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How China Is Achieving Its Significant Economic Growth By Applying A Different Model Apart From Other East Asian Countries?

1696 words - 7 pages

1. Introduction-The remarkable triumph of the Chinese economy
According to World Bank (2010), China’s gross domestic production (GDP) reached as much as $5,930,529,470,799 in 2010, when for the first time China ranked the second in the world following the United States and surpassed Japan, and has been maintain the ranking in the following years with larger gap outperforming Japan. Moreover, the annual growth rate of China’s GDP has averaged over 9 percent in the last 3 decades (World Bank, 2010), with no other country having achieved such rapid developmental success as China in the world (Turin, 2010). As the country with the largest population in the world, China has lifted 300 million of ...view middle of the document...

It has been a long time debate among academics that if there’s a Chinese own model that distinguished from the other previous developed East Asian countries.

2. Different Chinese industrial policy under different context
Compared with Japan and South Korea, China is a large country in both geographic area and population, according to Global Edge (2014), China’s population takes one-fifth of the world entire population. China is rich of many natural resources, while almost all raw materials and agriculture goods had to be imported in Japan (Sakoh, 1984). Both of China and Japan had suffered a great economic recession after World War Two, Japan’s economy has recovered rapidly in late 1950s, averaged a growth rate of 10 percent during two decades after World War Two (Ellington, 2004), and prosperously developed in late 1980s (Wile, 2013), while China has opened its economy since 1978 after a long time conservative policy, took a more pragmatic perspective and aggressive policy targeting economic growth (Global Edge, 2014), and gained prominent economic growth since then.

2.1 Privatization of corporate sector
Based on Xu (2010), state-owned enterprises (SOEs) refers to corporations and enterprises which are solely funded by the state or with the state as the biggest shareholder, 63 trillion RMB assets of SOEs in industrial and service sectors takes 30 percent out of 208 trillion RMB total assets. However, the state ownership of enterprises in Japan is very rare, even compared with European countries, don’t mention China. For instance, Japan state did not run any business in manufacturing except for cigarettes (Sahoh, 1984). However the family ownership has been strictly restricted in Japan, and ownership remains in financial institutions (Lee, 1997).

According to OECD (2009), the inefficiency and unprofitability of SOEs in late 1980s and early 1990s has reminded the urgent need to reform SOEs for Chinese policymakers. While China’s SOEs’ reform has been historically fell behind many others’ reform since the reform of SOEs may consequently result in many other political and economic issues, such as restructuring of welfare system, financial structure and employment system, which is also reflected by Chinese “Gradualism Approach” reform rather than a “Big Bang Approach” (Tantri, 2013). Figure 1. shows that the number of SOEs has dropped from more that 30% in 1999 to 3.1% in 2008 (Xu, 2010). Over 80 percent of SOEs have been privatized or listed publicly (Yao, 2011).

Figure 1. Share of SOEs in the industrial sector has declined in the past decade

Source: World Bank

In contrast with China’s progressive corporatization privatization policy, South Korea had conducted a state-led economic growth policy with more barriers since its exclusive ownership and poor financial structure. According to Lee (1997), South Korean government has largely financed the chaebol's business through state-owned banks in straightway, thus chaebol's business have...

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