“Higher productivity has performed an economic miracle in China. Chinese productivity increased at an annual rate of 3.9% during 1979 – 94, compared to 1.1% during 1953 – 78. By the early 1990s, output growth exceeded 50%. Such explosive growth in productivity is remarkable.”
In the light of the given text and common understanding related to economics, discuss the most likely reasons behind this growth of productivity in China during 1979 – 94.
“Higher productivity has performed an economic miracle in China. Chinese productivity increased at an annual rate of 3.9% during 1979 – 94, compared to 1.1% during 1953 – 78. By the early 1990s, output growth exceeded 50%. Such explosive growth in productivity is remarkable.”
In the light of the given text and common understanding related to economics, discuss the most likely reasons behind this growth of productivity in China during 1979 – 94.
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Solution and Explanation
Chinese productivity grew by 3.9 percent a year during 1979-94. In 1953-78 it grew by only 1.1 percent a year.
By the early 1990s output growth went above 50 percent. The question asks the most likely reasons for this jump.
Step 2: Find the turning point:
The big change in China around 1978 was the start of economic reforms. Before that the economy was run under strict state control.
These reforms came in two phases, and each phase raised productivity.
Step 3: Reason 1: first phase reforms in agriculture, trade and investment:
Farmers were allowed to cultivate individual plots. They could keep the surplus income left after paying taxes.
The chance to earn more made farmers work harder and use land better, so efficiency and output went up.
Foreign trade and investment were also opened, which brought in new technology and ideas.
Step 4: Reason 2: later reforms in industry:
In the next phase, private firms were allowed to take part in industry.
The government enterprises now faced competition from private firms. This forced them to cut waste, improve quality and innovate.
Higher productivity and fast growth in output followed.
Final Answer:
The rise in Chinese productivity during 1979-94 was mainly due to economic reforms. Agricultural, trade and investment reforms gave farmers incentives to produce more, and industrial reforms brought private participation and competition, which raised productivity, innovation and growth.
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