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When the 10-year “cultural revolution”(1966-76) finally came to an end in October 1976, China bade farewell to endless political campaigns. It was at that time that the Chinese people realized how poor they were. In 1978, China’s GNP accounted for only 1 percent of the world’s total, and its import and export volume took up only 0.8 percent of the total world trade volume. But in three decades, China’s annual GDP growth rate reached 9.8 percent. China surpassed Japan in 2010 to become the second largest economy in the world.
Shortly after the “cultural revolution,”Deng Xiaoping proposed that the focus of the CPC’s work should be shifted to socialist modernization construction as soon as possible. Deng’s proposal became the will of the decision-making body at the Third Plenum of the Eleventh Central Committee of the CPC. The meeting is regarded as the starting point of China’s reform and opening up as well as of China’s march toward rejuvenation. Since the plenum, China has seen a new upsurge in economic construction. The focus on economic development for more than three decades has brought considerable changes to the lives of the Chinese people. At the moment, China is the second largest trading country in the world, accounting for over 8 percent of the total world trade volume.
Deng believed that the development of the productive forces was fettered by the highly concentrated planned economy system, and decided to introduce market forces to emancipate and develop the productive forces at an appropriate time. The socialist market economy system was established in China along with the reform in rural areas, the restructuring of state-owned enterprises (SOE) and the emergence of private enterprises, which jointly propelled the emancipation and development of China’s productive forces.
The household contract responsibility system with remuneration linked to output was implemented in rural areas in 1978. The rural reform aroused the peasants’ productive enthusiasm, rapidly emancipated the rural productive forces and reversed the situation in which agricultural production had remained at a standstill for a long time. There were bumper harvests for years on end. The problem of food and clothing that had troubled the Chinese people for quite a long time was basically solved in just a few years.
The rural reform also boosted the development of enterprises in rural areas. These township enterprises were recognized as “an important force in the national economy” and an “important supplement to the SOEs.” The Central Government gave local governments the decision-making power to promote economic development and use fiscal surpluses as incentives. The criteria for assessing government officials were based on the performance of the local economy. This policy greatly mobilized the enthusiasm of peasants and governments at the grassroots level. Explosive growth appeared in the number of people engaged in non-agricultural activities—from 28 million in 1978 to 176 million in 2003. The value of the industrial output of township enterprises accounted for one third of the total national industrial output in the mid-1990s, equal to that of the foreign-funded or state-owned economic sector. The township enterprises provided jobs for a large number of rural surplus laborers and increased market competition pressure, which stimulated the SOEs to improve their efficiency.
Compared with the rapid development in the rural areas, the urban reform process seemed slow and short of vitality. Finally, China decided to learn from the West by promoting the share-holding system in these enterprises. On September 26, 1986, the Shanghai Jing’an Securities Business Department was opened officially in Shanghai. This was the first securities market in China. The stock exchange, once regarded as a symbol of capitalism and banned for a time in China, was established again in Shanghai and Shenzhen. Now the change of securities trading data in these two cities has almost become the barometer of China’s economic development.
In the surging tide of market competition, the SOEs withstood severe challenges. There were 6,599 large and medium-sized enterprises operating at a loss in 1997. By formulating the Enterprise Bankruptcy Law, the Chinese Government allowed some SOEs that had almost closed down to go bankrupt. This had been unimaginable during the era of Mao Zedong, when workers
never thought that they might lose their jobs one day. An important reason why the CPC followed this course was to encourage workers as well as enterprises to adapt to the competition in the market economy. In 2000, a modern enterprise system had been basically established in most large and mediumsized backbone state-owned enterprises. Despite the existence of some problems, the competitiveness of the SOEs has been enhanced, and their overall strength has greatly increased. In an article in the United Morning Post of Singapore, it was pointed out that the number of Chinese enterprises listed in the Global 500 ranked among the largest of all countries, and most of these enterprises are SOEs.
At the beginning of China’s implementation of the reform and opening-up policy, Deng proposed the strategy of “allowing some regions and people to prosper before others” through honest business operation. Due to geographic advantages and policy support, the southeast coastal regions took the lead in development, where the private sector has since flourished. The private economy now accounts for 65 percent of China’s GDP, and 70 to 80 percent of the country’s economic growth comes from China’s private economy. The private economy also offers the most opportunities for employment, accounting for 75 percent of China’s employment market.
Since 1978, the CPC has found a way suitable for China to develop its economy in line with its national conditions, rather than blindly copying the doctrines of Marxism or being blindly guided by neo-liberalism. Therefore, China’s economy is composed of the private economy, foreign-funded economy and state-owned economy.
The top leaders gradually reached a common understanding that reform and opening up were necessary for China to survive in the modern world. China’s governments at the grassroots level formulated preferential policies to attract foreign investment. The overseas Chinese played the role of “matchmaker” in establishing the relationship between foreign investors and Chinese laborers, entrepreneurs and government officials. With the constant increase in the investment of overseas Chinese and the profits gained from China’s mainland, Japan, the United States and the EU also began investing heavily in China. By 2005 the accumulated foreign investment used in China totaled $618 billion. Such investment greatly spurred the development of China’s economy and addressed to a certain extent the problem of capital shortage in China’s modernization drive. To attract more foreign investment, the Chinese Government greatly enhanced the country’s infrastructure construction and made a rational adjustment of the industrial structure.
China is interested not only in foreign investment, but also in foreign technologies. To invest in China, a foreign investor must transfer part of its technology. China is trading its huge market for advanced technologies. China began introducing foreign investment and technologies with the establishment of special economic zones. In 1979, the Central Government decided to set up four special economic zones in south China, including Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province. To open further to the outside world, China opened 14 coastal cities in 1984. The adoption of the strategy of first developing the economy of the coastal regions prompted the relatively rapid development of these regions, which had a total population of 200 million. These regions have become bases for introducing foreign investment, and exerted an influence upon the vast regions in the west of China as funnels for funds and technologies, thus giving impetus to China’s overall economic development.
Deng also called resolutely for emphasizing the work of science and education. As a result, the college entrance examination was resumed in 1977, after being suspended for 11 years. The government also strengthened its support for basic education by adopting the nine-year compulsory education system and promoting it nationwide after abolishing tuition fees for children from families with financial difficulties. Now over 90 percent of Chinese children receive basic education. The CPC formulated the strategy of rejuvenating the country by relying on science and technology in the 1990s, and regards scientific and technological development as a national strategy. Later, the scale of China’s higher education was expanded rapidly, and the number of university students now amounts to 25 million. There are now nearly 100 million college graduates.
Students studying abroad have also become an indispensable force for advancing China’s economic development. The Chinese Government adopts various incentives to encourage Chinese students studying abroad to return and render services for their motherland after they finish their studies. China has cultivated a large number of skilled scientific and technological workers through strengthening education. By the end of 2005 the total number of Chinese people skilled in science and technology had reached 42.46 million, which was higher than that of the U.S. (42 million) and next only to that of the EU (54 million).
Investment in science and technology hit a record high in 2008, with total social investment reaching 371 billion yuan, or 1.49 percent of GDP. There is no doubt that the importance attached to science, technology and education is an important factor enabling China to create economic miracles.
As the above-mentioned factors have continued to play their roles, China’s economy has maintained a relatively high development speed for over three decades. Bruce Kasman, chief economist of Morgan Chase Bank, said, “It is a landmark for the global economy. The most impressive thing is that China, in a time when most countries around the world find it tough to move on, can still maintain a rapid growth rate.”
Although China’s economic development has scored achievements that catch the world’s attention, there are still many problems that need to be solved. For example, the gap between the rich and the poor and the gap between different regions are widening, and the income distribution relationship needs to be rationalized. The Chinese leadership is striving to solve all these problems.
Shortly after the “cultural revolution,”Deng Xiaoping proposed that the focus of the CPC’s work should be shifted to socialist modernization construction as soon as possible. Deng’s proposal became the will of the decision-making body at the Third Plenum of the Eleventh Central Committee of the CPC. The meeting is regarded as the starting point of China’s reform and opening up as well as of China’s march toward rejuvenation. Since the plenum, China has seen a new upsurge in economic construction. The focus on economic development for more than three decades has brought considerable changes to the lives of the Chinese people. At the moment, China is the second largest trading country in the world, accounting for over 8 percent of the total world trade volume.
Deng believed that the development of the productive forces was fettered by the highly concentrated planned economy system, and decided to introduce market forces to emancipate and develop the productive forces at an appropriate time. The socialist market economy system was established in China along with the reform in rural areas, the restructuring of state-owned enterprises (SOE) and the emergence of private enterprises, which jointly propelled the emancipation and development of China’s productive forces.
The household contract responsibility system with remuneration linked to output was implemented in rural areas in 1978. The rural reform aroused the peasants’ productive enthusiasm, rapidly emancipated the rural productive forces and reversed the situation in which agricultural production had remained at a standstill for a long time. There were bumper harvests for years on end. The problem of food and clothing that had troubled the Chinese people for quite a long time was basically solved in just a few years.
The rural reform also boosted the development of enterprises in rural areas. These township enterprises were recognized as “an important force in the national economy” and an “important supplement to the SOEs.” The Central Government gave local governments the decision-making power to promote economic development and use fiscal surpluses as incentives. The criteria for assessing government officials were based on the performance of the local economy. This policy greatly mobilized the enthusiasm of peasants and governments at the grassroots level. Explosive growth appeared in the number of people engaged in non-agricultural activities—from 28 million in 1978 to 176 million in 2003. The value of the industrial output of township enterprises accounted for one third of the total national industrial output in the mid-1990s, equal to that of the foreign-funded or state-owned economic sector. The township enterprises provided jobs for a large number of rural surplus laborers and increased market competition pressure, which stimulated the SOEs to improve their efficiency.
Compared with the rapid development in the rural areas, the urban reform process seemed slow and short of vitality. Finally, China decided to learn from the West by promoting the share-holding system in these enterprises. On September 26, 1986, the Shanghai Jing’an Securities Business Department was opened officially in Shanghai. This was the first securities market in China. The stock exchange, once regarded as a symbol of capitalism and banned for a time in China, was established again in Shanghai and Shenzhen. Now the change of securities trading data in these two cities has almost become the barometer of China’s economic development.
In the surging tide of market competition, the SOEs withstood severe challenges. There were 6,599 large and medium-sized enterprises operating at a loss in 1997. By formulating the Enterprise Bankruptcy Law, the Chinese Government allowed some SOEs that had almost closed down to go bankrupt. This had been unimaginable during the era of Mao Zedong, when workers
never thought that they might lose their jobs one day. An important reason why the CPC followed this course was to encourage workers as well as enterprises to adapt to the competition in the market economy. In 2000, a modern enterprise system had been basically established in most large and mediumsized backbone state-owned enterprises. Despite the existence of some problems, the competitiveness of the SOEs has been enhanced, and their overall strength has greatly increased. In an article in the United Morning Post of Singapore, it was pointed out that the number of Chinese enterprises listed in the Global 500 ranked among the largest of all countries, and most of these enterprises are SOEs.
At the beginning of China’s implementation of the reform and opening-up policy, Deng proposed the strategy of “allowing some regions and people to prosper before others” through honest business operation. Due to geographic advantages and policy support, the southeast coastal regions took the lead in development, where the private sector has since flourished. The private economy now accounts for 65 percent of China’s GDP, and 70 to 80 percent of the country’s economic growth comes from China’s private economy. The private economy also offers the most opportunities for employment, accounting for 75 percent of China’s employment market.
Since 1978, the CPC has found a way suitable for China to develop its economy in line with its national conditions, rather than blindly copying the doctrines of Marxism or being blindly guided by neo-liberalism. Therefore, China’s economy is composed of the private economy, foreign-funded economy and state-owned economy.
The top leaders gradually reached a common understanding that reform and opening up were necessary for China to survive in the modern world. China’s governments at the grassroots level formulated preferential policies to attract foreign investment. The overseas Chinese played the role of “matchmaker” in establishing the relationship between foreign investors and Chinese laborers, entrepreneurs and government officials. With the constant increase in the investment of overseas Chinese and the profits gained from China’s mainland, Japan, the United States and the EU also began investing heavily in China. By 2005 the accumulated foreign investment used in China totaled $618 billion. Such investment greatly spurred the development of China’s economy and addressed to a certain extent the problem of capital shortage in China’s modernization drive. To attract more foreign investment, the Chinese Government greatly enhanced the country’s infrastructure construction and made a rational adjustment of the industrial structure.
China is interested not only in foreign investment, but also in foreign technologies. To invest in China, a foreign investor must transfer part of its technology. China is trading its huge market for advanced technologies. China began introducing foreign investment and technologies with the establishment of special economic zones. In 1979, the Central Government decided to set up four special economic zones in south China, including Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province. To open further to the outside world, China opened 14 coastal cities in 1984. The adoption of the strategy of first developing the economy of the coastal regions prompted the relatively rapid development of these regions, which had a total population of 200 million. These regions have become bases for introducing foreign investment, and exerted an influence upon the vast regions in the west of China as funnels for funds and technologies, thus giving impetus to China’s overall economic development.
Deng also called resolutely for emphasizing the work of science and education. As a result, the college entrance examination was resumed in 1977, after being suspended for 11 years. The government also strengthened its support for basic education by adopting the nine-year compulsory education system and promoting it nationwide after abolishing tuition fees for children from families with financial difficulties. Now over 90 percent of Chinese children receive basic education. The CPC formulated the strategy of rejuvenating the country by relying on science and technology in the 1990s, and regards scientific and technological development as a national strategy. Later, the scale of China’s higher education was expanded rapidly, and the number of university students now amounts to 25 million. There are now nearly 100 million college graduates.
Students studying abroad have also become an indispensable force for advancing China’s economic development. The Chinese Government adopts various incentives to encourage Chinese students studying abroad to return and render services for their motherland after they finish their studies. China has cultivated a large number of skilled scientific and technological workers through strengthening education. By the end of 2005 the total number of Chinese people skilled in science and technology had reached 42.46 million, which was higher than that of the U.S. (42 million) and next only to that of the EU (54 million).
Investment in science and technology hit a record high in 2008, with total social investment reaching 371 billion yuan, or 1.49 percent of GDP. There is no doubt that the importance attached to science, technology and education is an important factor enabling China to create economic miracles.
As the above-mentioned factors have continued to play their roles, China’s economy has maintained a relatively high development speed for over three decades. Bruce Kasman, chief economist of Morgan Chase Bank, said, “It is a landmark for the global economy. The most impressive thing is that China, in a time when most countries around the world find it tough to move on, can still maintain a rapid growth rate.”
Although China’s economic development has scored achievements that catch the world’s attention, there are still many problems that need to be solved. For example, the gap between the rich and the poor and the gap between different regions are widening, and the income distribution relationship needs to be rationalized. The Chinese leadership is striving to solve all these problems.