Household Responsibility System In China

In this case reading, it discusses how the country’s economy has evolved from the beginning of the Chinese civilisation to the 21st century through a series of historical events and reforms. Under the leadership of Deng Xiaoping, China had undergone a range of reforms that had transformed the country’s economy and paved the way to China’s economic success today.

One such reform is the creation of the Household Responsibility System (HRS) in 1979. Instead of collective farming which was less efficient, Deng Xiaoping decided to replace it with household farming which gives the individual households more autonomy to make their own decisions but under the condition that they must fulfil the quota set by the government. Nevertheless, the HRS was

However, with the success of SEZs, it created a problem that the government wanted to avoid: regional inequality. The SEZs were mainly situated in the eastern part of China and therefore, foreign and local investments would usually be directed towards the eastern and central part of the country . With lack of such investments and developments, the western part of China starts to fall behind in terms of the economic conditions and the standard of living there. With the eastern and central regions becoming increasingly more developed and the western regions remaining underdeveloped, this created greater regional inequality in the country as seen by the increase in China’s Gini coefficient from the range of 0.21 to 0.24 in the 1970s to a range of 0.4 and 0.5 in 2005 . As such, although SEZs helped to promote economic growth in China by slowly opening up to foreign investors, it also created more inequality between the regions which was a major problem to the Chinese government which will be discussed

This shows that, China still has not fully given up their socialist features. Furthermore, the government still has control over several important sectors in the country. The banking sector still remained closely linked to the state despite the reforms that took place in the 1990s. The government made changes to the management system and recentralised power in the People’s Bank of China (PBOC) as well as created 4 new asset management companies (AMCs) with the aim of dealing with the huge quantity of non-performing loans (NPLs) that caused problems to the economy. However, the AMCs were still under the control of the state and there were still limited foreign participation in the banking sector. Hence, the Chinese market still did not resembled the markets in other capitalist markets. Moreover, the Chinese still have yet to fully abolish the hukou system which restricted the movement of the people, putting those living in the rural areas at a disadvantage compared to those living in the urban areas. As such, China’s economy still retains certain socialism