Outline

I. Introduction
II. Reforms Summary
o I. Economic Reforms
o ii. Political Reforms
o iii. Foreign Policy Reforms
III. Courses of Reform
a. Phase 1: 1978-84
b. Phase 2: 1984-93
c. Phase 3: 1993-2005
IV. Impact and Legacy
V. Rise to Superpower Status
VI. Critical Analysis

I. Introduction
o “When China wakes, it will shake the world.” Napoleon
o Inherited a deteriorating economy.
o Mao’s disastrous economic and cultural policies.
o The Great Leap Forward and Cultural Revolution
o Previously, China was rigidly carrying forward the agenda of socialism both economically
and politically.
o Deng remained as the paramount leader from 1979 to 1992.
o Economic Rehabilitation of China
o He is regarded as a reformist
II. Reforms Summary
o 1. Economic Reforms
 Reforms contradictory to Socialist Ideology sparked an economic revolution.
 Reforms include
 I. Market Principles
 ii. Collectivization of agriculture ended
 iii. Lifting of protectionist policies
 iv. Encouraged entrepreneurial businesses
 v. Privatization of firms
 vi. Opening up for foreign investment
 vii. Special Economic Zones
o 2. Political Reforms
 “Personality Cult” system of politics weakened.
 He reduced the powers of his own office but retained the powers with CPC. The
President and VP were limited to two consecutive terms in 1982 (until March
2018).
 Mao’s image as the founder was hampered after Deng’s image as a reformer.
 One Country, Two Systems
  Impact: Set the way for more efficient, responsive and technocratic system of
governance.
o 3. Moderate Foreign Policy
 Established trade and diplomatic relations with USA.
 Revamped relations with USSR
 Friendly relations with neighboring countries including Japan
III. Courses of Reform
o Economic reforms began after Deng Xiaoping and his reformist allies ousted the Gang of
Four Maoist faction.
o By the time Deng took power, there was widespread support among the elite for
economic reforms.
o As the de facto leader, Deng’s policies faced opposition from party conservatives but
were extremely successful in increasing the country’s wealth.
o 3.1 Phase 1 (1978-84)
 I) Agriculture Reforms
 Deng’s first reforms began in agriculture, a sector long mismanaged by
the Communist Party.
 By the late 1970s, food supplies and production had become so
deficient that government officials were warning that China was about
to repeat the “disaster of 1959”, the famines which killed tens of
millions during the Great Leap Forward.
 Deng responded by decollectivizing agriculture and emphasizing the
household-responsibility system, which divided the land of the
People’s communes into private plots.
 Under the new policy, peasants were able to exercise formal control of
their land as long as they sold a contracted portion of their crops to the
government.
 This move increased agricultural production by 25% b/w 1975 and 1985,
setting a precedent for privatizing other parts of the economy.
 The bottom-up approach of the reforms promoted by Deng, in contrast
to the top-down approach of the Perestroika in the Soviet Union, is
considered an important factor contributing to the success of China’s
economic transition.
 II) Urban Industry Reforms
 A dual-price system was introduced, in which (State-owned enterprise
reform 1979) state-owned industries were allowed to sell any
production above the plan quota, and commodities were sold at both
plan and market prices, allowing citizens to avoid the shortages of the
Maoist era.
 Moreover, the adoption of Industrial Responsibility System 1980s
further promoted the development of state-owned enterprise by
allowing individuals or groups to manage the enterprise by contract.
 Private businesses were allowed to operate for the first time since the
Communist takeover, and they gradually began to make up a great
 percentage of industrial output. Price flexibility was also increased,
expanding the service sector.
 III) Open Door Policy
 In December 1978, to open the door to foreign businesses that wanted
to set up in China.
 For the first time since the Kuomintang era, the country was opened to
foreign investment.
 Deng created a series of special economic zones for foreign investment
that were relatively free of the bureaucratic regulations and
interventions that hampered economic growth.
 These regions became engines of growth for the national economy.
o 3.2 Phase 2 (1984-93)
 During this period, Deng Xiaoping’s policies continued beyond the initial
reforms.
 Controls on private businesses and government intervention continued to
decrease, and there was small-scale privatization of state enterprises which
had become unviable.
 A notable development was the decentralization of state control, leaving local
provincial leaders to experiment with ways to increase economic growth and
privatize the state sector.
 Township and village enterprises, firms nominally owned by local governments
but effectively private, began to gain market share at the expense of the state
sector.
 Conservative elder opposition, led by Chen Yun, prevented many major reforms
which would have damaged the interests of special interest groups in the
government bureaucracy.
 Corruption and increased inflation increased discontent, contributing to the
Tiananmen Square protests of 1989 and a conservative backlash after that
event which ousted several key reformers and threatened to reverse many of
Deng’s reforms.
 However, Deng stood by his reforms and in 1992, he affirmed the need to
continue reforms in his southern tour.
 He also reopened the Shanghai Stock Exchange closed by Mao 40 years earlier.
o 3.3 Phase 3 (1993-2005)
 In the 1990s, Deng forced many of the conservative elders such as Chen Yun
into retirement, allowing radical reforms to be carried out.
 Despite Deng’s death in 1997, reforms continued under his handpicked
successors, Jiang Zemin and Zhu Rongji, who were ardent reformers.
 In 1997 and 1998, large-scale privatization occurred, in which all state
enterprises, except a few large monopolies, were liquidated and their assets
sold to private investors.
 Between 2001 and 2004, the number of state-owned enterprises decreased by
48 percent.
 During the same period, Jhiang and Zhu also:
  Reduced tariffs, trade barriers, and regulations.
 Reformed the banking system;
 Dismantled much of the Mao-era social welfare system;
 Forced the Chinese army (PLA) to divest itself of military-run
businesses;
 Reduced inflation;
 Joined the World Trade Organization WTO.
 The domestic private sector first exceeded 50% of GDP in 2005 and has further
expanded since.
 Also in 2005, China was able to suppress Japan as the largest economy in Asia.
However, some state monopolies still remained, such as in petroleum and
banking.
IV. Impact and Legacy
o Lifted 200 million people out of poverty.
o While absolute poverty declined from 41% of the population to 5% from 1978 to 2001.
o As of 2008, private sector accounted for 70% of GDP.
o 9.5% growth rate from 2008 to 2013.
o Per capita incomes grew at 6.6% a year.
o Average wages rose six-fold between 1978 and 2005.
o Asian leaders view China’s economic growth as an “engine of growth for all Asia”
V. Rise to Super Power Status
o “Once China becomes strong enough to stand alone, it might discard us.” (Henry
Kissinger)
o China’s dream to become a global power started to materialize in Deng’s era.
o Current BRI to dominate the world owes its root to the economic liberalization of Deng.
o China is expected to cross US economy by all measures in coming years.
o Deng transformed a civil war ridden population into a Scientific society which has won
5G race from present day Great Powers.
VI. Critical Analysis
o Believed that economic and political liberalization do not go hand in hand.
 Francis Fukoyama’s thesis -> Inevitability of democratization.
o A capitalist model of free markets and privatization coupled with socialist style state
controlled political order.
o Tiananmen square massacre of pro-democracy protestors on June 4, 1989.
o Hard stance towards Taiwan and Tibet.
o Xi Jinping as a shadow of Mao – Abolishment of two-term limit set out in 1982.