China has become the manufacturing hub, not just that China has also become the largest economy in the world. So let me tell you how it all started and how china managed to reach this milestone. Today we see china as economical power and they also have big cities, highways, airports, and a good lifestyle. When you turn around and look 40 years back, this was not the scenario. China’s story of being one of the poorest countries in the world to the second-largest economy of the world is interesting.
History Of Economic Growth
In 1949 after the communist revolution Chinese economy was badly hit by continuous civil wars. China was poor than some of the African countries at that time. Under the leadership of Mao Zedong, China adopted the Soviet economic model. He started a campaign called a great leap forward. Under this campaign, mount tried an industrial transformation of farming by the communal system but this campaign failed and cause economic breakdown and death of millions. Even after the economic crisis, Chinese politicians always focused on the occupation of Taiwan occupation of Tibet in the India china war for Chinese politicians. One china policy was important than the economic growth of China at that time. Things started changing after 1979. In 1979 china opened its foreign trade and investment by implementing free-market reforms. All these reforms were made possible by Deng Xiaoping Nang. He was known as the architect of modern China. Under his leadership, China shifted its economic policies socialist economy to a capitalist economy.
After 1979 the average GDP growth of China was 9.5% till 2018. China has lifted more than 700 million people out of poverty in the last 40 years. China’s share in the global economy increased from 1.8% in 1979 to 18.4% in 2018. The pace of the Chinese economy was described by the world as the fastest sustained expansion by a major economy in history. So what reforms did china make to become the 2nd largest economy and that too in just 4 decades?
Creating Special Economic Zones
These are intended to function as zones of rapid economic growth by using tax and business incentives. This was to attract foreign investment in technology. The first four special economic zones were created in 1980 in southeastern coastal China. These four zones were Shenzhen, Zhuhai, shonto, and shaman. These are some of the first special economic zones of China. In these areas, the local government is permitted to offer tax incentives to foreign investors. They can also develop their infrastructure without the approval of the central government. Business enterprises made most of their investment marketing and production decisions. Also, foreign ownership of such ventures was legalized. These facilities attracted investors from western countries and also from Japan, Singapore, and many more. As businesses grew, more and more migrants came into these special economic zones looking for jobs, and rapid growth began in china.
Special economic zones contributed significantly to national GDP, employment, exports and attracting foreign investments. It is estimated that in 2007 special economic zones accounted for about 22% of the national GDP, about 46% of FDI, and 60% of exports. It also generated about 20 million jobs. Shenzhen was one of the first zones of special economic in China. Shenzhen is the best example of success and special economic zones. Back then it was a small town with a population of 30,000 but today it has grown to 18 million people. It is developed as an electronic manufacturing city or you can say it is the silicon valley of China. Everything that is needed to manufacture electronic equipment is available there. It is like an ecosystem developed for the electronic market. This is why all the giant companies like Microsoft, Apple, and Sony have manufacturing units there. All these special economic zones have done the job of making china a manufacturing hub, startup hub, infrastructure hub.
Infrastructure development is the key factor of economic growth of any country as china started to grow economically. The central as well as the local government began to invest heavily in infrastructure projects. China’s infrastructure projects help to make transportation efficient and fast for people as well as for goods. This was an indirect help for the economy to grow at a much faster rate. In 1978 the total highway length in china was nearly 12 million kilometers. Now it is 405 million kilometers. So highway length increased 44 times in the last 40 years. Similarly, the railway length in 1978 was 50,000 kilometers. Now it has increased to 130,000 kilometers. China has also developed road connectivity with rural areas in the last decade for easy transportation of agricultural goods. China is not only developing its conventional infrastructure like transportation, energy sources, water, conservancy but they are also trying to develop modern infrastructure like 5g, artificial intelligence, industrial internet, fiber optic communication.
Now let`s talk about the educational reforms. Education plays an important part in the development of any country. In 1979 china’s total employed people were around 400 million. In 2018 that number increased to 780 million. Plenty of job opportunities was created in the span of 40 years. As we know China is the largest population on earth that means they don’t have a shortage of manpower also their labor cost was cheap back then. In the 21st century, companies just don’t need laborers, they need highly skilled manpower so education plays an essential role in this. More educated does not mean more skilled labor. The Chinese government is trying to fill the gap between what market demand and what is taught in the education system. This is done by the introduction of internships for college graduates. They also introduce new technology in schools syllabus and from the past few years, vocational education in china played an important role to improve the educational system. In 2017 employment of vocational college graduates surpassed the employment of university/college graduates. China has the largest vocational education system in the world and it enrolls nearly 30 million students each year. The Chinese government gives free vocational education to our migrant laborers so these skilled students become the backbone of the Chinese manufacturing and services sector.
Other factors also contributed to the growth of china’s economy such as government support for companies to set up their manufacturing, creating ease of doing business.