1. China’s Economic Rise
& Current Landscape
Wanli Hu
UMass Boston
National Chinese Language Conference
April 7, 2013

2. Table of Contents
I. Deng’s Economic Reform
 Deng’s pragmatism replaced Mao’s ideology of
class struggle
 A “revolution” of ownership transformation
 Top-down state owned enterprises reform
II. Open-Door Policy
III. Economic Miracle
IV. China’s Current Challenges
V. Discussion

3. I. Deng Xiaoping Resumed his Power and
Launched China’s Economic Reform in 1978

4. I-1. Pragmatism Replaced Mao’s
Ideology of Class Struggle
New mindset:
 Deng remarked that “a liberation of thoughts” was
necessary and the leadership must “seek truth
from facts” - Third Plenum of the Eleventh CCP Congress, Dec. 1978
 "To get rich is glorious” Deng’s economic reform
delivered this message indirectly.
 To Get Rich is Glorious: China in the 80s-Orville Schell
 One fifth of humanity…… are now fully unleashed in an
epic pursuit of material wealth.- New York Times, January 2, 1994.

5. Focus of the Chinese Communist Party:
 Economic Development is the core of the
“
Party work.”
Approaches:
 “It doesn’t matter whether its is a white cat or
a black cat, it is a good cat as long as it
catches mice”
 “ Planning and market forces are not the
essential difference between socialism and
capitalism.” Both planned economy and
market economy are acceptable.
 “Cross the river by stepping over stones”

6. I-2. A “Revolution” of Ownership Transformation
Three marginal bottom-up “revolutions”
 Household responsibilities in the countryside in
1979
 Xiaoguang Village: A harvest output larger than previous
5 years combined, per capita income increased 20 times
 Agricultural production increased 6.7% every year from
1979-1984
 Township & Village Enterprises (TVE)
 Its output in the national GDP reached 26%, and hired
130 million people in 1996 -Harold Coase & Wang Ning
 Individual economy in cities
 Individual businesses (个体户）appeared & solved 20
million people’s job in 1980s

7. State Owned Enterprises (SOE) Reform
A top-down economic reform from 1980 to 2006
 A failure of SOE reform in 1980s led to the June 4
Incident
 52% of SOE enterprises were in debt in 1994
To invigorate large enterprises while relaxing
control over small ones (抓大放小）
 85% of SOE enterprises ownership were transformed to
shareholding or private companies from 1997-2006
 Non-state owned economy reached 65% of China’s
GDP in 2008
 2010: 42 SOE enterprises in 500 Strong

8. III. The Open-Door Policy
• New thinking:
• Mao: If you are not with us, you are against
us.
• Deng: If you are not against us, you are with
us
• Normalization with Japan (1972), US
(1979) & the Soviet Union (1989)
• 2001: China entered the WTO
• China’s tariffs dropped to 9.8% from
an average of 15.3% in five years
• 2003, China surpassed the US as the
largest recipient of FDI, 2012:$100 billion
• Study abroad and welcome foreign
students to China
• 2011-12:194,000 Chinese students in US
• China’s three “ten thousands” plan

9. IV. China’s Economic Miracle
1. GDP has grown at an annual average
rate of 9.5% from 1978-2010
2. China becomes world’s second largest
economy in 2011, and largest exporter
and second largest importer
3. China’s development is a powerful driving
force behind the global economic growth.
In 1990-2002, China was placed
first, with a contribution as high as 27.1%.
4. Foreign reserves: $3.2 trillion (2011;
ranked 1st).

10. Since 1978, 400 million people have been
lifted out of poverty in China—about 75
percent of the world's total poverty reduction
over the last century.
In two decades China has experienced the
same degree of industrialization, urbanization
and social transformation as Europe did in
two centuries - Newsweek, Issue 1, 2008
 Newsweek, Issue 1, 2008

11. IV. Current Challenges
• Imbalance between Economic Great Leap
Forward & Stagnation of Political Reform
• Imbalance between the Rich & the Poor
• Imbalance between Wealth Increase & Integrity
Decline
• Imbalance between Economic Growth &
Environment Deterioration

12. IV-1. Corruption in China
Hu Yaobang, Zhao Ziyang, two enlightened
reformers were dismissed.
China suffers from widespread corruption.
For 2010, China was ranked 78 of 179
countries in Transparency International's
Corruption Perceptions Index.
Some 668,000 party members have been
punished for corruption in the past five years
(2008-12), according to official figures that
represent only the tip of the iceberg, experts
says. Peter Ford, The Christian Science Monitor, November 24, 2012

13. Continue
“Naked officials” (裸官） phenomenon
(officials who stay in China while their
wives and children live abroad).
The term "naked official" was selected as
one of China's top 10 buzzwords in 2009
From 1978 to 2003 about 4,000 corrupt
officials left China, taking at least $50
billion out of the country- 2010-02-24, China Daily

14. Corruption in the eyes of Chinese
people & new leader of China
• Corruption remains the No 1 concern
among Chinese people
• Xi Jinping warned that corruption could
lead to "the collapse of the Party and
the downfall of the state."

15. Continue
• “Wealth Drain” phenomenon
 Nearly 60% of people who have
more than 10 million yuan ($1.53
million) claim that they either
consider emigration abroad (47%) or
have completed the process (27%).

16. IV-4. Imbalance between Economic Growth &
Environment Deterioration
“Made in China” is the largest brand
product in the world, which made China
the second largest economy and largest
exporter globally.
What is the cost of this economic
development?

17. Land Challenge to China
• Only 7 % arable land supports 20 % population of
the world
• 28 % of its territory turned to desert
• An estimated 100 square miles of land is lost to
desert per year
• 400 million people are affected by desertification
• A sandstorm brought 330,000 tons sand to Beijing
one night in April 2006

18. Water Challenge to China
Water Resources:
• With 20% of the world’s population but only 7% of
global water resources (China has only one-fifth as
much water per capita as the United States).
• More than half of China’s 660 cities suffer from
water shortages, affecting 160 million people.
• 90% of cities’ groundwater and 75% of rivers and
lakes are polluted.
• As a result of widespread water pollution, 700
million people drink contaminated water every day.

19. Greenhouse Gas
In 2008, China surpassed the United States
as the largest global emitter of
greenhouse gases by volume. It
contributes to sulfur dioxide emissions
and acid rain, which falls on over 30
percent of the country.
Only 1 percent of the country’s 560 million
city inhabitants (2007) breathe air
deemed safe by the European Union.

20. Continue
Environment pollution and related
health issue cost China 9 % of the
annual income in 2008, World Bank
The government received six hundred
thousand environment-related
complaints in 2006, a figure that has
increase roughly 30 percent each year
since 2002.

21. Energy Challenge to China
Energy crisis:
•China has passed the U.S. to become the world's biggest energy
consumer in 2010.

22. 危机：Turn Crises into Opportunity
China is a world leader in green energy &
China is about to be the largest green
energy market
 hydropower, wind, solar, and biofuels.
China is the largest hydroelectricity
producer, representing around 17 percent of
domestic electricity use.
China is home to about 80% of the world’s
solar panel manufacturing capacity

23. Continue
Bloomberg placed China as the established
global leader in wind industry for the past four
years
China’s wind power is 26.8% (US 21.2%)
globally
Approximately 9.5% of China’s energy
consumption is green energy by 2015.

24. Discussion
1. Why did Deng Xiaoping call the Economic Reform as
a “second revolution?”
2 . What factors lead to China’s economic miracle?
3. What kind of difficulties/challenges did Deng have
during the Economic Reform?
4. What kind of crises and challenges is China facing?
5. Is China’s development pattern sustainable? If not,
how to change it?