Summary and Policy Issues

Abstract

The package of policy and systemic reforms introduced by the Chinese leadership in 1978 comprised two major components. One was a shift in development policy away from the previous pattern of extensive growth based on the priority development of the producer goods sector. The new development strategy was aimed at achieving more balanced, proportionate and sustainable development based on intensive growth and increased economic efficiency. To enhance efficiency, the new strategy entailed the sectoral reallocation of resources away from the input-intensive producer goods sector towards the less-inputintensive consumer goods sector. Both the open-door policy and the emphasis on consumer goods production were essential to enhancing efficiency: the former through greater participation in the international division of labour and the import of advanced technology; the latter improved living standards and thereby raised workers’ incentives.