Microsoft Word EcRefChina Oct06. doc

 
 
 
35 
II:1 Consequences for Previous Social Arrangements 
35 
II:2 
Social 
Outcomes 
38 
 
III. 
Social 
Policy 
Options 

50 
III:1 Policies to Influence Factor Income

50 
III:2 Income Transfers and Social Insurance 
57 
III:3 
Human 
Services 
67 
A. 
Education 
and 
Training 
68 
B. Health Care
72 
IV. Concluding Remarks 
78 
References 
83 

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Introduction 
The fascination with the economic development in China during the last quarter of a 
century (approximately 1978-2006) largely depends on two circumstances. One is 
the radical shift of economic system in a country encompassing a fifth of the 
population of the world. The other is the country’s successful economic 
performance in connection with this shift. The most obvious illustrations of the 
latter are the officially recorded aggregate GDP growth rate of about 10 percent per 
year, the eightfold increase in per capita household income and the drastic fall in the 
number of individuals living in “absolute poverty”. However, equally interesting are 
the social problems that have accompanied this transformation – manifest, for 
instance, in the fields of income security, the overall distribution of income, and the 
provision of various types of human services, such as education and health care. 
To highlight these issues, this paper applies a systems-oriented, “holistic” approach 
to China’s radical economic reforms. It deals with both the nature of the reforms 
and their economic and social consequences. More specifically, the paper focuses 
on the interaction between economic and social forces during the reform period. I 
also consider China’s options for continued economic and social reforms, whereby I 
draw heavily on relevant experiences over the years in developed countries. 
Although I concentrate on economic and social developments of the country as a 
whole, the huge differences across geographical areas within China remain an 
important aspect of these developments. Since the focus of the paper is on long-term 
structural issues, the design of short-term macroeconomic stabilization policy will 
not be discussed, although the importance of such policies for income stability will 
be stressed.
The paper starts with a characterization of China’s economic reforms in terms of a 
multidimensional classification of economic systems, where today’s China is 
described as a special type of “mixed economy” (Section I:1). When looking at the 
economic consequences of the reforms, I deal with both the impressive growth 
performance and various types of economic costs (I:2). The next step is to study the 

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consequences of the economic reforms for the previous social arrangements, which 
were tied to individual work units – agriculture communes, collective firms and 
state-owned enterprises (Section II:1). I continue with various social developments, 
which reflect a complex mix of social advances in some respects and regress in 
others (Section II:2). China’s future policy options in the social field (Section III) are 
classified into three broad categories: those influencing the level and distribution of 
factor income (i. e., incomes from labor and capital), income transfers (in particular, 
social insurance) and the provision of human services. Section IV contains brief 
concluding remarks about China’s achievements and unsolved problems in the 
economic and social fields. It is unavoidable that the analysis shoots at a moving 
target – both because the reform process moves on and because of ongoing revisions 
of the national accounts.
1
I make no attempt to explain the internal political processes among the Chinese 
leadership behind the economic reforms. Although Deng Xiaoping stands out as the 
dominant political leader in the initial stages of the reforms, the views, interest and 
actions of political leaders at all levels must also have been crucial for the process.
1
When no other sources are mentioned, I rely on official Chinese statistics published by the National 
Bureau of Statistics of China. I have then taken note of the revisions of the national accounts of China 
reported in December 2005 (published in Statistical Abstract, 2006). For a short summary of these 
revisions, see Oxford Analytica, 2005, and People Daily, 2005. For a discussion of the production of 
statistics in China and the recent revision of the national accounts, see Holz (2005a and 2006).

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