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China's opening to the outside world was perhaps the most visible of its reforms of the 1980s. China's international trade volume grew dramatically, it attracted tens of billions of dollars of foreign direct investment and it became an active borrower in international financial markets. In contrast to the pre-reform era, foreign trade grew more rapidly than the domestic economy and in some regions of the country it appeared that it had become a powerful engine of growth, accelerating not only the speed of domestic development but the pace of structural and technical transformation as well.
The future of the reforms in China ultimately depends on whether, and if so to what extent, reforms introduced in the recent past have improved the consumption and the standard of living of the Chinese people. It also depends on whether any such gains in the standard of living have been widely spread among the whole population. Since 1978 real per capita consumption in China has risen at an average annual rate of 7 per cent which is more than three and a half times that of the preceding 21 years. As a result, the standard of living of the average Chinese citizen in 1990 was more than double that of 1978. However, the growth of consumption and the living standard was rather uneven during the reform period. During the first phase of the reforms (1978–85) the consumption standard increased rapidly without widening existing income disparity. During the second phase (1985–90), however, improvements in consumption standards slowed significantly amidst rising inflation and growing income inequality. The question is whether the recent trend of a relatively slow rise in the standard of living and greater income disparity will continue in the 1990s. The purpose of this article is to examine the recent trends and changes in the level, structure and differentials of Chinese consumption and living standards, and to assess their prospects for the 1990s
Since the introduction of economic reform in late 1978, rural China has undergone an impressive economic transformation. On the one hand, decollectivization has culminated in the disbanding of the people's commune and the development of individual household farming. On the other, the re-emergence of the market has brought about a growing commercialization and industrialization of the rural economy.