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    D.E Case Study 04 Hafiz Ahmed (1811160)

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    Ahmed Zai
    The document is a case study about China's economic development and reforms since the late 1970s. It discusses how China pursued economic reforms that led to dramatic economic growth averaging 10% annually. Prior to 1979, China followed a Soviet-style model focusing on heavy industry, but economic reforms abandoned this approach in favor of pursuing comparative advantage. The authors of the case study were involved in China's decision-making and provide insights on how pursuing the right development strategy led to China's economic miracle.

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    D.E Case Study 04 Hafiz Ahmed (1811160)

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    Ahmed Zai
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    The document is a case study about China's economic development and reforms since the late 1970s. It discusses how China pursued economic reforms that led to dramatic economic growth averaging 10% annually. Prior to 1979, China followed a Soviet-style model focusing on heavy industry, but economic reforms abandoned this approach in favor of pursuing comparative advantage. The authors of the case study were involved in China's decision-making and provide insights on how pursuing the right development strategy led to China's economic miracle.

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    development economics

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    D.E Case Study 04 Hafiz Ahmed(1811160)

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    The document is a case study about China's economic development and reforms since the late 1970s. It discusses how China pursued economic reforms that led to dramatic economic growth averaging 10% annually. Prior to 1979, China followed a Soviet-style model focusing on heavy industry, but economic reforms abandoned this approach in favor of pursuing comparative advantage. The authors of the case study were involved in China's decision-making and provide insights on how pursuing the right development strategy led to China's economic miracle.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    7 views3 pages

    D.E Case Study 04 Hafiz Ahmed (1811160)

    Uploaded by

    Ahmed Zai
    The document is a case study about China's economic development and reforms since the late 1970s. It discusses how China pursued economic reforms that led to dramatic economic growth averaging 10% annually. Prior to 1979, China followed a Soviet-style model focusing on heavy industry, but economic reforms abandoned this approach in favor of pursuing comparative advantage. The authors of the case study were involved in China's decision-making and provide insights on how pursuing the right development strategy led to China's economic miracle.

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    Understanding a Development Miracle: China

    Case Study # 04
    by
    Hafiz Ahmed Abid (Registration #1811160)

    Assigned by:
    Ma’am Kulsoom
    Subject:
    Development Economics

    BBA
    Fall - 2020
    (Case Study: 04) Understanding a Development Miracle: China

    China has created an economic miracle since its economic reforms began in the late 1970s,
    becoming the fastest growing economy in the world. Gross domestic product has grown at an
    average rate of 10 percent annually for the past 18 years, and personal income and living
    standards have improved significantly. China may become the world’s largest economy early
    next century. The great success of China’s economic reforms has attracted worldwide attention.
    The China Miracle is a book that addresses the following questions: How did China’s economic
    reforms create the miracle? Why has there been such a dramatic difference in China’s economic
    performance since the reforms? Despite the reforms, why is there a ‘‘boom-bust’ ’ cycle in the
    Chinese economy? Can China continue its growth? What are the general implications of China’s
    experience for other economies in transition? The authors of this book have been involved in
    many of the decision-making processes during China’s economic reforms. Combining their first-
    hand experience and solid training in modern economics, the authors provide new insights into
    China’s economic development strategy and reforms from both theoretical and empirical
    perspectives. The main argument of the book is that economic performance and growth depend
    crucially on the choice of development strategy. The China miracle is the result of China’s
    having chosen the right development strategy that is, pursuing the economy’s comparative
    advantage and abandoning the ‘‘heavy-industry-oriented’ ’ or ‘‘leap-forward’ ’ development
    strategy adopted during the pre-1979 reform period. According to the authors, the dream of
    China’s socialist revolution was prosperity for the people and the country. After the People’s
    Republic of China was established in 1949, Chinese leaders chose a leap-forward strategy that
    required the development of heavy industry, as in the Soviet model, to catch up with Western
    industrialized countries.
    China’s economy in 20 years, which would have meant an average annual growth of 7.2 per
    cent. Most people in the1980s, and even as late as the early 1990s, thought that achieving that
    goal was a mission impossible. 
    The desire to develop heavy industries existed before the socialist elites obtained political power.
    Dr Sun Yat-sen, the father of modern China, proposed the development of ‘key and basic
    industries’ as a priority in his plan for China’s Industrialization in 1919 (Sun 1929).
    While the policy goal of France, Germany and the United States in the late nineteenth century
    was similar to that of China in the mid-1950s, the per capita incomes of the three countries were
    about 60–75 per cent of Britain’s at the time.
    However, unlike in the case of China, their state-owned firms were not allowed to set the prices
    for selling at markets after fulfilling their quota obligations and the private firms’ entry to
    the repressed sectors were subject to severe restrictions.
    However, the wages were liberalized, while in China the wage increase was subject to state
    regulation. These reforms led to wage inflation and exacerbated shortages.
    China’s dual-track approach to transition. The collective volume edited by Brandt and Rawski
    (2008) provides excellent discussions of other development and transition issues in China.
    See the discussions about the differences in the gradual approach in China compared to the
    Former Soviet Union and Eastern Europe in Lin (2009,) Many of China’s problems today,
    including environ- mental degradation and the lack of social protections, are generic to
    developing countries. In this section, I will only focus on a few prominent issues that arose
    specifically from China’s dual-track approach to transition.
    The collective volume edited by Brandt and Rawski (2008) provides excellent discussions of
    other development and transition issues in China.Before the transition, the state-owned
    enterprises obtained their investment and operation funds directly from the government’s
    budgets at no cost.
    The government established four large state banks in the early 1980s, when the fiscal
    appropriation system was replaced by banking lending. The interest rates have been kept
    artificially low in order to subsidies the state-owned enterprises. Prices of natural resources were
    kept at an extremely low level so as to reduce the input costs of heavy industries. 

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