Industrial Transformation in China

China has experienced tremendous changes in recent decades, especially in the industrial sector. The industrial transformation that began in 1980 to 1990 has become one of the main drivers of the country’s economic growth.
The reform’s focus on the manufacturing sector, driven by the success of previous agricultural reforms, had a tremendous positive impact on China’s economy and society.
One of the first steps in this reform was the migration of excess labor from the agricultural sector to the manufacturing sector. Increased productivity and income in the agricultural sector allows people to seek better employment opportunities in the growing manufacturing sector.
This created mass migration flows that not only increased the workforce in the manufacturing sector but also provided a significant boost to productivity and innovation.
In an effort to increase investment and development, the Chinese government actively encourages foreign investment and the establishment of business entities in cities and villages. This creates a conducive investment climate and ensures equal distribution of investment across the country.
This success was also supported by the creation of an efficient pricing system and market institutions, which facilitated stable and sustainable economic growth.
Industrial transformation in China not only includes the manufacturing sector but also involves reducing the role of the state in resource allocation. By introducing market elements into the economic decision-making process, China has succeeded in creating an environment that is more dynamic and responsive to market demands.
Reforming the banking sector and closing unprofitable state-owned factories are important steps to create a more efficient and competitive economic structure.
Based on data released by the World Bank between 1990 and 2000, the positive effects of industrial transformation are very visible in the reduction in the percentage of poor people from 33% to 16%. Increasing employment opportunities, rapid economic growth and more equal distribution of income have become the main drivers of increasing social welfare.
The factors influencing the rapid economic growth in China involve several key aspects. First, rapid industrialization creates jobs, increases productivity and enhances China’s global competitiveness.
Second, high savings rates enable the accumulation of capital for investment and development. Third, massive investment in infrastructure provides a strong foundation for long-term growth.
Fourth, labor market deregulation is also an important factor in facilitating worker mobility, reducing barriers to entry and exit from the labor market. Fifth, an open and internationally competitive economy provides incentives for innovation and increases global competitivene
Source Bappenas