From Command to Market Economy in China and Vietnam

Reading Assignment 3
Summary of the major topics and content:
Reading Assignment 3 is on Chapter 5 of “East Asian Development: Foundations and Strategies”
by Dwight H. Perkins. It covers command and market economies in China and Vietnam. The text
is very informational and doesn’t include much of the author’s opinions. The chapter is split into
4 main sections. The first section talks about the first phase of China’s economic reforms. The
second follows it up with an explanation of Deng Xiaoping’s tour of the south and the economic
reforms of the 1990s. The third section mentions China’s accelerating foreign investment and the
final section talks about Vietnam’s reforms.
A brief highlight of the author’s key points and main reasoning on the issues:
Both China and Vietnam started their economic booms with command economies mirroring the
Soviet system. All industrial input/output was controlled by the government or by state-owned
enterprises. This made sense as both countries were in wartime and had to precisely control their
resources. China was fighting the US in Korea from 1950-1953 and Vietnam was fighting for
independence from France. This control led to famine in both countries and a lack of exports due
to closed-off trade. This all changed for China in 1977. It was then that they started to import
foreign tech and in 1978, they eliminated collective agriculture. Basic land use rights were
established; however, the government still owned the land. From 1979-1984, agricultural output
jumped by 52.5%. In 1984, China established a dual-price approach to market prices.
Industrialists could buy their inputs at market prices while state-owned prices had their input
prices controlled by the government. These two initiatives caused China’s GDP to grow 11.3%
from 1985-1988, but also caused high inflation and political corruption. In the 1990s, Den
Xiaoping toured the South and enacted economic reforms. In 1992, banks were given more
freedom in terms of investments, and in 1999, China joined the WTO. These actions expanded
their export market and allowed foreign countries to invest in the growing China. Vietnam
followed a very similar trend to China. Like China, Vietnam copied the Soviet-type system
before 1986 – specifically the market economy in which the government controlled the economy.
Through the 1980s, although the Vietnamese economy grew, it was poor, particularly in
agriculture which caused yet another famine like in China. In 1986, reformer Nguyen Van Linh
was elected as general secretary. By 1990, Vietnam had freed up almost all prices and removed
most restrictions on imports. However, post-1990, the communist party still ruled Vietnam just
like China. There were no talks of privatizing enterprise. Once inflation was back under control,
the government once again controlled state enterprises. Farmers were granted land use rights, not
outright ownership. In the post-2000 decade, Vietnam passed the Enterprise Laws, legitimizing
domestic private businesses and providing security for Vietnamese investors. As a result, private
industry boomed in 2006-2010, growing at an average annual rate of 21.6%. By 2010, Both
Vietnam and China’s economies had moved on from their pre-reform period. However, that
doesn’t mean they abandoned the Soviet model. The government still controlled major
enterprises within their country and still limited private property ownership.
Opinion with reasoning on author’s viewpoints:
Both China and Vietnam started off rocky. In my opinion, collectivized agriculture was the
stupidest idea in all human history. It failed in Russia, China, and Vietnam. I am so happy both
nations decided to abandon it. I’m also glad that both countries became more open and liberal to
the idea of private ownership. Like I mentioned in Reading Assignment 2, I believe that the best
government policies are a mix of laissez-faire and interventionist. The same can be applied to the
way governments deal with the economy. Although I believe in a market economy, some
command economy rules must be applied like no monopolies and (reasonable) controlled prices.
We can see that when both countries were under a command economy, their GDPs didn’t grow
much. However, by applying some freedoms like market input prices and private ownership,
both China and Vietnam grew. In my point of view, I’m proud of China’s ability to analyze the
economies of the world and apply the best ideas to its economy.