Contrast Indian and Chinese Economic Reforms Essay

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China’s economy experienced rapid growth after Mao’s death in 1976, when power passed to Deng Xiaoping. Unlike Mao, Deng was a pragmatic man who was determined to transform China, which had been devastated from the policies passed during Cultural Revolution in 1914. In 1978 and 1983, Deng reformed the agricultural sector by creating the Household and Contract Responsibility Systems, respectively. These systems allowed farmers to sell surplus production to the government or the free market and keep profits provided quotas were met. Agricultural productivity increased from 30% to 100% since 1978. (China: Building Capitalism with Social Characteristics). To combat food shortages and a rising population, Deng passed a one-child policy. Deng also opened free zones in coastal cities to attract FDI. By 1992, China succeeded in attracting $11.2 billion. (China: Building Capitalism with Social Characteristics) As a result of the agricultural and industrial reforms adopted in the late 70s, by the end of the 80s, China’s economy was booming. However, the high growth created high inflation which approached 20% by the 1988. To prevent inflation from spiraling out of control, the government froze credit from state banks, tightened monetary policy, controlled imports and exports, raised interest rates, and devaluated the currency. These measures were tough on the population and sparked a massive protest in 1989 at Tianamen Square which was controlled militarily. During the 90s, China continued operating with capitalist policies but paying close attention to social impacts. The government was able to increase tax collection and deal effectively with the problems brought by rapid privatization. In 2001, China joined the WTO and by 2004, it became the world’s third largest exporter behind the U.S. and Germany. (China: Building Capitalism with Social Characteristics)

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