Over the past few years, the various doctrines that have been initiated by the Chinese government with respect to their economy have caused growth and change, primarily to their structure. Several important reform measures, for example, were adopted to regulate China's economic procedures and build substantially more effective institutions. However, the general satisfaction with the economic policies has created a problem that now effects the Chinese economy in 1998. Policymaking has been trapped in a relatively undistinguished and non-innovative mode, fashioning the tired cliché' "If it is not broke, do not fix it."
The priority that has been given to fighting inflation seems to have limited the initiative process. A self--restraint policy was implement to focus on getting inflation to drop below double-digit figures. Although inflation first increased from 16% to 25 % in 1993 and 1994, it hit a moderate level of 17 & in 1995 and only9.8 percent during the first part of 1996. However it is necessary to question the true success of these programs, since it is obvious that the change didn't fall according to plan. If austerity or this severe self-restraint had been in place since mid-1993, why should inflation increase? The reforms of 1993 and early 1994, although they accomplished many things, it did cause a scare when it created inflation.
As one of its reforms, China established a new unified exchange rate in the beginning of 1994. Because few people had expected that the rate might last a long range, many were surprised to see that the new rate turned out to be stable and defensible. However this success of their renminbi can be attributed directly to 3 factors: the foreign investment continued to flow money in to China and their new "free" market, foreign invested export-oriented firms were beginning to generate substantial foreign exchange earning, and Chinese domestic firms, responding vigorously to the new opportunities created by devaluation allowed the renminibi to remain stable, and it some places it increased its dollar value.
As the effects of these proposals permeated through China, the country's policies became reactive and concentrated the anti-inflation effort. The country was then bombarded by political indecisiveness. For example, China failure to enter the world Trade Organization caused conservative backlash against radical reform. On yet another side of the spectrum, bold actions were limited by the partial success of the 1994 tax reform. Taxation was shifted to a value-added tax in the beginning, however the government initially guaranteed that no local government would suffer a reduction in expenditures due to the provisions of the tax reform. The effect that tax reform has produced was substantially hindered by the ease with which existing companies have gained temporary tax exemptions. Yet the main hindrance has been the slow progress taken in setting up separate central government tax authority has meant that thee central government does not yet have full authority to override local interests. From the continued setbacks of these policies, one can interpret why China's programs are slowing up today.
As China's economic system westernized or modernized, they continued to use the same reactionary methods as always. However, in a competitive economic system, decisions must be made swiftly, and decisively. Some of their greatest success in these policies came when others made swift decisions to capitalize. Although faced with the uncertainty of the effects of this system completely, during 1996 ales cautious approach should have been taken. Just because the economy has not caused any challenging problems or crises, does not mean that it is particularly fit for its role of regulating the economy. Because of the complacency of this government, true success of this economy is due to the new freedoms allowed to foreign investors to grade in the domestic market.
The Chinese economy of 1996 is the result of the interplay of vigorous market force and rather moderate government policymaking. The journalist wrote, "Some leaders believe that they can shape the future development of the Chinese economy through better management and with the help of a carefully chosen 'industrial policy.' " No one knows how successful this program would have worked in 1996, but surely someone should have known that it was necessary to make. However nothing was taken and today economic growth is slowed to a near