An Economic History of Modern China

An Economic History of Modern China

Joseph C.H. Chai

As a country’s current development is path dependent, the rise of China and its strategic implications can only be understood in a historical context. Hence, the key to understanding contemporary China is the understanding of its past. So far there has been an absence of a comprehensive text dealing with Chinese economic history in the English language. An Economic History of Modern China fills this important gap, focusing on modern Chinese economic growth and comprehensively surveying the patterns of China’s growth experience over the past 200 years, from the Opium wars to the present day. Key events are traced back to their foundations in history to explain their impact on China’s modern economic growth.

Chapter 16: Towards a New Growth Strategy

Joseph C.H. Chai

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics, economic psychology


Much has been written about China’s reforms and its open door policy but very little on its new development strategy. Ishikawa (1983) suggests that in the reform period: ‘the previous development policy of high growth and high investment is being replaced by a new one which aims at securing a steady increase in personal consumption and in which investment is weighted in favour of light industry and agriculture’. However, this view proved premature, for while the development of heavy industry is no longer emphasized and improvement in consumption is stressed it is not true that the government has abandoned its high growth and investment strategy. Otherwise it would be difficult to explain why the government continues to extol the doubling of China’s gross national product (GNP) every ten years as a goal of long-term development (Chai and Roy 2006). Similarly, the allegation that China no longer pursues a high investment policy does not square with the fact that China’s fixed investment as a percentage of gross domestic product (GDP) has risen from 23 per cent in 1978 to 40 per cent in 2007 (Brandt and Zhu 2010). What, then, is China’s new development strategy? To begin with, the high-growth goal in order to catch up with developed countries’ income per capita has not changed. This is evidenced by the targets set in the 1980–2010 long-term Development Plan which adopted a three-step strategy to achieve the goal, with each first step envisioning to double China’s GDP within a decade. This...

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