Chinese economic reform and development: achievements, emerging challenges and unfinished tasks

The economic transformation that has taken place in China since the late 1970s is now regarded as one of the most significant social changes in human history. Within just three decades, China has succeeded in transforming itself from a centrally-planned closed economy into one of the world’s most dynamic and globally-integrated market economies. The dynamics unleashed by Deng Xiaoping’s reforms, open-door policies and institutional changes have unleashed enormous entrepreneurial energy and propelled continuous capital accumulation, productivity gains and trade and income growth on a scale the world has never seen before. During this period, China’s total gross domestic product (GDP), industrial output, foreign trade and, importantly, its per capita income increased respectively by factors of 16, 27, 124 and 12.1 As a result, the incidence and severity of poverty have declined dramatically in China. According to a recent World Bank report (2009), between 1981 and 2004, the fraction of China’s population consuming less than US$1 a day in today’s purchasing power fell from 65 per cent to 10 per cent and about half a billion people were lifted out of poverty. This achievement has contributed critically to global progress in reducing world absolute poverty and indeed ‘a fall in the number of poor of this magnitude over such as short period is without historical precedent’ (World Bank 2009:iii).2