Just a few bunches of people could have imagined how much economic and social grow China would have in the next 40 years after Deng Xiaoping developed economic reforms and introduced open door policies. China’s economy suffered major changes since the reforms by opening certain zones of the mainland and also creating beneficial conditions for private initiative and entrepreneurial relationships, this made an impact on china’s GDP, turning into one of the main direct foreign investment and technological development country. All of this is possible because the brilliant use of internal conditions being applied into different production processes to obtain a wide variety of products for international markets, changing now the stigma from bad quality to high-end products with competitive prices. This paper will review the events that lead china’s government to apply these reforms, what was the impact back then and also, it’s importance nowadays.
Before 1978 it occurred major events that led China to change its economical view. In 1976 the Premier Zhou Enlai died he was a follower of Mao Zedong reforms and wanted china to make progress with the “Four Modernizations”. In September 1977, Mao Zedong died, he had managed China for almost 27 years after he founded the People’s Republic in 1949. He was a strong leader but the effect that the “Cultural Revolution” and “The Great Leap Forward” had a great cost to China. Few after Mao’s dead the “Gang of Four” were arrested.
After all of these changes it was expected for China to have a new development path, but after a few months this dream of change wasn’t visible and the concerns about the future of China continued. Hu Goufeng became Chairman of the Communist Party of China (CCP) when on power he presented a report on the Eleventh Congress that supported past policies and approaches with a mentality like Mao had in the past. So, there were not fresh ideas to really make China develop, Goufeng was really more focused about political thinking and ideals, there were almost nothing new on the economic development area.
At the same time during 1977, Deng Xiaoping returned to the political environment, he had the same thoughts such as Zhou Enlai about that China needed social and economic reforms, but he was turned down by the leaders of the CCP. Xiaoping was displaying new fresh and positive approaches for the future of China. One of the glances of a brighter future was the restoration of Chinese universities that were attacked and closed in the cultural revolution, later, on December of 1978 Deng Xiaoping returned to political power stating new reforms and ideals.
The Third Plenary Session of the Eleventh Central Committee held in December 1978 was a turning point of the path that China would take in matter of economic and social development. In this meeting was decided that the methodology of the economy in China had to be changed, now the communication and cooperation with other countries would be expanded, the implementation of the new advanced technology and equipment, educational levels to fulfill the needs of modernization. Here is where the importance of the “Four Modernizations” (agriculture, industry, science and technology, and national defense) relies. There were other major decisions made that day like the need to reduce the centralized management of the economy and eliminate the impediments stated by the government in order to achieve economic development especially at local levels.
It was decided that all was going to start in the agricultural area because of its importance on “the foundation of the national economy”, giving particular attention to the decentralization, ownerships and the rule of law, later these features were applied to the other areas of the economy. On 1979 gave a speech towards the economy path and past ideals:
“Realizing the four modernizations is a many-sided complex and difficult undertaking. The task of the ideological and theoretical workers cannot be confined to discussion of the basic principles. We are confronted with many questions of economic theory, including both basic theory and theory applied to particular spheres such as industry, agriculture, commerce and management. Lenin called for more talk about economics and less about politics. In my opinion, his words are still applicable with regard to the proportion of effort that should be devoted to theoretical work in these two spheres. I am not saying of course that there are no more questions to be studied in the political field. For many years we have neglected the study of political science, law, sociology and world politics, and now we must hurry to make up our deficiencies in these subjects. Most of our ideological and theoretical workers should dig into one or more specialized subjects. All those who can do so should learn foreign languages, so as to be able to read important foreign works on the social sciences without difficulty. We have admitted that we lag behind many countries in our study of the natural sciences. Now we should admit that we also lag behind in our study of the social sciences, insofar as they are comparable in China and abroad. Our level is very low and for years we haven’t even had adequate statistical data in the social sciences, a lack that is naturally a great obstacle to any serious study”. (Deng Xiaoping, 1979)
(From Selected Works of Deng Xiaoping, Volume II <1975-1982>)
From this, we can say that Deng Xiaoping had the opinion that political and ideological debate in China was a major topic but not so developed as it should be. He gave a clear message that he wanted to change how Chinese people were thinking, he wanted to give them the tools to adapt the modernization, he knew that this would be beneficial not only for private sectors but also China in general. The new path that China was taking in matter of ideals and politics provided a possible positive economic benefit.
Xiaoping implemented the new way that China’s economy would be ruled, “Socialism with Chinese Characteristics”, he wanted to have a capitalist economic development but without living the socialism core values aside. Xiaoping could see the importance of the SEZ’s (Special Economic Zones) such as Shenzhen here is where manufacture became China’s biggest source of wealth, due to the number of products that China could export and the low prices that could be made, this duo impacted international markets in the way that now China was on sight for new foreign investments.
Incentives were implemented, this helped to boost manufacturing and agriculture across China. During the period of 1980 and 1986 the manufacture output doubled and move towards consumer-focused products this allowed the increase of efficiency and technology imports. The success of the economic development of China because of the well managed leadership of the CCP. Since China opened its doors the economy faced a huge growth. Its GDP (Gross Domestic Product) has moved from less than $150 billion U.S Dollars in 1978 to 12.24 billion U.S Dollars in 2017 (Source: World Bank). At the same time more than 600 million people have escaped poverty, taking into account the size of China, geographically speaking, and its population (1.386 billion) is a major win that any country could desire.
So why does socialist China have been so successful?
The answer is still on a back and forward debate some people telling that it has been so successful because China is not really socialist anymore and other stating that it’s because the government control over major economic factors, the last one is the one I personally agree on, and I will explain my reasons.
The CCP developed five important factors since 1978: state ownership of lands, capitalism on light industry, socialism on heavy industry, no elections and media control. The first three are the basis of the “Socialism with Chinese Characteristics”. Socialism basically means that people are the owner of the capital, and the profit generated for the capital is used for people. So CCP given up the control of the ‘light industry’, made the smart decision of focusing on ‘heavy industry’ where banking is a major part, and this is a key point for the success of China.
CCP started to control incomes and pulled out people from poverty. In other socialist countries they have the obligation of giving the same amount of money for each individual for example the government gives 8 million yuan for a town of 10 thousand poor families, meaning that each family will receive 800 yuan, they have money, but they are still poor. China brilliant plan was to loan more money and also the 8 million, the other loan was directed to create infrastructure, this will create jobs for at least a thousand of those 10 thousand families, so then with a steady income these one thousand families could get out of poverty. In the future these families that got out of poverty will generate income for the government to help another cycle of a thousand families.
Because of state owner ship and socialism in heavy industry, Chinese government has more income than other capitalist countries, its control over all the decisions made in the country allows the government to use the money the right way, how is supposed to be used and investing on fundamental part in order to shorten each cycle of people developing income for the government.
In retrospective China would have been nowadays in a whole different environment if it had continued without the economic related reforms. Without these changes China economy would not be the one that we know today, its achievement was reached because Chinese government focused on realistic goals. Thanks to the reforms the restructuration of China economy was achieved in an amazingly short period of time.
This process of reconstruction of China with these reforms have not only benefited Chinese people but also brought major economic and global benefits. It has stimulated global economic growth and cooperated to maintain the world economy and political balance. Its impact has scaled for other countries like Australia, it became less dependent of the basic overseas nations for international trade market. China also contributes to diversify the location of global economy activity helping to reduce global and regional fluctuations in economic activity. Along history China has become dependent on international trading, but the economic development during the reforms has expanded its domestic market. Meaning, that global economic recessions will make less damage to Chinese economy due to China’s home markets will help to reduce its impact, allowing to maintain regional economic stability. We have already seen China’s economy power during the Asian Financial Crisis in 1997 were China played an important role in stabilizing and containing it with its monetary reserves.
Chinese people wanted a change in its economy from the core, the reforms helped to go step by step to achieve this, they began from rural areas, then extending to urban areas, knowing well that this eventually would change its whole economy. The economic path that China has followed and believed until today has been the same philosophy expressed by Zhou Enlai and Deng Xiaoping, it is to improve the well-being of Chinese people with the liberty of changing policies to adjust for the changing circumstances to come in the future.
These clear vision of knowing what China wants in the future is a key point for its great economic achievements that is why China now wants to change into developing certain areas that have not been developed as others for example international investments, high-end products, politically reliable, this is all part of that step by step method, of first reinforce the their disadvantages and weak point before making big time decisions, in order to reduce the impact in their population, they are planning into the future, they are one step ahead of every other country in the world. China is changing its whole system for further improvements but most importantly it is preparing Chinese people for these changes as well, that is the major differentiator of China from any other country in the world.