China

Historical Background & Geography

China has one of the world's oldest and most continuous civilisations, with states and cultures dating back more than six millennia. The People's Republic of China (PRC) was established in 1949 under one-party rule.

Oldest Civilisation

6,000+ years of continuous civilisation. PRC established in 1949.

Area

9.6 million sq km — 3rd largest country (after Canada & Russia)

Population (2019)

1,393 million (0.5% growth). Now No. 2 after India (Worldometer 2024).

Economy

One-party rule under PRC — all critical sectors, enterprises, and lands under government control.

Indian context:Both India and China emerged from colonial/imperial rule in the mid-20th century. India gained independence in 1947; China's PRC was established in 1949. Both pursued state-led development, but diverged in the late 20th century.

Great Leap Forward & Cultural Revolution

China witnessed two major upheavals under Mao Zedong that significantly impacted its economic trajectory before the 1978 reforms.

Exam-critical:GLF met with two major problems — severe drought (killing ~30 million people) and Russia's withdrawal of professionals during conflict. These failures led to widespread famine and economic disruption.

Reforms Introduced in 1978

China introduced reforms in phases starting 1978. The present-day fast industrial growth can be traced back to these transformative reforms.

Agriculture Reforms

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Reforms initiated in agriculture, foreign trade, and investment sectors.

Key Changes

1.Commune lands divided into small plots, allocated to individual households (use only, not ownership)
2.Households allowed to keep all income from land after paying stipulated taxes

Indian parallel: Like India's post-independence land reforms (Zamindari abolition), China also redistributed land — but kept state ownership, giving only usage rights to farmers.

Remember:China's reforms followed a logical sequence — agriculture first (feeding the people), then industry (producing goods), then opening the economy (attracting foreign investment). This phased approach is key to understanding China's rapid growth story.

Dual Pricing System

The reform process involved dual pricing — fixing prices in two ways simultaneously. This was a transitional mechanism to gradually move from a planned economy to a market economy.

Dual Pricing Mechanism
Aspect	Government-Fixed Prices	Market Prices
Who sets the price?	Government fixes the price for inputs and outputs	Determined by supply and demand in the open market
Which quantities?	Fixed quantities — farmers and industrial units must buy/sell these at government-set prices	Remaining quantities — transactions beyond the fixed quota
Purpose	Ensure essential goods remain affordable and supply is guaranteed	Allow market forces to operate and reward efficiency
Who benefits?	Consumers get essential goods at controlled prices	Producers earn higher profits on surplus production

Exam-critical: Dual pricing = two pricing mechanisms operating simultaneously. Government-fixed for fixed quantities; market prices for the rest. This system allowed China to maintain social stability while gradually introducing market forces.

Indian parallel: India also had a dual pricing system during the License Raj era — controlled prices for essential commodities (rice, wheat, sugar) under the PDS, and open market prices for the rest. India dismantled this more gradually through the 1990s-2000s.

Special Economic Zones (SEZs)

Special Economic Zone (SEZ)

An area in a country in which the business and trade laws are different from other regions within the same country. SEZs are located within a country's national borders and aim to increase foreign investments.

China established its first four Special Economic Zones in 1980 to attract foreign investors. These were strategically located near Hong Kong, Macau, and Taiwan.

Shenzhen— Near Hong Kong

Now a global tech hub — home to Huawei, Tencent, and BYD. Transformed from a fishing village to a megacity.

Zhuhai— Near Macau

Gateway to Macau — focuses on electronics, biotech, and tourism. Connected via the Hong Kong-Zhuhai-Macau Bridge.

Shantou— Near Taiwan

Historic treaty port — specialises in textiles, toys, and light manufacturing. Major centre for overseas Chinese investment.

Xiamen— Near Taiwan

Island city with strong Taiwan links — electronics, petrochemicals, and tourism. Named one of China's most liveable cities.

Why these locations? Shenzhen, Zhuhai, Shantou, and Xiamen were chosen for their proximity to Hong Kong, Macau, and Taiwan — regions with strong Chinese diaspora and abundant capital. This geographic advantage was key to attracting early foreign investment.

Indian parallel:India established its SEZ policy in 2005 (SEZ Act). India's first SEZ was in Kandla (Gujarat) — much later than China's 1980 initiative. China's early mover advantage in SEZs contributed significantly to its manufacturing dominance.

Notes