Economic Reform and Social Change in China

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Within industry, iron and steel, electric power , coal, heavy engineering, building materials, and basic chemicals were given first priority; in accordance with Soviet practice, the aim was to construct large, sophisticated, and highly capital-intensive plants. A great many of the new plants were built with Soviet technical and financial assistance, and heavy industry grew rapidly. As the Second Five-Year Plan—which resembled its predecessor—got under way in , the policy of the Great Leap Forward was announced.

September 1999, No.45

In agriculture this involved forming communes , abolishing private plots, and increasing output through greater cooperation and greater physical effort. In industry the construction of large plants was to continue, but it was to be supplemented by a huge drive to develop small industry, making use of a large number of small, simple, locally built and locally run plants.

Economic Reform

A spectacular drop in agricultural production ensued. Meanwhile, the indiscriminate backyard production drive failed to achieve the desired effects and yielded large quantities of expensively produced substandard goods.

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These difficulties were aggravated when Soviet aid and technicians were withdrawn. By late the country faced an economic crisis of the first order. The authorities responded with a complete about-face in policy. Private plots were restored, the size of the communes was reduced, and greater independence was given to the production team. There was also a mass transfer of the unemployed industrial workers to the countryside, and industrial investment was temporarily slashed in order to free resources for farm production. The agricultural situation improved immediately, and by some resources were being redirected to the capital goods industry.

The Great Proletarian Cultural Revolution began in , but, unlike the Great Leap, it did not have an explicit economic philosophy. Nevertheless, industrial production was badly affected by the ensuing decade of confusion and strife, which also left some difficult legacies for the Chinese economy. In industry, wages were frozen and bonuses canceled. Combined with the policies of employing more workers than necessary to soak up unemployment and of never firing workers once hired, this action essentially eliminated incentives to work hard.

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In addition, technicians and many managers lost their authority and could not play an effective role in production in the wake of the movement. Overall output continued to grow, but capital-to-output ratios declined. In agriculture, per capita output in was no higher than in Rural economic reform initiated after Mao Zedong began with major price increases for agricultural products in By the emphasis had shifted to breaking up collectively tilled fields into land that was contracted out to private families to work.


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During that time the size of private plots land actually owned by individuals was increased, and most restrictions on selling agricultural products in free markets were lifted. In much longer-term contracts for land were encouraged generally 15 years or more , and the concentration of land through subleasing of parcels was made legal.

In the government announced that it would dismantle the system of planned procurements with state-allocated production quotas in agriculture. Peasants who had stopped working the land were encouraged to find private employment in the countryside or in small towns.

Social and Economic Change - Revision 1 - Higher Modern Studies - BBC Bitesize

They did not obtain permission to move to major cities, however. At the same time, the state has permitted a private sector to develop and has allowed it to compete with state firms in a number of service areas and, increasingly, in such larger-scale operations as construction. A number of related measures were established to enhance the incentives for enterprise managers to increase the efficiency of their firms.

When looking at the economic consequences of China's change of economic system, he deals with both the impressive growth performance and its economic costs. The author also studies the consequences of the economic reforms for the previous social arrangements in the country, which were tied to individual work units-agriculture communes, collective firms, and state-owned enterprises.


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He continues with the social development during the reform period, reflecting a complex mix of social advances, mainly in terms of poverty reduction, and regresses for large population groups in terms of income security and human services, such as education and, in particular, health care. Next, the author discusses China's future policy options in the social field, whereby he draws heavily on relevant experiences in industrial countries over the years.

The human cost of China's economic reforms

The future options are classified into three broad categories: policies influencing the level and distribution of factor income, income transfers including social insurance, and the provision of human services. See Less -. All language versions and volumes across World Bank Repositories.

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