Economic Reform and Readjustment

Economic Reform and Readjustment:

            China was one of the poorest countries sixty years ago. It is now the second richest country in the world, only second to the United States. Part of the reason for this growth is because of the economic reforms and readjustments the Chinese government took. The Chinese economy shifted from a communist market to that that embodied some capitalist ideas like free market. The changes were brought through the readjustment and reform period, where changes were made to improve the Chinese economy. The Chinese reforms and readjustments are examples of the effectiveness of policy reforms done to bring about economic prosperity.

Policy reforms

Agriculture decollective and household responsibility system

Reform programs were initiated experimentally during the readjustment period. The most successful of them was the contract responsibility system of agriculture production. It was suggested by the Chinese government in 1979 as a way for the poor rural communities living in arid and mountainous areas to increase their incomes. The system allowed individual units of families to work on a piece of land for profit, in return for delivering a set amount of farm produce to the collective at a given price. The arrangement created an incentive for farmers to reduce production costs and increase their productivity.  They produced more because they could get more money for it. A reward system was established that encouraged productivity. Due to its success the responsibility system was adopted by very many farm units in all sorts of areas.

During the reform period of the country, the contract responsibility system of the country was adopted in the entire country, and the commune structure was largely dismantled (Reforms of the Economic System, Beginning in 1979, 2010).

Agriculture was also rejuvenated by the encouragement to form free farmers market in urban areas and the country side. These allowed some families to operate as specialized households. These made the specialized households devote their energy in producing scarce commodities or services for profit. This in turn increased variety in the market and led to new innovations.


In the 1980’s private enterprises and free market activities were legalized and encouraged. However the central government had to fight continuously with the local government agencies to stop them from imposing excessive taxes on independent merchants.  (Reforms of the Economic System, Beginning in 1979, 2010)

“Opening up” special economic zones

The most conspicuous symbols of the foreign trade’s new status were the four coastal special economic zones created in 1979. This was a zone established to give foreign investment special treatment. Three of the four zones were located in one province.  The province name was Guangdong which was next to Hong Kong. The cities where the economic zones where located were Shenzhen, Zhuhai and Shantou. The fourth city Xiamen was located in Fujian province. This was directly across the Taiwan straight. More significant to Chinese economic development was the creation of economic development zones in fourteen of the largest coastal towns in 1984. This included Tianjin, Shanghai and Guangzhou all of which were major industrial and commercial zones. These zones provided productive exchange between major Chinese economic networks and foreign firms with advanced technology (Joseph 2010).

Foreign trade and commerce

The role played by foreign trade increased drastically during the reform period. Before the reform period the combined value of exports and imports seldom exceeded 10% of the national income. In earlier periods china was determined to achieve self sufficiency. They restricted external trade. Under Deng Xiaoping the then President of China, foreign trade was regarded ass an important source of investment funds and modern technology. Therefore restrictions on trade were loosened, and foreign investment was legalized. The most common foreign investments were joint ventures between Chinese units and foreign firms. Sole ownership by foreign investors became legal (Joseph 2010).

China had been for long an attractive investment. This was because of its rich history, mineral wealth and its large population which provided a good market for selling goods and cheap labour. All they needed to do was to open their markets and investors would flood in. by opening up to foreigners gained in sectors like technology where new one s were introduced. They also learned about more efficient and effective means of production.

Domestic commerce was also stimulated by the reform policy. The reform policy explicitly endeavored to enliven the economy by shifting the primary burden of allocation of goods and services from the government plan to the market. This was a more efficient means of allocating resources. This was demonstrated by the reduction of shortages in the market and an increase in variety.


            The policy reforms that China implemented contributed a great deal the economic development of the country. They facilitated the exploitation of resources which were enormous in the country. They opened up trade and improved business. They established a reward system that encouraged hard work and innovation. In conclusion the policy reforms done by the Government of China go a long way to demonstrate the impact of such policies to the economy if implemented well.

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