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China Opening Up
to the world
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Today, everyone is talking about the fruits of China’s reform and opening-up
policies. What was China’s economy like before 1978?
Upon the founding of the People’s Republic of China in 1949, measures were
introduced throughout the country for the establishment of a state run socialist
economy. In 1950, the Vice Premier of the Government Administration Council
(later named the State Council) CHEN Yun called a meeting to regularize revenue,
unify financial and economy functions under the state and stabilize prices. By 1952,
the mechanism of China’s domestic economy was basically in place.
From 1953 on, China began to implement a planned economy. The first five
year plan targeted at industrial development. When it was completed in 1957, the
overall economic strength of the country greatly increased.
In 1958, MAO Zedong mobilized the whole country with the “Great Leap
Forward” campaign. People’s communes were set up in rural villages. The entire
nation was called to get involved with a steelworks campaign.
The “Great Leap Forward” resulted in the economy suffering from serious
hardship for three years from 1959 to 1961. In 1961, the Central Committee of the
Communist Party of China announced a new “adjustment” policy in order to
“strengthen, replenish and enhance” national economic development. A meeting of
7,000 people in 1962 further affirmed this policy. By 1965, adjustment was basically
accomplished and China’s economy saw the light of day. In 1966, MAO Zedong
launched the “Cultural Revolution”.
development of China slowed down.
In the 10 years that followed, the economic
Translated from: 《明報》。「共和國 50 年專輯─從統一財政到宏觀調控」。
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1.
Which of the following describes the situation of China before the reform and
the opening up?
a.
b.
Please indicate with  in the blanks on the right。
An economic system based on public ownership means that all means
of production (land, machines, factories … ) are owned by the
collective ( the nation).
Prices of goods adjust automatically in response to the market.
c.
In a planned economy, all decisions relating to production and
allocation are made by the collective.
d.
Badly run enterprises will close down as a result of deficit and loss.


The establishment of Special Economic Zones (SEZs) and
coastal open cities
At the end of 1978, the Third Plenum of the Eleventh Central Committee of
the Communist Party of China was convened. It decided to adopt the
reform and opening-up policy engineered by DENG Xiaoping. The
mistakes of the Cultural Revolution and of the years before it were fully
and seriously corrected. Emphasis shifted to modernization and economic
and political reforms. From then on, a socialist market economy with
Chinese characteristics 1 was gradually put in place. The road to
modernization has begun.
1
A socialist market economy is a way of organizing economic life. There are many components.
Public ownership is the major component and private ownership has its place too. The state retains
macro economic control, but the market plays an important role in respect of the deployment of social
economic resources. For example, what to produce, how to produce, where the produce go etc. are
mainly decided by the market pricing mechanism. Government’s role is to ensure the orderly
operation of the market.
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2.
As described in Source 2, the Third Plenum of Eleventh Central Committee of
the Communist Party of China made important decisions on China’s
development. List the decisions in two ways.
Answers for reference:
1. correct errors of the past;
2. affirm the need for development, especially economic development.
When the Chinese Government decided to implement reforms on the economic
system in 1978, a step-by-step opening-up policy was introduced concurrently.
From 1980 on, five SEZs in Shenzhen, Zhuhai, Shantou of Guangdong Province,
Xiamen of Fujian Province and Hainan Province were commissioned. Special
economic policies and management mechanisms are adopted in these zones.
SEZs have acquired much experience for China’s engagement in the
international market in respect of foreign investments and outward trade etc.
By 1999, the hi-tech industry became the best asset for Shenzhen SEZ with an
output of 81.98 billion yuan, representing 40.5% of the city’s total industrial
output, and the forefront in China.
Reference:
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3.
Based on Source 3, explore the role of SEZs in the reform and the opening up of
the Chinese economy.
Answers for reference: 1. importing hi-tech and management methods;
2. acting as test points for new policies and new economic mechanisms;
3. acquiring experience of international markets in respect of foreign
investments and outward trade.
In 1984, China opened up an additional 14 coastal cities. They are
Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong,
Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhanjiang and Beihai.
Then in 1985, the Changjiang delta area, the Pearl River delta area, the Minnan
triangle, Shandong Peninsula, Liaodong Peninsula, Hebei and Guangxi were
made open economic areas. A massive coastal economic open belt was
brought into being.
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In 1990, the Chinese Government decided to develop and open
Pudong in Shanghai as well as a number of cities along Changjiang.
They form the Changjiang open belt with Pudong as the dragon’s head.
In 1992, it was decided to open up a number of frontier cities and all
inland provincial capitals and capitals of autonomous regions. 15
bonded areas, 32 national-level Economic and Technological
Development Zones and 53 hi-tech industrial development zones were
established a number of large and medium sized cities. As it is, China
succeeds in opening itself up to the world in all directions, multi
layered, and in a massive scale covering the coast, the rivers, and
frontier and inland regions.
Reference:
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4.
Based on Sources 3, 4 & 5, indicate on the following map of China the regions
open to the world for business at the three different stages. Colour the SEZs of
the first stage in blue, those of the second stage in red and those of the third stage
in yellow.
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5.
What are the advantages and disadvantages of reforming the economy and
opening up to the world by the strategy of “feeling your way across the river”?
Answers for reference: Advantages: By opening up some areas first, one
avoids making major mistakes later. Disadvantages: That some enjoy
opportunities and preferential treatment results in disparity between the
rich and the poor. This may spark discontent in inland areas. (Other points
are acceptable as long as they make sense.)
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Where should a company set up its headquarters?
Let us assume you are the CEO of a foreign enterprise engaging in the production of
electronic and computer spare parts and you are considering setting up your Asia
Pacific headquarters in the mainland. Which city would you consider? Beijing,
Shanghai or Shenzhen?
Collect information on these three cities before making
up your mind.
Beijing is the political and cultural centre of China. It
is an international metropolis. Shanghai cannot measure
up in this respect.
After twenty years of development, Zhongguancun in Beijing
can be described today as the “Silicon Valley of China”.
Zhongguancun is also a supplier of ready-made technology.
Currently, Beijing is also the capital for transnational
enterprises.
Top global companies such as Motorola,
Hewitt-Packard, Nokia, General Motors have their headquarters
in Beijing.
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Since 1999, many Chinese and transnational
enterprises have moved their headquarters to Shanghai.
The world’s number one brand Coco-Cola has moved its
China headquarters to Shanghai.
Top Chinese
enterprises such as Haier and Zhanghong also have their
technical headquarters there.
Shanghai enjoys
convenient transport and excellent communication.
The local government has invested heavily in basic
facilities. It is a good place for enterprises. China’s
economic centre is now here in Shanghai in the
Changjiang delta area.
Shenzhen is a major industrial and business city in the
Pearl River delta. It is also the earliest to benefit from the
reform and opening-up policies. Many business from Hong
Kong have set up production facilities here. With Shunde,
Dongguan and other cities and towns in the vicinity, an important
economic centre has been formed. Shenzhen’s success in the
past twenty years is remarkable. Located at the centre of South
China, Shenzhen benefits from Chinese capital flow from Hong
Kong, Macau and South East Asia. Western capital flow, on the
other hand, is relatively modest.
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6.
In which city would you set up your company’s Asia Pacific Headquarters?
What factors would you consider?
I would set up my Asia Pacific Headquarters in …(Students are free to give
any answers as long as they give reasons for their choice.)
Answers for reference: Factors to consider may include foreign investment,
experience in outward trade, transport, communication facilities,
information network, availability of staff talents, compatibility with
company image and development direction ….
During the process of China’s reform and opening up, DENG Xiaoping played
an important role and contributed greatly. DENG Xiaoping pointed out that some
people were opposed and they did not have confidence in reform and opening up to
the world. “Whoever refuses to go for reform and opening up have to step down.
We should be bolder and quicken further the pace of change. If we don’t go for
reform and opening up, we will be left to die.” Can you describe briefly DENG
Xiaoping’s contribution to reform and opening up?
Apart from DENG Xiaoping, which personalities played important parts in the
process of reform and opening up? Can you give a brief description?