China Today. China’s Rise to Power. Economics Coursework

China’s Rise to Power
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The People’s Republic of China rise to be the second-largest economy in the world in 2018 was unlikely four decades ago. China has been among the world’s fastest-growing economies, with real annual gross domestic product (GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as “the fastest sustained expansion by a major economy in history.” A nation founded about 70 years ago and had its infancy years rooted in collectivism and Maoist ideologies borrowed from their communist neighbor to the North, the Soviet Union had stifled economic development and prosperity in the country. However, in the last four decades, Chinese economy has risen to unprecedented levels in what some people call the Chinese economic miracle. The key preconditions that led to the growth are multifaceted but interrelated. They are; large population, economic reforms initiated by Deng. Cumulatively, these conditions had a great impact on the economic miracle that ensued characterized by rapid foreign investment, rapid urbanization and economy rooted in manufacturing sector.[Morrison, Wayne. 2019. "China’s Economic Rise: History, Trends, Challenges, Implications for the United States." Congressional Research Service 1-38.]
When Deng Xiaoping took the realms of power in Beijing, he sought to change the communist principles of the Mao era and institute new dynamic, modern and capitalistic approaches that could help the country grow economically. Mao’s China was largely communist and the economy was only supported by a state-owned enterprise. Deng sought to change the approach to allow for privatization and direct foreign investment into the country. He ushered in a new approach to economy known as dual economy. Some parts of the country would continue to have communism styled economy and others had a capitalistic approach. Through the creation of the special economic zones, and allowing for privatization within those zones, China set out to change and grow the economy which had long been underpinned by communism. When Deng created the special economic zones and allowed for foreign investment, western countries were quick to take advantage of the liberalization of the economy. In the coming decade China enjoyed heavy foreign investment especially by manufacturing firms that sought to take advantage of the cheap labor in the country. Allowing for privatization of state-owned enterprises also offloaded a huge burden on the government to support businesses which were loss-making but too sensitive to be shut down. Many small businesses came up which continued to absorb the high number of workers who were laid off when the state-owned enterprises starting going under. The new approach to economy became competitive and rewarding proportional to the investment individuals put it. More small businesses continued to come up and the economy started to grow. The state-owned enterprises also became competitive and became profit-making enterprises. The special economic zones also witnessed ballooning of companies as China started becoming the world factory. These companies created and supported other industries. I.e. A manufacturing farm created demand for ...