Economic Developments 1979-97 Flashcards
What were the Four Modernisations?
The development of:
1) Agriculture.
2) Industry.
3) National defence.
4) Science and technology.
What are market forces?
Typically operating in a free market (where governments do not control pricing), the inter-action of supply and demand to determine prices. An increase in supply will lead to a fall in price, and an increase in demand will lead to a rise in price (vice-versa).
What was China’s Open Door Policy?
A policy allowing China to both import and export more goods. This allowed China to enter the world trading system in the late 1970s.
When was the Third Plenum?
December 1978.
What was the significance of the Third Plenum on economic planning?
It marked a shift towards Deng’s agenda, making the Four Modernisations as the economic resolution, stating that China ‘requires changes in all methods of management, actions and thinking which stands in the way of growth in the productive forces. Socialist modernisation is therefore a profound and extensive revolution’.
What was ‘socialism with Chinese characteristics’ (3)?
1) The economic system that Deng wished to build, believing China could benefit from the ‘dynamic’ capitalist system and foreign trade with capitalists.
2) Deng allowed enterprises to make decisions on production based on market forces and the pursuit of profit.
3) China adopted an Open Door Policy on foreign trade. This exposed Chinese companies to competition and force them to become more efficient in order to keep their costs down.
What did the slogan ‘To get rich is glorious’ encourage?
To encourage people to work harder, take risks and maximise their personal wealth.
Why did Deng introduce the slogan ‘To get rich is glorious’?
Deng believed that China would benefit from competition, the pursuit of profit and individual opportunity. Deng insisted that this would not alter China’s socialist nature.
What were the 2 main agricultural changes made by Deng Xiaoping?
1) Communes were broken up and replaced by the xiang, smaller communes based on towns and villages. Peasants could lease land from the xiang to farm by themselves, although each xiang had to meet output targets set by the state.
2) The work brigades of the commune system were abolished and replaced by the ‘household responsibility system’, allowing peasants to make decisions about the land they farm. As long as peasants paid taxes and contributed to the procurement quotas set by the state, they could keep profits made from selling surplus food (in rural markets) or from ‘side occupations’.
What were the xiang?
Smaller communes based on towns and villages. Peasants could lease land from the xiang to farm by themselves, although each xiang had to meet output targets set by the state.
What was the ‘household responsibility system’?
Replacing the work brigades of the commune system, it allowed peasants to make decisions about the land they farm. As long as peasants paid taxes and contributed to the procurement quotas set by the state, they could keep profits made from selling surplus food (in rural markets) or from ‘side occupations’.
What was the average annual growth in grain production for China 1957-78?
2%.
What was the average annual growth in grain production for China 1978-84?
5%.
What was the average annual growth in grain production for China 1984-88?
-1%
What problems did Deng face in regards to agricultural modernisation 1984-88 (4)?
1) Peasants did not own the land they farmed, instead leasing it from the state, usually on 15 year leases. AS there was no guarantee that the lease would be renewed, peasants were reluctant to invest their own money in the farms, with many continuing traditional, but inefficient, methods.
2) The government’s price fixing policy distorted the rural economy. Peasants were paid a fixed price for their ‘quota grain’, increasing by 20% in 1979. At the same time, the government were reluctant to increase food prices for consumers in the cities. This meant that the state were subsidising both producers and consumers, leading to a growing and unsustainable budget deficit.
3) The subsidy on rice was higher than that on wheat, encouraging farmers to switch to rice production, leading to a surplus of rice and a shortage of wheat. In response to the budget deficit, Deng loosened price controls and reduced subsidies to farmers in 1984.
4) This caused price rises, leading to panic buying and food shortages. Urban unrest in the late 1980s led to the suspension of the decontrol of prices and temporary food subsidies.
5) The decline in grain harvest forced China to become a net importer of grain in 1987. This was due to peasants leaving the countryside to work in the growing cities and due to the loss of agricultural land to the growing cities.
What is a subsidy?
A payment to producers by the state in order to keep prices low., as they help to cover the difference between costs to the producer and the revenue they earn from selling a product at a fixed price.
What was Deng’s main priority in 1984?
The modernisation of industry, and expanding China’s trade.
What were Special Economic Zones (SEZs)?
Areas where trade laws differ from those of the rest of the country in order to encourage foreign trade and investment.
What were ‘development triangles’?
Areas that were given the same concessions as the Special Economic Zones.
What were the 3 ‘development triangles’?
1) The Pearl River delta in Guangdong province, centred on Guangzhou.
2) The Min River delta in Fujian, centred on Xiamen.
3) The Yangzi River delta in southern Jiangsu and northern Zhejiang provinces, centred on Shanghai.
What was the significance of SEZs for China’s economy 1979-84 (4)?
1) The first 4 zones were established in coastal areas near Taiwan and Hong Kong, to allow for cross border trade, in 1979.
2) In these areas, foreign capitalists were encouraged to invest in joint enterprises through low tax rates, state investment in transport links and the building of factories by the state to the specification of foreign companies.
3) In these areas, China’s main export industries were established, with foreign investment initially only allowed in companies producing goods for export.
4) The SEZs were so successful in attracting inward foreign investment that in 1984 the programme was extended to 14 more coastal cities, with special attention given to developing high-technology industries in these areas.
What was the impact of SEZs and ‘development triangles’ on China’s export trade and inward foreign investment 1981-91?
Between 1981-91:
China’s export trade grew by 500%.
Inward foreign investment grew by 400%.
What were the negative impacts of the development of the SEZs (4)?
1) The abolition of customs duties between Shenzhen SEZ and Hong Kong led to a rapid increase in imports, straining China’s foreign currency reserves.
2) The investment on infrastructure (roads, railways, airport) was a burden on state finances.
3) Despite the relaxation of controls and reduced taxes in the SEZs, foreign businesses complained that the Chinese bureaucracy was slow to make decisions.
4) There were fears within China that the emphasis on developing the coastal cities would widen the gap with the inland areas, leaving them deprived them of investment and lagging behind in development.
What is a market economy?
A capitalist economy that is driven by market forces (supply and demand).
How did China move towards a ‘socialist market economy’ from 1992 (2)?
1) The SEZ programme was extended to all provincial capital cities and some 30 cities along the Yangzi River. In addition, provincial officials in all parts of China were allowed to establish their own ‘development zones’ modelled on the SEZs.
2) The lower labour costs of the inland areas began to attract inward foreign investment, although the greater share of these investments continued to go to the coastal regions.
How did Deng’s beliefs on economic planning and state ownership differ in the 1990s compared to the 1980s?
In 1979, Deng emphasised the importance of economic planning and state ownership of the main industrial enterprises. Whereas after 1992, Deng announced that central planning was not essential to a socialist society, and that private ownership of business was important.
Why did state-owned enterprises (SOEs) not fit into Deng’s ‘socialist market economy’ (2)?
1) The state controlled all decisions on prices, wages and the size of the labour force. This meant there were no incentives to work hard or penalties for poor performance, since employees enjoyed job security.
2) In 1986, new labour contracts introduced incentive payments and short-term contracts, but only for new employees.
How did Deng phase out SOEs from the Chinese economy in the 1990s (3)?
1) Deng exposed them to market forces by removing state subsidies, forcing them to make efficiency savings.
2) Many were converted into joint public/private enterprises, and others declared bankrupt and forced to close.
3) Deng increased competition by allowing foreign-owned enterprises to sell their goods in the Chinese market.
