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There are two prevailing explanations of what caused China's rate of economic growth to take off. The first view emphasizes globalization. According to this view, Chinese growth started when Deng Xiaoping liberalized trade and foreign investments by setting up special economic zones in the coastal provinces. China's export-oriented manufacturing, largely foreign-funded, employed millions of rural migrants, boosted their income, and reduced poverty far and wide. The second perspective emphasizes the importance of internal reforms—especially in rural, interior regions—of the agricultural pricing system; land contracting; and the entry of rural businesses known as township and village enterprises.
To date it has taken China more years to "reform" the central planning system (1978-2012) than it took for it to establish and operate that system (1949-1978). Under a broad definition of the private sector, China's private fixed-asset investment share was only around 34 percent in 2005. China has moved from central planning to what might be called a commanding-heights economy. This is progress, but China is far from completing its transition to a market economy.
To date it has taken China more years to "reform" the central planning system (1978-2012) than it took for it to establish and operate that system (1949-1978). Under a broad definition of the private sector, China's private fixed-asset investment share was only around 34 percent in 2005. China has moved from central planning to what might be called a commanding-heights economy. This is progress, but China is far from completing its transition to a market economy.
AmCham China's Policy Committee is pleased to host Yasheng Huang of MIT's Sloan School of Management to share his new research exploring the factors that contributed to China's economic success over the past three decades, and what those findings reveal regarding the current economic challenges facing China. Yasheng Huang's research focuses on rural China, where Chinese growth took off. Reforms enabling rural private entrepreneurship, including significant financial reforms, determined the pace and the nature of China's overall transition to a market economy. In the 1980s it was the rural entrepreneurs who responded quickly to the incipient political and policy flexibility and started businesses that competed directly with the urban state-owned enterprises. By the same token, reversing rural reforms in the early 1990s not only suppressed rural entrepreneurship but also had the effect of slowing down China's overall transition to a market economy. In the 1990s and 2000s, China had no shortage of urban reforms, such as opening to foreign trade and investments; privatization of loss-making small state firms; and housing reforms. Yet China remains one of the most statist economies in the world.
