The
Chinese economic reform
or
reform and opening-up
; known in the West as the
Opening of China
is the program of economic reforms termed "
Socialism with Chinese characteristics
" and "
socialist market economy
" in the
People's Republic of China
(PRC). Led by
Deng Xiaoping
, often credited as the "General Architect", the reforms were launched by reformists within the
Chinese Communist Party
(CCP) on December 18, 1978. In 2010,
China
overtook
Japan
as the world's second-largest economy. The success of China's economic policies and the manner of their implementation resulted in immense changes in Chinese society in the last 40 years, including greatly decreased poverty while both average incomes and
income inequality
have increased.
- Beginning in the late
1970s
, China overcame centuries of stagnation precisely because
Mao
’s successors understood that they had to decentralise the People’s Republic, giving economic if not political power to the people. If western commentators are right,
Xi Jinping
wants to go in the opposite direction. If the Chinese are lucky, he will turn out to be an enlightened
absolutist
, like
Singapor
e’s
Lee Kuan Yew
. If they are unlucky, he will be just another emperor who fondly dreamt of controlling a fifth of humanity.
- It came shortly after
Mao
's death in September of that year, and by the end of 1978 Deng had outmaneuvered all of his rivals to become China's "paramount" leader. He had already by then turned the tables on his predecessor by claiming that Mao had been right seventy percent of the time and wrong thirty percent: this now became party doctrine. Among the "right" things Mao had done were reviving China as a great power, maintaining the
Communist Party
's political monopoly, and opening
relations with the United States
as a way of countering the
Soviet Union
. Among the "wrong" things was Mao's embrace of a disastrously administered
command economy
. With this pronouncement on percentages, Deng won himself room to pursue a very different path. It involved experimenting with markets at local and regional levels, after which Deng would declare whatever worked to be consistent with
Marxist-Leninist
principles. Through this bottom-up approach, he showed that a communist party could significantly, even radically, improve the lives of the people it ruled?but only by embracing
capitalism
.
Per capita income
tripled in China between 1978 and 1994.
Gross domestic product
quadrupled.
Exports
expanded by a factor of ten. And by the time of Deng's death in 1997, the
Chinese economy
had become one of the largest in the world. The contrast with the moribund
Soviet economy
, which despite
high oil prices
showed no
growth
at all in the
1970s
and actually contracted during the early
1980s
, was an indictment from which Soviet leaders never recovered. "After all," the recently deposed
Mikhail Gorbachev
commented ruefully in 1993, "China today is capable of feeding its people who number more than one billion."
- But
democracies
also took root because they generally outperformed
autocracies
in raising living standards.
Markets
do not always require democracy in order to function:
South Korea
,
Taiwan
,
Singapore
, and China all developed successful economies under less than democratic conditions. The
Cold War
experience showed, though, that it is not easy to keep
markets
open and ideas constrained at the same time. And since markets proved more efficient than
command economies
in allocating resources and enhancing
productivity
, the resulting improvement in people s lives, in turn, strengthened democracies.
- From
agrarian
economy to global superpower in half a century?China’s transformation has been an economic success story unlike any other. Today, China is the world’s second largest economy, making up 16% of $86 trillion global GDP in nominal terms.
- In 1978, after years of state control of all productive assets, the government of China embarked on a major program of economic reform. In an effort to awaken a dormant economic giant, it encouraged the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce. By nearly all accounts, the strategy has worked spectacularly.
While pre-1978 China had seen annual growth of 6 percent a year (with some painful ups and downs along the way), post-1978 China saw average real growth of more than 9 percent a year with fewer and less painful ups and downs. In several peak years, the economy grew more than 13 percent. Per capita income has nearly quadrupled in the last 15 years, and a few analysts are even predicting that the
Chinese economy
will be larger than that of the United States in about 20 years. Such growth compares very favorably to that of the "Asian tigers"--
Hong Kong
,
Korea
,
Singapore
, and
Taiwan Province of China
--which, as a group, had an average growth rate of 7-8 percent over the last 15 years.
Curious about why China has done so well, an
IMF
research team recently examined the sources of that nation's growth and arrived at a surprising conclusion. Although capital accumulation--the growth in the country's stock of capital assets, such as new
factories
,
manufacturing
machinery, and
communications
systems--was important, as were the number of Chinese workers, a sharp, sustained increase in
productivity
(that is, increased worker efficiency) was the driving force behind the economic boom. During 1979-94 productivity gains accounted for more than 42 percent of China's growth and by the early 1990s had overtaken capital as the most significant source of that growth. This marks a departure from the traditional view of development in which capital investment takes the lead. This jump in productivity originated in the economic reforms begun in 1978.
- On Dec. 13, 1978, at the close of a Communist Party gathering that lasted over a month, Chinese leader Deng Xiaoping delivered a speech that laid out a pragmatic vision for China’s future. It was a country that was then not long out of the grip of the chaos and terror of the
Cultural Revolution
.
He proposed that China learn from the example of other, richer countries, allow workers and peasants to “vie” to get ahead so those with a better standard of life would inspire others to work harder, and proposed that provinces and enterprises be given the power to make decisions or try new things.[...]
In 1981, just three years after Deng’s reform project was launched, almost 90% of
Chinese people
lived in
extreme poverty
by the definition of the
World Bank
. By 2013, that number had dropped to less than 2%.
- After 40 years of development, China has become the world’s second largest economy. The contribution from China to the global
GDP
has increased from 2.4 to 14.8%, the per capita GDP from 380 to 54,000
CNY
, the per capita disposable income from 170 to 24,000 CNY, and the outward
foreign direct investment
from 297 to 1,235,925 million CNY.
- The opening up policy has enabled China to learn from other countries, either developed or developing. To strengthen its own capabilities, China has expanded research capacity, emphasized advanced management and increased infrastructure development. China has entered a new stage of development, with growth rate of domestic investment on infrastructure development decreasing and rapidly increasing foreign investment. China has also expanded its foreign direct investment through such international programs as the “
Belt and Road Initiative
” to promote economic cooperation, technological innovation, and resource sharing between regions and countries. On the basis of its own national conditions, China has taken a “small step, but fast run” rather than a “shock therapy” approach, with new policies or programs. This was first demonstrated on a small scale, and then incrementally spread to the whole country, to ensure success and reduce the trial-and-error cost as far as possible. China has increasingly realized the importance of achieving an “ecological civilization” by learning from the past and promoting an aggressive decoupling of the relationship between environmental
pollution
and associated loss of natural capital and
economic growth
, and chosen to make
sustainable development
a national strategy.
- No country in human history ever grew so fast over such a long period of time. Average annual growth rates of 9.7 percent pulled hundreds of millions of Chinese out of
poverty
. The policy of reform and openness also led to a fundamental departure from norms in
Mao
’s China, replacing
collectivism
and group
conformity
with individual
performance
and
diversity
. The unparalleled rise of China also fundamentally changed the
international world order
. The country began to wield its economic influence in search of raw materials with the confidence and intentions of a future global superpower. China’s growing economic power inevitably resulted in an increasingly assertive foreign and security policy.
- Klaus Muhlhahn,
Making China Modern: From the Great Qing to Xi Jinping
(2019)
- We are seeing the power of economic freedom spreading around the world. Places such as the
Republic of Korea
,
Singapore
,
Taiwan
have vaulted into the
technological era
, barely pausing in the
industrial age
along the way. Low-tax agricultural policies in
the subcontinent
mean that in some years
India
is now a net exporter of food. Perhaps most exciting are the winds of change that are blowing over the People's Republic of China, where
one-quarter of the world's population
is now getting its first taste of economic freedom. At the same time, the
growth of democracy
has become one of the most powerful political movements of our age. In
Latin America
in the 1970s, only a third of the population lived under democratic government; today over 90 percent does. In
the Philippines
, in the Republic of Korea, free, contested, democratic
elections
are the order of the day. Throughout the world, free markets are the model for growth. Democracy is the standard by which governments are measured.
- Ideas of ‘
market socialism
’ ? for example, in the
USSR
in the
1920s
,
Czechoslovakia
in
1968
and
Hungary
in the
1970s
? had never proposed a system with the
capitalist
sector outgrowing the parts of the economy owned by the state. Chinese leaders from
Deng Xiaoping
onwards asserted that they were developing a ‘
communism with Chinese characteristics
’. The red-dyed gauze no longer occluded reality. The communist order was retained only as a means of rigorous political and ideological control; its economic and social components were blown to the winds. Concepts of
Mao Zedong Thought
were abandoned except insofar as they promoted the goals of national identity, centralised administration and superpower status. An extraordinary hybrid was created. China had become the only
communist
state which developed a vibrant economy by giving it over to capitalism.
- Robert Service,
Comrades: A History of World Communism
(2009)
- In China, they started on limited economic reform first but it was beginning to succeed in producing more
goods
for the people?on a limited scale certainly, but it was beginning to succeed. You cannot get economic reform really going well and with a future unless you get political
liberty
. That was what they found. We have always known it. Here, I think it was perhaps the wiser way to start: to start with the political reform, the thorough discussion. After all, new ideas come out of
discussion
and free interplay of ideas and discussion between one and the other. The
glasnost
as it is called, has gone very far very quickly, far further, far faster than we thought and I think that plus the
communication
of the
ideas
will in the end lead to much greater prosperity. I think the point that I have to make again is that although the
politicians
at the top?led by
Mr. Gorbachev
?could bring about the glasnost, it requires the practical and willing cooperation of the people to enlarge their responsibility and their activity to bring success in
economic reform
. I believe that will come about. I believe that the changes?the glasnost?really have become permanent because they have gone so much further than anything we thought and they have given a so much better atmosphere and less tension?the fear seems to have gone?and so I believe that perestroika is now set upon its course and that it will go through to success.
- The reforms also paved the way for things like China's trillion-dollar
Belt and Road Initiative
(BRI) ? an ambitious infrastructural push aimed at expanding China's political and economic influence internationally ? and set the stage for the emergence of e-commerce and technology giants like
Alibaba
and
Huawei
.
- Socialism was blended with a
free-market
economy and agricultural collectives were disbanded, allowing peasants to profit from the portion of their production that was designated as surplus.