ECONOMIC REFORMS OF THE 1980s

C064 – Animesh Wasan

C020 – Ashish Agarwal
I051 – Saahil Jain
I005 – Devansh Chhabria
 Phase 1: Reform in the
Countryside
Between 1982 & 1988
Farmers allowed to self-produce FDI in PRC: $8.5 billion

Late 1980s
Rise in state procurement prices Provisions for increasing
foreign trade

Household Responsibility System

1985
Opened 4 cities to coastal
trade
One child policy
1988
Hainan transformed into
SEZ and opened 3000
Special Economic Zones (SEZs) miles coastline

1992
FDI hit $11.2 billion
 Phase 2: Rural Industrialization
and Enterprise Reform
Exports (% of
Year GDP (Billions of US$) Per Capita (US $)
GDP)
• SOEs prior to 1978 1978 149.54 156.40 4.56
• Introduction of Contract Responsibility 1980 191.15 194.80 5.91
Transformati
on of SOEs
System 1982 205.09 203.33 11.02
1984 259.95 250.71 9.53
1986 300.76 281.93 8.71
• Private enterprises were allowed after 1978 1988 312.35 283.54 14.38
• Increased manufacturing (30%) and exports 1990 360.86 317.88 13.61
Introduction (65%)
of TVE’s Changing Role of the State

• Move towards market-based system of pricing

• Left the system vulnerable to corruption
Dual Price
System
 Rebellion and Retrenchment
• Effects of Reforms could be seen
– Agriculture: Steady Growth 3.2%
– Industrial Production: 20.7% RETRENCHMENT PROGRAM
growth
• Unequal Inflation 1988 Freezing credit Tightening Cutting
Raising 1990
Interest rates
issued by State control on State
and devaluing 2%
19.2% Banks imports Investment
currency
High Inflation

Inflation RECTIFICATION PROGRAM

Spiral
SOEs and TVCs
Inflationary Public
borrow heavily Famers did not Enterprises did
pressures
to fund experienced a
accumulated
expansion receive cash for not have access
lower standard
their products to credit
of living
Side-effects of Rapid Growth