Why has China developed its economy so much? Chinese economic miracle: what is the secret

The main factors behind the phenomenal growth of the Chinese economy are as follows.

The first factor is the effective role of the state in the economy, which actively influenced and influences ongoing processes at all stages of economic reform. In the Chinese theory of reforms, the term “a comprehensive system of macroeconomic control carried out through economic levers” is used to denote the role of the state. Chinese leaders gradually, step by step, as the need arose, built the market (institutions, competition, private property) and at the same time supported and modernized state-owned enterprises.

Supporters of “shock therapy,” which includes four main elements: price liberalization, liberalization of foreign trade and exchange rates, denationalization and privatization of state-owned enterprises, and the implementation of a non-inflationary macroeconomic policy, believe that this is enough to quickly align the price structure to the world level and build market institutions , and then the market itself will regulate economic processes. Followers of the shock model understand that the privatization of state-owned enterprises will inevitably lead to increased unemployment until the private sector begins to absorb excess labor. Therefore, the shorter the transition period, the sooner, according to supporters of “shock therapy,” the economy will stabilize. For example, Jeffrey Sachs argued this way: “if you are going to cut off a cat’s tail, it is better to do it in one fell swoop than to cut it into pieces.” It is believed that, since the pain will be short-lived, political opposition to the reforms will soon die out, without having time to lead to the repeal of the reforms.

Chinese proponents of "gradualism" argue that the four above-mentioned elements of "shock therapy" do not need to be administered simultaneously and instantly. They believe that the process should take place gradually, sector by sector, stretching over many years, and during this time (before the launch of the market autopilot) the role of the state is extremely large. The "gradualist" approach can be characterized by four principles. First, price reform may be incomplete and gradual (parallel price system in China). Secondly, the emergence of foreign competitors in the domestic market must be gradual so as not to lead to the collapse of the national industry. Thirdly, privatization of state-owned enterprises is not necessary at the first stage of reforms, and private property can develop not instead of state property, but together. Fourthly, the transition to a market economy can be carried out without an overly tight macroeconomic policy: “monetary policy may not be tight or soft, but support the production the country needs.” Fifthly, the order (priorities) of reforms is important; synchronization does not mean the simultaneity of all reforms, but their consistent mutual influence. In China, rural reform preceded urban reform, and price reform preceded property and property rights reform. At the same time, it is impossible for certain links of reforms to be too ahead of others, and for some, on the contrary, to lag behind.

Depending on the stage of formation of market mechanisms, the functions of the Chinese state and especially the forms of their implementation changed. Direct management methods were replaced by indirect ones, directive planning - by indicative planning and forecasting, the center of gravity of government intervention was transferred from the microeconomic level to the level of macroeconomic regulation and, most importantly, administrative methods of regulating economic processes were replaced by market ones.

The analysis shows that the system of public administration that existed at all stages of Chinese reforms was adequate to the tasks of economic modernization of the country, which made it possible to transform China into a modern powerful state.

The second factor is significant resources / labor / with a constant increase in their quality and low wages (excess labor in the labor market made it possible and is allowing wages to be kept at a low level). Physical population growth and the movement of labor from labor surplus areas to new growth points ensured in the period 1978-1988. about a third of GDP growth.

The third factor is a high share of savings and investment (above 30% of GDP), complemented by effective strategies for attracting foreign investment, primarily in high-tech industries. According to many Chinese experts, investments also provided about a third of GDP growth.

The fourth factor is the openness of the economy (kaifang zhetse), based on an export-oriented development model, which, due to the growth of foreign exchange earnings, involves increasing the technology and knowledge intensity of the economy, mastering the latest information and communication technologies, and introducing modern industrial logistics schemes.

The fifth factor is an advantageous territorial and natural location. The geographical location of its territory is of no small importance in China's successes. In the historical process of forming its territory, expansion in the southern and northwestern direction gave the country access to the Pacific Ocean; its territory contained the shortest land routes from the shores of the Pacific Ocean to European countries. China has the third largest territory in the world (after Russia and Canada).

On the territory of China there are a number of large fuel (oil, coal, gas), various ore and non-metallic mineral deposits (tungsten, lead, zinc, vanadium, titanium, tin, molybdenum, nickel), as well as building materials (gypsum, barite, phosphate rocks). ores, mica, asbestos, kaolin). China ranks first in the world in terms of potential hydro resources. However, on a per capita basis, China is not very rich in natural resources, especially water, forest and land (arable) resources.

Thus, the Chinese practice of economic growth is simple and does not contradict the theory: using the savings of the population and overseas Chinese (huaqiao), the state equipped the infrastructure and stimulated the creation of new jobs in the private sector parallel to the public sector, which exported its products and directed foreign exchange earnings to procurement of new technologies and modernization. The level of consumption gradually increased, which increased domestic demand and stimulated the influx of new investments in the form of global multinationals, which were eager for access to the giant Chinese market.

Thanks to a long period of consistently high growth in GDP (the highest in the world) and exports (Fig. 1.5), absolute and relative amounts of savings and investments, including foreign ones, and the involvement of millions of people in industrial production and the service sector (Table 1.1), China managed to create a modern industry, significantly expand and improve the infrastructure (Box 1.1), create a variety of industrial sectors that were previously absent in the country and thereby significantly increase the share of industry and services in GDP (Table 1.1).

* National Income Savings Fund.

** According to Chinese statistics, the primary sector is agriculture and forestry, the secondary sector is industry, energy, construction, and the tertiary sector is services, transport, education, healthcare.

Source Chinese Statistics Yearbooks.

This article is from the section- success factors of economic reforms in China, which is dedicated to the topic - China's economic growth - drivers of phenomenal growth. I hope you appreciate it!

Interesting video about the development of China

Just four decades ago, a country like China had a rather weak, lagging economy. The economic reforms that have taken place over the years, which have made the country's economy more liberal, are considered to be the Chinese economic miracle. The rate of economic growth over the past 30 years is incredible and amazing: on average, the country's GDP increased by 10% per year, and GDP per capita grew by 9%. Today, China occupies a leading position among world economies. Let's consider how this country managed to achieve such indicators, how the economic miracle happened, what were its reasons and what was the situation that preceded it.

China in the middle of the twentieth century

After the end of World War II, China stood at a crossroads and did not know what to choose: a liberal capitalist or, following the example of the great power of the USSR, a socialist path of development. The civil war that rocked the country until 1949 led to the separation of the island of Taiwan and the creation of the People's Republic of China, led by Mao Zedong.

With the advent of the Communist Party, the painful construction of socialism begins: the nationalization of property and the implementation of agrarian reform, the implementation of five-year plans for economic development... Accepting help from the USSR and focusing on the political and economic system of its socialist neighbor, China is industrializing the economy. Sometimes we had to resort to tough and uncompromising methods.

"Great Leap" to nowhere

However, after 1957, relations between China and the USSR cooled, and Mao Zedong, who did not share the views of the then Soviet leadership, decided to implement a new program, called the “Great Leap Forward.” The goal of the ambitious program was to dramatically develop the economy, but the new direction turned out to be unsuccessful and had tragic consequences both for the people and for the Chinese economy as a whole.

In the 60s, the country experienced severe famine, cultural revolution and mass repression. Many government instruments ceased to function, and the communist party system collapsed. But in the early 70s, the government set a course for restoring party organizations and improving relations with the United States. After the death of the “Great Helmsman” Mao Zedong in 1976, the country found itself in a difficult economic situation, unemployment increased, and a card system was introduced.

Since the end of 1976, Hua Guofeng has become the head of China. But the actual reins of power are taken by Deng Xiaoping, a politician who fell into the millstones of the Cultural Revolution and was restored to the post of Vice Premier of China in 1977.

Decisive plenum

Considering the Great Leap Forward program to be largely erroneous, Deng Xiaoping, relying on the support of the Communist Party, began implementing a program to modernize the economy. In 1978, at the next plenum of the Communist Party, the course towards a socialist market economy was officially proclaimed, which would combine two economic systems: planned-distributive and market.

The new government path is called the reform and opening up policy. Xiaoping's liberal reforms are based on the gradual transition of economic structures to market ones and the preservation of the communist system. assured that all transformations will take place under the leadership of the Communist Party, and the dictatorship of the proletariat will be strengthened.

Highlights of transformations and reforms

Briefly speaking about the new reforms, the Chinese economy should be focused on export production and massive attraction of investment. From this moment on, the Celestial Empire proclaims itself a country open to expanding ties with other states, which has attracted foreign investors. And the liberalization of foreign trade and the creation of special economic zones for foreign entrepreneurs led to an unprecedented increase in export indicators.

First of all, Xiaoping reduces state control over many sectors of the economy and expands the management functions of business leaders. The development of the private sector was encouraged in every possible way, and stock markets appeared. Serious changes affected the agricultural sector and industry.

Four stages

During the entire reform of China's economy, four temporary stages can be distinguished, carried out under a certain slogan. The first (from 1978 to 1984) stage, implying transformations in rural areas, the creation of special economic zones, had the following slogan: “The basis is a planned economy. Addition: market regulation.”

The second (from 1984 to 1991) stage is a shift in attention from the agricultural sector to urban enterprises, expanding their field of activity and independence. Market pricing is being introduced, the social sphere, science, and education are undergoing reforms. This stage is called “Planned Commodity Economy”.

The third (from 1992 to 2002) stage took place under the slogan “Socialist market economy.” At this time, a new economic system is being formed, implying further development of the market and defining the instruments of macro-regulation of state control on a new basis.

The fourth (from 2003 to the present day) is designated as the “Stage of Improving the Socialist Market Economy.”

Transformations in the agricultural sector

The Chinese economic miracle began with the transformation. The essence of the agrarian reform was the abolition of the then existing people's communes and the transition to family contracting with a single collective property. This meant the transfer of land to Chinese peasants into ownership for a period of up to fifty years, and part of the products received from this land was given to the state. Free pricing for peasant products was also introduced, and market trade in agricultural goods was allowed.

As a result of such transformations, agriculture received an impetus for development and emerged from stagnation. The new established system of collective ownership and family contracting qualitatively improved the living standards of peasants and helped solve the food problem.

Transformations in industry

The economic system of industrial enterprises was almost freed from directive planning; they were supposed to be turned into self-sustaining enterprises with the possibility of independent sales of products. Large strategic enterprises remain under the control of the state, while medium and small enterprises are given the right not only to manage their business, but also to change their form of ownership. All this contributed to the fact that the state focused on improving the situation in large state-owned enterprises and did not interfere with the development of the private sector.

The imbalance in the production of heavy industry and consumer goods is gradually decreasing. The economy is beginning to turn toward increased production of goods for domestic consumption, especially since China’s large population contributes to this.

Special economic zones, tax and banking systems

By 1982, as an experiment, some coastal regions of China declared themselves special economic zones, and after the 1984 plenum, a total of 14 cities were approved as special economic zones. The purpose of forming these zones was to attract foreign investment in Chinese industry and the development of new technologies, accelerate the economic development of these regions, and bring the country's economy to the international stage.

The reforms also affected the tax, banking and currency systems. Value added taxes and a single income tax for organizations are being introduced. The central budgets began to receive a larger share of revenues thanks to a new distribution system between local administrations and the central government.

The country's banking system was divided into state-owned banks pursuing the government's economic policy, and other financial institutions on a commercial basis. Foreign exchange rates now began to float freely, which was regulated only by the market.

The fruits of reforms

The Chinese economic miracle began to manifest itself in the late 80s. The results of the transformations had a qualitative impact on the lives of ordinary citizens. Unemployment rates are reduced by 3 times, retail trade turnover doubles. The volume of foreign trade by 1987 increased 4 times compared to 1978. Billions of dollars of foreign investment were attracted, and by 1989 there were 19,000 joint ventures.

Speaking of China, it manifested itself in a decrease in the share of heavy industry and an increase in the production of consumer goods and light industry. The service sector is expanding significantly.

It was amazing at its unprecedented growth rates: 12-14% in the early 90s. During these years, many experts spoke about the phenomenon of the Chinese economic miracle and predicted China's role as an economic superpower of the 21st century.

Negative consequences of reforms

Like any coin, Chinese reforms had two sides - positive and negative. One of these negative aspects was the threat of inflation, which followed as a side effect of increased labor productivity after reforms in the agricultural sector. Also, as a result of the price reform, the situation in the industrial sector worsened. Unrest began, resulting in student demonstrations, as a result of which Secretary General Hu Yaobang resigned.

Only in the early 90s, the course proposed by Deng Xiaoping to accelerate and improve the economic environment helped overcome the overheating of the economy and create systems for controlling inflation and the country's development.

Chinese economic miracle and its reasons

So, now about the reasons. Studying the phenomenon of China's economic miracle, many experts put forward the following reasons for the economic recovery:

1. The effective role of the state in economic transformations. At all stages of reforms, the country's administrative apparatus adequately responded to the tasks of economic modernization.
2. Significant labor resources. Demand in the Chinese labor market is always greater than supply. This allows wages to be kept low while productivity is high.
3. Attracting foreign investment in Chinese industry, as well as in high-tech industries.
4. An export-oriented development model that made it possible, through foreign exchange earnings, to increase the knowledge intensity of the economy and the development of the latest technologies.

However, China's main economic progress was the abandonment of “shock therapy” and the gradual formation of a market mechanism, which improved the economy through effective market regulation.

China today

What have China's four decades of wise reforms led to? Let's look at the main economic indicators below. Today's China is a powerful nuclear and space power with modern industry and developed infrastructure.

Some numbers

Over the three quarters of 2017, China's GDP reached about 60 trillion yuan. This amounts to 6.9% in annual terms. The increase in China's GDP in 2017 is 0.2% compared to the previous year. The share of the agricultural, industrial and service sectors in GDP is increasing by an average of 5-7%. In 2017, the growth trend in innovative and high-tech sectors of the economy continues.

In general, despite a slight slowdown in growth rates, the Chinese economy (it is quite difficult to briefly describe this phenomenon) today retains the potential for long-term growth and continues structural reforms.

Forecasts for the development of the Chinese economy

Having created a market mechanism in the economy, the Chinese government plans to further improve it, while showing the advantages of socialism. However, experts make both optimistic and pessimistic forecasts for the development of the Chinese economy. Some are confident that it will be difficult to confront the growing economic, political and social problems while maintaining communist power. Growing emigration to developed countries and the gap between rich and poor can reduce the effectiveness of government and the role of the party. In contrast to them, other experts argue that, after all, a hybrid of socialism and the capitalist market is possible due to the originality of the Chinese nation and the mentality unique to it. All that remains to be said is that time will put everything in its place.

Introduction

If we evaluate China, it is necessary to explain the GDP growth rates, which from year to year for 30 years amount to at least 9-10% per annum. In this regard, China is a modern record holder: according to today's statistics, there is no country that has achieved a weighted average real growth rate of over 10% over the course of 20-30 years. This is an example of a successful economy in this regard. But we should not forget that China is not the only country in this region. There are enough countries in the Asia-Pacific region that have achieved almost the same successes and the same growth rates over the course of 20–30 years. The most striking example is Japan, where from 50 to 75 the annual growth rate was 8.5%. In Korea it is also 8.5%, in Taiwan - 9.1% since 1960. We should not forget, of course, Singapore, Hong Kong, Thailand, Malaysia - they all approached 9% real GDP growth over three decades. So, on the one hand, China is a successful example, but on the other hand, it is simply the latest example of Asian high rates of development. What explains this dynamic? The answer to this question is a simple formulation - the “Chinese model” of development.

The purpose of this thesis is to analyze the causes and essence of China's economic growth. Identification of the fundamental factors of growth and the nature of economic reform. In order to answer the questions posed, it is necessary, firstly, to determine step by step what China's economic growth is, to give a brief description of the successes of the PRC economy over the past 30 years since the beginning of reforms. Secondly, analyze the theories that exist today, giving their own view of the cause of growth. Identify the most complete and correctly characterizing hypothesis and, based on it, conduct an analysis of the main reforms adopted in China since the beginning of 1978. Third, identify and show the main factors of growth. By combining the results of the analysis, the answer to the question of what the “Chinese” economic development model is will be obtained.

And finally, the negative aspects of accelerating economic growth will be considered. The main ones highlighted are socio-economic problems and environmental problems. The latter is the most dangerous in the case of China. Violation of the ecosystem and a radical deterioration in the living conditions of the population could lead to destabilization of the political situation in the PRC and loss of people's trust in the government.

Economic "miracle" of China

Characteristics of China's Economic Growth

October 1, 2010 marked the 61st anniversary of the founding of the People's Republic of China. In 1949, the PRC was a backward, semi-feudal and semi-colonial country. The economy was in complete ruin, the people lived in extreme poverty, and the average life expectancy of the population was only 35 years.

China's half-century development path has been both glorious and thorny. There were great achievements, but there were also major failures. In particular, from 1966 to 1976, excesses in politics, ideology, and culture led to the cultural revolution, which inflicted the most serious moral and economic damage on the state and people for the entire period since the founding of the PRC. The country was again on the verge of economic ruin.

Table 1. GDP dynamics for the period 1966-1976 (in%)

When the “cultural revolution” ended, the Chinese people were faced with questions: what is socialism, where to go next for China. In December 1978, Deng Xiaoping, as the leader of the ruling party, gave answers to these questions. Knowing very well the history and reality of China, having deeply analyzed the experience and lessons of the world socialist movement, he put forward a policy of reform and opening up and pointed out the path to building socialism with Chinese characteristics and building a socialist market economy. China, with its huge population and limited arable land, could only follow the path of socialism. Western-style capitalism not only could not solve the problem of its development, but would also lead to destruction.

Deng Xiaoping called for the emancipation of people's consciousness and the breaking of stereotypes in the concept of socialism of the Soviet model. He stated again and again that poverty is not socialism. To build socialism, which would have an advantage over capitalism, it is necessary, first of all, to get rid of poverty. The peculiarity of China is that when it embarked on the path of socialism, it was far behind developed countries in terms of the level of productive forces. Therefore, China will be in the initial stage of socialism for a long time, where the development of productive forces is the most pressing task.

Deng Xiaoping advocated a realist approach, noting that China did not accept Western-style capitalism. But it must be widely open to the whole world in order to borrow advanced management methods, the best achievements of science and technology, and attract foreign capital from all countries of the world, in particular developed capitalist countries, in order to accelerate the development of productive forces in the country. He emphasized that everything that contributes to the development of socialist productive forces, increasing the overall power of the state and the living standards of the people is good.

The implementation of Deng Xiaoping's ideas has led China to a breakthrough in economic development and social progress over the past 30 years. Today, China is becoming a powerful regional superpower, rapidly taking the place of Japan as the leader of the Asia-Pacific region. For 1979-2010 the average annual GDP growth was about 9.93% http://data.worldbank.org/country/china - World Bank database.

Graph 1. Dynamics of China's GDP for the period 1978-2010

Table 2. Dynamics of China's GDP in the period 1979-2010.

The phenomenon of rapid economic growth has become a distinctive feature of the Chinese “economic miracle”. It is worth noting that the growing mass of goods was largely consumed by the domestic market, and labor productivity, which remained extremely low before the start of reforms, grew at a rate of 2% to 3.8% per year, providing up to 43% of the increase in national income. This distinguished the Chinese economy from other Asian countries. Inozemtsev V.L. Limits of “catching up” development. - M.: Economics, 2000.

Over the past 30 years, GDP per capita production in China has increased 20.5 times, labor productivity - 3.4 times. The problem of food and clothing has now been solved; Great strides have been made in eradicating poverty. The standard of living of the population is rising rapidly. The shortage of goods has disappeared; currently, for the vast majority of goods, there is a balance and even an excess of supply in supply and demand. China has surpassed all countries in the world in the production of grain, cotton, oilseeds, meat, coal, steel, chemical fibers, yarn, textiles, clothing, cement, televisions and programmable switches; and in terms of electricity and chemical fertilizers - in second place.

In the field of science and technology, China has reached or approached the world level in such fields as nuclear and space technology, high-energy physics, biology, computing and telecommunications. The total amount of imports and exports for 2010 was 2.813 trillion. dollars, and the foreign trade surplus amounted to 199 billion dollars. China in 2010 took second place in the world in terms of export volumes, which amounted to 1.506 trillion. dollars, and in third place in terms of import volumes, amounting to 1.307 trillion. dollars http://data.worldbank.org/country/china - World Bank database.

Since the beginning of the policy of reform and opening up, foreign capital has been used in China in a total amount of over $806 billion. In 2010, China ranked second in the world after the United States in terms of the scale of attracted foreign capital. In terms of foreign currency savings and gold reserves, China ranks first in the world: as of 2010, they reached 2.622 trillion. dollars https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. China became the world's third largest economy back in 2007, overtaking Germany in terms of GDP. And already in September 2008, China became the largest foreign investor in US government bonds.

China is at the forefront of developing countries in terms of major health indicators. Average life expectancy has doubled since 1949 and amounted to 73 years.

The successes achieved by the Chinese economy over the past twenty years are, of course, undeniable. The country's stable development indicates that state leaders have taken into account many lessons arising both from the experience of their neighbors and from unsuccessful attempts to reform the Soviet economy. There are numerous forecasts, the authors of which tend to predict the future place of the Chinese economy on the world stage. According to their forecasts, in ten or even fifteen years, China will overtake the United States in terms of GNP. However, it must be borne in mind that similar predictions were made in the late 70s in relation to Japan and that the Land of the Rising Sun's unaffectedness by the stock market panic of 1987 was also considered an indicator of its unshakable stability. Inozemtsev V.L. Limits of “catching up” development. - M.: Economics, 2000. Meanwhile, ten years later, not a trace remained of the signs of former prosperity, and the leading role of the United States in the world economy only strengthened.

Therefore, today, without belittling the importance of Chinese reforms, it is necessary to take into account that the reformation of Chinese society is identical to the evolution of any country implementing a policy of “catch-up development”, and for this reason one should not expect China to achieve a dominant position in the economic system of the present time.

According to the latest official information, the growth of China's economy has developed so rapidly that today everyone unanimously confidently declares that China's economy has become the second in the whole world! The question of what explains the rapid growth of China's economy is not too difficult in the modern world, since after analyzing market prices and purchasing power parity of this country, it immediately becomes clear that China must necessarily lead the world rankings.

How can we explain the rapid growth of China's economy?

World experts in the field of economic development argue that the growth rate of China's economy has increased so much recently that even exchange rates, especially the dollar, cannot in any way affect the fluctuation of the Chinese economy in a leading position in the world. Some of them are of the opinion that soon this country will even be able to surpass Japan’s GDP in terms of financial indicators.

More recently, the director of the State Administration of Foreign Exchange of China announced that it was his country that became the owner of the second economy in the world. But, despite this, he noted that the Chinese government is ready for the fact that after the economic situation in the country grows, China will have to experience some slowdown in such a rapid trend in the development of the national economy.

But, despite the speech of a representative of the Chinese government, it is still impossible to say with certainty that the country will be able to surpass the economy of Japan, which has held a leading position in the world for four decades. Today it is clear that purchasing power parity is a clear indicator that China is, in fact, the second largest economy in the world. The reason why it has not yet been officially said that this particular country is one of the leaders of the world economy is that at the moment China’s economic indicators are constantly underestimated.

Rapid growth: China's economy

Today, in the comparative table, China's GDP has almost reached Japan's GDP: $4.900 trillion versus $5.080 trillion. As for Chinese economists, they say that in order for their country to finally be able to surpass Japan in the world ranking of economic development, it is necessary to eliminate the main obstacle, which is the yen.

According to a United Nations report, it is China, together with India, that will become the areas where the most rapid economic growth will occur. In addition, it should be noted that the main thing that explains the rapid growth of China’s economy is that the country’s government itself has set such a promising goal for itself. Without a doubt, Chinese officials have achieved clear success towards achieving their final goal: already in 2010, the Chinese economy became the third largest in the world. Today, the trend towards rapid and explosive growth is increasingly increasing.

Thus, economic growth was 8%, as planned by the Chinese government. At the same time, industrial production increased by as much as 11%, as previously promised by China's Minister of Industry.

Despite the fact that during a constantly developing economy, China was acutely threatened by recession, it nevertheless managed to maintain quite impressive rates of growth of the national economy. The government began to improve the state of the economy by adopting a special economic stimulus package and a sharp increase in bank lending.

Today, the rapid growth of China's economy is planned due to an increase in foreign trade turnover, especially exports, by 15%. Due to China's rapid economic growth, the unemployment rate in other countries is increasing. In addition, for the same reason, other countries are losing their influence in the world market. That is why financial experts predict that in the near future:

1. China faces numerous trade-related disputes;
2. the Chinese government will have to answer for violations of free trade rules;
3. The Chinese government will have to combat economic overheating, which consists of rapid influx and growth of the money supply.

The violations of free trade are already known today: Beijing is forcing its American counterparts to sell books, films and music exclusively in cooperation with Chinese state-owned companies.

But, despite some problems that appear in the Chinese economy, the government is successfully managing to combat them. Thus, the expected results have already been observed recently, that is, consumers are increasing their spending. According to official information, the Chinese government plans to increase consumption by its population in order to transform the national economy into an engine of economic growth.

In addition, it should be noted that the government is currently implementing a large-scale program for government stimulation of GDP growth. Thus, it prepares the entire economy of the country for very strict structural reforms that can liberate the economy from the role of exports and investments in them. In the future, it is planned to increase investments abroad in order to ensure sufficient profitability of its foreign exchange reserves. In addition, the government is determined to purchase securities owned by commodity companies.

Video: China's GDP Growth

The question is not new, even, to be honest, it is already quite old, but some people who are not particularly interested in economics may have it. What are the reasons for the success of the Chinese economy and why such development could not be achieved in Russia?

[Article updated 6/26/2019]

Preface

They will laugh.

Only the lazy didn’t talk about China’s economic miracle

At the moment, China's GDP is about 11 trillion dollars, China is the second economy in the world according to this indicator, after the United States.

China's economic growth

China's GDP growth has been 8-11% or higher for many years, only beginning to slow down slightly in recent years. Although, curiously, the US is growing faster than China. I wrote about this separately:

It should be noted that GDP per capita is not the same thing as population income. GDP is, as it were, the value of all assets per person, although this is a rather rough definition, but it makes no sense for us to go deeper now.

The fact of China's success in recent decades rarely causes controversy, and this despite the fact that China is formally a communist-socialist country. This is what breaks many patterns, and this is why I want to compare China a little with Russia and the USSR. How did China manage to achieve such success and what was the reason for the rapid growth of the Chinese economy?

Success story of the Chinese economy

Often history is changed not by the people as a whole, but by very specific individuals.

Fine. Let's look at the specific steps and actions that led China to success. There weren't that many steps.

Reducing the role of the state in the economy

The correlation is direct, even at the tax level.

Once you cut taxes, like Trump did just recently, you leave more money for businesses and people, and that's a plus for the country.

Joint ventures with foreigners

I worked there for some time.

At least one region in the country should be preferential, where taxes and duties are low. China is full of such special economic zones, and no one will suddenly cancel this policy tomorrow, so they invest there.

Example with low taxes from the game

Well, in reality, this is not clear to anyone.

• Taxes;
• Fees;
• Licensing;
• Checks;
• Problematic labor legislation;
• Crime;
• Lack of government stability and predictability.

There is no need to talk about predictability, stability and predictability of Russia. Russia is famous in the international arena for the fact that absolutely no one in the world is able to calculate the next step of the Russian Federation.

This may be good for some things, but not for the economy.

If there is even the slightest crime, even the smallest, then this is a huge negative factor for investment in the country. And what can we say about countries where crime is at the highest level. Where it is sometimes difficult to distinguish an official from a bandit and it is unclear who came to you to demand something from you.

Respect for private property also goes into this point. In China there is a death penalty for corruption, but in Russia what do they do with corrupt officials?

Promoted?

There are also interesting things, for example. It is known that excess and Massive alcohol consumption increases crime, reduces ability to work, etc. In China, of course, they also drink, but by Russian standards this is a child’s level. True, there are exceptions here, for example There's a lot of drinking in South Korea, even more than Russians, you will be surprised, but the economy there is ok.

Export orientation

Disadvantages of the Chinese system

A billion people with zero claims and minimal ambitions who do not know how and do not like to fight. Everyone has been mocking the Chinese for centuries. The British mocked in the Opium Wars, the Mongols mocked, the Japanese mocked. The Russians bullied many times, biting off pieces along with everyone else during the Russian Empire. For centuries, China has been pressed, used and squeezed out, the people there are so downtrodden and submissive, but you can do anything with them, which is what was done.

But the people are now awakening to a national consciousness that has never completely died. For all their downtroddenness and outward modesty, such a population and such a sample, of course, gives rise to geniuses.

Appetites are growing.

China has long since changed and the West is penetrating deeper and deeper.

However, all these tons of production have greatly, greatly polluted the atmosphere; this is a huge and real problem.

In the cities it’s almost impossible to breathe, everyone wears masks.

Due to the one-child policy, the population is aging, world money is also not endless, and it has all been in China for a long time. Global investors are the smartest people in the world, they are very nervous and have enormous paranoia.

If something suddenly happens tomorrow, for example the Chinese government does something (of course, there are few chances, since they don’t like multi-move moves and forks), or for example, data about a slowdown in growth comes out, then trillions of dollars will be taken out of China in the same way as they were taken there, in a matter of days. Capitalists are not interested in anything other than the rate of growth of capital in this world.

Now the growth there is 7% and they have long been starting to slowly transfer the money to other places. You may increasingly notice clothing and food produced in Vietnam, Turkey and even Russia. There is less space, all the fatty pieces have already been sawed off and eaten, competition is growing. And if 10-30 years ago foreign markets were ready to digest billions of tons of cheap and bad Chinese products, foreign markets are also not bottomless, they are filling up, and people increasingly prefer quality and many are willing to pay for quality. And “made in China”, as you know, is a guarantee of price, but not quality.

The guarantee of quality is Germany, whose economy has been doing well for many years.

China strengthened the currency until 2013, now it is weakening again. This is a signal that there may be problems with exports, although the trade balance does not seem to be falling. The exchange rate greatly affects the trade balance and the same Trump said a billion times that China likes to play with the exchange rate. (China, china, china)

If export earnings fall, you simply weaken the currency. What Russia did after the fall in oil prices to balance the budget.

Since 2013, the yuan has been weakening, and this is a bad sign for the economy. They are trying to rebuild it to accommodate domestic demand and in many ways this is successful, but even now, and never really, the Chinese could not be real leaders in terms of innovation, the United States has always beaten them because the core of the US political and economic system is better. China can catch up and be one step behind the leader, but as you know, the Chinese adapt and copy, they rarely come up with something really new, although of course they come up with something and much more than many other countries, but from the United States in this regard they are lagging behind. Although after writing this I wanted to test my thoughts.

The check refuted me:

However, according to grants (approval of the application, as I understand it) The USA is in the lead. As you can see in the top, Japan and South Korea are countries with a fate similar to China and a leap in development, but Korea and Japan are still very different from China.

Thousands of guns from the north, loaded with nuclear warheads, are aimed at Seoul.

But in Japan everything is pretty normal, except for the giant government. debt and the risk of flooding and destruction from the next volcanic eruption, plate shift or some other crap, but overall in Japan and Korea the situation is many times better than in China.

Russia manages, even with relatively weak support for science, to hold sixth place in the world in terms of the number of patents, which inspires some hope, but of course it’s sad, since one can only imagine what would happen in Russia if ever history, the state gave normal money for science, or if there were a large private business in the Russian Federation that would support this science.

Science in China, by the way, is strongly supported by business.

Some ships in some wrong seas?

Any desire to return some islands?

Tibet? Chinese firewall? Executions?

And a bunch of other terrible things that are happening in China have been pushing smart Chinese out of the country for decades. The scale of the brain drain is colossal; Russia has never even dreamed of it. All smart Chinese have been in the USA, Europe and Canada for a long time.

They will never return, and they take away not only their brains, but also usually a lot of money. Half of Canada has been bought up by the Chinese, half of the west coast of the USA belongs to the Chinese. But don't think that this is being bought by Chinese capital in the sense of the Chinese government.

This is bought by individual Chinese who raised it in China; this loot has nothing to do with China. It's like buying apartments in Miami by you know who. The same situation is happening in China, but only hundreds of times larger.

Russia with her (and mine, in this blog) Constant talk about thieves and bad government is nothing compared to China. There, too, everything is rotting from the inside and much is rotten. I have Russian friends who went to China to study, we talked. I can’t tell you what nasty things he told me about. The man returned home.

If you think that there is censorship in Russia, write something bad about their government on the Chinese Internet and we will see how quickly you will have problems. The problems are quiet, and no media will cry for you later, simply no one will know about it. I would never be able to create such a blog in China and write such things, for example talking about the shortcomings of China in comparison with the USA.

Although it is still possible to raise a lot of money in China, although not everything is absolutely terrible there, and the country is still actively developing and is already a world leader, there are problems there too. I just wrote the last point for this purpose, so that you don’t think that China is ideal. Don’t mix the economy and power of China and ordinary Chinese into a heap. You don’t mix up, for example, the authorities of Russia/Ukraine and the people of these countries?

If, for example, the Russian authorities have 80 yards of dollars in US Treasury bonds (UPD, not anymore, hooray!) and the country is supposed to be rich, this has nothing to do with ordinary people. For the average Chinese, China is far from ideal. They are still poor, the competition is enormous, there is work, but not enough normal work. Although incomes are growing, in Russia people still have more money and assets, each individual.

The censorship there is cruel, the living conditions are disgusting, the environment is bad.

All the loot in China is the loot of foreigners, who can withdraw it at any time, or the loot of the government, which is not so kind and fluffy. And in general, if they don’t do something urgently about the environment, it will simply become impossible to breathe there.

If anyone thinks that the United States will start a war with China, then it is obvious that such a war is not beneficial to anyone. Their economies are highly dependent on each other, and even considering how Trump scolded China, they stupidly won’t let him fight with it, and he himself does strange things, leaving various partnerships that were previously created clearly against China.

The United States is addicted to cheap Chinese goods like a drug, and without the United States China will very quickly come to a complete end.

All supposed US/China tensions are being blown up by the media, it's a political game.

It was necessary to release as much American money into the country as possible; this is a clear guarantee that the United States would not be able to do anything with the Russian Federation economically, if it were 5-10% of trade turnover.

That is, guaranteed protection from the United States is the presence of American money in the country in large quantities. American money has the most powerful (most powerful) in the world of lobbying and this would be an ideal defense. This is exactly what China did, tying itself to the United States with thin threads, perhaps not even consciously.

That's all. The article is already a little outdated and I am for some mistakes. I later returned to this article several times and improved it, but did not completely rewrite it. In any case, I'm glad if you enjoyed reading.

You will find my other articles about economics in a special section.