Chinese Economic Reform - Chinese Economy Prior To Reform

Chinese Economy Prior To Reform

During the 1930s, China developed a modern industrial sector, which stimulated modest but significant economic growth. Before the collapse of international trade that followed the onset of the Great Depression, China’s share of world trade and its ratio of foreign trade to GDP achieved levels that were not regained for over sixty years.

The economy was heavily disrupted by the war against Japan and the Chinese Civil War from 1937 to 1949, after which the victorious Communists installed a planned economy. Afterwards, the economy largely stagnated and was disrupted by the Great Leap Forward famine which killed between 30 and 40 million people, and the purges of the Cultural Revolution further disrupted the economy. Urban Chinese citizens experienced virtually no increase in living standards from 1957 onwards, and rural Chinese had no better living standards in the 1970s than the 1930s. One study noted that average pay levels in the catering sector exceeded wages in higher education.

The economic performance of China was poor in comparison with other East Asian countries, such as Japan, South Korea, and even rival Chiang Kai-shek's Republic of China. The economy was riddled with huge inefficiencies and malinvestments, and with Mao's death, the Communist Party of China (CPC) leadership turned to market-oriented reforms to salvage the failing economy.