History of Chinese Economic Growth

I. History of Economic Growth and Reform Since 1978 China has experienced very rapid GDP growth. Between 1978 and 2009 China has had an annual growth of over 8% for twenty five out of thirty two years, and from 1979 to 2006, China had an average real GDP growth of 9.7% annually. This rapid growth has increased the size of its economy by eleven times what it was. In that same time period China’s world ranking for total trade rose from 27th to 3rd place. The real GDP per capita in China had also increased eight fold within that time period. This has led to many changes within China like higher living standards and a long process of urbanization that are also having their own positive effects on economic growth. The growth that China has experienced was due to a long process of incremental reforms starting in 1978 that have transitioned China from a planned economy to a market driven economy. These reforms came in two distinct phases. Phase one of the economic reforms lasted roughly from 1978 to 1992, and the second phase lasted from 1993 through the present. The first phase of economic reforms concerned itself more with decollectivizing agriculture, bringing in foreign investment, and allowing entrepreneurs to start businesses. These economic reforms were a great start but most industries still remained state owned and inefficient. The second phase of economic reforms focused heavily on privatization, getting rid of policies that hampered trade, and the breaking of many state owned monopolies. These are just short overviews of the reforms, and I will get more into the specific details of each phase of the reforms and how they affected economic growth in the next paragraphs. The first phase of economic reforms that lasted from 1978 to 1992 introduced many changes to the Chinese economy. One of the most important policies of this phase of the economic reforms is the creation of the dual track system. The dual track system refers to “the coexistence of a

Cited: "China and US GDP Annual Average Growth Rate (1978-2009)." China US Focus. China – United States Exchange Foundation, 09 June 2011