Between the early 1980s and the first half of the 1990s, the Chinese economy developed at a very high rate (Table 2): the annual growth rate of GDP was on average 10 %, with peaks in a few years higher than 14 % and a downsizing in more recent years; the per capita income, despite the increase in the population (estimated in 1998 at over 1260 million residents), has quadrupled; employment continued to rise, reaching 700 million total employees, with particularly high increases in the urban private sector (around 20% per annum in the 1990s); inflation, which registered high peaks (24.3 % in 1994) but far from the three-digit inflation of other countries in transition to the market economy, has been brought under control; exports, which grew faster than GDP, albeit with a fluctuating trend, allowed, despite the sharp increase in imports, considerable trade surpluses and a considerable accumulation of reserves, placing China in tenth place in the world trade ranking. It is difficult to establish to what extent these extraordinary results – which make China a great emerging economic power – are due to the changes in economic and financial policy introduced by the reforms of the 1980s and experienced by theviii and ix Five-Year Plan (1991 – 95 and 1996 – 2000).
One of the most interesting changes consisted in the attribution to the People’s Bank of the China of the functions of a true central bank and in the separation of its functions both from those of the ordinary banking system, progressively open to private individuals, and from the action of the government. ; at the same time, instruments have been adopted which make it possible to initiate, albeit with many limitations, a monetary and credit policy similar to that of Western market economies.
However, important innovations such as the introduction of the usual monetary policy instruments – interest rate shifts, changes in bank reserve requirements and open market operations – have not yet been able to produce significant effects. The changes in the interest rate, although important in modifying the savings supply of households, have shown little impact on the behavior of credit supply and demand. In particular, the maneuver to raise the rate was not very effective against public enterprises, which, being able to directly or indirectly download their deficits on the state budget, were not encouraged to reduce the demand for loans from the banking system: an increase in the cost of credit has thus translated into an easing of budgetary constraints for businesses and the consequent issue of money on behalf of the Treasury. Also the introduction of the compulsory reserve (13 % of deposits) did not substantially change the framework of monetary policy instruments: changes in the reserve ratio were not very effective due to the extraordinary size of the free reserves held by banks to remedy the limited interbank market and the dysfunctions of the system of payments. It is no wonder that, even in the stabilization policy carried out successfully in the late 1980s, the new economic policy instruments – in particular interest rate maneuvers – played a limited role compared to traditional administrative methods (ceiling for loans and freezing of part of the funds raised).
A change in monetary policy with more evident effects concerned the liberalization of the exchange rate regime, which occurred in conjunction with the gradual abandonment of the centralized management system for foreign trade and the state monopoly of currencies. This liberalization policy was initiated in 1981, when exporting companies were authorized to retain a portion of the acquired currency – which varies according to the sector and region – to carry out imports on their own and then to offer it, through the intermediation of the Bank of the China, to other importing companies. Thus, alongside the official exchange rate that overvalued the Chinese currency (the yuan renminbi), a swap exchange rate was created . The latter, although adopted by a strictly controlled group of importers and exporters, was already more sensitive to the relationship between demand and supply of currency and soon became the reference rate for all, so that, in 1985, the official rate ended with the ‘align with it. The next step was to allow the formation of the swap rate to be determined no longer by the Bank of China, but by market forces through a currency clearing center, established in 1987 (Table 3). The success of this new mechanism – initially limited access but rapidly spread to absorb over 80 in 1993% of all currency transactions carried out in the country – formed the premise for abolishing the double exchange system. In a short time, the quota-holding mechanism for foreign exchange proceeds was abandoned; the authorizations to sell or buy foreign exchange for documented commercial operations have been abolished; the swap currency market was replaced by the interbank market, and the conditions necessary to achieve the convertibility of the yuan-renminbi were brought closer. In parallel with the process of loosening exchange control, the Chinese currency stopped being artificially overvalued: the gradual but substantial devaluation (in 15 years, the yuan renminbi has lost four-fifths of its value against the dollar) has been used as a real trade policy tool, allowing Chinese exports to compete with products from other emerging Asian countries.
According to Top-Engineering-Schools, the separation of the functions of the central bank from those of the government led, together with the reform of state-owned enterprises, to substantial transformations also in the structure of the state budget, both in terms of expenditure and revenue.
The privatization process and the related financial autonomy acquired by the state industry have reduced the amount of transfers and public contributions to public enterprises, while the gradual abandonment of the traditional state financing mechanism – consisting of the transfer of corporate profits state – has made it necessary to gradually adopt a tax system, perhaps excessively decentralized, based on income taxation and VAT. These changes, although not delineable in a coherent plan for the reform of public finance management, have changed the nature of fiscal policy with major consequences in what has been defined as the soft landing. of the Chinese economy in the last five years of the century, ie the control of the pace of economic development (with a slowdown below 10 % on average per year) in order to mitigate inflationary pressures.
No less important than general economic policies were the intervention strategies in some key economic sectors: in the first place agriculture and energy. Transformations in the agricultural field were one of the main elements of the first phase of Deng Xiaoping’s reforms: the abandonment of collectivization (rural family businesses – without however the transfer of land ownership – quickly took the place of the ‘popular communes’ ‘) led to a renewal of production structures, rapidly increasing productivity and allowing for an extraordinary development of production which prevented the onset of imbalances between supply and demand for basic food products. Twenty years after the initiation of these reforms, the modernization of production structures and further growth in productivity were also pursued by encouraging the development of large agricultural enterprises, in which private ownership combined with a strengthening of the control power of local authorities no longer constitutes a prejudicial barrier. In any case, at the end of the 1990s Chinese agricultural policy was going through a phase of rethinking, uncertain as to whether to introduce private property, how to overcome the difficulties posed by sharp price increases, to complete the liberalization of trade in agricultural products, and to mitigate the growing gap between rural incomes and those of industrialized urban areas.
The energy sector, which has always been considered strategic for economic development, had in the past created the need to finance massive investment plans necessary for the exploitation of national resources (relatively abundant, especially as regards coal). The rapidity of economic growth, soon making internal energy production insufficient compared to the overall needs of the China, has raised new problems: it has made unsustainable the degree of inefficiency of energy consumption in industry and in the civil sector and has given priority to safety. of external procurement which has become the central objective of commercial policy and participation in joint ventures, multinationals for the research and exploitation of national and foreign energy sources.
