The People's Republic of China is now the world's second largest economy after the United States and the world's fastest-growing major economy, with an average annual growth rate of 10% from 1978 through 2005, according to official statistics. 1 It is also the second largest trading nation in the world and the largest exporter and second largest importer of goods. In more than 50 years since the founding of the People's Republic of China in 1949, Chinese economy has undergone an unusual

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... ent process, passing through socialist heavy industry development strategy and economic reforming and opening-up strategy. Due to the reform and opening-up policy China has attracted foreign direct investment, increased its productivity and raised its economic efficiency by introducing profit incentives to rural collective enterprises, family farms and private businesses. There are some economic development models in China's private sector. Among those the Wenzhou economic model is the most successful one. undergone an unusual and tumultuous development process, passing through revolution and socialism. During the initial stages, China followed a socialist bias heavy industry development strategy. Consumption was reduced while rapid industrialization was given high priority. The government took control of a large part of the economy and redirected resources into building new factories. Entire new industries were created. Most important economic growth was "jump-started". Tight control of budget and money supply reduced inflation, and it was done at the expense of suppressing the private sector of small to big businesses. Economy reform from 1978: China began to make major reforms to its economy since 1978. The Chinese leadership adopted a pragmatic perspective on many political and socioeconomic problems, and sharply reduced the role of ideology in economic policy. During this period China took several remarkable steps to improve the living standards, social conditions, and relative social stability. A decision was made in 1978 to permit foreign direct investment in several sectors of the economy and establish "special economic zones" to bring down the cost of manufacture. The country lacked the legal knowledge of international practices to make some of the projects attractive to many foreign businesses. However, in the early 1980s steps were taken to expand number of areas and related efforts were made to develop the legal and other infrastructures necessary to implement investment projects successfully. This additional 1 Barry Naughton, The Chinese Economy Transitions and Growth, the MIT Press, Cambridge, 2006, p3.