Primer Ciclo de Educación Infantil

East Asian economies experienced dramatic changes in industrial structure during the period of their rapid economic growth. South Korea and Taiwan followed Japan in the process of industrial transformation from light industries to heavy and chemical industries and further to some high-technology sectors. In Singapore and Hong Kong, foreign trade and financial services developed to such a level that transformed the city-states into global commercial and financial centres. Thailand, Malaysia and Indonesia started the industrialisation process with selected industries and benefited from increasing inward FDI, especially that from Japan and the East Asian NIEs.

In the late 1980s, the newly emerged theory of the developmental state emphasised that governments played a central role in the economic development of East Asian economies.

Industrial policy has been asserted the central factor behind the rapid industrialisation of East Asian economies. Some important interpretations of the role of industrial policy on industrialisation include Amsden’s (1989) book on South Korea, Wade’s (1990) book on Taiwan, as well as Johnson’s books on Japan (1982, 1995).⁴⁸ These authors argued that the governments of the three economies devised an array of incentives that encouraged private investment in strategic industries. Price mechanism and non-price means were utilised to encourage private firms to take actions that the government considered to promote rapid industrialisation. These governments identified critical economic areas for development and directed resource allocation towards selected industries. These governments also tried to subject the selected sectors to international competition that forced them to become more efficient. The industrial policies encouraged the development of industries and altered the structure of the economy that would not have taken place merely depending on firm response to market signals.

Factors associated with rapid industrialisation in other East Asian economies, such as high saving and investment rates, high-quality human capital and industrial policy, are also applicable to China.⁴⁹ Like in Japan and South Korea, industrialisation in China during the

48 Nevertheless, some scholars argued that the economic success does not itself constituted proof of the efficacy of such policy (Vestal, 1993), and the successes that were achieved were often matched by failures, and that the costs were not insignificant (Stern et al., 1995).

49 China has one of the world’s highest saving rates at over 40 percent. As a percentage of GDP, investment has grown to 45 percent in recent years. Fixed asset investment has been the principle driver of China’s economic

reform period was greatly influenced by industrial policy. In the 1980s, the priority was the development of light industries in order to change the structure of dominant heavy industries and weak light industries and the overwhelming shortage of consumer goods in the markets.⁵⁰ As a result of these early efforts, the percentage of light industry in total industry rose from 44 percent in 1979 to 52 percent in 1984. In the early 1990s, the problem of shortages in the consumer goods was generally solved and the industrial structure was healthier than that of the 1980s in terms of the heavy-light industry ratio. The industrial policy pursued in Japan and South Korea’s years of rapid development can be considered as valued-orientated, which aimed to direct resource allocation towards industries with higher growth potential and more value-added (thus the more potential contribution to economic growth). Different from this scheme, China’s industrial policy prior to the early 1990s can be considered as shortage-orientated. The industrial policy aimed to direct resource allocation towards industries with low production capacity thus with difficulties to meet the market demand. As markets were not fully created and firms were not good at reacting to market signals, industrial policy in China acted in part as a complementary to the market mechanism for resource allocation.

In 1989, the State Council issues the ‘Decision on the Gist of Current Industrial Policy’, the first explicit general guideline for a national industrial policy. In 1994, the State Council issued the ‘Outline of State Industrial Policy in the 1990s’, providing the basic institutional framework for China’s industrial policy. In the 1990s, China’s industrial policy has become more value-orientated to support some specific strategic industries.

Several ‘pillar industries’ characterised by sophisticated technology and high value-added production, such as machinery, electronics, petrochemical, automotive and construction, have been identified and consequently supported by specific policy measures. The support of the development of high-tech industries has been increasingly emphasised by China’s industrial policy. The industrial policy for the electronics and Information and Communications Technology (ICT) sector (first consumer electronics, then computer and telecommunications, later on software and integrated circuit) and the related broad national strategy of ‘promoting industrialisation by informatisation’ provide a typical example (see Subsection 7.1.2 for details). In addition to the pillar-industry argument, Chinese industrial policy has kept emphasising the importance of agriculture, basic industries and infrastructures. China’s trade policy reinforced the role played by industrial policy. Based on a study on the determinants of tariff rates for 95 industries in 1996, Chen and Feng (2000) found that the trade policy pursued by China was principally defined by the industrial policy that favoured high-technology industries and the concerns of social stability. On the other hand, polices towards inward FDI have become increasingly industry selective. The role played by the Chinese government in industrialisation came not only from the central government but also from local state agencies. Based on a decentralised governance structure, the arrangements of authority sharing and a system of fiscal decentralisation have brought strong incentives to local governments to promote economic development at the local level. As local governments actively involved in the process of local economic development, especially of the growth of the manufacturing sector, which was considered to be the main source of tax income and local employments, they spontaneously played a significant role in industrialisation in their localities (Qi, 1992;

growth.

50 In Kornai’s view, the problem of shortage is the central, unavoidable feature of the planned economies. It is rooted in the problem of soft budgetary constraints in the socialist economies.

Zheng, 1994; Montinola et al., 1995).

During the reform period, China’s industrialisation process was largely driven by the new economic forces introduced by economic transition, internationalisation and a decentralised government structure. The newly entered non-state-owned enterprises have played a vital role in the rapid structural change in the Chinese economy. While an increasing number of foreign firms built or transferred their production capacity into China, industrial clusters popped up in some FDI-attracting hotspots in coastal provinces of China.

Some industries, such as that of low-end products like textiles and toys, led this process of considerable capacity migrations, followed by other industries of high-technology products.

As this process accelerated in recent years, the effects of China’s industrialisation went beyond its territory. China has been alleged to become an increasingly powerful global deflationary force as low price consumer goods made in China flush into international markets. Ironically, China was also alleged to be a global inflationary force as the strong demand for natural resources and primary products from China exploded in recent years.

As the manufacturing strength and export competitiveness built up, China was considered to become the ‘workshop of the world’, as highlighted by its rapid economic growth and extremely high share of the industrial and manufacturing sector in the economy. Behind China’s strengthened competitiveness was a combination of capital and technology from foreign firms and domestic labour forces from the world’s largest pool of manufacturing labour. Extremely cheap labours fed the country’s export-oriented industries, fuelling low-cost production for the manufacturing sector and exports. This provides a comparable process to what took place in the East Asian countries, but with times of scale. The more major difference has been that, in these tiger economies, wage inflation followed rapid economic growth as labour resource became stretched eventually.

In China, however, the supply of low-priced labour seems almost inexhaustible, making it possible to sustain this growth pattern for a considerable while in the future.

One of the specific characteristics of China’s industrialisation during the reform period, therefore, lies in the labour side and the dualistic nature of its economic structure. There are still a huge amount of redundant labour in the rural areas, earning on average just RMB¥ 2476 per year compared with the RMB¥ 7703 of people living in cities.⁵¹ The gap between rural and urban areas poses a severe problem to China due to a severely skewed economic growth process. Yet it also confers a bonanza for factory bosses in China: as most migrant workers head to factories around China’s coastal cities, a seemingly endless supply of low-priced labour⁵² allows companies not only to control costs, but even to cut them dramatically. By contrast, post-war Japanese and South Korean economic development has been characterised as rapid growth with relatively equitable distribution of income (Whang, 1989).

51 Data for 2002. According to the NBSC.

52 In 2004, severe shortage of migrant workers in a number of locations such as Guangdong was reported.

Whether this signalise a structural change remains a question and need further observation.