The Economy of Modern Day China

[Music] this is Shanghai a 21st century metropolis that typifies modern China it is a glistening city with space-age architecture and a population driven to build their own respective fortunes just this city alone one of hundreds of cities in China has a gross domestic product larger than countries like Sweden Norway and the United Arab Emirates yes modern china has come a long way from where we left it in previous videos in this series it is now the second largest economy in the world and it looks poised to reclaim the title of the world's largest economy within the next century which is a convenient segue to note that this video is the final video in the three-part series on the economy of China here we will be exploring modern-day China and what transformed it from a half-crippled failed state into the economic superpower that we know today if you haven't already seen the first two videos in this series I would encourage you to watch those as well it doesn't necessarily have to be an order but it is important to understand that China was once the world's most powerful economy then it wasn't and now it may be all over again we were introduced to this man in the last video Deng Xiaoping the eventual successor of Chairman Mao and this man is really important to understand because he epitomizes the Chinese transition from a socialist state with a centrally planned everything to the mixed market economy that we see today Deng Xiaoping was still a devout communist who subscribed heavily to the teachings of the party and communist literature but as with all literature he saw compromise in the understanding of how these teachings would apply to his beloved nation Chairman Mao was well let's say a bit of a stickler for the idea that all men are born equal and nobody should be better than anyone else during the Cultural Revolution if you were too rich or too smart or too different you were most likely going to be labeled as a class enemy which was really really not good this was an effective tool for exerting the rule of the party through devout subservience under the fear of death for stepping out of line but was really terrible for the economy punishments for people that went above and beyond meant that the Chinese population made been mediocre an art form which when mixed with some failed experiments meant that the nation was struggling to feed itself and its bold industrial plans were falling behind so a different approach was needed Deng Xiaoping always fell on the more easygoing side of the Communist Manifesto book club he believed that resources should still be allocated by the state but he also believed that high-performing workers or managers should be rewarded not executed crazy I know an important side note is that Deng Xiaoping was never actually President or chairman or any kind of head of state over China he was the chairman of the central Advisory Committee which wasn't a government role but it was an appointment inside of the Communist Party a better way of understanding this is that Donald Trump is currently the President of the United States and a member of the Republican Party but he is not the head of the Republican Party a lady named Rhonda McDaniel is the leader of the American Republican Party so within the party she technically outranks him but he is also president and she doesn't really hold on to any position within the American government it's all a bit weird but even more so in the case of China because the Chinese Communist Party is the government so the lines are even a little bit more blurry what this meant in reality though was that Deng Xiaoping had more of an oversight advisory role to whoever the head of state actually was it was a whole big thing but anyway what is important is that in nineteen seven six the current head of state who are golfing with deng xiaoping rolled out the Chinese modernization program which had a few big initiatives to turn the Chinese economy around the first big one was rewarding good workers with recognition and a larger allocation of government welfare as well as rewarding managers of the factories and farms across the nation that hit or exceeded their targets this avoided a lot of the incentives that workers and managers had to deliberately underperform in the previous system and now for the first time in over four decades actually rewarded solid effort on top of this the plan also called for giving a lot of the process control back to the managers of these enterprises Deng Xiaoping realized that having party officials flexing their authority over production lines of the country was counterproductive and decided that the factory managers and farm managers of the nation should actually be ultimately responsible for the processes within their facilities again crazy I know this wasn't to say that party officials lost their teeth altogether though if a facility was underperforming then they had the authority to get involved and fix things up as they saw fit so there was still a carrot and stick it's just that the two were orientated in the right direction the carrot for productiveness and the stick for laziness now this whole system actually got off to a bit of an unfortunate start despite being a much more robust economic policy than the mouse guidelines previously in place the rollout of the new system coincided with some of the coldest winters in Chinese history resulting in widespread failed crops now this was argued by many to be the failing of the system and hey we should just go back and revert to everything that we were doing before but there was a glimmer of hope in the industrial sector in the two short years that this plan was rolled out over the industrial output of the nation had jumped by over 30 percent just between the years of 1977 and 1979 which was the most drastic period of growth the country had ever witnessed so there was probably something to be said for this whole system but things were bet to get even crazier than that [Music] throughout its entire history of prosperity or oppression China had been an economy that relied almost exclusively on its domestic market it had been the world's largest economy up until the end of the 19th century not because of colonialism or trade but because it had a lot of productive people and an abundance of farmland to feed itself it had at times been strong-armed into trading with colonial powers that were interested in its tea and spices but that was far from the cornerstone of the national economy the Chinese government with the guidance of Deng Xiaoping decided to see the potential of international trade at this time China was obsessed with the idea of self-sufficiency and there was a lot of surface level arguments that supported this ideology China was supposedly a worker's paradise why would they utilize labor from overseas to make things that could have otherwise been made by a Chinese worker likewise why would they send something Chinese made overseas when it could have remained in China to contribute to the wealth of the nation on top of this China was a communist nation that found itself in an increasingly hostile world at this time it wanted to have the security of being able to look after itself in a world that didn't really like it these were all fair points but Deng Xiaoping decided that the time had come where the advantages outweigh the cost now the advantages of a global trade are massive to countries that can effectively engage in it we have explored this in depth with the video on foreign exchange but briefly there are things that some countries will do well and some countries will do badly if everybody tries to do the things that they are good at and bad at well that's ok but it is better perhaps that everybody focuses on what they do well and just trade with the difference at this point China had actually become pretty good at manufacturing the infrastructure was ok but their manpower was monumental they weren't going to be building anything high-tech yet like cars or airplanes but low cost low tech manufacturing was kind their forte they needed to produce everything a poor nation needed which made them really good at producing cheap things also ironically enough it had become pretty terrible at farming things like the farming collectives the backyard furnace experiments and the exploding population growth meant that once ample Chinese farmland was struggling to keep up with the needs of the nation this wasn't and opened the floodgates type deal though the Chinese government embraced international trade in a very Chinese government way only opening it up initially to areas that he classed as special economic zones these were regions like Shenzhen which was conveniently positioned right next to Hong Kong which was kind of its own special economic zone at this point it also opened it up to other areas like Guangzhou and of course Shanghai these became areas that were still very much part of China but were allowed certain liberties the first of these was the fact that they were allowed ports to conduct international trade but later these limitations got even more liberal they were allowed to own private enterprise and foreign direct investments were allowed then people were allowed to buy real estate and foreign goods and very quickly these special economic zones started to look like every other world city in every other country around the world and people got rich very rich which was great but also terrible remember how China was a socialist nation under the rule of a communist party well having a whole lot of people becoming very rich kind of went contrary to this whole deal the rules of these special economic zones facilitated this kind of wealth but it made people outside of these cities rightfully envious bizarrely enough though this was all kind of part of the plan DVR ping was most famously noted for saying that he wanted everybody to get rich but for that to happen some people were going to have to get rich first today the People's Republic of China is by no stretch of the imagination a socialist state the policies that dictated the prosperity of special economic zones have for the most part overflown into all regions in China but that does not mean that everybody was equally blessed by these policies China is now an economy based on services and manufacturing farming which was once the foundation of this economy is barely a site thought in China's annual output which has caused huge divides the cities of China were in the right place at the right time to develop in line with the world economy as it embraced globalization shipping containers and international trade deals were formulated as China was perfecting the art of producing what the world wanted these policies led to the most intense period of economic development the world had ever seen China went from a nation barely able to feed itself to the second largest economy in the world in less time than the Simpsons has been on air China wasn't even open for trade when the first mobile phones were being sold and now it is almost impossible to find one that wasn't made there the wealth of this nation has been largely responsible for the greatest period in human history as billions have been pulled out of absolute poverty and into the modern world but that is not to say poverty still doesn't exist remember when some people got rich first well those people weren't necessarily the smartest or the most innovative or even the hardest-working those people were Communist Party officials that were lucky enough to be situated in these special economic zones today the Chinese economy is of course a remarkable thing but it is still in a sense very much a government controlled and centrally planned economy sure on paper it now has entrepreneurs and independent companies it has stock markets and super yachts buyouts and billionaires but it is still ultimately at the will of the government who succeeds and who doesn't many people are under the impression that China has achieved such economic success because their government eased control over aspects of the economy but in reality they just changed this oh gee today the Chinese Communist Party has just as much influence over China as it did during the Cultural Revolution it just so happens to be a more prosperous place because it enacted good economic ideas it is difficult to determine where China is going and there is no better way to embarrass an economist than to ask them to predict the future but there are a few things that we can take away from understanding the history of its economy for starters it certainly has the capacity to be the world's most powerful economy for most of recorded history it has been the 20th century was more of an anomaly in that sense but if it does take the top spot it will be a very different nation to what it was before the country suffered under an authoritarian rule poor people just looking for their next meal are easy to rule over but it can't be maintained forever it is possible that the well that China has embraced may liberate it from this kind of rule and it is equally likely that it will just continue to prosper underneath it realistically we are likely to see a slowdown in the Chinese economy 20 years before the Chinese economic miracle there was the Japanese economic miracle a nation that established itself as the workshop of the world that eventually transitioned into a serviced economy and then slowly into a comfortable equilibrium the two nations are obviously very different in many regards but oftentimes looking at history is the best way to determine the future hi guys I hope you enjoy the latest video I just want to say a huge thank you to our new patrons over on patreon as always guys your support continues to make this channel possible otherwise if you did enjoy watching please consider liking and subscribing we will be hosting a YouTube livestream for the Q&A session so you can either join us over on the second channel linked in the video description or join our discord server directly if you would like to participate thanks guys bye

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Keywords: the economy of modern day china, the economics of modern day china, the economy of modern day china explained, the economics of modern day china explained, modern day china economics explained, economics explained modern day china, modern day china economy explained, modern day china economy, modern day china economy economics explained, economics, modern day china economics, how modern day china economy works, economics explained

Id: JNhsB0h7gZc

Length: 15min 17sec (917 seconds)

Published: Sun Feb 02 2020