China's rise from a "poor, stagnant country to a major economic power" within such a short time span has often been touted by many economic analysts as one of the world's greatest economic success stories (Elwell et al: 2007). China's rise is so celebrated, because while pre-1978 China experienced annual growth of "6 per cent a year, post-1978 China saw average real growth of more than 9 per cent a year" making it the envy of many of Asia's other developing economies (Hu and Khan, 1997: 1). In this essay I will therefore analyse the reasons why the Chinese economy was able to grow so fast in the 1980s and 1990s up until 1998, namely: the development of Special Economic Zones (SEZs), Town and Village Enterprises (TVEs), increased productivity and foreign direct investment as well as large capital reserves. I will also explain why China's economic advances and strategies in this period enabled it to lessen the financial impact of the 1997 currency crisis that was so detrimental to the economies of many of China's neighbours.
However before analysing how China was able to stave of the currency crisis it is first important to analysis how China was able to so rapidly transform its once fledgling economy into the juggernaut it is today. Prior to 1978, China maintained a centrally planned economy which meant that "a large share of the country's economic output was directed and controlled by the state" which also meant that the state controlled "production goals, controlled prices and allocated resources" throughout most of the economy (Elwell et al: 1997 and Guthrey, 2003). However, the death of Chinese leader Mao Zedong in 1976 freed up economic reformist leader Deng Xiaoping to institute the Four Modernizations program in 1978 (Bell et al, 1993 and Sachs and Woo, 2001).