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Nov 8, 2017 in Economics
Crisis of China’s Economy
China’s traditional economy was predominantly dependent on agriculture. The economy also consisted of exchange of goods and services i.e. The Chinese traded their agricultural products, salt from mining and they also imported gold. The traditional economy relied on cowrie shell like metal as a medium of exchange and later replaced it with paper money. On its early days and on its course for civilization, the traditional economy was faced by crises that will be discussed below.
First, the economy had to deal with crisis of disruption caused by civil wars that was prompted by the invasion of the Japanese, in addition to the general economic laxity in various industries impaired china’s course to self sustainability. Additionally, the china’s traditional economy faced a problem of poor distribution of resources for example land for agricultural production by its peasantry populations. Another economic crisis was lack of adequate, efficient and modern agricultural machinery and other industrial equipments. This crisis was however solved at around 1953-1957 by the import of the above machineries and equipments from the east European Nations and the former USSR (Graham, 2006).
This resulted to an increased produce and export of agricultural products to the above countries. These civilization came with a positive impact of an increased production at around 1958-1959, but the enthusiasm for improved quotas rapidly lead to uncalled for over exploitation on resources and also compromised the quality of these products, this was followed by a flop in agricultural harvest and the general economic upset of the prior period. By 1961, the GNP had collapsed to an probable $ 81 billion, approximately the level arrived at in 1955. However this was followed by investments and proper planning that brought the economy back on track.
Graham (2006) adds that the crisis came as a result of abandonment of major long term economic planning and instead all efforts were focused on policies promoting domestic self sustainability, this stressed on grain self sustainability and the consequence was a drop in industrial production of 10%-20% while the grain production improved slightly due to differing rain patterns and distributions. Lastly the crisis of the traditional economy was the poor and worsening transportation competence, drop in availability of raw materials at some time and in addition lack of adequate energy supply in industries. In 19991-1995 measures were put in place to develop the infrastructure which in turn accelerated the economic growth at an average rate of 10%in a year making china the fastest growing economy globally. On top of infrastructure, there was a call to revamp the legal and monetary institutions which were in a crisis with an aim of attracting overseas investors.
In conclusion, the Chinese traditional economy has had a number of crises that slowed down the intended economic development from the prehistoric days. The crises ranged from civil wars, poor infrastructure, poor legal and monetary systems to mention but a few. The Chinese government on its course to modernization put various appropriate measures in place that help to fix the crises and consequently stimulated the economic growth witnessed today in china.