Econ Research Paper

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Yuxi Ding Economic Development in China 3/25/12 The Major Economic Problems During 1949-1978 Period During the first thirty years after the establishment of the People’s Republic of China in 1949 was the period when the Chinese government explored the Chinese national condition and looked for a model that could best contribute to the fast economic growth. The government revised the Chinese economic system by eliminating its traditional framework. With the aid of the Soviet Union, the Chinese economy recovered quickly and gained many achievements. For example, the economic performance marked a rising rate of the gross domestic capital formation; the per capita gross domestic product (GDP) generally grew until the end of the 1970s. According to the statistics, the per capita GDP was 58 yuan in the 1950s and reached 109 yuan in the 1970s (Dwight H.Perkins 135). However, despite these gains, the state made some significant decision-making errors. Two major mistakes during this significant period caused unnecessary economic losses and became obstacles that prevented China from developing efficiently and sustainably. The first error, called the “ Big Push Industrialization”, was a strategic mistake. China prioritized heavy industry by highly investing in it. Many reasons led to this strategy. As an agricultural country, China in the 1950s lacked a rudimentary industrial base; therefore, the government saw the development of heavy industry as an effective way to push Chinese industry into a new stage. The deterioration of China’s international relations also resulted in the development of heavy industry. The outbreak of the Korean War threatened China’s safety; China’s involvement in the war led to a direct conflict between China and America. Confronted with the menace from the Western countries and learning from history lessons, China decided to strengthen its

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