Question

Define Economic Transition (50-80 words). Analyze and discuss the impact of economic transition on China’s economic development. (400 words).

Answer 1

ECONOMIC TRANSITION

                       An transion in the economy is when the economy is changing from centrally planned economy to a market economy. The transition is usually characterized by changing and creating of institutions, particularly private ones. It vhanges the role of the country or state. The might be many disadvantages during th eperiod of economic transition as it is an action of risk taking.

CHINA'S ECONOMIC TRANSITION

                      China's economic transition period is said to be from 1978. In the last 40 years it has developed unbelievably. During 1978 Deng Xiaoping took over control of Communist party of China. He was responsible for initiating reform and planned economy. There were four resons that the time was ripe for the reform.

1. The cultural revolution was very unpopular, the part and government had to make changes to win thw support of people.

2. After years of experience in economic planning, th egovernment officials understood the shortcoming of planned system and the need for change.

3. Successful economic development in other parts of Asia, like, Taiwan, Hongkong, Singapore and South Korea known as four tigers demonstrated to Chinese people that market economy works better than the planned one.

4. For all the reason stated above, the Chinese people were ready for to support the economic reform.

                           After 1978, Rural markets began to open. Farmers were allowed to raise pigs, chickens and ducks, the farming of which had been banned during the cultural revolution as Capitalist activities. They also engaged in handcrafted products. One difference is that the ownership of land was and still is collective.The important points they were particular about in series are:

1. Marketting and distribution.

2. Pricing of the products.

3. Development of financial institutions to support the development of Agriculture.

4. Effort from the government.

                           Chinese economy was essentially a closed one before the economic transition. Foreign trade and investment helped them a lot in the reform. It is interesting to note that several economic policies adopted by themainland China was adopted by Taiwan two decades earlier.

                           At the turn of 21st century, China was in the process of joining world trade organization(WTO). China agreed to gradually lower its tarrifs on agricultural and industrial products and open manufacturing industries. The lower the tarrifs, higher would be the imports.

The key drivers of China's growth over the past few decades mainly includes,

1.entry into the WTO in 2001

2. A wave of privatisation of many state owned industries in late 1990s.

3. More recently, policy stimulus undertake in response global financial crisis.

CONCLUSIONS

                          China's economy has grown at an impressive rate over the past 20-25 years or so. However, growth ha smoderated over recent years and is projected to ease further as the longer-term drivers of that growth recede. High and rising levels of corporate debt in the face of the excess capacity and declining profitability suggests a greater risk of corporate defaults, which could ultimately lead to disruption in the financial system.