Professional Documents
Culture Documents
Muhammad Mudassir Iqbal 13P00061 Usman Ilyas 13P00048 Anum Batool 13P00035 Kamran Ather 13P00047
1/12/2013
Table of Contents
Introduction ..................................................................................................................................... 3 Natural Resources and Investment in Capital ................................................................................. 4 Trade and foreign investment ................................................................................................ 5 Agriculture model and reforms ................................................................................................... 6 Structural Reforms ...................................................................................................................... 7 The state and non-state sector ..................................................................................................... 8 The rise of non-state sector ......................................................................................................... 9 Labor Force and Economic Development .................................................................................... 10 Employment Statistics .............................................................................................................. 10 Employment Policies ................................................................................................................ 12 Increasing Employment Opportunities ..................................................................................... 12 Taxation and Financial Policy .................................................................................................. 13 Developing non-profit Public Post............................................................................................ 13 Flexible Employment Policy..................................................................................................... 13 MOLSS & ILO Collaboration .................................................................................................. 14 Hukou Reform .......................................................................................................................... 14 Unemployment Monitoring Policy ........................................................................................... 15 Skill Development and Education ............................................................................................ 15
Technological Changes ................................................................................................................. 18 Institutional framework ................................................................................................................. 20 Conclusion .................................................................................................................................... 21 References ..................................................................................................................................... 21
Introduction
China is known as the worlds largest exporter in todays time frame and at the same time it is the fastest growing economy since the introduction of market based economic reforms in 1978. According to IMF report, China is the ranked 90 th by nominal GDP and 91st by GDP (PPP) on per capita terms in 2011. China is also known as the worlds second largest economy after USA. There are two time frames of China which are important; one is before 1979 and other being after 1979. Chinese economy before 1979 was known to have many problems, like problems of low productivity growth, lesser incentives for investment on human capital. Its economy emphasis was on production, capital construction, and high accumulation but ignored agriculture and small industry, peoples livelihood, efficiency and consumption. Due to these reasons China had high urban unemployment and low productivity growth. According to the data, its GNP grew at a slower pace of 6.2 per cent before 1979 and from 1980 to 1993 the GNP was known to be at 9.6 per cent. GNP per capita grew 4.3 per cent and 8.2 per cent in corresponding periods; GNP per capita has rapidly increased from $280 in 1980 to $530 in 1994. Although the growth rate declined to 4 or 5 per cent in 1989 and 1990 due to the efforts to deal with unacceptably high inflation and turmoil, the rates re-accelerated to 7 per cent in 1991 to 14 per cent in 1992, 14 per cent in 1993, 11 per cent in 1994, 4 and 10 per cent in 1995.
The impact on the light industries for example textiles has increased even more significantly, because of the reduced government interference the exports of textile which were 4.6% of the world exports in the year 1980 has increased to 2401% in 2005. And the output has increased manifold as well. The reasons which are attributed for this level of industrial development are contributed to removal of barriers to entry in the industry by new firms and the sense and increased competition among the firms in the organizations. The competition has positively impacted the organizations and the overall quality and output of the Chinese firms and economy. In bid to be the competitive the firms continually upgrade their technology and invest in improving ways to do work to create edge over their competitors. This is not only within the china but Chinese firms are competing worldwide for their share. The Chinese industry is producing surplus and that is the reason the exports of the country are very high. Due to the reforms e.g. removal of barriers to entry the number of industrial firms increased from 377,300 in 1980 to nearly 8mn in 1990. According to the economic census which does include the enterprises whose annuals sales are below RMB 5mn, there are 1.33 mn manufacturing firms. Due to these the industrial performance of china which was nothing sometime back has now exceeded the industrial performance of japan.
Trade and foreign investment The government of China decided to open Chinese economy for trade with other countries and organizations and also to allow foreign investment in the country. Before the reforms, it was not done. The Chinese economy was mostly closed to international trade and the foreign investment was minimal. The government decision to allow foreign investment has greatly helped the economy of china and the quality and quantity of output. Again with the increased competition this
time specially from the foreign goods and firms which were the best in the class in almost all the sector of the business and economy it has helped to increase the output, the quality of the products and the production units, the knowledge which the foreign skilled people brought to China was also a contributor towards the increase in the industries and the quality and standard. In short, due to globalization and opening up, China has boosted its economy and the quality and standard of the industry. The reforms in the trade which were brought by the Chinese government include the reduction in the tariff. The tariffs were reduced for example the overall tariff rate fell from 56% in 1980 to 15%. By the year 2001, there were less than 40% of imports which were subject to the tariff and just 9 % of imports which were subject to licensing and import quotas. The example of it is that Chinas average tariff on the product of industry was around 8.9% by 2005. Whereas other BRIC nations such as India has the average tariff on the industrial product of 27 % and Brazil has the average tariff of around 30.9% The foreign investment in China was also liberalized on the Dengs ascension, Special Economic Zones (SEZs) were made in the starting 1980s to attract foreign investment and capital. Special incentives were provided to them for this purpose such as giving them exemption from taxes and the regulations. Later these Special Economic Zones were expanded due to their success. By the year 2004 FDI has increased to 160bn.
of the agricultural produce can be set and must be in control for the most of the population. And any amount of surplus produce can be sold at market rate. This increase in the incentive for households increased the effort and productivity to produce more. The reforms were completed in the year 1984. The positive effect of this reform can be seen as between 1978 and 1984. The total factor productivity in the agricultural sector grew by 5.6% annually. Due to the productivity growth in the same time period, the Chinese agricultural output increased by 47 percent. This increase in the availability of food alleviates the Chinese subsistence food constraint and formed a structural transformation in which the agriculture labor reallocated to industry and work in the industries.
Structural Reforms
In the same time period, from 1978 to 1984, the employment in agriculture fell from 69 percent to 50 percent. The 19% of the labor force of China went out of the agriculture to work in the industry. But they did not go to the cities and urban areas. Instead most of them were employed in the rural industries which were set up by the village and township level governments that are called Township and Village Enterprises. After sometime by the early 1990s, the industry has exhausted the growth in output which was mainly efficiency gain with same technology due to increased incentive to work. After this there was more liberalization of the output and input. The government reduced their intervention further and as a result the growth occur due to increased use of technology in the agricultural sector and Rozelle (2008) documents that the liberalization were so extensive that with the exception of restriction ownership of land the other policies were among the most liberal policies in the world and is among the least intervened and distorted agriculture sector and economy of the world. This liberalization provides the agriculture more incentive to increase their efforts, acquire new technologies. The results of it were consistent increase in the productivity which remain at 5.1% during 1988 to 1998 and around 4.13% from 1998 to 2007. After the period of 1990s according to the researchers and economists this growth in productivity
is contributed by technological advances. The employment in agriculture further reduced from 46% in 1991 to 26 percent in 26% in 2007. The reforms and growth in agriculture sector has positive impact on the overall economic growth in India. The arguments by the economist have explained the role of agriculture in developing economy. It says that the productivity growth in agriculture directly improves and enhances the productivity but also indirectly due to structural changes. These structural changes has led to growth when the productivity increase in agriculture sector the demand of food can be fulfilled with lesser number of workers employed in agriculture. With less workers employed in this sector the labor which is free from it can go somewhere else and work in other sectors of the economy and work for the development of other sectors. Another fact is that the non-agriculture sector was more productive as the average labor productivity of non-agricultural sector was six times higher in 1978 than agriculture. So when this labor was reallocated from agriculture to non-agriculture sector the increase in total productivity was obvious.
Employment Statistics
As of 2005, Chinese population was soaring to 1.30576 billion. The total rural and urban employed population became 758.25 million of which rural population consists of 484.94 million and 273.31 was urban population. Annually 10 million new labor forces were entering into it. In search of work approximately 150 million labor forces were migrating from rural to urban areas. Due to persistent urbanization, patterns of employment in urban areas changes radically. From 1990-2005, percentage of employed work force increased from 18.5 to 31.4 for tertiary industry, for those in secondary industry rose from 21.4 to 23.8 but for primary industry it reduced from 60.1 to 44.8. With the perpetual growth in urban population, Chinese government has formulated many guidelines to control the escalation in urban unemployment. Despite of the fact that more than 60% of the population resides in rural China, job opportunities was mainly in urban areas. Although state owned enterprises terminated a huge number of labor force as compare to private region where 17.5 million new jobs
have been created even then it was not sufficient enough to offset the prevalent increase. Due to lay off by SOEs almost 40 million workers lose their jobs; opportunity in private sector has increased more than ever before with 75 million jobs have been created during the same years. Most of the jobs were seen in the services division and among tertiary sector. In collective urban unemployment rises which varies from region to region almost high among coastal areas of the country. By the end of 2005 registered unemployed population in urban areas constitutes about 8.39 million with the percentage rate of 4.2. In contrast to this, jobs in rural areas became abundant as it gave privately owned and SMEs a chance to perform their role in creation of jobs. As collective decrease in employment gave chance to rural and village enterprises to quickly meet the demand of consumers because abundant labor was available at cheap level. But in the late 1990s because of fierce competition with private firms and lack of proper training at the top management level of TVEs led to poor financial performance which results in decline of employment level. Huge throngs of working population switched their jobs towards farms and cause a farm industry to saturate. Afterwards huge amount of migration took place from rural to urban areas which caused further more difficulty for them to find a better job. Moreover, keeping in view that most of the population in rural areas is uneducated and unskilled as most of the workers havent got basic secondary education. It has been observed that only 1 out of 5 people have completed primary level education. Because of that underprivileged education mostly people are underemployed and this rate is relatively higher than the other Asian countries rose to about 3-6% which show these figures are similar to those found in urban registered rate ate 4%. Productivity rate of Chinese farmers are also lower than those in other Asian countries. To reduce that underemployment rate government needs to take measures on immediate basis.
Employment Policies
Chinese government sanctioned a proactive set of policies to protect the rights of its labor force and help them in finding those jobs which best suits them. Labor market underwent substantial changes by the mid-1970s. Allocation of jobs and administrative control of wages had been taken over by the government. Employers became less authoritarian in control over people jobs. These reforms led foreign-funded organizations to increase quota for unemployed people. As a part of these reforms, Chinese government allows private and foreign investors to operate in the country. In light of these policies SOEs sustained employed people and provide a many social benefits like medical, transportation, education and pensions. SOE also started employment under which people who are unemployed can stay in temporary employment centers where they can stay for at least 3 years and can get minimum monthly benefits and during this time period they will consider to be employed by SOEs. From 1980 to onwards number of employment policies established which are as follows:
in re-employment centers (RECs) and can get assistance in finding new job and minimum social benefits.
These employment systems at all levels provide free assistance and employment guidance to rural and urban unemployed people. Those who left work or unemployed will get one-stop service including registration, job consultancy, vocational skill training and insurance benefits. By providing more information for job seekers, Chinese government creates more opportunities for unemployed people and effectively increased the pool of its skilled labor.
Hukou Reform
The household registration system was developed in 1950s to regulate the movement of population among cities and to grow a labor market. People from rural side were needed to stay in urban areas to gain access to city services like education, health and social security. In 1990 government provide allowance to stay in urban areas and started to build their own business and raise a family. Also in early 2000s government removed charges for those who wanted to stay in urban areas, small towns and cities such child birth charges, temporary residence fees for migrants. However, certain barriers remain like people in rural areas can have two children whereas urban hukou is allowed to have only one child. Despite of their low incomes rural hukou have to own a house in urban areas which is difficult for them. Hukou in small towns and cities are not attractive to rural migrants as compare to those in larger cities because of better facilities being provided by the government.
conceptual framework that links education and growth (Mankiw, Romer, & Weil, 1992; Mulligan & Sala-I-Martin, 1992). An abundance of empirical studies have found a positive relationship between growth and education (Barro, 1991; Levine & Renelt, 1992; Mankiw et al., 1992), there are several recent papers which investigated the relationship between different educational levels and growth in China. Chi (2008) concluded that tertiary education has a positive and larger impact on GDP growth than primary and secondary education. Fleisher, Li, and Zhao (2010) found that workers with more than elementary school education have a much higher marginal product than labor with no higher than elementary schooling. The gross enrollment ratio in tertiary education reached 20 percent in 2005 from 6 percent in 1999. According to the empirical results in the articles, tertiary education plays a vital role in the economic growth rather than primary and secondary education. In China more developed provinces benefit more from tertiary educational levels. In one article (Demurger, 2001), used a panel data of 24 provinces in the time period of 1984 to 1998, to estimate the relationship between the proportion of population with a secondary or higher education and per-capita growth, and the empirical analysis showed that secondary or higher education has more impact on per-capita growth. Another research (Chen and Feng, 2000) estimated an equation of cross-sectional growth for 29 provinces in China from 1978 to 1989 and results were positive for education and economic growth. (Wang and Yao, 2002) found out that human capital contributed considerably to economic growth in China over the period from 1952 to 1999. So the significance of investment in human capital is known by much empirical evidence given by different authors in various articles. For the Chinese students, there are actually two choices for the education that they acquire. First, being that they study in their own country and second, being that they study in foreign country. Traditionally the Chinese people use to prefer the domestic education but as the time has changed and now there are very less barriers to acquire the best quality of education, people from the republic of China have started to take admissions in foreign countries. Other reasons for this new trend were of global integration of information and globalization in the world. Families with good enough
resources have started to send their children abroad for better education and this has turned out even better for the Chinese development program. As China opened its borders for larger firms in the world to cultivate in their soil, students who graduate from foreign countries have helped these firms to invest in China and establish their firms inside the atmosphere of China. These students tend to make the firms owner understand the culture of China and if these students were not available the foreign investment in China would have been with a slow pace. Overseas education has its own importance and significance in todays era; it is as much important as foreign investment and open trade. Education does end the barriers of language and culture and this in return helps the firm to trade more freely and comfortably. However, no country can achieve sustainable economic development without substantial investment in human capital (Ozturk, 2001). Education not only enhances peoples knowledge of the world and helps them to find out their potential abilities and interests, but also enriches peoples living standards by equipping them to work in a skilled position. Moreover, the benefits that people gain from an overseas education can influence the general society by improving productivity through the acquisition of advanced management methods and technological skills for example. China's progress in higher education enrollment places it in the mid-range of the enrollment status of major developing and industrialized nations.
Technological Changes
Before 1979, China was at the heart of political actions, economic stagnation, treachery, fractional combats, and human destruction. In early 1970s, when the effects of Cultural Revolution started to fade, China continued to modernize in the four main sectors i.e. agriculture, industry, science, and military by investing in foreign modern equipment and resources. This created a completely new wave of technological importation. Inside period of 19721976, 5.15 billion US dollars ended up spent in order to equip completely new factories all with brought in equipment. The emphasis in this particular period was heavy mechanical industry. In 1978, the total investment was 50. 1 million yuan RMB, a new 31% raise over 1977; also, many technical import agreements were signed hastily, as an end result, foreign reserve had a deficit 10 million US Dollars for that year. After the economic reforms, scientific imports in addition to technological development within China also have been through simple adjustments. Domestically, advanced schooling ended up being restored in addition to widened, numerous government businesses were being often restored or perhaps freshly set up, scientific R&D through research facilities establishments to help organizations in addition to inter-firm technological sharing were done. The most significant achievement from the 1980s could possibly be the actual breakthrough in the rural skilled labor. The rural professional sector will be seen as an important factor in addition to be developed into important milestone for China's monetary expansion. Going into the actual 1990s, 2 activities usually are worthy of bringing up. An example may be the actual breakthrough regarding private organizations in addition to their own investments regarding engineering through the sector. Additional will be the maturity in the home-based home technology marketplace. Chinas technological innovation imports following 1978 altered considerably.
Equipment and machinery imports were curtailed, as an alternative, technological innovation licenses had grown to be the major factor to help import overseas
engineering. 302 scientific import legal agreements from the period of 1979-1990 were done because of the Express Organizing Payment, 41. 4% were technological innovation licenses, 9. 3% were technological discussion, 5. 3% were joint ventures and the rest of 44% were being equipment imports (Chen, 1997). Although equipment imports were being nonetheless substantive, but the situation has much improved than pre reform period. Alternatively, technological innovation licensing offers various strengths. The idea will allow any region a choice of blending overseas engineering with existent engineering. Thus, China's shift through equipment imports to help technological innovation licensing ended up being a proper decision. The 1990s in addition witnessed any increase regarding China's increase in creating innovative products. With 1990, the actual several major conveying merchandise within China were being clothing, crude oil, natural cotton textile, refined oil, in addition to man-made fiber merchandise; within 1995, they will grew to be clothing, household electronic devices, telecommunication products, gadgets, in addition to steel (Chen, 1998). This speedy improvement has increased and created a global market for Chinas products with international standards.
Institutional framework
Agriculture was widely state owned in 1979. After 1979, locals were allowed to produced their own products and de-collectivism was implemented. This caused them to produce substantial amounts for themselves and after that government used to purchase the surplus on market rates. This promoted the growth in the agriculture sector of China as it caused motivation for creating a living and profit for themselves which was forcefully taken away previously. Ahead of 1978, it turned out rare to locate marketplaces in the towns. Outlying marketplaces had been intermittent. They were restricted to designated locations, normally in the market areas. By 1985, many towns increased their particular day-to-day market places, usually setting up shops on the main roadway providing the village. Market places continued to grow easily, giving a larger array of everything in addition to produced merchandise. These marketplaces were usually wide open each day of the full week. This improvement in day-to-day marketplaces is surely a significant indicator of commercialization. It encourages this stream of merchandise and the growth of product manufacturing. The tertiary level of marketplaces, in nation cities, features equally large detailed marketplaces in addition to specialized at wholesale prices market places. As with the traditional market areas, marketplaces in the nation area have cultivated easily since 1978 in addition to participate in a significant function with linking non-urban in addition to downtown marketplaces. The rural people were allowed to set up their own facilities and state owned interference reduced substantially. These people used industrial facilities and used cheap resources and adequate employment force available in the rural areas. By subcontracting work, industrial facilities were able to lower production costs: this not only created monetary profits for the firms but it also created fringe benefits for the local population such as property, bonus deals, family vacation leaves and medical care. Moreover, subcontracting arrangements gave a wider advertising and marketing outreach intended for urban industrial facilities in situations where business owners obtained parts from manufacturing plant after which it assembled and also marketplace the actual complete
products. Most of these arrangements provide the opportunity to escape agriculture and also manufacture products with reduced amounts of danger considering that credit rating, stuff, and also technological innovation are supplied with the manufacturing plant.
Conclusion
Chinese Model of Economic development involves various factors that led to rapid economic growth after 1979. The widespread reforms after 1979 which included industrial, agriculture, institutional, technological, education and labor reforms, ensured the growth of the stagnated Chinese economy in 1979. These reforms helped China to maintain an impressive growth rate of approximately 9%. These figures speak for the success of their policies and reforms. Moreover, if closely observed, Chinese government are closely watching their economy and are steering it dynamically towards maintain continuous growth in Chinese economy.
References
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http://www.fas.org/sgp/crs/row/RL33534.pdf
https://webspace.utexas.edu/hl4958/contemporary-chinesehistory/Nee%20and%20Su%20%20Institutional%20Change%20and%20Economic%20Growth%20in%20China%20The %20View%20from%20the%20Villages.pdf