scratching a living in rural areas who,
                                                         given an opportunity to work in the factories in
                                                         the coastal areas, will move to the cities. They
                                                         expect very low pay and as employers seek more
                                                         labour, more people move. There has been no
                                                         shortage of labour that might have led to wages
                                                         being bid up. This has actually helped to make
                                                         Chinese society more stable.

                                                         What would have happened without the
                                                         financial crisis?
                                                         The Chinese government has been quite
     Many farmers still have very low incomes.           obsessive about pro-growth policies. There has
                                                         been a tendency for inflation to accelerate but
                                                         the government learnt lessons and did slow the
     What were the forces that created the miracle?      economy appropriately. In terms of social justice,
                                                         the trends are not so positive. And when we
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