Essay Sample on China's Economic Revival: Deng Xiaoping's 1978 Reforms

Introduction

In the late 1970s, China, still an emerging nation thirty years after a revolutionary command change in 1949, was in urgent requirement of complete change (Yeung, Lee & Kee, 2009). The prolobnged fiasco of the Cultural Revolution had just concluded, leaving China's economy latent, and the citizens physically, and psychologically exhausted. Deng Xiaoping, the principal planner of China's open strategy, and monetary reform established in 1978, delineated a fundamentally new method to enhance a gradual change in the society (Yeung et al., 2009). One of the significant economic reforms was the establishment of Special Economic Zones (SEZs) to mainly lure foreign direct investment (FDI), augment China's exports, and hasten the introduction of innovative technology (Yeung et al., 2009). The essay has identified the implementation of Special Economic Zones as a strategy that is meant to resolve the economic dormancy that was experienced several decades following the Cultural Revolution war of 1949, and further, the dimensions of globalization emanating from China's Special Economic Zones.

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There were four SEZs implemented in 1980, were backed to seek practically, and open monetary procedures functioning as a implementing ground for creative rules, if it becomes current would be executed more extensively across the nation (Yeung et al., 2009). The emphasis on-forwarding connections with other nations globally, particularly through globalization of foreign direct investment, and trade relations with consumerist nations, and retrograde connections with diverse parts of China was the primary reason for their inception (Yeung et al., 2009). These SEZs were intentionally situated away from the epicenter of the party-political regime in Beijing, to reduce any impending risks that may arise as a result of political instability, which would dent its functioning (Yeung et al., 2009). More specifically, the four zones were located in coastal regions of Guangdong, and Fujian had a long history of interaction with the external world through emigration, and they were in proximity with Hong Kong, Macao, and Taiwan (Yeung et al., 2009).

The moment Deng Xiaoping ascended into authority at the climax of 1978, he inherited an manufacturing economy that was crippling down, particularly due to Moist central planning that caused two main problems; First, the economy of China was too reliant on capital-intensive heavy industry, whereas the manufacturing of consumer products was least, and provisions of essentials like clothing, electric fans, and bicycles, were regulated (Kroeber, 2016). Through the proposition of implementing the SEZs, Xiaoping wanted to gradually improve several elements; China to move from capital-intensive heavy industry to labor-intensive light industries (Kroeber, 2016).

Further, the introduction of SEZs would allow foreign industries to establish industries on special terms. Xiaoping, initiated price reforms to lessen the influence of chief planners, and augment the role of the marketplace, and finally enhanced lenience for privately-owned firms (Kroeber, 2016). Deng Xiaoping borrowed the first two ideas from the East African development model, that has continuously made several East African nations to generate much-needed revenue through labor-intensive exports of consumer goods as a factor of enhancing long-term financial growth (Kroeber, 2016).

The selection of Shenzen was particularly strategic since it is located athwart a narrow river from Hong Kong (Yeung et al., 2009). This area was key as the economists in China would learn how industrial modes of financial development, and contemporary techniques of an active capital would run if implemented in other regions within China (Yeung et al., 2009). One year after the establishment of the four Special Economic Zones, China experienced positive impacts. For example, these zones contributed 59.8 percent of total Foreign Direct Investment in China, with Shenzhen accounting for the largest share of 50.7 percent, and the remaining zones each contributing at least 3 percent of FDI (Yeung et al., 2009). A few years later, the four SEZs still injected 26 percent of FDI into the economy, and by the end of 1986, the four SEZs have contributed a total of US$1.16billion, or 20 percent of nation's GDP (Yeung et al., 2009).

The idea of setting up SEZs has enabled China to shift from labor-intensive to set up industries that would later help them to generate revenue through exporting products to other nations (Kroeber, 2016). Therefore, since the inception of SEZs, the grouping of auspicious policies, and the precise mix of production elements in the SEZs occasioned in high rates of financial growth in China. The implementation of SEZs particularly benefitted Shenzen, which currently contributes a lot in terms of GDP through fishing, and industries (Kroeber, 2016). SEZs have contributed greatly to China's economic growth. They have allowed experimentation with market-centered reforms and acted as a catalyst for the efficient sharing of local, and global resources (Kroeber, 2016). They have also broadened economic channels by luring foreign capital, allowing technology, and technical, and managerial professionalism that has spurred industrial growth (Kroeber, 2016).

The Economic Dimensions of Globalization

Although the globalization procedure is an intricate and multidimensional subject, some of its elements are more noticeable, and significant aspects of China's SEZs are economic (Anonymous, 2020). One economic scope of globalization that emanates from the SEZs in China includes the aspect of it attracting foreign industries to be located in Shenzen, and thereby contribute attract more international investors in the country (Anonymous, 2020). Since the main motive behind the establishment of the four SEZs was a change from capital-intensive heavy industry to labor-intensive light industries, and foreign industries would help actualize this idea. As a result, allowing foreign investors in these zones, the growth of global integrated production systems has accelerated. Four elements have been suggested as bases of the current growth in global trade; the first two are the decrease of transportation costs and trade barriers. The third notion is the augmented demand for diverse brands of comparable products among other nations with similar income levels, and the final one is the break-up of value, or production chains (Anonymous, 2020). These break-up has created trade flows in intermediate goods that cross regional boundaries on several instances within the process of creating a single product (Anonymous, 2020).

In China, most SEZs were well integrated into underlying local clusters. As an outcome, these zones encouraged foreign investors to create joint projects with local counterparts (Zeng, 2016). In Taiwan and South Korea, administrations also back the backward connections through practical assistance, and other strategy interpositions (Zeng, 2016). The zone commissioners dynamically enhanced inter-linkages between local industries, and foreign investors within the zone, by permitting preferential access to intermediate goods, and raw materials to domestic firms supplying FTZ firms. Further, the zone governments offered technical assistance to outsourcing companies (Zeng, 2016).

The Relationship Between Export Performance, and Economic Growth As Economic Models of Globalization

Thanks to the strategic implementation of the four SEZs, the gross exports of China have surpassed the trillion-dollar mark (2.21 trillion) and currently ranks first globally (Jiang, 2017). In the first stage of the Chinese economic reform, processing trade was advantageous to the economy of China. Even though the production factor structure has altered a great deal, the export scheme remains the first step to processing trade (Jiang, 2017). Aside from immediate financial growth, long-term economic growth is particularly based on endogenous economic growth. Jiang (2017) pointed out that lengthy economic development relies on endogenous economic growth like export processing zones to generate revenue through the export of products. The two main facets of endogenous financial development include; accumulation of physical capital, and human capital accumulation (Jiang, 2017). China, currently has huge foreign currency reserve, and completed industrial facilities, further decreasing marginal returns of economic capital, and higher labor prices also indicate that China has turned out to be a nation that rarely experiences capital shortages (Jiang, 2017). However, the adverse impact of exports on the long-term financial growth in China could be explained by the deviation between production structure, and export scheme. On the other hand, the production scheme will gradually affect the high-tech industries in China. Finally, decreasing the factor price distortion is still a path that the real production cost of an export commodity (Jiang, 2017).

Conclusion

In conclusion, the essay has examined Deng Xiaoping's proposition of implementing four Special Economic Zones as an attempt to solve the decade-long economic dormancy that was experienced several decades following the Cultural Revolution war of 1949. During that period, the economy of China was overly reliant on capital-intensive heavy industry, whereas the manufacturing of consumer goods was least, and supplies of essentials like clothing, bicycles, and electric fans were regulate. The economy was not generating enough GDP and was relying on a domestic source of revenue. However, through the introduction of SEZs. Xiaoping wanted to primarily bring the following reforms; shift from capital-intensive heavy industry to labor-intensive light industries, An emphasis on light industries exports to enhance the foreign exchange required to import capital elements to enhance globalization, and prevent any instance of capital shortage that may further dent the economic situation of China.

References

Zeng, D. Z. (2016). Special economic zones: Lessons from the global experience. PEDL Synthesis Paper Series, 1, 1-9. Retrieved from https://assets.publishing.service.gov.uk/media/586f9727e5274a130700012d/PEDL_Synthesis_Paper_Piece_No_1.pdf

Anonymous. (2020). The economic dimensions of globalization. 1-74. Retrieved from http://www.rrojasdatabank.info/globdev/Globalization-Chap2.pdf

Jiang, Q. (2017). Does Exports Promote the Economic Growth of China? A Long-Run View Point. International Journal of Financial Research, 8(2), 64-74. Retrieved from file:///C:/Users/User/Downloads/Does_Exports_Promote_the_Economic_Growth_of_China_.pdf

Kroeber, R. A. (2016). Chapter 3: Industry and the rise of the export economy in the Overview: China's Political Economy. Retrieved from file:///C:/Users/User/Downloads/Kroeber%202016%20pp%209-17.pdf

Yeung, Y. M., Lee, J., & Kee, G. (2009). China's special economic zones at 30. Eurasian Geography and Economics, 50(2), 222-240. Retrieved from file:///C:/Users/User/Downloads/Chinas_Special_Economic_Zones.pdf