China and India Economy During

China and India economy during the 1950's-1980.

Chinese and Indian economy

Development patterns in India and China between 1950 and 1980

India and China are among the leading economic players in the modern day global society. They have constantly played an important role within the society due to their rich cultures, yet in recent years, they have also become international economic powers. In attaining this position however, they have undergone numerous change processes. A notable period to assess the economic developments of the two countries is represented by the decades between 1950 and 1980.

India has historically been a peaceful country, having built a strong economy through work, efforts and fair trade. During the eighteenth century however, it was colonized by Great Britain, which weakened its economy. Natural resources and commodities would exit India at low prices and finished products would return into the Indian market at unreasonably high prices (Active UK China).

In 1947, India gained its independence from the United Kingdom and found its economy shuttered. At the beginning of the eighteenth century for instance, India was generating 22.3 per cent of the global GDP, and after the occupation of the British, it was only contributing 3.8 per cent.

After it achieved its independence, India commenced a series of political and economic efforts in order to revive its economy. These were organized in five-year plans, aimed at setting and achieving short and medium term goals. The issues tackled by these plans were various, focusing however mostly on the sectors of agriculture and industry. The desire of the Indian authorities was mainly that of aligning the country with the developments carried out within the global community.

"These Five-Year Plans, started by Indian government, focused on the needs of Indian economy. If on one hand agriculture received the immediate attention on the other side industrial sector was developed at a fast pace to provide employment opportunities to the growing population and to keep pace with the developments in the world" (Maps of India).

Similar to India, the years before 1950 in China were also troublesome times for the country. Since the fall of the Qing Dynasty in 1911, China had been witnessing the demise of its economy. And the most crucial problems in this sense were represented by the wars between China and Japan, followed by internal turmoil in the country. The economy was shuttered as all resources had been used to support the wars. This situation virtually reveals how similar the contexts and backgrounds in India and China were at the turn of the 1950s decade.

Then, just like India, when China came to an end with the wars and the economically difficult situation, it came to focus more on the economy. Its scope was that of restoring the national economic system and of ensuring better living standards for the population. And similar to India, it did this through the development and implementation of policies to support the economic goals. Still, major differences are obvious in the means in which the Chinese authorities went about the development of their economic system.

The Chinese economic system was created with the premises of the socialist ideology. Emphasis was placed on the equalization of incomes across the entire population. Consumption was decreased and even rationalized and the capitalists and the players in the private sector were disadvantaged against, to even be fined or punished.

The Soviet model dominated the entire movement of economic revival and was characterized primarily by the opening of new factories. Industry sat at the core of developments and less focus was placed on the agricultural sector, which eventually came to deteriorate.

China "followed a socialist development strategy focused on heavy industry. Consumption was reduced while rapid industrialization was given high priority. The government took control of a large part of the economy and redirected resources into building new factories. Entire new industries were created. However, small to large private sector businesses were suppressed and capitalists were severely fined or punished. Meanwhile, agriculture was forced to depend on its own minimal capital resources for a significant portion of its funding. By following the Soviet model, the goal was to set up technologically sophisticated, large-scale, capital-intensive plants. Many new factories were built with the Soviet's technical and financial assistance" (Active UK China).

At the end of the 1950s decade, the Soviet-Sino split occurred and China lost the financial, technological and know-how support of the Soviet Union. During the 1960s then, it found itself in a great economic and social depression. In order to address the amounting problem, the private sector was granted more freedom and the agricultural sector was offered more support. Gradually, the Chinese authorities moved towards new reforms that would modernize China and align it with the international developments, revealing the same trend as in India, only occurred after the intermediary stages of Soviet collaboration and the implementation of a socialist regime in politics, economy and society.

3. Chinese reforms from 1978 through today

As China witnessed the negative effects of the socialist regime, coupled with the absence of Soviet support, it came to the realization that it was necessary to develop and implement new strategies and policies. The focus as such fell on issues disregarded during the Soviet influence. More emphasis came to be placed on agriculture as a form of self-suitability and the private sector was liberalized.

In 1979, a more complex process of reforms was implemented and its aim was that of modernizing China and aligning it to the developments of the global community. The approach was one of practicability over ideology and the focus fell on the well-being of the Chinese population, as well as the economic and political stability of the country.

"Since 1979, China has embarked on a new era of unprecedented development by applying major reforms to its economy. The Chinese leadership adopted a pragmatic approach to many political and socio-economic problems, and sharply reduced the role of ideology in economic policy to build a "Socialism with Chinese characteristics." Political and social stability, economic productivity, and public and consumer welfare were considered paramount and indivisible. The government also focused on foreign trade as a major vehicle for economic growth. Reforms began in the agricultural, industrial, fiscal, financial, banking, price setting and labor systems" (Active UK China).

It is rather improper to argue that China has completed its transition process as all of its reforms have been implemented. China -- however today is the second largest economy of the globe after the United States -- remains an emergent economy. It still has untapped potential and its economic triumphs are underway. And while at an economic and political level, its reforms continue and still face challenges, the triumphs so far registered cannot be denied.

But one might wonder what exactly were the sources of success in the reform processes implemented by the People's Republic of China. Particularly, it is wondered how was China able to use its reforms and implement them in such a manner that they generated the ultimate benefit of transforming the country into a global economic leader. Yingyi Qian at the University of California, Berkley argues that there were several factors that contributed to the success of the reforms. These refer to the following:

The creation of the market based on the principles of liberalization, free trade and free movement of resources. The scope followed in the creation of the new market was a dual one and revolved around the simultaneous ability of the new market to meet the goals of the Chinese population and economy, while also being efficient.

The development of firms and the changing approaches of ownership. As has been previously mentioned, before the 1979 reforms were initiated, China had placed little emphasis on private property and the private sector. Nonetheless, as new reforms were developed and implemented, they came to protect the right to property and they even offered support to private economic agents, as a source of economic return and job creation

The reform of the government. The Chinese policy makers had already managed to implement the efforts in the sense of market liberalization, stabilization and privatization. But in order to ensure that economic growth would follow, they needed to also ensure that the government would act as a facilitating force. Emphasis was for instance placed on the offering of incentives or the improvement of the relationships and collaboration between the private entities and the state institutions. At the level of the government, the reform was sensitive to revenues in the meaning that it became imperative to improve the role of the government, but not negatively impact its revenues.