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Andrew Papadimos

This articles is from Chinese Business Center

Since the implementation of the Open Door Policy and economic reforms, economic growth in the PRC has been rapid. Graph 1 depicts economic growth in the PRC since the 1950s, and presents a corresponding view of Australia's economic growth patterns.

Fluctuations in the growth rate of the PRC's national income are closely related to domestic political conditions and campaigns. Graph 1 illustrates clearly the effects on the PRC's economy of the Great Leap Forward from 1958 to the early 1960s - with a negative economic growth of over 20% for the year 1962 alone. Also dramatically illustrated are the effects of the Cultural Revolution, with 1968 showing a negative growth of almost 8%. The 1962 and 1968 represent times of particularly serious political and economic turmoil within the PRC. Although negative growth in the PRC's economy also occurred during other periods, the declines in economic activity were never as serious as these two years.

Graph 1 also illustrates clearly the effects of Deng Xiaoping's economic reforms and the Open Door Policy, with a dramatic increase in activity especially during 1978. The only other year where such considerable economic activity was evident - apart from the years following the Great Leap Forward and the Cultural Revolution - was in 1984.

1984 showed particularly high growth and was a year in which the PRC's economy went into overdrive. As a reaction to the increases in spending during 1984, a tightening of monetary policy in an effort to slow down economic growth followed 1985. 1988 was another year in which the PRC's economy went into overdrive, and was followed yet again by a tightening of monetary policy that has continued until present day.

Since the implementation of the new policies in 1978, the PRC's growth rate of national income and national income per capita has accelerated at an annual average of 8.7% per year. Such high economic growth has offered Australia and the world many opportunities for trade and investment. However, the low economic base from which they began underscores the PRC's economic achievements of the past decade. The high level of economic growth in the PRC, therefore, has really been a process of 'catching up'.

Graph 1

Annual Growth in the PRC's National Income (1953-1988)


Note: Australian data are for Financial Years ending December 31. PRC data are for Financial Years ending December 31 and based on current prices.

Source: The Parliament of the Commonwealth of Australia, Taiwan: The Spectacular Growth of the 'Other China', Current Issues Paper No. 2, 1989- 90. Beijing Review Press, The Development of China (1949-1989), 1990, p. 23.


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