Macroeconomic Issues in China in the 1990s

Abstract

In 1981 the Chinese leadership set the goal of quadrupling China's 1980 per capita GNP by the year 2000 in order to raise the people's standard of living to a “relatively comfortable level.” But apart from sustained growth, the Chinese planners are also very much concerned with economic efficiency and price stability. The new development strategy to attain these goals is economic reform and opening to the outside world Over a decade has now elapsed since these goals were set. This article addresses the issues of how far the Chinese economy has advanced toward those objectives, the major challenges that lie ahead and China's economic prospects in the 1990s.

Destabilization of the Chinese countryside and rural industrial development

“…This sum is comparable in size to budgetary revenues and amounts to about 20% of national income (Wong, 1991). These funds deluged an economy already flooded with capital due to easy credit and the production of money (Oksenberg and Tong, 1991;Sivan, 1988;Yeh, 1992). In the ten years between 1979 and 1988, money in circulation rose by an annual average of over 26%3 Ominously, the currency oversupply served to fuel inflation.…”

“…While land tenure formally obligates peasants to labor service for such purposes as infrastructure maintenance and reforestation, the drastic weakening of local authorities often makes this duty impossible to enforce (Tseo, 1990;Tyson and Tyson, 1992i). Hence, infrastructure seems to be suffering (Tseo, 1990 andYeh, 1992), and the great gains in reforestation of the past decade and a half, especially in the and North (Tseo, 1992), may be in jeopardy. Education and vocational Iraining no longer come free of cost; new seed strains and innovations in technique, once disseminated as a public service by the various extension organizations, are becoming commodities to be sold for profit (Tseo, 1990 and.…”

“…Not surprisingly, the new economic pressures have provided incentive for large peasant households, which offer the distinct economic advantages of additional labor, additional land, which is allotted according to household size, and guarantors for retirement (Robinson, 1985;Yeh, 1992). This has resulted in serious violation of birth control strictures in the countryside (Bannister, 1984;Tseo, 1990).…”

[Can Communist Economies Transform Incrementally? The Experience of China]: Comment

“…The growth indicators say little about the allocative efficiency of the investments. There is no dispute, however, that subsidies to the state enterprises have been a continuing source of macroeconomic destabilization, with total budgetary subsidies in 1990 totalling no less than 106 billion yuan out of total budget outlays of 309.3 billion yuan (Yeh, 1992). As Yeh summarizes:…”

A Macrotheoretic Model of the Chinese Economy

“…5 Nonetheless, the proportion of manufactures in China's total exports has grown in most years and by 1993 stood at 81.8% (SSB, 1994). This growth has come partly from more profitorientated SOEs and partly from small profit-oriented firms with a high degree of independence from state control (World Bank, 1990;Yeh, 1992).…”