Post reform China is an important economic model to study. Its sheer size, both in terms of man-power and land mass, make it an impossible case to ignore. It has the highest population in the world roughly twice that of India, China's closest competitor for that dubious title. And after the break up of the USSR, China became second to only Canada in total area. Furthermore, recent economic reforms in China have enjoyed a relative success that defies conventional wisdom, making it necessary to seek a rationale for its deviation from expected outcomes. The renewed strength of the once poor China and its current position in the global economy provides a unique model with many features worthy of examination and some of emulation, both in theory and practice.
This paper examines how China transformed it's economy from a plan economy to market economy through reforms introduced by Deng Xiaping. The success of reform efforts is indicated by the rapid, continuous growth of the Chinese GDP since the late 1970s, when the measures were instituted. Using a 'positive analysis' model with the motivating issue being modernization, the role of FDI in China since the introduction of market reforms is examined as a major reason for their success. China was behind the technology curve in part due to its Confucian-based dedication to channel intellectual pursuits toward perfecting human nature and not the physical sciences and for other reasons which will be discussed in more detail
An overview of the economic development of China within a political context prior to Deng's reforms is presented as a basis for comparison with the post reform economic condition. The political must be included because the economic system depends on it to provide guidance and enforce certain rights. Then the market reforms introduced by Deng are discussed. An examination of the incentives for FDI is included, followed by a tracing of the pattern of forei...