CHAPTER 6

THE MIRACLE OF CHINA: SUCCESS OF THE ECONOMIC REFORM

KEY CONTENTS
 the exploitation of comparative advantages at every stage of development.
 necessary policy environment and governmental action
 china moves from the traditional- leap-forward strategy to the comparative advantage strategy
 incentivisation of non-SOEs
 TAKE AWAYS
 intent by government is a key ingredient for economic development.
 Development approaches for small countries may not be suitable for large countries. (taking a leaf from
the four little dragons (south Korea, Hongkong, Taiwan and Singapore))
 The author strongly believes they work especially looking at China’s comparative advantages.
 development initiatives need the involvement of the private sector in order to succeed/ rather to speed up
development
 -the secret to effective development was the wide participation of different sections of society
(household responsibility systems)
 TAKE WAYS CONT…..
 Incentivisation of SOE’s made them slow to adapt to the market economy
 artificially suppressed or raised prices by government have a negative effect on the comparative
advantage exploitation.
 rapid development of collective individual economies created many employment opportunities thus
reducing poverty.
 China has opened up to the world and is playing a dominant role despite having spent decades
employing the inward-looking economic structure.
 TVEs had a major role in China’s economic growth through contributing a lot to government’s off
budget revenue
QUESTIONS
 Are there levels of development where we hold back on our comparative advantages?
 -Is the comparative advantage approach universally applicable (looking at a socialist and
capitalistic stand point)?
 - Is the previous inward-looking economic structure the reason for China’s ability to be a
global giant?