Chapter 3: China
The People’s Republic of China (PRC) has emerged as the second largest economy in the world since the commencement of economic reforms in 1978, the watershed moment of which was a substantial relaxation of official restrictions on the conduct of international trade and capital transactions – China’s ‘opening up’. Perhaps the most significant benefits of the opening up process have been sustained economic growth averaging around 9 per cent per annum across the three decades since, associated with impressive economic and social transformation. The three preceding decades had been dominated by central economic planning, following the establishment of the PRC on 1 October 1949. In an historically remarkable achievement, China’s investment-led, outward-oriented growth model has pulled out as many as 400 million or 500 million people from the dire straits into which their economic conditions had been sunk, largely by those three decades of central planning. While Chinese development strategy remains outward-oriented, China has yet to become a fully market economy. Its economic and financial reform programmes have been guided by gradualism. Careful observation of rapid financial deregulation and capital market liberalization in many countries, frequently accompanied by financial crises as an aftermath, has led China into a pragmatic, sequential approach to reforms aimed at rapid economic growth and development while minimizing social and political disruption. The reform process has slowed since 2005, but without major policy reversal or lack of commitment to establish an efficient market economy.
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