Deng’s Economic Reform

Session 6

Table of ContentsI. Deng’s Economic Reform

Deng’s pragmatism replaced Mao’s ideology of class struggle

Bottom-up marginal reform Top-down state enterprises reform

II. Open-Door Policy III. Economic MiracleV. Discussion

I. Deng Xiaoping Resumed his Power and Launched China’s Economic Reform in 1978

(Third Plenum, Eleventh Central Committee)

I-1. Pragmatism Replaced Mao’s Ideology of Class Struggle

Deng remarked that “a liberation of thoughts” was necessary and the leadership must “seek truth from facts” - Third Plenum of the Eleventh CCP Congress, Dec. 1978

“ 凡是毛主席作出的决策，我们都必须拥护，凡是毛主席的指示，我们要始终不渝地遵循”。 "whatever decisions Chairman Mao made, and we must all embrace, where Chairman Mao's instructions, we must consistently follow."

“Economic Development is the core of the Party work.” 发展是硬道理 （ Development is the last word.”) “ 阶级斗争是个纲，纲举目张。”（“ take class struggle as the key link, when the lead rope is raised, the fish net opens wide. ）

Approaches to Goals

“It doesn’t matter whether its is a white cat or a black cat, it is a good cat as long as it catches mice”Cross the river by stepping over stones (learning by doing)

“ 评价一个国家的政治体制，政治结构以及政策是否正确，关键看生产力是否得到了持续的发展。” 1987 年 5 月

Interest-Motivation Stimulation

Some areas and some people can get rich first, lead and help other regions and people, and gradually achieve common prosperity. Deng Xiaoping, October 23, 1985 meeting organized by the U.S. Time Inc

"To get rich is glorious” Deng’s economic reform delivered this message indirectly.

Orville Schell in his 1984 book "To Get Rich Is Glorious: China in the '80s."

One fifth of humanity…… are now fully unleashed in an epic pursuit of material wealth.- New York Times, January 2, 1994.

I-2. Bottom-up Marginal Reform

Four marginal “revolutions”

Household responsibilities in the countryside in 1979

Township & Village Enterprises (TVE)

Individual economy (private economy)

Special Economic Zones

Agricultural Reform

The household responsibility system Of the population of 120, 67 peasants died A harvest larger than previous 5 years combined Per capita income: 22-400 yuan Rise & Wheat yields increased to 50 % in 1987National famer spent 60

days on the crops per year, compared with 250 -300 days in commune. Agricultural production

increased 6.7% every year from 1979-1984 800 million peasants gained much more freedom.

Township & village enterprises

Its output in the national GDP increased from 6% in 1978 to 26% and hired 130million people, about 23% of the population in the countryside in 1988. Its expert reached 25 %of the national expert in mid 1980s.

Urban Individual Economy

20 million jobless returned youth, 10% of urban population

400,000 in Beijing, 8.6%. and 380,000 in Tianjing, 11.7%.

1979 permission to start individual enterprises in cities.

Wenzhou became cradle of private economy 买茶叶蛋的超过做导弹的

From 4 cities in 1980expended to all the costal cities in 1990

Shenzheng30,000-14 million

State Owned Enterprises (SOE) Reform

A top-down economic reform

Failure in 1989 Parallel price system & corruption Price reform High Inflation 9.5% in Jan. to 38.6 % in Aug. June 4 Incident

Ownership transfer to shareholding or private companies

To invigorate large enterprises while relaxing control over small ones ( 抓大放小）2010: 42 Chinese enterprises in 500 Strong

III. The Open-Door Policy• Normalization with Japan, US &

the Soviet Union• 2001: China entered the WTO

• China’s tariffs dropped to 9.8% from an average of 15.3% in five years

• 2003, China surpassed the US as the largest recipient of FDI

2012:$100 billion• Study abroad and welcome

foreign students to China• Three “ten thousands”

Comparison between Mao’s Cold War Mentality

& Deng’s Post-Cold War Mentality

Mao: China should make preparations “for an early world war, a major war and nuclear war.”

If you are not with us, you are against us.

Deng: China’s foreign policy in the 1980s, and in fact in 1990s, even in the 21st century, can be summarized in two sentences. China makes efforts to maintain world peace and oppose hegemony. China always belongs to the third world.”

If you are not against us, you are with us.

Deng Visited Japan in 1978

"China is striving to build itself into a modernized socialist power. We need a peaceful international environment and we are willing to develop friendly and cooperative ties with all countries. Despite different social systems in China and Japan, the two countries should and can coexist in peace and friendship."

Deng Xiaoping in the US

Deng and Carter

Deng and Mikhail Gorbachev

IV. China’s Economic Miracle

1. GDP has grown at an annual average rate of 9.5% from 1978-2010

2. China becomes world’s second largest economy in 2011

3. China’s development is a powerful driving force behind the global economic growth. In 1990 2002, China was placed first, with a contribution as high as 27.1%.

4. Foreign reserves: $3 trillion (Mar 2011; ranked 1st).

In 2007 China contributed more to global growth than the United States, the first time another country had done so since at least the 1930s.

Since 1978 400 million people have been lifted out of poverty in China—about 75 percent of the world's total poverty reduction over the last century.

Lawrence Summers has recently pointed out that during the Industrial Revolution the average European's living standards rose about 50 percent over the course of his lifetime (then about 40 years). In Asia, principally China, he calculates, the average person's living standards are set to rise by 10,000 percent in one lifetime!

In two decades China has experienced the same degree of industrialization, urbanization and social transformation as Europe did in two centuries - Newsweek, Issue 1, 2008

Newsweek, Issue 1, 2008

Continue

• Centrally-planned economy transformed into market economy, with growth the fastest ever, made China a second largest economy.

• New rising power has not resulted in a war, territorial expansion, or a challenge to the world order.

1.

Discussion

1. How did Deng Xiaoping convince Chinese people to follow his new policy?

2 . What are the four marginal revolutions?

3. What factors led to China’s economic miracle?

4. What are different mentalities between Mao and Deng in foreign policy?