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Compare and contrast the approaches to economic reform adopted in China and Russia

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LI PO CHUN UNITED WORLD COLLEGE OF HONG KONG NICOLA ZILIO O CHINESE STUDIES COURSEWORK O 2164 WORDS TABLE OF CONTENTS 1. Introduction........................................................................... 3 2. Pre-Reform Conditions in China and Russia..................................... 4 3. The Chinese Bottom-Up Micro-economic Approach Versus The Russian Top-Down Macro-economic One.................................................. 5 4. Foreign Investment Policies in China and Russia................................ 7 5. Conclusion............................................................................. 8 6. Bibliography........................................................................... 9 1. INTRODUCTION Once a man said: "Black cat or white cat, it's good cat that catches the mice" 1 Deng Xiaoping and another replied: "The market is not an invention of capitalism. It has existed for centuries. It is an invention of civilization." 2 Mikhail Gorbachev Deng Xiaoping and Mikhail Gorbachev became famous in history to be the authors of two of the most important economic reforms of all times, respectively the Chinese and Russian ones. Nowadays it is habit to consider China's economic reform as the "Chinese Miracle"3, whereas that of Russia just as a mere failure. Data, in fact, support this thesis. Since China begun the reform in 1978, her GDP raised fourfold (from US$ 175 billion in 1978 to US$ 700 billion in 20004) principally sustained by large foreign private investments5. On the contrary Russia assisted to a constant fall of her GDP, which has more than halved, from US$ 700 billion to US$ 300 billion6, since the beginning of the reform in 1992. ...read more.


Local governments, in fact, took the inventiveness to give out land to single households. The excellent results were found out by the state only later on, and consequently the method was implemented in all China30. This example shows how the first big target of the Chinese reform was the renewal of agriculture, as it was the leading sector of China's economy, in contrast with the Russian industrial approach. After the Third Plenum of the CCP in 1978 Deng Xiaoping decided the general reduction of the state's control on agriculture by (1) decentralizing its management and establishing a household land ownership system, (2) raising selling prices and (3) opening the agriculture market to diversification31. Under the new system, a predetermined proportion of the output had to be delivered to the state in return the peasant had the right to manage the land and tools and then remaining output32.This has left the Chinese households with a greater independence, probably the main reason for China's great economic expansion. Her achievements in this sector are vast: from 1978 to 1994 China has seen an annual growth of more than 4%33; for instance the output of main agricultural products, such as grain, cotton and tea have more than doubled, whereas fruit and fish have seen an eightfold increase34. ...read more.


CONCLUSION It is common to believe China will become in the following decades the next super-power, thanks to her incredible economic growth; whereas Russia is almost always seen as a decaying country. This situation, as we have seen, mainly arises by the opposite strategies the two nations have adopted in implementing their reforms as a result of their initial social, political and economic conditions. China preferred a gradualist approach, reforming first her rural areas, then promoting (1) the creation of new TVEs and (2) FDI. On the contrary Russia chose a "big bang" approach, mass-privatizing her SOEs, considering only little her agricultural sector and restricting FDI. Despite these considerations it is difficult to deduce which of the two countries will "win the race". In Russia from 1992 to 1996 inflation was reduced from 245% to almost 0%, exports have rose by 16% and GDP is steadily growing by 3-4%60. On the other hand, according to some scholars, China's official growth statistics have been overestimated by 1-2%61, furthermore some Chinese economists believe them to exceed even 2-3% the real data62. Market conditions are random and prediction on the relative economic performances of China and Russia cannot be made; only time and maybe new reform strategies will determine which of two will be economically successful and which a failure. ...read more.

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