China’s Economy What Everyone Needs to Know

Abstract

Developing China: the remarkable impact of foreign direct investment, by Michael J. Enright, London, UK, Routledge, 2017, xiv+260 pp., £95.00 (hbk), ISBN 978-1-138-22815-3, £32.69 (pbk), ISBN 978-1-138-22816-0, £29.59 (ebk), ISBN 978-1-315-39334-6 Already the largest economy in the world in 2015 in terms of gross national income as real purchasing power (that is, measured at purchasing power parity exchange rates), China attracts attention from a much wider range of people than China specialists. Kroeber's book is squarely aimed at such readers, although more specialist readers will gain from it too. He opens with an examination of China's political economy, nicely done and a good, self-con-tained introduction to the economy and polity for busy people. He includes a critical analysis both of the personalities and the institutions involved in policy-making since China's famous post-1978 economic reforms. He notes that despite the centre's power to mobilize resources and influence policy, in practice there is a high degree of decentralization, especially to provin-ces and in terms of the ownership of the still-important state owned enterprises (SOEs). By 2014, a surprising 84% of government expenditure was taking place at the subnational level, and in President Xi Jinping's fiscal reform package of 2014–2016, a start was made to bring subnational (mainly provincial) revenue raising powers better into line with expenditure com-mitments (ch. 12). The country's large geographic size and large population of 1.4 billion people allow for pol-icy experiments to be conducted on a large scale, in particular geographical areas and then spread nationwide if successful, as in the early post-1978 agricultural reforms. I was surprised, though, that when he observes that China had followed the policies of Japan, Taiwan and Korea in land reform, export expansion and financial repression, he also argues that China was not able to use protection of the domestic economy against import competition to help new industries to develop and eventually to export, an important aspect of the 'East Asian model'. He argues that China could not use such policies, which he describes as 'mercantalist', because it did not have its predecessors' easy access to the US-dominated world trading system (53). In fact, I would suggest that from the early years of the economic reforms in the 1980s until the late 1990s when it was liberalizing import controls in preparation for its 2001 WTO accession, China certainly was using such mercantilist policies. While it was becoming the world's largest exporter of apparel in the 1980s, it retained prohibitively high tariffs on imports of clothing; in the 1990s, while it was developing its domestic motor industry, it had, as Kroeber himself records (203), import tariffs of 100% or more on vehicles. De-collectivization of agriculture into family farming spearheaded China's economic reforms and was probably the most important factor in the country's spectacular reduction of absolute poverty – which fell, on the World Bank's definition, from 84% of the population in 1981 to a mere 6% in 2011 (ch. 2). The chapter neatly chronicles the shift back to urban bias in the 1990s following the discontent leading to the 1989 Tiananmen incident. Attempts to redress the balance were made in the 2000s with investment in rural infrastructure and the provision of increased free education and health insurance. Rural dwellers still suffer from the