During the decade of "Cultural Revolution", China's economy was a prisoner of ideology and incompetence. From the 1950s to the late 70s, the nation had a highly centralized planned economy.
The period of 1977-1997 has been one of reforms. Deng Xiaoping's economic reforms dramatically had the moribund economy reinvigorated.
Reforms came to the rural areas first. The people's communes were dismantled, thus ending a system that had kept farmers in economic straitjacket for years. City reforms came somewhat later and not without difficulty.
In 1979, the government established Special economic Zones (SEZs) in Shenzhne, zhuhai, Xiamen, and Shantou, four cities in southeastern coastal China. SEZs are designated areas which are allowed to use tax and business incentivesto foster economic growth and where local governments can develop their own infrastructure without the approval the the central government. As a result of these liberal reforms, Big strides have been made with achievement visible to every fair-minded person.The country's GDP has quadrupled since 1978, growing by as much as 13% in 1993. The success of these economic zones has encouraged the government to create new ones, and now SEZs have been established all along the eastern seaboard and down the Yangzi River.
Increasing privatization has also led to an improved standard of living for many Chinese. But the rapid growth of the Chinese economy has not been painless. The government must face the tremendous problem o fhow to deal with the heavily subsidized, debt-ridden state-owned enterprises. These industrial dinosaurs still employ a large number of Chinese workers but operate appallingly inefficiently. The government can no longer afford to subsidize there money pits, and the days of the iron rice bowl (a liife-time guaranteed job provided housing, education, and pension.) are coming to an end.Many workers are being paid months late, given extended vacations, or simply laid off. The need to streamline inefficient enterprises runs right up against another problem facing the government:unemplyment. There are currently 60 to 100 million surplus workers drifting between villages and cities looking for work.
Despite these potential pitfalls, the economy has continued to grow at a solid rate under the guidance of Prime Minister Zhu Rongji. China managed to stand strong without devaluing its currency dring the financial crisis that sent most of Asia into a tailspin in late 1997. Now China is on the course to gain membership in the world Trade Organization (WTO) throughy negotiations.