0s. So in 1978, China turned to a market-based economy, unleashing an entrepreneurial spirit that had been pent up for nearly 30 years. Those reforms also created a consumer economy, spurring 20 years of remarkable economic growth that has transformed China by raising living standards for hundreds of millions of people. According to World Bank estimates, ChinaÆs poverty rate fell from 33 percent of the population in 1970 to 10 percent in 1990. Still, that 10 percent represents 80-100 million people who do not have enough food to eat or clothes to wear.
Farmers, freed from the inefficient commune system, dramatically increased their production. For example, they raised their grain harvest by an average of nine percent per year during the early 1980s. Rural per capita income doubled in five years (1978-1983), putting China on the road out of the Third World. Chinese farmers accomplished these increases even as the countryÆs arable land decreased markedly, from 12 percent to 7 percent of ChinaÆs 3.7 million square miles.
Market-based economic reforms had unintended consequences, too. More efficient farming meant fewer jobs, displacing millions of agricultural workers and prompting the government to steer industrial projects into rural areas (hence the drop in arable land). Fewer state controls opened the door for inflation, which forced many to look elsewhere for better-paying jobs. More than 100 million people abandoned the countryside and went to the cities in search of work. Urban areas, already overwhelmed by earlier migrations (ChinaÆs urban population had increased from 71.6 million people in 1952 to 131 million by 1960 ), faced potential disaster.
China has avoided that disaster to date thanks to the strength of its urban economy. The cities absorbed all of those people without major unrest thanks to massive building projects in that provided employment and a better way of life for millions of peop...