Today's China Economic Development
China has an ancient history and was a leading civilization of theworld for many centuries. Today's China (officially the People's Republicof China) is the most populous country in the world (pop.: over 1.3billion) and the fourth largest in terms of area. The country has undergonegreat economic changes in its modern history ranging from its transition toa radical socialist economy following the Communist Revolution in 1949 tothe market-oriented reforms that stated in the late 1970s and continue till 1. History of Modern China's Economic Development After decades of political turmoil and civil war between thenationalists and the communists, the People's Republic of China was foundedin 1949 under the Communist Party of China. Led by Mao Zedong, the newlyestablished communist state immediately set about restoring the economy,which had been devastated due to decades of warfare, to a working order.This was quickly accomplished by repairing the destroyed transportation andcommunication links and restoring the economic activity. The banking systemwas nationalized and placed under the People's Bank of China. The monetarysystem was unified, credit tightened and budgets centralized to con
Some of its weaknesses include rampant corruption, increasingregional income inequality; weak financial institutions, industrial over-capacity, and widespread unemployment that could follow the restructuringor folding of the SOEs at some stage. It has a huge potentialmarket of consumers with rapidly rising incomes. Arecent investigation conducted by the All-China Federation of Trade Unions(ACFTU) indicates that before the 1980s, the average income of Chinesewomen was about 80 % of men, which compared favorably with all developingcountries and even exceeded the situation in most developed countries(salaries of women in the US, Canada and most European countries are about75% of the men's salaries in comparable positions). ("The Banking System," 1998) Despitethe reforms carried out in the Chinese banking sector since the early1980s, the sector is till far behind the international standards of bankingand is considered as a 'weak link" in China's economic boom by manyfinancial experts. The Chineseleadership, particularly Mao was not satisfied with the relatively sluggishperformance of the agriculture and decided that the centralized Sovietmodel of socialism was not suited to China's rural economy. "CIA Fact book") Because of its huge population,the per capita income of China is still low by world standards, i. The regional inequality in incomeshave, however, widened considerably and the incomes of the population inthe soil-rich costal areas of the country are about 10 times greater thanthe incomes of the people living in the barren interior of the country. During this period, the incomesin China have quadrupled, the country has moved from a command economy to amarket economy, and progressed from a rural society to a urban society. Theagricultural production too grew by about 4% annually. The result of the 'Great Leap Forward' was, however, disastrous. The main objective of the plan was toachieve a high rate of economic growth through emphasis on industrialdevelopment, particularly the heavy industry. Over the next few decades, thebanking system under the Ministry of Finance exercised tight control overthe financial services, money supply and credit and the People's Bank ofChina's role as the central bank overlapped with the Ministry of Finance'sduring the Cultural Revolution (1966-76), in particular. In order to improve the standing of state-owned banks,the government took the unprecedented step of injecting with US$45 billionfrom the country's foreign exchange reserves into two of them (the ChinaConstruction Bank and the Bank of China) at the end of last year.
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