Development Economics Essay

Two Years after the death of Mao Zedong in 1976, it became apparent to many of China's leaders that Economic reform was necessary. By 1978 " Chinese leaders were searching for a solution to serious economic problems produced by Hua Guofeng, the man who had succeeded Mao Zedong as CCP leader after Mao's death" (Shirk 35). As Susan L. Shirk describes the situation in The Political Logic of Economic Reform in China, restoring the CCP's prestige required improving economic performance and raising living standards. After the communist take over the country, Mao contained his emphasis on moral force by demanding that Chinese citizens demonstrate what he referred as "correct consciousness".
It is noteworthy that shirk feels that the Chinese communist party leaders saw economic reform as a way to regain their and their party moral virtue even after Mao's death thus, paradoxically, by demonstrating their expertise in a moral political area of competence, the leaders of CCP felt they could demonstrate how they were serving the people. To a great extent, the issue of economic reform became politicized as the issue was used as a means by Deng Xiaoping to attain the leadership of the Chinese Communist Party. "Reform policies became Deng's platform against Hua for post-Mao leadership" (Shirk 36). Given this history of economic reform, it is evident that "under the present system economic questions are necessarily political questions" (Dorn 43). China was "still a state in which the central government retain[ed] the dominant power in economic resource allocation and responsible local officials work[ed] for the interest of the units under their control" (Solinger 103). China's economy retains these characteristics of potential for growth--and inflation--to this day. Another important aspect of Chinese economic reform was the decision of China to join the world economy. Deng Xiaoping and his allies hoped to effect this 1979 resolution in two ways: by expanding foreign trade, and by encouraging foreign companies to invest in Chinese enterprises. This policy--denoted the "Open Policy" (Shirk 47)--was a drastic removal from the policies of Mao Zedong and, in fact, from centuries of Chinese political culture. The Open Policy, which designated limited areas in China "as places with preferential conditions for foreign investment and bases for the development of exports" (Nathan 99), was extremely successful in the areas where it was implemented (Shirk 47). (Nathan 51) (52). The Chinese were as vociferous about issues of sovereignty. The financial district, which will feature a new stock exchange, is also being rebuilt by China and foreign investors in a joint venture. By being designated for preferential conditions, Shanghai received from the central government tax exemptions for enterprises doing business with foreign companies, tax holidays for new factories set up with foreign investments, and a bonded zone--the largest in China--for duty free imports of raw materials. Additional foreign investments have continued to pour into other areas of China. The Chinese government has made conscientious attempts to promote the strength of the country's economy while protecting its citizens. Just a few weeks ago, the government instituted "tight-money policies, intended to control inflation and slow what has been the world's fastest growing major economy" (Shenon "China Halts" D1). This latter move was "meant to calm millions of first-time Chinese investors who evidently went into the market believing that stock prices could only go up" (Shenon "China Halts" D1). Might this policy show a union of economic and moral concern? China's interest in stock markets is no longer restricted to within its own boundaries. This month, Shandong Huaneng Power Development Company, "the first mainland Chinese company to have its primary listing on the New York Stock Exchange" ("China Stock" D5), began trading shares. Moreover, China stands to gain from the issue's sales.

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