1) Macroeconomic management of the Chinese economy is problematic with high growth rates producing high inflation outcomes and the need for effective monetary policy to contain price and cost pressures.
2) The late 1990s saw focus shift to closing unprofitable state enterprises through increased autonomy and dealing with insolvency in the banking system with the foundation of a diversified banking system and fiscal decentralisation.
3) Along with supplying low-cost labour to coastal manufacturers, urbanization will improve agricultural efficiency of production as surplus laborers are removed; leading to increased growth in the sector.
1. China and a few rapidly developing economies are experiencing high inflation rates due to their very speedy growth rates. As sakata mentioned above, monetary policy is the primary tool used to manage the level of aggregate demand in an economy. Demand-pull inflation (you'll learn about this all in topic 3 and 4) is where aggregate demand grows faster than aggregate supply (or when the aggregate supply curve becomes inelastic due to low unemployment, but this might get a bit too confusing for now), so there's overall a greater amount of demand in the economy compared to supply, which causes an increase in the general price level - inflation. Monetary policy refers to a central banking agency controlling the cost and supply of credit/money in an economy. As sakata said, in AUSTRALIA this means the Reserve Bank of Australia influencing the cash rate (almost like the wholesale cost of money) which in turn influences a range of interest rates in the economy. By increasing the cash rate and hence interest rates, the RBA can slow down demand in the economy and reduce inflation as higher interest rates discourage borrowing for spending etc (you will learn more about this later). However, in China, their banking system is a little different, and I believe their monetary policy also consists of a few other tools. They use interest rates + these other tools to manage the level of demand in the economy and slow down growth to a sustainable, non-inflationary level.. did that make sense?
2. I liked Sakatahaha's answer here, but I might give my own answer as well. China shifted from a more centrally planned economy to 'market socialism' in 1978. This meant adopting more market principles. One of the things they did was in the 1990s, they privatised a lot of state owned enterprises and 'decollectivised' agricultural production, which I believe is another word for saying adopting a market system with regards to agricultural production. As for the banking system and fiscal decentralisation, I'm not too sure - I didn't see anything like it when I did China. Presumably it's referring to establishing a financial system where those with a surplus of savings can be matched to those who can use it for investment, but I'm not sure about fiscal decentralisation.
3. I believe this is referring to the trend for Chinese farmers to leave their farm and move to cities to seek work. unfortunately, most end up working in sweat shops or unemployed. Largely unskilled and without strong labour laws, these ex-farmers provide low cost labour to manufacturing firms. I can only take guesses re the agricultural efficiency. I presume it's referring to the 'law of diminishing marginal returns' - where if you have a fixed resource (say, a farm) and a variable resource (normally labour), the benefit you get by adding an additional worker decreases for each worker you add, to a point where they are doing very little. This is like a 'too many cooks spoil the broth' sort of scenario. There's not enough equipment/area to farm for them to be productive. If a farm is only so big, adding extra workers won't result always in a proportional increase in output. So what I think 3. is trying to say is that by the last few workers (who aren't super productive at the micro level) leaving for the city, the productivity of the remaining labour increases. If you recall, productivity is output/input, so by reducing the amount of unproductive labour inputs, you increase average productivity. I don't know how this would lead to increased overall and absolute growth in the sector. I would think they were referring to perhaps increased growth per worker.
I hope that helped, I felt maybe I could add my thoughts to the other two guys
