Jennings Kelley, Josh Junnier, Renee Reeve
China currently stands as an economic powerhouse. Before understanding how China reached its economic level, it’s important to know where it is now. The total (estimated) GDP for 2015 is $18.96 trillion. Currently, this is the first for total GDP in the world. The GDP growth rom 2014 is 7.4%. This growth rate is not only large, but has been sustained by China for many years. Part of the reason that China is such a powerhouse is the fact that China is the largest country in the world, population wise. The total population for 2015 is 1,370,049,000. With this many people, there is no shortage of workers. Now, to understand how the economy reached this level.
On October 1, 1949 the Communist Party defeated the Nationalist Party. This was also the end of the Civil War. The Civil War and the Communist rule afterwards resulted in economic instability for China. In 1949, Mao Zedong took power. He initiated “The Great Leap Forward” in hopes of creating more of a communist community. By creating steel forges, Mao hoped to modernize rural China and raise the economy. Instead, the opposite occurred. This policy led to a great famine across China opposed to the idea of improving agricultural and industrial production. Mao then decided to spearhead yet another project years later in which he referred to as “The Cultural Revolution.” The Cultural Revolution in 1966 was a communist government takeover in which the communist government sought to purge China of its remaining imperial ways. This resulted in the Chinese people gaining a Communist mindset instead. With this mindset, the people would be more lenient towards Communist regulations. In 1972, America finally recognized China, despite its government. With this recognition, China gains an important trade partner. After World War II, America emerged as one of the top economies in the world. It was one of the only countries that did not have its economy devastated by the war. This monopoly on the world’s economy resulted in giant growth of America’s economy. Having a economic powerhouse for a trading partner adds a real benefit for China’s economy. But because of its still unstable economy, trade remained below its maximum potential. Only after China’s economic reform was the potential reached.
Unfortunately, the cause for China’s switch from an unstable to a stable economy includes a dark event. The Tiananmen Square massacre, yet another turning point for the communist government in China, took place from mid-April to early June in 1989. This revealed many cracks in the government and cause much strife for the country as a whole. Many people, the majority of which were students, protested the communist ways. The constant up and downs, mostly caused by famines, finally angered the people to a point to protest. This protest led to a major massacre leaving somewhere from 241 to 2,000 people dead and another 7,000 to 10,000 people injured. Despite the tragedy, the Tiananmen Square massacre effected China in many ways. The most important effect relied on the Chinese. They were given an ultimatum: either no more communism government or a better economy. The people chose to have a better economy for fear of another civil war. During this time, tourism in China dropped to $1.8 billion from $2.2 billion previously. Because of the massacre, China nearly doubled their defense spending. This started the upward turn of China’s economy.
The reasons for China’s rise, according to the IMF, resides in China’s increase in productivity, formation of rural and private businesses, production of capital investments, and the expansion of foreign trade. Out of these four reasons, the increase of productivity proves to be driving force for China’s rise in its economy. From 1979 to 1990, productivity resulted in more than 42% of China’s growth. In the 90’s, the growth went well over 50%. To further prove the importance, the annual rate should be looked at. Between 1953 and 1978, the annual rate of productivity was 1.1%. Between 1979 and 1994, the rate jumped to 3.9%. These numbers, though small, are actually rather large. In the 60’s and 80’s, America’s rate was a mere 0.4%. What ultimately helped the increase in productivity was China’s change in policy for rural and private enterprises.
Thanks to government reform, the formation of private business was easier than ever in modern day China. The state loosened laws surrounding property and allowed citizens the ability to open up their own private business, partially in rural areas. They also allowed citizens to create their own pay, to hire and fire at their own desire, and to sell products in a private market with competitors. As more people grew encouraged to own businesses, more jobs were naturally created. The young, and more importantly, educated people could work. At this time, youth made up a majority of the population. With their youthful energy, more work could be done at faster and more efficient rates than before. Along with the increase of jobs, more people earned more money. More money leads to more spending money, and thus more consumer products. Though the introduction of private business seems more inclined with western capitalism, the communist government still holds some control over business and markets. Through this cycle, not only did productivity grow, but also the foundation of modern China’s economy.
Another key player in the rise of China deals with capital investments and foreign trade. Through capital investments, newer machinery, better technology, and improved infrastructure allowed more efficient trade. Some think capital investment occurred in China due to America’s global influence. To earn money for the growing industrial industry, China looked towards foreign trade. They became a major export power, providing many products for America and other countries. In 1994, money from trade reached $100 billion. With this money, China could build factories, jobs, international markets, and technology.
From then on China relied on foreign trade and increased production to throw itself into a new era of communist power. This was the start of China’s economic domination of the world. This coupled with massive port cities on its east coast and a use of the South China Sea trade route, a place still fought over today, led China to become an economic powerhouse in a few short decades. To some, this growth is troubling and to others it’s impressive. But with China’s economic power steadily rising, there will inevitably be conflict in the future.
