Over the last three decades, China has experienced consistent economic development in unprecedented levels, which resulted in taking the country to the second biggest economy in the world. It began in the early 1980s, when it sought to transition to a market economy, with an extraordinary modernization process taking place to change the face of the economy, by transforming coastal areas and cities. New industries had to be developed, the business environment had to be changed to be modern, and improving participation in a global economy making it the current major player especially in emerging markets.
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Under president Hu, the country has been consistently experiencing economic growth, and development. In fact, the country attained the second biggest economy in the world under his leadership. Under his watch, the country engaged in what is known to be the scientific development concept or perspective. It is an ideology which sought to deviate from the former regime in some areas while retaining some policy matters. The concept aims to incorporate a multi- pronged development agenda that includes overall sustainable development, social welfare, a humanistic society, improved democracy, and creating a harmonious society. In his agenda and theme the state could engineer sustainable development through tested and proven methodologies of governance. The model seeks to minimize conflict amongst different interest groups in the society, in order to create and maintain stability on the national level resulting in the advancement both economically and culturally. The model pursued a socialist approach with Chinese characteristics with the state participating in economic development with social services.
The Zemin government sought to reform the economy to be market-oriented. The government, then tried to transform the knowledge to goods and service production to meet the market needs. This resulted in huge industrialization, in China. When Hu took over, then he modeled the industrialization quest to have a meaningful effect on the lives of everyday Chinese people socially to guard against adopting western system with people having to make money to improve their lifestyle.
World economic crisis impacted China negatively. The falling demand for export goods in Europe and North America meant that factory production was less. Employment opportunities started becoming leaner with other macroeconomic challenges like to decelerate growth and deflation occurred. It resulted in social unrest due to lack of employment and poor pay. The government responded by boasting economic activities inside China by putting in place a stimulus package to increase expenditure hence reversing the effects of the crisis. Among the policy instruments used were to reduce interest rates on loans, the central government financed directly some projects, direct grants to businesses and issuing bonds to finance budget deficits. The move was meant to boost demand for locally made goods by the population to sustain economic growth even with fast dwindling external demand. Since then, the government has been frequently reducing the central bank rate to reduce the cost of loans.
Two regional economic models have surfaced within China in Guangdong Province, in western China and Chongqing City out of differences in leadership. Guangdong model turned towards opening up the economy to foreign economic models with the establishment of special economic zones attracting industries from Taiwan, Hong Kong and South Korea to focus on export trade as a foreign capitalist approach. On the other hand, Chongqing model emphasized on state dominance role to finance heavily on healthcare, education, pensions, housing and other public services to improve people’s lifestyles.