A Tale of Two Chinas: An analysis of negative externalities of Economic Reform of Rural China

Abstract

In a world of increasingly interconnected economies, it is important to understand not only the driving forces, but the historical contexts by which an economy has developed. Few countries today are more feared or misunderstood than China, whose rapid economic growth has led to knee jerk responses from both governments and the international business community. Despite this, many aspects of China's development cycle remain fragile, to both internal social forces and international economic crisis. This is due in large part to the means by which the Chinese government has enacted free market leaning reforms since the death of Mao and the rise of Deng Xiaoping in 1976. As a result, China today faces a number of societal conflicts, rooted in the economic disparities between urban and rural communities, which have been exacerbated by the economic reforms and threatens to curb economic growth, which over the past 20 years has remained stable around 10 percent annually (real GDP). In this paper, I intend to explore the historical contexts of China's gradual reforms in order to better understand the emerging negative externalities of decentralization on rural Chinese society and the consequences of migration to urban centers in the context of future industrial growth both domestically and in the foreign market.