China in the 20th century
China in the 20th century has been going through enormous changes. From
colonialism and imperialism to republicanism, from communism to capitalism, and from
underdevelopment to a country maintaining over 10% economic growth for over ten
years. In this research paper, I will focus on the transition of China from a Communist
command economy to a type of market economy as well as the economic fluctuations
throughout this period.
In 1949 Oct 1, the People’s Republic of China was established. Before 1949,
there was a period of civil war soon after the world war two. The confrontation was
between the Nationalist Komintang led by Chiang Kai Shek and peasant-based
Communist party led by Mao-Zedong, ended with Chiang’s defeat. Mao became the
leader of China, and he believed that Marxism was the best way to solve China’s social
and economic problems. He wanted to stop the landlords from exploiting the farmers.
Under the rule of the Communist party, the people owned all the economic areas of
China, and these would be controlled by the Communist government. All of the people
would work for the common goal of the country. As a result, Chinese socialism was born.
The pre-communist history of modern China has been essentially one of
weakness, humiliation and failure. This is the atmosphere in which the Communist Party
developed its leadership and early growth. This resulted in strong determination by
chairman Mao to eliminate foreign influence within China, to modernize the country and
envision a strong economy under Communist control. Therefore, a series of radical
reforms were introduced and the social organize was transformed under Communist
Economic growth during the first ten years of Mao’s regime was significant.
However, the Great Leap Forward (1958-61) introduced catastrophic changes resulted in
a famine in which some 30 million people may have died. The Cultural Revolution from
1966-76 led to further disruptions and the standard of life worsened. (all these will be talk
in details later) After the death of Mao Zedong in 1976, Deng Xiaoping came into power
in 1978. He was in favor of capitalist-style reforms and he also changed China
fundamentally by introducing dramatic changes in economy to cope with the growing
influence of global capitalism.
The period of Mao
Before the People’s Republic of China was established, China remained
predominantly rural and agricultural, with close to 90 percent of the population living in
the countryside and about 65 percent of the national income generated in the agricultural
sector. (Liu and Yeh 1965, 66, 212) At that time, very few people could read, inflation
was so high that prices sometimes rose daily, and the tenants were greatly exploited by
landlords (Kristof and Wudunn,61).
The period of 1949 to 1952 was largely the reconstruction and rehabilitation
period. Land reform began promptly after the founding of People’s Republic. The
Communist halted inflation, restoring confidence in its new paper currency, divided up
the land, tried to end up opium addiction and prostitution, banned child marriages, and
encouraged the peasants to go to school and breathed new hopes into the people. It was
the first time a moderate degree of equality ever existed for most of the Chinese people
(62). Most people were delighted by the communist, reconstruction works were
completed by 1952. During this rehabilitation period, output in both industry and
agriculture rose rapidly from the sharply depressed 1949 levels, and hadd been restored to
previous peak levels (Lippit 133).
The period of recovery and rehabilitation was followed by the First Five Year
plan, 1953-1957, during which output continued to rise strongly (110). During this
period of time, heavy industry was stressed by the government. It was the first time
China began to produce large quantities of trucks, merchants ships, tractors and jet
airplanes. By 1957, the gross industrial product increased 2.3 times from that of 1952
level, and industrial output grew at an average rate of 18 percent between 1952
to 1957 (111). The private sector had almost disappeared, and the state directly
produced 70% of output.However, the successes in industrialization had a
contradiction with the benefit of the rural areas, because growing number of
peasants were employed in the industrial sector. Besides, to sustain rapid
industrialization and urbanization, the government had to procure large quantities of
grains through taxation and required sales at below-market prices. This created intense
dissatisfaction in the countryside and made further increases in procurement difficult.
And this in turn, making the industrial sector lacked the capacity to provide chemical
fertilizers needed for agricultural modernization. Therefore, the development strategy that
the First Five Year Plan embodied could not be maintained.Despite the above
problems, the overall growth performance of the Chinese economy in this period was
Politically, Chairman Mao launched another campaign called the “Hundred
Flowers Campaign” in Feb 1957. Since he wanted to solidify his power in the party, so he
used an ancient Chinese adage, “let a hundred flowers bloom, and a hundred schools of
thought contend” to “encourage” the people to criticize the government (Shui111).
Traditionally, Chinese intellectuals were given the freedom to criticize the governments
without fear of persecution. And Mao had read many Chinese histories written by
intellectuals who during imperial times criticized the government (145). However, other
leaders in the Communist party did not embrace such traditions, and condemned the
Hundred Flowers Campaign and launched the Rightist Campaign which condemned
critics of the Communist party (147).
After 1957, the “Maoist Era” continued.
Undaunted by the failure of the Hundred Flowers Campaign, Mao in May of 1958
launched another grandiose plan: the Great Leap Forward (1958-60). This was Mao’s
economic plan to transform China into an industrial nation in two years time, the plan
was to decentralize agriculture and created communes which would promote heavy
industry and agricultural production (Potter 70). it was launched in the hopes that it
would exceed the output of Britain in only 15 years. Citizens were encouraged to make
steel in their spare time by melting iron ore in special “backyard furnaces”(Shui 67). If
the iron ore was unavailable, people were told to melt down their own iron possessions.
Since all the citizen’s cooking utensils were used to make steel, meals were provided by
the communist government (70). The GLF did not last long because people resisted this
kind of regimentation and the Chinese workers complained about long working hours. In
fact, the long hours of extra work did not increase productivity, which made the work
senseless to the majority (73).
The GLF seemed to symbolize Mao’s embrace of technology and industry, in
fact, it epitomizes Mao’s reliance on traditional Chinese ideals first formulated in his
observance of the peasant culture. It relied on a commune system, which operates much
like the China of Mao’s childhood (86). Small villages would set rice quotas and
economic priorities and work as a group, sharing resources for the harvest. Communes
can be seen as based on Confucian idea of obligation too. Traditionally, Confucianism
obligated a child to respect a parent. Communes, according to Mao would replace that
obligation to parents, with an obligation to communism. Unfortunately, the experiment
failed(90). Misapplication of resources coupled with an unforeseen drought was
disastrous and 20-30 million starved (77).
Initially, Mao wanted to raise the output of the industrial sector by 25 percent
Annually; however, the gap between the growth rates of heavy industry and light industry
was to be closed not by reducing the effort to develop heavy industry but by accelerating
the development of light industry, relying on labor-intensive processes wherever possible.
“The parallel development of modern, technically advanced methods and traditional
labor-intensive ones became known as ‘walking on two legs’.”(Lippit 114) Besides, life
became completely politicized during the GLF, cadres were under tremendous pressure to
report sharply improved results. As a consequence, the results of GLF were predictably
From 1961-1965, China returned to a more conventional, less ideological-
mobilizational approach to economic development. Economic rather than political
criteria were stressed, and material incentives in both industry and agriculture received
renewed emphasis, with income tied more closely to work performance. The measures
taken to restore production during this recovery period were successful. Industrial
production increased over eighty percent from 1961-1965, while agricultural production
increased about fifty percent during the same period. However, the renewed
attention to living standards were short-lived. (116) In the mid-1960s, Mao Zedong
became increasingly concerned with some of the social tendencies that were becoming
manifest during this period. However, he had lost his dominant position in the party with
the failure of the Great Leap Forward, so he had to find some force outside the party to
give expression to his concerns. Therefore, the Great Proletarian Cultural Revolution
was launched in 1966 (Liu 39).
The central theme of the Cultural Revolution was the need for a transformation of
institutions, consciousness, and social values. It was seen by its proponents as a struggle
between two roads, one leading to socialism and the other leading to capitalism. The
Gang of Four, including Mao’s wife largely orchestrated the Cultural Revolution, in
which the “Red Guards” ~ millions of activist youths were their main supporters (Shui
214). Universities and schools were shut down, widespread purges of “rightist elements”
forced many former Communist officials into rural re-education camps (including Deng
Xiaoping). Children were urged to denounce their parents and teachers, or even labeled
them as enemies (222). The Red Guards stormed the whole country, beating up the party
officials, destroying books containing opposite views and spreading their beliefs that the
four olds (old ideas, old culture, old customs and old habits) were to be eradicated (223).
Economically, The Cultural Revolution had two important consequences. One
was the decline in industrial output in 1967 – the first for many years, due to the general
dislocation. (Lippit 154,179) The other was that it halted the tentative revival of foreign
trade. Between 1966 and 1970, trade was frozen at existing levels, the outbreak of anti-
foreign feeling (such as the burning of British Embassy) created a climate within which
new trade possibilities could not be explored (Howe xxxi). “Although total national
income rose during the Cultural Revolution, it was gained by greater investments of
capita, manpower and raw material and not by raising economic efficiency and returns”
Both the real wages of people and economic accumulation had fallen about 30 percent
between 1966-76 (Rabushka 56).
Mao died in September 1976 and his death was immediately follow by a new
phase of social and economic policy. The “Gang of Four” were arrested and accused not
only of attempting to seize power, but of disrupting the economy. In 1978,
Deng Xiaoping the new leader of China, criticized Mao’s policies and reversed most of
his policies. Deng led a drive to loosen the Chinese government’s control over the
economy of China and welcomed foreign investments under a new “open door” policy.
The transition to Capitalism officially began in China.
The period of Deng
Deng Xiaoping was one of the most important men in the world during the post-
Cold War era. His policies- “political repression and economic liberalization” – have
very great impact on more than one-fifth of the world’s population (Kristof &Wudunn
103). After he took over in 1978, the economic growth of China was spectacular. He
launched the “four modernizations” program in agriculture, science, industry and the
army.” Since Deng launched his reform program, the Chinese economy has enjoyed an
annual average growth rate of about 9 percent.This is the triple growth rate of that of
the United States in that period, and about 70 percent more than that of India or
Indonesia (316). “As for such growth rates in a huge country like China, there has been
nothing like them in the history of the world.” (317)
In the post-1978 period, Dent established a series of agricultural, industrial,
commercial, fiscal and financial reforms that gave a greater scope to market forces and
began to lessen the role of state in China’s economy (Rabushka 71). In 1979, the Chinese
government made it possible for Hong Kong businessman to invest directly in China,
initially in partnership with communes, and later with other levels of government and
individuals (Potter 316). Besides, the Chinese government did not collect income tax
from the foreign investor for three years, which is something never thought possible
since the Cultural Revolution (317).
On Oct 20, 1984, an official report on “ Reform of the Economic Structure”
repeatedly used phases and terms such as “ the individual economy,” “the market,”
“competition,” emphasizing individual incentives and market forces to stimulate
economic efficiency. 2) In a speech published in 1985, Deng went so
far as to say, “ I am afraid that some of our old colleagues have this fear: after a
generation of socialism and communism, it is unacceptable to spout some capitalism. It
cannot harm us. It cannot harm us.”(Rabushka 71)
Since 1978, Deng complemented agricultural and industrial reforms with several
commercial, investment, and trade reforms. He began to search for foreign capital that
included international borrowing and effort to attract direct foreign investment to china.
The “open door” policy was a radical departure from the past. In 1980s, the government
open up the coastal cities for foreign investment. They gave Guangdong and Fujian
Provinces greater autonomy in matters of foreign trade and investment. Besides, four
Special Economic Zones were formally designated such as Sheng Zhen which is near
Hong Kong. These Special Economic Zones are totally capitalist-style and attracted
foreign investment(85, 86).
The increase in prosperity of both urban and countryside between 1979 and1985
have been remarkable. Under Deng, the majority of Chinese people learned what it
meant to own televisions, refrigerators, and washing machines (Kristof
&Wudunn 105). According to research conducted in the Chashan district (in southern
part of China), in 1979, only 305 of Chashan district’s households had television sets; by
1985, 1832 household owned one set. In 1979, there were only 8 refrigerators in that
commune, all collectively-owned. By 1985, there were 485. Similar to the case of
washing machine, there was no washing machine in 1979 in the commune; by 1985, 5
percent of households owned washers (Potter 327).
Wages of the factory workers continued to rise in the period of 1979 to 1984,
the average earnings of the factory workers increased by 290 percent. The average
income of peasants in some of the districts even grew by 300 percent. The improvement
in the infrastructure lay the ground for further development. Transportation and
telecommunications as well as other aspect of social daily life improved significantly
Behind the prosperity, contradictions exist, stratification is being created, and
concern with social welfare has become secondary. Economic classes and class
antagonisms are re-emerging, casting doubt that China continues to be a “communist
Ironically, it was the communists who finally organized a market
economy in China, and Mao had played a part in it (Kristof & Wudunn 326). Why?
First of all, the book “The Rise and Decline of Nations” by Mancur Olson, it
addressed the fundamental question of what turns a nation into an economic dynamo. He
asked why Germany and Japan performed economic miracles after being defeated in the
World War Two. Answer is that, it was the war which created catastrophic losses and
then became a motivation of economic dynamo (322). That is, when people or a country
is confronting with the worst situation, their energy and determination would be inflame.
Similar to the case of China, Communist Party itself during Mao is a paralyzing social
force, it fulfilled much the same role as war did to Japan. Especially during the Cultural
Revolution, people lived in a state of chaos, and it was Mao who created this kind of
necessary and inevitable changes (333).
The Communist Party unified the country and cleared away
the landowners and stagnant class. This created for the first time a moderate degree of
equality and built up capital. This is an important ingredient for economic takeoff and
the stability of a market economy. Otherwise, a weak economic foundation in the new
market economy of China, might lead to revolution again (326).
By 1992 and 1993, China’s economy was growing 13 percent annually, faster
than that of any other country in the world. Although these are unsustainable figures,
China will still keep up of 10% economic growth every year for the foreseeable future.
It has been one of the world’s fastest growing ever since the late 1970s. The Asian
Economic Crisis of 1998 slowed China’s growth slightly but it has responded well and
created a new & growing stability.
Today, the growing prosperity and diminishing poverty is transforming China in
fundamental ways. All around China, many people became xiang qian kan. This is a
play on words, for xiang qian kan was a common slogan that means “Look to the future!”
But the same expression, written with a different character for qian, loosely translated
means “march towards money”. And in today’s China, you do not need ask which they
mean. Everybody including the government is marching towards money.
China is enjoying an economic Renaissance. A steady supply of foreign currency
from the investors helps China modernize its infrastructure, agriculture and industries,
thus benefiting China’s gargantuan population of 1.2 billion people. If only a quarter of
them could be considered middle class, then there exists a potential market of more than
300 million consumers. If China in the coming decades, increased its GNP per
capita to $5000 – the level of its new industrialized neighbor, South Korea – it will
possess the world’s largest economy. With such economic power, China will become
one of the world’s leading trade power, it is a goal that Chinese authorities are firmly
intent of reaching (Fong 120,121).
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