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The Multi-Revolutions of China
The Social and Economic Upheavals of Maoist and Post-Maoist China
By Jeff Sun & Dan Tran
Engineering 297A: Ethics of Development in a Global Environment
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Table of Contents
Abstract
Page 1
The Impetuses for Post-Mao Economic Policies
Page 3
A Historical Perspective
Page 4
Maoist Institutional Asceticism
Page 6
The Cultural Revolution’s Destruction of
Traditional Values
Page 14
Looking Forward
Page 22
The Aftermath of Mao’s Death and the
Beginning of Economic Reforms in the 1980s
Page 23
Two stages of reform
Page 25
The Need for Agricultural Revitalization
Page 26
Opening Up to the World
Page 27
Reforming Industrial Enterprises
Page 30
Main achievements of economic reforms
Page 32
Further Economic Reforms in the 1990s and
Unresolved Problems from the First Economic
Revolution
Page 34
Move towards Privatization
Page 38
China’s Future Economic Progress
Page 39
Economic development in the Asia-Pacific
Region
Page 41
China’s Economic Goals
Page 43
China’s Investments Opportunities
Page 44
Conclusion
Page 46
Bibliography
Page 50
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Abstract
China today is a country on the verge of economic dominance and
superiority in our world. With 2 decades worth of economic policies
focused on free enterprise, free trade and developing a competitive
advantage in manufacturing and production, China has positioned the 21st
century to be China's century.
But how did Maoist China, a country built on sociopolitical revolution and
Marxist ideology, develop into what is now post-Mao China, a China
more capitalist than it had ever been in its history? The answer lies in Mao
ZeDong's social and economic policies from the 1950s to the 1970s and
their complex, far-reaching consequences.
From this historical explanation of why China's present-day economic
policies came about, we bring the focus to what these economic policies
actually were, and their role in China's rapid modernization and economic
progress in the 1980s and 1990s. From there, we look at China today, and
hypothesize China's place in the political and economic framework of our
modern international society.
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The Impetuses for Post-Mao Economic Policies
China’s leaders since 1949. Mao ZeDong (left), one of the most intriguing and volatile leaders of the 20 th
century, would create a society based on his view of Marxist ideologies. His successor, Deng Xiaoping
(middle), would quickly turn China’s focus to one of economic reform and progress. Deng’s economic
vision of China has been further modernized and enhanced by his successor, Jiang Zemin (right).
[http://news.bbc.co.uk/nol/shared/spl/hi/asia_pac/02/china_party_congress/china_ruling_party/problems_m
ount/img/300_pics/three_leaders_300.jpg]
The 21st century will be China’s century.
Over the years, many have tried to argue against such a notion: “The United
States is too powerful,” they say, “the United States has too much technology. The
United States has too great of a military!”
But everyday, it becomes ever more clear that this premonition is quickly
becoming a stark reality. The clothes we wear, the televisions we watch, the computers
we use, the countless articles that we depend on for everyday life – so many are stamped
with a little logo that represents a global changing of the guard: “Made in China.”
China’s economy today is growing faster than ever, driven by hard-hitting
economic policies aimed at fostering free enterprise, global trade, and a competitive
advantage in manufacturing and production that goes unmatched in our global economy.
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But how did today’s China come about? How did a rural, agricultural society built on
ascetic ideals of communalism, simplicity and sociopolitical revolution develop into the
world economic powerhouse that is China today? How did a people that had been
programmed to follow Marxist philosophies suddenly discover the impetus to switch
gears and embark on economic progress based almost purely on capitalistic ideals?
How did a country in our world’s economic backwaters just a few decades ago
become what today is modern-day China, a country at the forefront of global economic
dominance and supremacy?
The complex answers to these questions lie in a defining epoch of China’s social,
cultural and economic history: the 30 years in which the Chinese people lived under Mao
ZeDong, one of the most multifaceted and unpredictable leaders in world history. Mao’s
continual call for asceticism in the name of Marxist egalitarianism would so deeply
repress his peoples’ desires for material well-being and economic success that when they
could have it once more, it would quickly become China’s obsession. His Cultural
Revolution so thoroughly broke traditional bonds of family and friends, founded in
millennium-old Confucian ideals of loyalty and trust, that the Chinese masses resentfully
turned to an opposing value system that stressed materialism, personal wealth, and
economic achievement. Mao’s policies and ideologies, and more importantly, the
subsequent backlash against them upon his death, would effectively constitute the
underlying forces that lie behind China’s modern-day economic policies and the rapid
economic modernization and westernization they brought.
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A Historical Perspective
For centuries, China stood as a rural state of landlords and peasants, built
essentially on Confucian values: “the importance of families, the loyalty to the family,
the ruling position of the patriarch” (Zeng quoted in Kuhn 260). In the 20th century, Mao
ZeDong would bring his Communist Revolution into this feudal environment.
Advocating the revolutionary Marxist ideal of socioeconomic egalitarianism, Mao would
quickly win the loyalty of millions of rural peasants, enabling him to build a massive
peasant army of over 500,000 soldiers. Though they were greatly outmatched in
weaponry, technology, numbers and funding, Mao’s peasant army fought with a passion
and determination that was greatly lacking in their opponents, the forces of the
Kuomintang, led by Chiang Kai-Shek. Over the course of several years, Mao would
ultimately lead his followers to victory against a Kuomintang that was essentially fighting
3 wars: against Mao, against the Japanese Invasion, and against the Axis powers of
World War II.
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Mao proclaiming his People’s Republic of China in Beijing, 1949.
[http://en.wikipedia.org/wiki/Mao_Zedong]
Instated as the Chairman of the People’s Republic of China in 1949, Mao would
create an egalitarian society founded on Marxist economic ideals of agricultural
collectivization and industrial nationalization, political ideals of continual revolution and
individual activism, and social ideals of self-sacrifice and asceticism (Walder Lect.). But
if one characteristic could describe great leaders such as Mao ZeDong, it would be their
inability to be satisfied, their endless yearning for more – whether it be more land, more
war, or in Mao’s case, more revolution. It was this precisely this never-ending call to
social revolution that would quickly detach Mao’s vision of China from that of his
people’s.
Upon his death, Mao’s Party selected Deng Xiaoping, a man whom Mao had
banished from Beijing twice before his death, as China’s new leader. Deng, always a
harsh critic of Mao’s economic policies or lack thereof, would immediately put China on
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his own path, one that he felt represented the pressing demands and modern attitudes of
the Chinese people. This path consisted of aggressive policies focused on economic
development and material progress at all costs (Cook 19). To this day, China is hardly
Mao’s China – except for his massive portrait hanging in Beijing.
Mao’s Portrait, still hanging today in the center of Tianamen Square in Beijing, China’s capital.
[http://www.kiku.com/electric_samurai/virtual_china/image/beijing_06.jpg]
Instead, it has become Deng’s China: a country devoted to economic modernization in
the form of private enterprise and free trade, a country that sees economic dominance and
superiority as its means for global recognition and power, a country that does not care, as
Deng Xiaoping says, “if the cat is black or white as long as it catches mice.”
Maoist Institutional Asceticism
China’s economic reforms in the late 1970s and into the 1980s presented the
Chinese people with the opportunity to be economically well-off and successful after 30
years of policies and ideologies embodying a system of institutionally forced asceticism.
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But we must ask: what was the impetus for the Chinese people and their leaders,
especially Deng Xiaoping, to so drastically switch gears from Maoist economic policies?
The answer, as we will see, is to be found in the shifting needs and demands of Chinese
people themselves, at the heart of which is a pent-up lust for a taste of the material wealth
and economic success that had been China’s forbidden fruit for a generation under Mao.
An idyllic Maoist life was one of poverty, of simplicity, of perfect egalitarianism:
such was arguably Mao’s most ambitious and far-reaching socioeconomic ideal of his
reign. Dr. Fang Wan, a researcher of cross-cultural psychology from China, attempts to
see just how ascetic the everyday life of Chinese people truly was in his “A Tale of Two
Cities.” In his assessment, Wan quotes a paragraph about the life of a new married couple
in Maoist China, exemplifying just what life was like for the great majority of China’s
citizens: ascetic, simple and poor.
“‘[They] held low expectations of life. They just lived in this small room when
they got married. There was no sofa, no cabinet, no table and chairs, no new
comforter at that time. They just pooled their stuff together and started their
married life. The room is small, only 12 square meters…To them, a small room is
big enough to live a life. Plain clothes are good enough to provide warmth.
Simple food is tasty enough to ally their hunger’” (Rong quoted in Wan 301).
In 1950, Mao gave the Chinese peasants, for the first time in Chinese history,
private and individual plots of land for them to sow and reap. But to the great dismay of
these farmers, Mao would quickly turn away from what he saw as a system of petty
capitalism. Instead, he chose to force his people into the incentive-loss, near-exploitative
institution of agricultural collectivization. Introduced in 1952, Mao’s new system gave
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his people little, if any more, than they had had before the Communist Revolution
(Walder Lect.). In fact, his people would work daily at a frenetic pace to meet monthly
and yearly quotas: “the people, dressed in their blue Maoist uniforms, would work
without sleep for 24, 48 and in some cases 72 hours straight, building with bare hands…”
(Deng 14).
A scene from Mao’s Great Leap Forward campaign, in which his government imposed impossibly high
quotas and unbearable workloads upon China’s peasants in an effort to compete with America and Great
Britain. In the Great Leap Forward’s aftermath, 30 million farmers would die of starvation or disease.
[http://www.tu-berlin.de/~alltag-china/pics/p_ih.jpg]
Many were “so hungry that they had difficulty sleeping…people became ill…elderly
died” (Chan 25). All this was part of Mao’s grand economic plan: to funnel large
amounts of grain from the countryside to fuel a growing industrial workforce. But such a
plan essentially created a distressing situation in which the peasant masses, the fuel
behind Mao’s revolution for over 20 years, were to work very hard yet live very poor.
My mother, a young woman who worked in Mao’s rural-education institution of
the 1970s, can clearly recount these difficult circumstances:
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“We loved Mao, everyone had to love Mao. And in his Little Red Book of Mao’s
Quotations, which we read several times a day, he told us over and over again that
we had to live in poverty and not strive for economic gain [and] economic
progress because that was how he and his Communist [comrades] had lived
before us. He told us we needed to give up our personal dreams, our personal
desires for happiness…and instead be hungry, be poor so that China as a country
could surpass Britain and America in power. I had always wanted to be a doctor,
many of my friends wanted to be professors, scientists and government officials.
But we gave up these dreams back then, because they were not Maoist. We were
all supposed to be equal, so how could I want to be a doctor, while millions of
farmers toiled everyday in the fields for nothing? Mao was almost a God to us
back then, and anything and everything he said was done without question. In
fact, we never even considered not doing what he asked of us” (Zhou Int. 1).
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A Maoist propaganda poster calling for the Chinese people to read and study Mao’s Little Red
Book of Mao’s Quotations on a daily basis. [www.wesleyan.edu/ dac/exhb/past/fifty3.html]
Ironically, it would be precisely this forced asceticism of the Chinese masses for almost
three decades that would create a society that, upon Mao’s death, would demand and
subsequently be exceptionally receptive to aggressive economic reforms allowing private
property, free enterprise, and economic modernization and westernization.
In urban China, people were considerably richer. Many worked jobs in industrial
facilities and government offices where the pay was above rural standards, and the
majority of urban residents lived in decent housing structures with the full service of
utilities. Still, self-sacrifice and “doing without” were a Maoist expectation of masses.
Thus, once again, we have the fertile ground from which today’s capitalistic economic
policies would rise from. My father, a young man living in Shanghai in the 1960s,
recounts, “We didn’t have TVs, cars or bikes. All we ever received was our daily
necessities. Anything extra traded for extraordinary premiums on the black market. I
remember that bicycles were the one thing we wanted the most. If I had to say whether
life was better or worse under Mao and before Mao, I would say without a doubt that [my
family and I] had a great deal less in Mao’s time than we had before Mao” (Sun R. Int.).
The people of urban China did not toil in the countryside day in and day out, but daily
life was still described to be almost impossible languid and tedious:
“There was nothing to do, nothing to do all day, except work. If you didn’t have
any work, you just loitered around the streets. Mao didn’t think we needed to have
“fun”…and so there were no recreational places, especially not for the younger
people. The pool halls, the bowling alleys, the bars and the nightclubs you see
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today? Nothing like that existed in Mao’s time, absolutely nothing! It was so, so
boring and tedious, every single day” (Sun Int.).
An artist’s portrayal of Jiangsu, an urban industrial city in 1970s China. Notice the artist’s
depiction of the city’s gloom and sense of desolation.
[http://kaladarshan.arts.ohio-state.edu/exhib/poster/PictPow4.html]
Zhao, a preeminent scholar of Chinese sociology who lived under Mao and survived the
Cultural Revolution, supports this view in his “Meanings of Money Nurtured by Nature,”
stating: “I did not enjoy [urban] life. In fact, I hated it. Not that I felt I suffered-I had not
expected a much better life-but because everything was so predictable” (346).
In a country that just a few decades ago had consisted of self-sufficient farmers,
enterprising businessmen, powerful landlords and important statesmen, China under Mao
was a country of state-imposed poverty and forced asceticism. Mao created a situation in
which his people lacked the bona fide socioeconomic competition and economic
incentive that motivated the citizens of other modern countries. People had no reason to
work harder and to be innovative. “The most happiness someone got in [China] was
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when someone got a parsed-out ticket saying they could get a radio or a bicycle,” as
Rong Sun states in his interview. Without the true economic incentives available in a
capitalistic state, Mao actually created a trifling competition for the small things that were
frugally meted out by the state. Duan Sheng Sun, an official in the Shanghai government
for 17 years describes how people participated in this competition as an “escape” from
Maoist egalitarianism; as a way to have more than one’s neighbor, to feel ever so slightly
a hint of economic and material success (Int.). Obviously the Chinese people, suppressed
by a stifling egalitarianism, had subconsciously developed an intense, pent-up desire to
have more, to do better, to be more successful than one’s neighbor. Such a yearning to
attain a “better” life than one’s peers, or even just a “better” life in absolute terms, would
lay a fertile groundwork from which capitalistic economic policies, allowing for private
property, private and free enterprise and open competition, would quickly spring up and
be almost universally accepted in the years to come.
Mao had effectively created a state in which both his rural and urban citizens
were looking to escape from his oppressive asceticism and egalitarianism, a situation in
which the great majority of Chinese citizens were quietly pleading for economic reforms
that would allow material progress and individual success. As Duan Sheng Sun states,
“Those of us in the cities knew what the United States and Great Britain had. We
wanted that…we wanted to be able to start our own companies, to become
managers, to choose our own houses, to buy what we wanted. We wanted to buy
our wives gifts, to buy our kids toys, to buy more than just what we needed to
survive off of. So many of us learned to love Deng Xiaoping because we
understood and appreciated his economic goals. He wanted to make real change
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to China, to bring to us what was making America and Great Britain so great and
so powerful. We loved him for that” (Int.)
Of course, what Duan Sheng Sun and his fellow citizens desired and loved so greatly
were economic policies aimed at modernization, westernization and real progress and
growth. Deng Xiaoping understood what was lacking in his country, and Deng
implemented precisely these policies upon Mao’s death to the great delight of his people.
Essentially, the Chinese people’s call to economic individuality and freedom, driven by a
pent-up lust for all that they had done without for 30 years, would be the impetus behind
the development and quick implementation of China’s modern-day economic policies,
policies that have quickly allowed China to evolve into the dominant economic player
that it is in today’s global marketplace.
The Cultural Revolution’s Destruction of Traditional Values
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A poster advocating the ideals of the Cultural Revolution. It says, “This Time It is Essential that the Great
Cultural Revolution of the Proletariat Immediately Move to Strengthen the Dictatorship of the Proletariat,
Guard Against the Restoration of Capitalism, and Establish Socialism” [http://kaladarshan.arts.ohiostate.edu/exhib/poster/PictPow4.html]
Mao’s ideologies and the far-reaching socioeconomic policies born from them
created a fertile foundation for the China of today. But there is one crucial event in Mao’s
regime important enough to justify its own analysis, that made an equally, if not more
important contribution to China’s post-Mao economic mindset and subsequent
development. This event, often considered to be the culminating and defining event of
Mao’s decades-long reign, was his Cultural Revolution of 1966-1968.
Mao in the 1960s was alarmed by what he saw as his country’s corruption and
self-seeking among his party members, bias inherent in his social programs, neglect of
the peasants who had brought the revolution and “ideological softness of China’s young
people” (yuan xi). In this period, it became ever more clear to Mao that his party
members, or cadres, were eating and living better than the vast majority of his people. An
idealist at heart, Mao refused to acknowledge that corruption was inherent in the Marxist
economic and political system. Furthermore, Mao saw that his own party’s focus had
reverted away from his core supporters, his original revolutionaries: the peasants. The
better part of his country’s social services and funding went to the cities, originally
strongholds of Kuomintang resistance against Mao and his forces. Mao went so far as to
believe that his most trusted comrades of many years, Liu Shaoqi and Deng Xiaoping,
were “revisionists” and “capitalists” (Walder Lect.).
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A propaganda poster advocating the ‘smashing’ of Liu Shaoqi’s and Deng Xiaoping’s
‘counterrevolutionary lines.’ [http://kaladarshan.arts.ohio-state.edu/exhib/poster/PictPow1.html]
And so Mao, never content in giving up revolution, put forth his Cultural Revolution, a
class struggle against the “enemies” of socialism. But who were Mao’s enemies to be? As
history tells, Mao made his enemies essentially anyone who had not shown a complete
and unwavering support to his radical revolutionary line. In the next several years, Mao’s
“cleansing” of his state would result in over one million deaths, 30 million imprisonments
and countless million more torture sessions. Mao and his Red Guards had “completed”
their Cultural Revolution, taking an immense toll on the psyche of the Chinese people.
In this chaotic period, China degenerated into “gang wars, joyrides, souvenir
hunts and orgies of destruction,” and was on the verge of Civil War (Yuan xix). Churches
were being burnt down throughout the country. Government offices were being raided
and even attacked by their citizens. Houses of the more “well-to-do” were robbed and
smashed to the ground. Mao had created an all-encompassing chaos in which people were
forced to turn on their peers, their closest friends and even their own family in an effort to
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not be labeled anti-Mao themselves (Walder Lect). Mao would tear apart China’s
traditional societal fabric, breaching a Confucian value system of loyalty to and trust in
family and friends. Not surprisingly, this breach of China’s millennium-old, deep-seated
values would go on to create a profound disillusionment with Mao and all that he stood
for.
A scene from Mao’s Cultural Revolution. Top party officials are denounced in a day-long rally.
[http://www.bordersstores.com/features/feature.jsp?file=redcolornewssoldier]
Yuan in his autobiography, Born Red, provides a vivid picture of the unchecked
social chaos of the Cultural Revolution period. He relates to us the time he and his
classmates were personally encouraged by Mao to accuse their teachers of “revisionism”
and “anti-Mao thoughts,” though they were in no way guilty of such crimes (55). He goes
on to say that within a year, workers were denouncing their peers, friends were accusing
friends, and sons were even accusing their own fathers of imaginary crimes against the
state. Yuan, in fact, recalls when he denounced his own father for being anti-Mao, thus
permanently ruining his relationship with his father and his whole family:
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“‘Papa, you’ve always taught me to be honest. How can you play such
tricks?...No wonder people call you a capitalist-roader!...You try to suppress
revolution!...I won’t be a capitalist-roader’s son! I’m a revolutionary! I want to
make revolution!’” (Yuan 247-248)
Duan Sheng sun also recounts this breakdown of loyalty and trust between friends and
family in this turbulent time:
“In my office, we were told to find 3 Rightists for every 100 workers. But there
were not 3 in 100, not even 1 in 100. We were all loyal to Mao! At first, no one
knew what to do, and no one accused anyone. But then the party officials came
back and told us that we had to accuse someone, or else we would all be charged
with harboring anti-Mao workers! So as you would probably expect, people
started accusing anyone who they had some personal grudge or jealousy
against…their bosses, coworkers they didn’t get along with. My boss accused me,
so I accused him. What else could I do? That was how it went on for months and
months. Many people were sent away to hard labor in Western China or to prison.
Soon, our office was almost like a graveyard. No one had faith in anyone else in
the office, and no one wanted to speak to each other” (Sun D Int.).
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Another scene from Mao’s Cultural Revolution. After a day-long hearing, the convicted anti-Mao
“revisionists” are ordered to 2 years of hard labor in Western China.
[http://www.bordersstores.com/features/feature.jsp?file=redcolornewssoldier]
The Chinese people that arose scathed from Mao’s Cultural Revolution were not
the same. “They had become people with no shame” (Kuhn 107). People had lost sight of
the ethical standards that their society had been built on for hundreds of years. There was
no longer a national value system founded on ideals of family, loyalty and trust:
Confucian ideals that were originally adapted into Mao’s ideologies in his call for mass
unity and collective thought. Religion in its traditional forms had been torn apart and
essentially labeled as anti-Mao in all of its forms and practices.
Mao had essentially demolished values that had exemplified the Chinese people
for more than a millenium. Hence, the majority of Chinese were deeply disillusioned by
Mao and his view of china, and even felt personally betrayed (Sun D Int., Sun R Int. and
Zhou Int. 2). “Mao had told us to believe this and that for 30 years, then he made us turn
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on our own beliefs. We were very confused, very mad at him. He had deceived us,” as
Rong Sun testifies.
Mao, for 30 years, had preached loyalty and devotion to family and friends,
together with the collective asceticism and communal unity that we have afore
mentioned. The Chinese masses, disillusioned by the treachery and disloyalty in Mao’s
Cultural Revolution, would bitterly react to Mao’s breach of their values by developing
new ethical standards in opposition to Mao’s. Duang Sheng Sun describes these new
standards for us: “‘We wanted to betray everything we’d been taught by
Mao…everything…equality, trust, comradeship…and we learned to believe in the
opposite...materialism, material pleasure, having money, having what my neighbor didn’t
have. If [Mao was] going to take away my friends, and make me fear my coworkers and
acquaintances, what could I turn to for happiness other than the materialistic things that
[Mao] hated so much?” (Int.)
Materialism, striving for material gain, money, increased pleasure, competition:
such is a basic dictionary description of capitalism and a more “westernized” economy. It
was what the Chinese people turned to in the wake of the Cultural Revolution’s chaos,
and it would be what they received in the years to come following Mao’s impending
death.
With the ethical standards and pseudo-religious values of generations in
shambles, the people of China found a haven in materialism, in a “blind chase after
money” (Yan quoted in Kuhn, 136). This unbridled materialism that formed in the postMao period, described to us ever so clearly by Massonnet in The New China: Money,
Sex and Power, would be one of the key developments that would drive the people’s call
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for aggressive economic policies of a capitalist and western flavor. Unable to rediscover
the contentment and pleasure in previous relationships of kin, friendship and
comradeship, the Chinese people learned to live for material possessions, economic
success, achievement in terms of the dollars in their bank accounts and the size of their
houses – objects that necessitated a new economic system of new economic policies
allowing for private property, private enterprise, western influences, western imports and
all the materialistic ‘joys’ of capitalism.
Looking Forward
As China prepares itself for this century on the verge of being a full-fledged world
power, scholars and economists around the world will address what they perceive to be
its potential, its direction, its future.
Economists will unquestionably analyze trade deficits and surpluses to figure out
China’s economic health in the years to come. They will push forward the wide
discrepancy between rural vs. urban development in China in the last several years for a
wide range of purposes and arguments. Bankers and investors will look at foreign
investment numbers and the ups of downs of the Chinese markets to get a sense of market
saturation, stability and of course, potential.
Politicians will examine China’s reaction to its new position at the forefront of
global matters. They will attempt to predict whether China will be the aggressor or the
victim in international affairs, especially concerning Taiwan and the United States. They
will analyze every step China takes in the funding and development of their military and
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weaponry. Furthermore, they will try to discern how China’s people view their own
leaders and other leaders of the world.
Social scientists, meanwhile, will focus on questions with far-reaching
implications of how Western thought will affect the most populous nation in the world.
They will attempt to understand just how Chinese culture will ultimately adapt to the
countless pressures of modern society, of a modern economy, of an international global
market.
In the complex and often tedious search for the answers to these important and
ever so compelling questions, it is often easy to overlook the Chinese people themselves,
along with a culture and history that is difficult to fully grasp and comprehend. But the
right answers to these questions can only be found with a thorough analysis of the
Chinese people and all that has shaped them in the past. For example, in this essay, it
took a thorough understanding of China’s complicated economic and sociocultural
history under Mao ZeDong to bring forth a distinctive and persuasive argument as to
what were the underlying impetuses of China’s modern-day economic policies and rapid
modernization today.
So in the many important studies and queries that will be conducted in China’s
name in the years and decades ahead, the world must not forget the social, cultural and
economic history of the Chinese people, and the complex circumstances through which
they lived under one of the most multifaceted and unpredictable leaders in world history.
With the contributing factors to China’s modern-day economic policies and
ensuing economic progress fully described and rationalized, the emphasis now turns to a
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thorough description of the economic policies instated following Mao’s death, and their
significance in China’s modernization and growth, today and tomorrow.
The Aftermath of Mao’s Death and the Beginning of Economic Reforms in the
1980s
Deng Xiaoping, revolutionary elder in the Communist Party of China who served as the "de facto" ruler of
the People's Republic of China from 1976 to 1997 [www.iisg.nl/~landsberger/dxp.html]
The death of Mao marked an epochal turning point in Chinese politics. The
struggle for succession that ensued led to the emergence of Hua Guofend, Mao’s
‘anointed successor’, as party chairman and state premier. But Hua was soon challenged
by surviving victims of the Cultural Revolution under the leadership of Deng Xiaoping,
the deposed former vice-premier. Termed pragmatists, the new leaders question the value
of the Cultural Revolution and of Mao’s policies of continuous class struggle and
25
uninterrupted revolution. They doubt the efficacy of Mao’s economic adventurism, which
during his twenty-seven year rule failed to life China from poverty and backwardness.
These pragmatists vow that the Cultural Revolution must never be allowed to
recur. They advocate unity, stability, discipline, and greater domestic liberty and
international cooperation. Most important, they have launched a program of
modernization under a younger leadership and tried to stimulate enthusiasm for work
through material incentives. Deng’s “Economics in command” has replaced Mao’s
“Politics in Command.” The adoption of the principle, “From each according to this
ability, to each according to this work,” reflects the new emphasis on expertise. Foreigntrained intellectuals, despised in the past, are now cherished as patriots (Ash and Kueh
21-22).
Deng and Mao Zedong repeatedly clashed when the Great Leap Forward (1957-1958) failed.
[www.iisg.nl/ ~landsberger/dxp.html]
The pragmatists gained power at the expense of Hua and the Maoists. Their
crowning victory came in June 1981 when the Sixth Plenary Session of the Eleventh
Central Committee officially affirmed socialist economic development as the central task
of the party and government under the new collective leadership of party Chairman Hu
26
Yaobang, Vice-chairman Deng Xiaoping, and Premier Zhao Ziyang. The Cultural
Revolution was completely repudiated, and Mao was held chiefly responsibly for its
excesses, while the party assessed itself a fair share of guilt for not having prevented his
mistakes (Hsu 47-48).
Soon after his death there was wide agreement that there were fundamental
defects with the over centralized economic system which China had adopted under Soviet
influence. The following view is reasonably representative: “Such a structure put the
national economy in a straightjacket, discouraging initiative in all quarters, causing
serious waste of manpower, materials and capital, and greatly hampering the growth of
the productive forces. For many years, this was a major cause of the slow pace of the
growth of the Chinese economy and the improvement of the living standards of the
Chinese people” (Hsu 64). China’s reforms in the 1980s have been likened to a person
crossing a river who moves forward from stone to stone without a clear idea of where the
next one is since it is hidden under the water ahead.
Two stages of reform
Overall the first decade of China’s economic reform since Mao’s death was
outstandingly successful. However, by 1988 the reforms were far from complete and
many problems had emerged. China’s economic reform can be divided into two stages,
although there is no meat boundary between then. The first stage was characterized
mainly by relatively simple institutional changes in which reform was widely welcomes
by the producers who were directly affected. This, broadly speaking, applied to the
agricultural reforms and the reform of the small-scale non-farm sector. In the second
27
phase of reform attention switched to large and medium-sized state-run enterprises. These
enterprises are much less flexible than agriculture and small non-farm enterprises, and
their workers and managers form privileged elite for whom the reforms increase
uncertainty (Harvie 36-37).
The Need for Agricultural Revitalization
Tentative reforms began in all sectors in the late 1970s, but in the early stages the
pace of advance was much the fastest in agriculture. The leadership appreciated the
fundamental importance of agriculture in a poor economy like that of China. Moreover,
peasants responded enthusiastically to each step in the rural reform, feeling that they
could only gain or buy it (Wang 98). In part also, the agricultural reforms were relatively
simple. They began tentatively contracting land out to groups within the production team,
but progressed rapidly by 1983 to full-scale contracting out of collective farmland to
individual households. This was, in effect, the largest and most egalitarian land reform in
history, since land was mainly divided among China’s 200 million rural households on a
locally equal per person basis. “Decollectivation” did not apply to many types of large
agricultural means of production or to some important collective activities. However, the
rural labor process underwent a revolution. Peasants were now working for themselves,
and could retain any surplus produce or income after meeting compulsory state quotas. A
further potential stimulus to peasant incentives was provided by a sharp improvement in
the intersectoral terms of trade for peasants in the late 1970s, although the improvement
in the 1980s was much slower. The far-reaching changes in rural economic organization
28
provided a breakthrough in people’s thinking about the Stalinist system of economic
administration (Babkina 143-146).
The rural economic reforms allowed peasants such as these to profit to benefit from their hard labor.
[www.postcardman.net/ china_mission.html]
The enormous rise in agricultural labor productivity greatly increased the availability
of rural surplus labor. The controls on the collective non-farm sector were relaxed in the
early 1980s. Enterprises obtained greatly intersected entrepreneurial freedom, and with a
short time collective non-farm enterprises operated in a competitive environment. The
private sector was legally permitted and from early in the 1980s a relaxed official attitude
was adopted towards private labor hiring. As early as 1983 private enterprises with
several hundred employees existed. Indeed, in formerly less prosperous parts of China
such as Wenzhou, the private enterprise became the dominant form of rural non-farm
business organization by the mid-1080s. (Nolan and Dong 198). While the collective
enterprise remained important in the more advanced areas, such as southern Jiangsu, a
wide variety of new subcontracting arrangements was introduced. In the small-scale non-
29
farm sector, as in agriculture, there was tremendous popular support for the increases
operation of market forces, which people perceived could for some time only mean in
increase in employment opportunities and family income (Nolan and Dong 201-203).
Opening Up to the World
A steady movements towards opening up to an international economy was apparent during the Post-Mao
era. [www.iisg.nl/ ~landsberger/ff-su.html]
In some respects, the greatest single change in China’s political economy after
Mao’s death was in the attitude towards the international economy. The shift towards an
open policy away from Maoist isolationism took a big step forward with the 979 law on
Chinese Foreign Joint Ventures (Liew 221). This was the first of numerous laws intended
to encourage foreign investment.
A radical shift also occurred in the 1980s in China’s attitude towards to foreign
trade, involving fundamental rethinking of its role in economic development. Instead of
being regarded as a sphere for the exploitation of poor countries, China’s leadership
shifted to an explicit recognition of the enormous contribution that international trade can
30
make to economic advance. China has an abundance of certain natural resources, a large
pool of low-wage surplus labor and many areas with strong commercial and
manufacturing traditions (Moore 178). Moreover, some potential trade competitors from
East Asia were moving into more sophisticated exports with higher value-added per
worker as labor costs rose. China’s leaders were acutely aware that they had missed out
on a great historic opportunity to expand exports rapid only in the 1960s and 1970s
(Fukasakum, Wall, and Wu 99). Given the right set of policies there were considerably
opportunities to expand export earnings, and hence the capacity to import, even in the
more slowly growing world economy of the 1980s. A number of measures were taken to
enliven the over-centralized administration of international trade so that more direct
contacts could be established between domestic enterprises and international buyers and
suppliers. Alongside some decentralization of the organization of foreign exchange
earned for exports. The extent of the ‘airlock’ between the domestic and the world
economy was much reduced compared with the Maoist period. Moreover, the increased
role of market forced within the domestic economy meant that domestic enterprises were
keener to take advantage of opportunities to profit from international trade (Moore 185).
Reforming Industrial Enterprises
31
State-owned enterprises like this industrial facility during the late 1970s and early 1980s was still in need of
industrial reforms. [http://exhibits.slpl.org/lpe/data/lpe240029608.asp?thread=240029535]
In the late 1970s over 800 per cent of the value of industrial output was still
produced in state enterprises, so that improving their effectiveness was of central
importance to the long-term success of the reform (Nolan and Dong 32). However, their
reform proved more difficult to accomplish than that of the collective and private sectors.
Nevertheless, considerable changes did occur in the first decade of the post-Mao reforms.
The overall objective of the reforms was to increase enterprise autonomy, raising the
efficiency of enterprises through new incentives to compete in the marketplace. The
attempts to do this can be divided into two phases with the turning point being the
‘Decision of the Central Committee on Reform of the Economic Structure’ in 1984
(Noland and Dong 40). The main method with which it was hoped to increase the vitality
of enterprises was increased rights to retain profits, which spread rapidly to most state
enterprises in the early 1980s. However, this did little to increase enterprise incentives.
Given the still fundamentally unreformed nature of the Chinese industrial price system,
32
profits were a poor indicator of enterprise performance, and profit retention became the
subject of protracted bargaining between the enterprise and its superior planning
authorities. Rather than work to cut costs to raise profits the system placed a premium on
cultivating connections to obtain through bargaining a better contracted profit retention
share. Beginning in 1983, an attempt was made to circumvent these difficulties by
substituting a series of taxes for profit sharing. However, because enterprise and sectors
faced unequal market conditions, particularly in the form of prices that were more or less
divorced from enterprises’ costs of production, the crucial tax was the ‘adjustment tax’
which itself became the subject of protracted bargaining (Hsu 123-124).
By the mid-1980s it was obvious that attempts to reform industrial enterprises
would be unsuccessful under the existing price system, and in October 1984 the Central
Committee announced that price reform was ‘the key to reform of the entire economic
structure’. A considerable reduction in state price control occurred in 1985. However,
overnight elimination of price control in a system where prices bore little relationship to
supply and demand would have produced chaos. Accordingly, the decision was taken to
introduce a ‘dual track’ system, with part of the enterprise output sold at state fixed prices
and part a either free-market. By 1987, the production sold at state fixed prices had fallen
to around 50 per cent and 65 per cent respectively (Nolan and Dong 67-71).
Main achievements of economic reforms
The sharp alteration in China’s economic institutions greatly increased
competition, shifted resource allocation and considerably increased labor intensity of
much of the workforce. Although still far form a free-market economy the role of the
33
market in China by the late 1980s had vastly increased compared with pre-1976. this
change was reflected in an accelerated growth rate and a much altered growth pattern in
the first decade of reform. Owing to the relatively large number of people entering the
reproductive age groups from the mid-1980s to the mid 1990s (an ‘echo-effect’ from the
post-Great Leap baby boom) and the many difficulties, both short- and long—term,
associated with trying to implement too harsh a population control policy in the early
1980s, China’s natural growth rate of population was rising in the late 1980s, but was still
much below the long-term trend rate of the Maoist period (Nolan and Dong 88-89).
At least as important as the overall acceleration in the growth rate was the striking
change in the balance of growth. Agricultural growth exploded in the early 1980s as the
rural reforms unfolded. In the early 1980s the average annual growth rate of agricultural
output was close to 10 percent, an extraordinary high future for a country as large as
China with limited possibilities to export farm produce. Even over the whole decade the
growth rate net of net agriculture output was almost three times the long-term growth of
the Maoist period (table 1.1).
During the reform decade the gross value of light industrial output accelerated to
a real annual average growth rate of over 14 per cent, while that of heavy industry
declined to around 10 per cent (Table 1.1). A number of factors contributed to this. On
the demand side urban and rural purchasing power grew rapidly, and the income
elasticity of demand for light industrial output was mostly higher for light industry’s
products than for the direct consumption of food. On the supply side, the production of
light industrial inputs (e.g. cotton, leather and timber) from agriculture grew rapidly, and
much capacity shifted form heavy to light industrial production. Moreover, the overall
34
productivity of capital almost certainly increased (Table 1.2) so that less output was
required of the capital goods industries to produce a unit of final product.
Enormous changes occurred in China’s international trade after Mao’s death.
Following a long period of slow export growth and a steadily falling share of world trade,
China’s export performance improved markedly in the 1980s. In volume terms, China’s
export growth rose from 6 per cent annum in 1968-80 to 12 per cent in 1980-6, despite
the fact that this was a period of great difficulties in world trade. China’s share of world
trade rose from 0.8 per cent in 1978 to 1.7 per cent in 1987, and the ratio of its exports to
GNP rose from just 5 percent in 1978 to 13 percent in 1987 (Fukasakum, Wall, and Wu
276), a turnaround which both assisted domestic growth and was a reflection of improved
domestic supply conditions.
Average annual growth rate (%)
1978-87
10.8
6.5
1953-78
7.4
Total social product
2.9
Gross value of
agricultural output
10.6
11.9
Gross value of industrial
output
13.0
10.0
Heavy Industry
8.7
14.1
Light Industry
5.7
9.0
National income (net
material product)
1.9
6.0
Agriculture
10.5
10.4
Industry
5.9
12.8
Construction
6.3
9.5
Transport
3.2
9.9
Commerce
2.2
1.3
Population
[Table 1.1] Key economic indicators, all China (output and income data all at
comparable prices) (Nolan and Dong 92)
35
Year
Increase (Yuan)
1953-7
32
1958-62
1
1963-5
57
1966-70
26
1971-5
16
1976-80
24
1981-5
41
[Table 1.2] Increase in national income per 100 yuan in accumulation.(Nolan and
Dong 93)
Further Economic Reforms in the 1990s and Unresolved Problems from the First
Economic Revolution
China’s economic performance in the 1980s was certainly impressive.
Quantitative indicators readily attest to the rapid growth, major structural changes and
unprecedented improvements in mass living standards which took place during these
years. A consensus view would no doubt attribute much of china’s economic success to
the reformist thrust of its economic policies. But those same reforms have been the
source of new tensions or have left unresolved other problems inherited from the past.. It
also helps explain the caution which characterizes many of the judgments of China’s
future economic prospects. Economic development in the first half of the 1990s was
dominated by the impact of the tour of southern China, which Deng Xiaoping undertook
at the beginning of 1992. In the wake of more than two years of economic retrenchment,
prompted by severe inflationary pressures in 1988-89, Deng used his tour to advocate
renewed reform and accelerated growth (Cheng 33). The choice of Guangdong as his
principal destination was not coincidental: this was, after all, the province most deeply
affected by the reforms (especially the open door strategy) implemented in previous
years. Nor was it coincidental that he should have described Guangdong as the “leading
36
force for economic development” and urged it to emulate Taiwan, South Korea, Hong
Kong and Singapore in order to become the fifth “little Asian dragon” (Cheng 44-45).
Deng’s highly-publicized remarks during his southern tour were a characteristic
response to China’s economic circumstance, entirely in keeping with his former beliefs.
They demonstrated his continuing commitment to the policies of reform and opening up
and reaffirmed the central importance of economic work in promoting national
development. In particular, the need for rapid economic growth once more emerged as a
clear priority, with Deng warning that “…low-speed development is equal to stagnation
or even retrogression” (Moore 168).
[www.iisg.nl/ ~landsberger/dxp.html]
Deng’s calls for accelerated reform and development defined the major thrust of
subsequent economic policy. At the Fourteenth National Party Congress (October 1992),
they were translated into official demands for the creation of a “socialist market
economic system.” To many this seemed an inherently ambiguous formula. But it
37
signaled clearly enough a determination to move even further towards reliance on prices
and competitive markets in allocating resources, albeit in a context in which public
ownership and macroeconomic regulation from the centre would each enjoy a continuing
role (Babkina 54-55).
Accelerated growth did characterize China’s domestic economic performance in
the wake of Deng’s southern tour. Indeed, in their own terms the figures highlight a
dramatic contrast between the period of retrenchment (1989-91) and the years of renewed
expansion from 1992.
Moreover, the immediate response to Deng’s advocacy of an even wider open
door policy was also overwhelming. In particular, in 1992 and 1993, utilized foreign
direct investment increased by some 150 percent per year (Ash and Kueh 44). The
significance of such expansion is suggested in the fact that by 1993, foreign –funded
enterprises accounted for more than 10 percent of national gross value of industrial
output and almost 35 percent of total trade (Ash and Kueh 45).
To deny the remarkable record of China’s growth performance in the first half of
the 1990s would be facile. That such an enormous economy should become the fastestgrowing in the world is evidence that the impressive quantitative indicators concealed
major underlying difficulties – many of them familiar from the 1980s, or in some cases
even earlier. It is noteworthy, for example, that in 1992 and 1993 the accumulation rate
soared to a level unequalled since the Great Leap Forward. The very rapid rates of
industrial and economic growth were based on excessively high rates of fixed asset
investment; they also gave rise to increasingly severe domestic raw material shortages
and infrastructure bottlenecks. In 1992, there was a sizable increase in the fiscal deficit
38
(by 36 percent), which remained largely intact in 1993, and meanwhile, they money
supply continued to expand at a high rate (Ash and Kueh 77). The buoyant trade
performances concealed a deterioration in the balance of merchandise trade, which in
1993 took it into deficit for the first time since 1989 (Ash and Kueh 78-79).
Against the background of these and other difficulties, it is not that the most
severe cost of the unprecedented growth of the early 1990s was the re-emergence of
serious inflationary pressures. In the middle of 1993, a first round of measures was
introduced in an effort to restrain inflation. Their impact was positive, but short-lived,
and by the end of 1994, the inflation rate was still excess of 25 percent (Harvie 232).
Renewed growth of fixed asset investment and consumer spending, as well as further
price liberalization measures, were amongst the most important contributory factors. In
the end, however, they were no more than symbols of the seminal problem, arising form
the structural contradictions inherent in the transition from a planned system to a market
economy (Harvie 244).
Move towards Privatization
In the early 1980s two-thirds of the industries in China were owned and operated
by the government, a proportion that state-owned industries is expected to retain well into
the next century (Waters 3). In the past the government dictated the kinds and quantity of
products that these industries were to produce and set the price for the end product. At the
end of the year any deficits incurred by these industries were subsidized by the state
government. Historically, a large percentage of these industries operated in the red,
forcing the government to allocate large sums of money to make up the losses (Waters 5).
39
Early in the 1990s, the government began experimenting with a process of
separating ownership and management of state enterprises. Ultimately, the people of
china, through their government, will retain ownership of these important industries, but
their management will be in the hands of each industry manager. Each manager will have
full responsibility for the profitability of his or her company. In a step-by-step manner,
the managers’ new role will include production planning, operations, pricing and labor
management. Under the new policies managers of state-owned organizations will be able
to hire and fire workers. The trend will be away from guaranteed life employment, a
practice that is known as the “iron rice bowl.”1 However, before this goal can be fully
implemented, China must develop a workable social security system and unemployment
insurance program that will replace the “iron rice bowl.” If a company needs additional
funds the managers will have to rely on the financial markets and not the state
government for help. If the company runs a serious loss, the industry will be allowed to
go bankrupt. The government anticipates a revitalization of these major industries,
making them more competitive and profitable in the evolving market economy. Thus, in
the coming years foreign investors will be able to work with these industries much as
they do with private businesses in the West. The government needs and wants help with
the management of many of these industries (Wong and Lu 234-240).
China’s Future Economic Progress
The “iron rice bowl” describes the country’s development policy which is life employment through the
retirement years and includes housing facilities for the employee and family.
1
40
The remarkable economic growth in China has led to a modernization and westernization of the major
cities in China, apparent in this electronics store in Shanghai.
[b3g.org/booth.htm]
Thanks to its success in market-oriented economic reform, the Chinese economy
has chalked up an annual rate of 9.7% real growth during 1979-2000. In absolute terms,
China’s total GDP sextupled between 1980 and 2000; and its per capita GDP quintupled.
By 2000, China’s total nominal GNP exceeded US$1 trillion, marking it the world’s
seventh largest economy. In terms of PPP (purchasing power parity), the Chinese
economy is new the world’s second largest after the USA – although the PPP measures
tend to overstate China’s real GNP just as the conventional approach has seriously
underestimated it (Wong and Lu 10).
On account of its successful open-door policy, China’s economy has also
achieved greater integration with the global economy. Over the past two decades, China’s
exports have increased at a hefty annual rate of 17%, from US$13.7 billion in 1979 to
US$250 billion in 2000. China has now become the world’s seventh largest exporting
economy. China’s efforts to attract foreign direct investment have been even more
successful. From 1988 to 2000, actual or utilized foreign direct investment in China
increased at an annual rate of 23% to reach a cumulative total of US$339 billion. No
41
other country in the world, besides the United States, receives more foreign direct
investment. As a result of its success in exports and FDI, China’s total foreign exchange
reserves in mid-2001 reached US$180 billion, the second largest in the world next to
Japan (Wong and Lu 11).
China’s economic success is also reflected in several important physical
indicators. China not only tops the world in grain production (necessarily so because of
its large population) but also in coal, steel and cement. Before Deng Xiaoping introduced
economic reform in 1978, home electronics manufacturing was trivial in China. Today,
one in four of the world’s color TV and one in five of the world’s fridge are now
produced in China. At the start of the economic reform, the whole of China counted only
2 million fixed-line telephone subscribers. By early 2001, China has 160 million fixedline telephone subscribers, in addition to 111 million mobile phones and 45 million
pagers. By the end of 2001, China expects to have 40 million people online as Internet
users, just slightly behind Japan. Not just in the “old economy”, China is also making
rapid progress in “New Economy” areas (Wong and Lu 15).
Economic development in the Asia-Pacific Region
42
China’s GDP growth rate is the fastest growing in the world.
[news.bbc.co.uk/.../ newsid_520000/520874.stm]
China’s immediate economic goal is to achieve the status of a developing country
early in the twenty-first century and become a developed country before the end of that
century. China will probably achieve these goals on schedule and become the center of
the Asia-Pacific region for several reasons, namely: China is currently the fastest growing
economy in the world and will maintain that momentum well into the next century; China
is also the largest country in the world, in both size and population; located in the heart of
the Asia-Pacific region, the country is blessed with large quantities of natural resources;
while its per-capita income is low by Western standards, it has been steadily rising since
the country opened up the outside world in 1979; and finally, China’s gross domestic
product (GDP) has been growing at an annual percentage rate of 9.3 percent since 1980
(Wong and Lu 22).
China currently enjoys social, economic, and political stability which it can
expect to maintain despite critical reports that continually appear in the Western press.
China has achieved this stability largely through the government’s determination to
eliminate poverty and improve the welfare of all its people.
By the end of 1994, China’s aggressive economic approach had already attracted
more than 206,000 foreign-funded enterprises. Between 1993 and 1994, about 40,000
new foreign enterprises were registered nationwide with no sign of abating. China’s
success in attracting foreign investors to its market, covering all types of businesses, is
the envy of all developing countries throughout the region and the world (Wong and Lu
24).
China’s Economic Goals
43
China’s blueprint for achieving economic leadership in the twenty-first century
includes a number of major reforms that will eventually open all of the country to the
outside world. In addition, the government continues to make it easier to do business in
China, reducing and eliminating trade barriers and also providing incentives to a wide
range of businesses that will help the country meet its economic plans. The government
has decentralized many of its investment decisions and has allowed interregional and
interprovincial competition to replace much of the micro-planning that had traditionally
been the function of the State Planning Commission since 1949. The government now
offers all kinds of incentives to attract foreign investment in such areas as infrastructure
and high-tech manufacturing (Wong and Lu 33-34).
China has also embarked on a number of programs and projects to develop its
central and western regions. Government officials have placed a high priority on
eliminating the poverty faced by 65 million Chinese at the turn of the century. In
addition, China has launched major initiatives to double its agricultural production in the
21st century and feed 22 percent of the world’s population with only 7 percent of the
globe’s available land. In the process, the government has undertaken to reduce the total
number of people living off farming in rural areas. Local and provincial governments are
endeavoring to mechanize farming as well as implement various methods of scientific
farming. Government leaders are also promoting local industries such as food processing,
light manufacturing, and retailing in order to absorb the surplus farm labor in all rural
areas (Wong and Lu 39).
44
China’s Investments Opportunities
The technology and telecommunication industry has already made great strides. Shown is the Shanghai
China central Market for telecommunications products.
[www.ripam.com.cn/.../ ]pm/telecommunication.htm]
In order to achieve the country’s economic goals, representatives from China are
traveling around the world on trade missions promoting the economic opportunities that
are available to foreign businesses wishing to invest in China. Furthermore,
municipalities, provinces, and autonomous regions are competing against one another to
attract foreign investments to high-priority projects in their backyards. The government is
not only soliciting foreign investments but is also searching for needed material and
equipment to implement its ambitious plans. Finally, these trade missions also include
contacting purchasing managers in foreign firms in order to market their products and
services.
45
In 1995, government officials announced their plans to import products valued at
US$1000 billion before the turn of the century. This announcement, made for the benefit
of industries around the world, alerted interested parties to opportunities in the Chinese
market (Wong and Lu 42-43).
Wu Yi, minister of Foreign Trade and Economic Cooperation, has stated that
China continues to publish industrial policies in a timely manner in order to provide
guidance to foreign investors (Wong and Lu 44). During the balance of the 20th century
and into the next, the government will focus on agriculture, energy, infrastructure,
communication and materials, using advanced technology. The government will also
encourage foreign investments in the relatively backward areas of Central and Western
China.
China’s government is also endeavoring to change its industrial mix, which
currently is weighted heavily with low-value added products. Instead of promoting such
industries as clothing, toys, and novelties, the government is placing high priority on
attracting high-tech industries that utilized the most advanced technology. The
government is seeking to attract major segments of the electronic industry by offering
special incentives for offshore investors. Government plans are to spend $12 billion in the
next eight car-markers in ventures to build up its auto industry. Plans are to make sedans
and small cars. China’s ultimate ambition is to be the world’s largest automobile
manufacturer during the 21st century (Waters 202).
Now that the Central Planning Commission has published its ‘wish list’ of
investment needs, all metropolitan areas, provinces and autonomous regions are
conducting trade shows with other promotional programs in an effort to match Chinese
46
business people with potential foreign investors, marketers, and procurement officials.
Each of the major industries, such as telecommunications, energy, and mining, offers its
own trade shows and seminars and also sends trade missions to developed countries in
search of needed resources ranging from material to money. Opportunities for
enterprising businesses from all corners of the globe are seemingly endless.
Conclusion
The China that Mao ZeDong built was a China that stood for socioeconomic
egalitarianism, material asceticism and continual social revolution in the form of
upheavals such as the Cultural Revolution. In Mao’s mind, political and social reform
before economic reform was almost always the order of the day, especially in the 1960s
and beyond. For decades, his people gave him what he wanted, and China stood as Mao
ZeDong’s China.
But upon Mao’s death, China became obsessed with the notions of economic
expansion, modernization and westernization. The new order of the day suddenly became
aggressive economic policies focusing on private property, free enterprise and
international trade. How did this switch in gears come about? As previously explained, it
was precisely Mao and his own policies that were ultimately responsible for this sudden
and dramatic shift.
Mao’s constant call for asceticism from his rural and urban citizens would force
them to make do with so little for so long that they would come to demand and
subsequently be very receptive to economic policies and programs emphasizing semicapitalistic ideals. Moreover, Mao’s Cultural Revolution would tear apart traditional
47
Confucian value structures of trust and loyalty to the point that the Chinese people would
inevitably turn to opposing value structures emphasizing material gain and economic
success: ideals that necessitated economic policies that would allow for more opportunity
and more progress.
The man who came to give the Chinese people what they wanted was Deng
Xiaoping. Chosen to be China’s paramount leader in 1978, Deng would provide his
people for the next two decades with the modern, near-capitalistic economic policies and
programs they so greatly desired.
The public’s reaction to these new policies was overwhelmingly positive. Long
stifled under the strict regimentation of Mao, the people yearned for civil and economic
liberalization, and they have gradually come alive to the new order. For all their respect
for the Great Helmsman, Mao Zedong’s passing was in many ways a relief, slowly lifting
the heavy burden of omnipresent politics from their shoulders. They welcome the
changes.
However, despite public support of the new leadership, the pragmatists’ victory
remains incomplete. Of its 38 million members, about half joined the party and rose to
positions of responsibility during the Cultural Revolution decade. This large group’s
indifferent attitude toward the new policies has prompted the expression “The two ends
are hot, but the middle is cold.”
The changes in China signify a shift of approach within the framework of the
Chinese Communist system. Rejection of Maoist class struggle and Mao’s adventurous
economic policies with the adoption of a more realistic modernization program has
caused a new order to emerge, and the Maoist era to end.
48
It is not just that the Chinese economy has achieved spectacular growth
performance over the past two decades. But it is also sufficiently clear that China’s
economy is carrying over its high growth momentum into this century, at least for the
first two decades. Unlike the other smaller East Asian economies, which can easily
exhaust their growth potential, China is a large and diverse continental-sized economy. It
has sufficient internal dynamics to sustain growth for a much longer period. This is
already evident in 2001 when economic growth in most parts of East Asia has plunged
due to the slow-down of the US economy. Only China’s economy is still able to keep to
its original target of yearly growth over 7% largely because of its reliance on domestic
demand.
However, for China’s economy to sustain continuing high growth in the next lap,
China will have to come to grips with several structural and institutional constraints,
including the unfinished business of economic reform. The two-decade long period of
rapid growth has effectively strengthened China’s economic power and raised its
people’s standard of living. It has also transformed China from a centrally planned
economy to a “socialist market economy”, one that operates increasingly in line with
capitalist norms. Many structural problems, however, remain. Weaknesses in the halfreformed fiscal system breed widespread rent-seeking activities at the local levels and
cause tensions in state budget. The flawed financial institutions and the biased ownership
structure continue to distort resource allocation, leading to huge efficiency losses. Interprovincial and inter-regional disparity is reaching a level that threatens national unity and
social stability. Some of these structural issues will get more acute in the future. What
49
needs to be done in the remaining areas of reform and restructuring will present
enormous challenges to the Chinese leadership in the next decade and beyond.
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