Even a few decades ago, China was not considered to be a significant entity in the global political economy. China emerged from the relative isolation and autarky of the Maoist period with the assumption of the de facto power by Deng Xiaoping in 1978. However, it was not until 1993 that China really became a significant entity in terms of global trade and FDI flows. With the passage of time, the Chinese political powers have blended the politics with its economical affairs which resulted in a drastic change in its global political economy (Nicholas 2002).
In 1949, the Communist China came into being after a revolution guided by Mao-Zedong. As it adopted Marxism as its politico-economic ideal, it discarded the capitalists system and persuades an economic policy in the opposite line. Communism itself prohibits capitalistic system of production and private initiative in both production and distribution. Moreover, China, following Soviet Russia, started its planning system which means the state-control of production, distribution, trade and commerce.
Thus, Communist China, since the very beginning adopted a line completely different from the system prevailing in the Western Europe. Of course it was helped by Soviet Russia in its economic development through a friendship of Marxian tie. But, China prohibited all other foreign investments, due to its better enmity with all capitalistic country particularly with the United States, the leader of the capitalistic world. But it is cardinal truth that in recent years – particularly after the demise of Mao, major changes have been introduced in Chinese economic policy.
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In spite of its adherence to Marxism, it has largely adopted some elements of capitalism and, hence, it may rightly be claimed that at present the Chinese economy is a mixture of communism and capitalism. Particularly, as China was soon after the revolution of 1949, was gripped by Stalinism, authentic Marxian model was never been honored and the economy began to march towards a new goal. The death of Mao merely accentuated that capitalistic trend. Basis of Capitalism China has obviously introduced capitalistic elements in other ways as well.
The opening up of foreign capital marks its coexistence within a socialistic economy on condition that it is used to strengthen the socialist sector. But, we are now seeing the exact opposite in China today. About the half of the national products are now produced by private companies. It means that China has deviated from the original model of controlling the private sector and depending upon the state-enterprise. What is more significant is that the state-owned enterprises are under capitalized and a large number of such prices have been sold to the private companies at a grave financial loss.
As a matter of stark reality China is now one of the biggest markets of different foreign enterprise. Last year the world-trade grew by 50%, but 60% of these growths was Chinese. In spite of calls to impose protectionist majors against Chinese exports, such export continues and, particularly these producers are mostly European, Japanese, and Koreans. It is also a particular fact that the Chinese Communist Party has eagerly endorsed the capitalistic intrusion in the political system and economic reformation.
Particularly after the death of Mao, the capitalist’s element began to dominate the economic system and China has adopted the formal decision to allow the Chinese capitalists into the party. The critiques have opined that there are some reasons for this diametrical change: First, the economic growth has allowed some capitalists to enrich themselves-but at the same time, it has ensured and improvement in the living standards of millions. The enrichment of the masses indicates that the private investors have rendered a signal service to the country and hence the role of private capital has been a matter of great encouragement.
(Roberts and James, 2003) Secondly, the new bourgeois class is practically composed of the relatives of the bureaucrats as well as the members of the old Chinese aristocracy. The Chinese Communist Party has failed to prevent their ascendency in the Chinese political economic life. Thirdly, after the integration of Hong-Kong into the People’s Republic of China, the Hong-Kong capitalists began to take a curtail role in the Chinese economy. This is also a reason why China is moving towards capitalism.
Fourthly, last but not the least, state-control of finance and the non-convertible Chinese currency have increased the level of saving of the Chinese families. Such large scale savings have also encouraged and increasing the private investment in productive sector. Thus, all these factors have played their prominent role in shifting the Communist economy of China to almost a capitalistic one. In other words, while China still claims to be a communist state, a compromise with capitalism has naturally changed its economic pattern.
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