What’s Gone Wrong in China?
The author wrote this paper in December 1992 under the title “Research Priorities” to guide researchers in IEAPE on their choice of subject matter. On re-reading the paper, the author found the contents very relevant in the light of the difficulties Vice Premier Zhu Rongji’s extensive control measures have run into, so this paper was circulated to Ministers and Permanent Secretaries under a different title.
Published by IEAPE as IEAPE Commentaries No. 7 on 15 April 1994.
This paper analyses the consequences following from the disparity between China’s political system — essentially a Marxist–Leninist state — and her economic system, which is moving rapidly towards an open market economy. The assumption is made that the political system will eventually be reformed to enable China to realise her full economic potential. Under this optimistic scenario, China will reach American living standards in 29 years if she maintains her present rate of economic growth, which has raised per capita GNP by 7.5% a year. A more realistic (but still optimistic) projection would be an annual growth rate of 7.5% for 15 years, 5% after that, and 3% thereafter. China then will arrive at this destination in 2024 AD. The economic parameters are easy to define. China will then produce each year some 450 million tons of steel, 54 million motor vehicles, 27 million refrigerators and 90 million TV sets. She will need some 20,000 universities and polytechnics to produce the educated work force her economy needs. Nobody knows by what path the country can progress from its present mess of contradictory elements to being by far the world’s largest economy. It is unclear if some major systemic failure will prevent her ever reaching this objective. This paper tries to identify some of the systemic defects that can frustrate progress, as seen from the present. Although dealing with contemporary problems, the perspective taken is necessarily a long-term one.
