China in the 20th century

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Overview

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

control.

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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.

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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

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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

extremely strong.(112,131,132)

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).

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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

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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

disastrous.(115)

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).

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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

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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

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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

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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

(328).

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

country” (336).

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

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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.

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Conclusion

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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