Ever since China adopted its open door policy in the late-1970’s, the nation’s economic development has since become a major focal point in the international arena, in particular in the Asia-Pacific region.
In order to appreciate China’s current economic policies, it is necessary to know the historical settings since the formation of the People’s Republic of China in 1949. This report begins by examining the ideologies that shaped the Chinese economy over the last four decades, and then considers the future prospects of the Chinese economy.
Deng Viao-ping was and still is the most influential and prominent leader in China. The ten years of reforms (1979-1989) since Deng came back in to power had brought about both positive and negative effects. The negative effects appeared to have the demand for improving economic conditions in the years of soaring inflation into a pro-democracy movement.
Coincident with the reform process was the rapidly changing external environment. In this technological era, the demand for democracy soon spreaded to the then former German Democratic Republic and then the whole Eastern Europe. This brought about the downfall of communist regimes, including the sudden disintegration of the Soviet Union into Commonwealth of Independent States.
And it appears that the Chinese leaders too are bending on resisting the peaceful evolution and the world trend in the decline of communism. Deng realizes that it is important to differentiate Chinese communism from the dying communism. Elsewhere, he has called Chinese communism “Socialism with Chinese characteristics”.
Through studying the Chinese economy in the past and the present economic policy, it is possible to draw out very different scenarios. The particular areas that are being identified as central to the future direction of China’s economic development include:
• A pessimistic view that China might become fragmented and divided if regional and structural imbalance, and/or income inequality between coastal and inland region cannot be corrected.
• A more optimistic view that secular change will prevail and add more capitalistic ingredients into so-called: Socialism with Chinese characteristic: like the case of Guangdong in recent years. This will undermine much of what remains of the command economy.