The rise of China manufacturers has helped build China’s successful economy, creating more prosperity than China could have hoped for 30 years ago. The so-called Great Leap Forward was meant to free China from extreme poverty; instead, it turned China into a world economic powerhouse with the second largest economy following the United States.
Who would have thought an underdeveloped nation with food shortages and antiquated factories would emerge to become a world manufacturing power? Over the past three decades, China has achieved tremendous development in manufacturing and as a world power.
In 1978, after many years of state control over all productive assets, the government of China began a major program of economic reform. To stimulate economic activity, it began to encourage the formation of rural enterprises and private businesses. China also liberalized foreign trade and investment policies, relaxed state control over prices, and invested in industrial production and the education of its workforce. This was a partial departure from China’s communist values and a move toward the capitalist ideals of an open marketplace economy.
In pre-1978 China, annual growth was a mere 6 percent per year; however, post-1978 China saw an average annual growth of over 9 percent. In some peak years, the economy grew over 13 percent. Per capita income nearly quadrupled over the last 15 years, and a few analysts are even predicting that the Chinese economy will be larger than that of the United States in about 20 years.
How did China grow so fast in a relatively short period of time? Surprisingly, the major driving force behind China’s economic boom was worker productivity. Granted, capital accumulation was also responsible; that is, the growth in the country’s accumulation of capital assets like new factories, manufacturing machinery, communications systems, and the sheer numbers of Chinese workers. However, the major force was the increase in worker productivity.
From 1979 to 1994, productivity gains accounted for more than 42 percent of China’s growth and by the early 1990s had overtaken capital as the most significant source of that growth. This is a departure from the traditional view of development in which capital investment takes the lead. This jump in productivity originated in the economic reforms that started in 1978.
In essence, this transformation appeared to trump China’s communist values in favor of the capitalist ideals of an open marketplace economy. And it was the open marketplace economy that gave birth to the growth of Chinese manufacturers.
Over time, the manufacturers were able to operate freely within the world marketplace, competing with the U.S., Europe and the Middle East. China’s export business continues to be incredibly profitable, and China continues to strive for economic dominance
China’s engagement in the global marketplace not only brought in export income, it also provided the information and experience to improve China’s technologies and supply of raw materials. Foreign investments in China also contribute to the growth of its economy. China’s participation in global trade has brought many opportunities. Today, China has only to recognize the need for good foreign relations with other countries in order to remain a foremost player in the international scene.
