New Left Review I/208, November-December 1994

Paul Bowles, Xiao-yuan Dong

Current Successes and Future Challenges in China’s Economic Reforms

China’s programme of economic reform has met with remarkable success. [1] We are grateful to Robin Blackburn, Mark Selden, Mark Setterfield and Gordon White for their comments. The average annual growth rate since 1979 has been 8.8 per cent, placing China in a select group of developing countries which have achieved sustained industrial growth for over a decade. Indeed, China doubled output per person in the ten years between 1977 and 1987, one of the shortest time periods for any country to achieve such a record. [2] See World Bank, World Development Report, Washington, dc 1991, p. 12. This impressive growth has in part been the result of significant increases in factor productivity in both the state and non-state sectors, a point of some importance given the well-documented failure of centrally planned socialism to raise productivity. [3] The terms ‘state’ and ‘non-state’ sectors have been used in the literature to distinguish between those enterprises ‘owned by the whole state’ and those owned by some other group or individual. The terminology is used widely although it is misleading in that, as we will see further below, the local state often owns enterprises in the non-state sector (a classification which arises because local-level governments do not represent the whole population). For a review of productivity in the post-reform period, see for example Kam-tim Lau and J. Brada, ‘Technological Progress and Technical Efficiency in Chinese Industrial Growth: A Frontier Production Function Approach’, China Economic Review, vol. 1, no. 2, 1990, pp. 113–24; G. Jefferson, T. Rawski, and Yuxin Zheng, ‘Growth, Efficiency, and Convergence in China’s State and Collective Industry’, Economic Development and Cultural Change, vol. 40, no. 2, 1992, pp. 239–66; P. Prime, ‘Industry’s Response to Market Liberalization in China: Evidence from Jiangsu Province’, Economic Development and Cultural Change, vol. 41, no. 1, 1992. For a discussion of the failure of the centrally planned system to raise factor productivity see G. Ofer, ‘Soviet Economic Growth 1928–85’, Journal of Economic Literature, 1988, and P. Bowles and T. Stone, ‘China’s Reforms: A Study in the Application of Historical Materialism’, Science and Society, vol. 55, no. 3, 1991, pp. 261–90. The result is that China’s economy is now estimated (using purchasing-power parity exchange rates) to be surpassed in size only by the us and Japan and there is a real possibility that China will become the world’s largest economy by 2025. [4] See imf, World Economic Outlook, Washington, dc 1993. In per capita terms, there have been impressive increases in living standards evidenced by a threefold increase in the average consumption of meat and eggs between 1978 and 1991, by a more than doubling of the average living space per person in rural areas in the same period, and by the fact that the ultimate basic consumer good, the television set, was owned by an average of one of every two rural households and by virtually every urban household in 1991. [5] All data are from the State Statistical Bureau, Statistical Yearbook of China, 1992.

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