(Labour markets and the banking system still have a long way to go in this respect.) But liberalisation of the economy increased allocative efficiency at the firm and at national level and provided incentives for the private sector to become more productive. * Globalisation and the free movement of capital brought foreign investment and capital equipment that China could not itself have produced. Without a social welfare system, Chinese people know that they have to have savings in case of job losses or poor health and to pay for their children's education.
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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