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Question -

In what ways does the present Chinese economy differ from its command economy?



Answer -

The present Chinese economy differs from its command economy in many ways.

  1. The China economy was based on the Soviet model. The economically backward communist China chose to sever its links with the capitalist world. It had little choice but to fall back on its own resources and, for a brief period, on Soviet aid and advice.
  2. This model allowed China to use its resources to establish the foundations of an industrial economy on a scale that did not exist before. The economy also grew at a respectable rate of 5-6 per cent. But annual growth of 2-3 per cent in population meant that economic growth was insufficient to meet the needs of a growing population.
  3. On the other hand, the present Chinese economy ended its political and economic isolation with the establishment of relations with the United States. It adopted the ‘open door’ policy and economic reforms in China. The policy was to generate higher productivity by investments of capital and technology from abroad.
  4. The new economic policies helped the Chinese economy to break from stagnation. Privatisation of agriculture led to a remarkable rise in agricultural production and rural incomes. The new trading laws and the creation of Special Economic Zones led to a phenomenal rise in foreign trade.
  5. China has become the most important destination for foreign direct investment (FDI) anywhere in the world. It has large foreign exchange reserves that now allow it to make a big investment in other countries.

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