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The Multi-Revolutions of China The Social and Economic Upheavals of Maoist and Post-Maoist China By Jeff Sun & Dan Tran Engineering 297A: Ethics of Development in a Global Environment

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[Table 1.1] Key economic indicators, all China (output and income data all at comparable prices) (Nolan and Dong 92)


Increase (Yuan)















[Table 1.2] Increase in national income per 100 yuan in accumulation.(Nolan and Dong 93)

Further Economic Reforms in the 1990s and Unresolved Problems from the First Economic Revolution
China’s economic performance in the 1980s was certainly impressive. Quantitative indicators readily attest to the rapid growth, major structural changes and unprecedented improvements in mass living standards which took place during these years. A consensus view would no doubt attribute much of china’s economic success to the reformist thrust of its economic policies. But those same reforms have been the source of new tensions or have left unresolved other problems inherited from the past.. It also helps explain the caution which characterizes many of the judgments of China’s future economic prospects. Economic development in the first half of the 1990s was dominated by the impact of the tour of southern China, which Deng Xiaoping undertook at the beginning of 1992. In the wake of more than two years of economic retrenchment, prompted by severe inflationary pressures in 1988-89, Deng used his tour to advocate renewed reform and accelerated growth (Cheng 33). The choice of Guangdong as his principal destination was not coincidental: this was, after all, the province most deeply affected by the reforms (especially the open door strategy) implemented in previous years. Nor was it coincidental that he should have described Guangdong as the “leading force for economic development” and urged it to emulate Taiwan, South Korea, Hong Kong and Singapore in order to become the fifth “little Asian dragon” (Cheng 44-45).

Deng’s highly-publicized remarks during his southern tour were a characteristic response to China’s economic circumstance, entirely in keeping with his former beliefs. They demonstrated his continuing commitment to the policies of reform and opening up and reaffirmed the central importance of economic work in promoting national development. In particular, the need for rapid economic growth once more emerged as a clear priority, with Deng warning that “…low-speed development is equal to stagnation or even retrogression” (Moore 168).

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Deng’s calls for accelerated reform and development defined the major thrust of subsequent economic policy. At the Fourteenth National Party Congress (October 1992), they were translated into official demands for the creation of a “socialist market economic system.” To many this seemed an inherently ambiguous formula. But it signaled clearly enough a determination to move even further towards reliance on prices and competitive markets in allocating resources, albeit in a context in which public ownership and macroeconomic regulation from the centre would each enjoy a continuing role (Babkina 54-55).

Accelerated growth did characterize China’s domestic economic performance in the wake of Deng’s southern tour. Indeed, in their own terms the figures highlight a dramatic contrast between the period of retrenchment (1989-91) and the years of renewed expansion from 1992.

Moreover, the immediate response to Deng’s advocacy of an even wider open door policy was also overwhelming. In particular, in 1992 and 1993, utilized foreign direct investment increased by some 150 percent per year (Ash and Kueh 44). The significance of such expansion is suggested in the fact that by 1993, foreign –funded enterprises accounted for more than 10 percent of national gross value of industrial output and almost 35 percent of total trade (Ash and Kueh 45).

To deny the remarkable record of China’s growth performance in the first half of the 1990s would be facile. That such an enormous economy should become the fastest-growing in the world is evidence that the impressive quantitative indicators concealed major underlying difficulties – many of them familiar from the 1980s, or in some cases even earlier. It is noteworthy, for example, that in 1992 and 1993 the accumulation rate soared to a level unequalled since the Great Leap Forward. The very rapid rates of industrial and economic growth were based on excessively high rates of fixed asset investment; they also gave rise to increasingly severe domestic raw material shortages and infrastructure bottlenecks. In 1992, there was a sizable increase in the fiscal deficit (by 36 percent), which remained largely intact in 1993, and meanwhile, they money supply continued to expand at a high rate (Ash and Kueh 77). The buoyant trade performances concealed a deterioration in the balance of merchandise trade, which in 1993 took it into deficit for the first time since 1989 (Ash and Kueh 78-79).

Against the background of these and other difficulties, it is not that the most severe cost of the unprecedented growth of the early 1990s was the re-emergence of serious inflationary pressures. In the middle of 1993, a first round of measures was introduced in an effort to restrain inflation. Their impact was positive, but short-lived, and by the end of 1994, the inflation rate was still excess of 25 percent (Harvie 232). Renewed growth of fixed asset investment and consumer spending, as well as further price liberalization measures, were amongst the most important contributory factors. In the end, however, they were no more than symbols of the seminal problem, arising form the structural contradictions inherent in the transition from a planned system to a market economy (Harvie 244).

Move towards Privatization

In the early 1980s two-thirds of the industries in China were owned and operated by the government, a proportion that state-owned industries is expected to retain well into the next century (Waters 3). In the past the government dictated the kinds and quantity of products that these industries were to produce and set the price for the end product. At the end of the year any deficits incurred by these industries were subsidized by the state government. Historically, a large percentage of these industries operated in the red, forcing the government to allocate large sums of money to make up the losses (Waters 5).

Early in the 1990s, the government began experimenting with a process of separating ownership and management of state enterprises. Ultimately, the people of china, through their government, will retain ownership of these important industries, but their management will be in the hands of each industry manager. Each manager will have full responsibility for the profitability of his or her company. In a step-by-step manner, the managers’ new role will include production planning, operations, pricing and labor management. Under the new policies managers of state-owned organizations will be able to hire and fire workers. The trend will be away from guaranteed life employment, a practice that is known as the “iron rice bowl.”1 However, before this goal can be fully implemented, China must develop a workable social security system and unemployment insurance program that will replace the “iron rice bowl.” If a company needs additional funds the managers will have to rely on the financial markets and not the state government for help. If the company runs a serious loss, the industry will be allowed to go bankrupt. The government anticipates a revitalization of these major industries, making them more competitive and profitable in the evolving market economy. Thus, in the coming years foreign investors will be able to work with these industries much as they do with private businesses in the West. The government needs and wants help with the management of many of these industries (Wong and Lu 234-240).
China’s Future Economic Progress

The remarkable economic growth in China has led to a modernization and westernization of the major cities in China, apparent in this electronics store in Shanghai.


Thanks to its success in market-oriented economic reform, the Chinese economy has chalked up an annual rate of 9.7% real growth during 1979-2000. In absolute terms, China’s total GDP sextupled between 1980 and 2000; and its per capita GDP quintupled. By 2000, China’s total nominal GNP exceeded US$1 trillion, marking it the world’s seventh largest economy. In terms of PPP (purchasing power parity), the Chinese economy is new the world’s second largest after the USA – although the PPP measures tend to overstate China’s real GNP just as the conventional approach has seriously underestimated it (Wong and Lu 10).

On account of its successful open-door policy, China’s economy has also achieved greater integration with the global economy. Over the past two decades, China’s exports have increased at a hefty annual rate of 17%, from US$13.7 billion in 1979 to US$250 billion in 2000. China has now become the world’s seventh largest exporting economy. China’s efforts to attract foreign direct investment have been even more successful. From 1988 to 2000, actual or utilized foreign direct investment in China increased at an annual rate of 23% to reach a cumulative total of US$339 billion. No other country in the world, besides the United States, receives more foreign direct investment. As a result of its success in exports and FDI, China’s total foreign exchange reserves in mid-2001 reached US$180 billion, the second largest in the world next to Japan (Wong and Lu 11).

China’s economic success is also reflected in several important physical indicators. China not only tops the world in grain production (necessarily so because of its large population) but also in coal, steel and cement. Before Deng Xiaoping introduced economic reform in 1978, home electronics manufacturing was trivial in China. Today, one in four of the world’s color TV and one in five of the world’s fridge are now produced in China. At the start of the economic reform, the whole of China counted only 2 million fixed-line telephone subscribers. By early 2001, China has 160 million fixed-line telephone subscribers, in addition to 111 million mobile phones and 45 million pagers. By the end of 2001, China expects to have 40 million people online as Internet users, just slightly behind Japan. Not just in the “old economy”, China is also making rapid progress in “New Economy” areas (Wong and Lu 15).

Economic development in the Asia-Pacific Region

China’s GDP growth rate is the fastest growing in the world.
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China’s immediate economic goal is to achieve the status of a developing country early in the twenty-first century and become a developed country before the end of that century. China will probably achieve these goals on schedule and become the center of the Asia-Pacific region for several reasons, namely: China is currently the fastest growing economy in the world and will maintain that momentum well into the next century; China is also the largest country in the world, in both size and population; located in the heart of the Asia-Pacific region, the country is blessed with large quantities of natural resources; while its per-capita income is low by Western standards, it has been steadily rising since the country opened up the outside world in 1979; and finally, China’s gross domestic product (GDP) has been growing at an annual percentage rate of 9.3 percent since 1980 (Wong and Lu 22).

China currently enjoys social, economic, and political stability which it can expect to maintain despite critical reports that continually appear in the Western press. China has achieved this stability largely through the government’s determination to eliminate poverty and improve the welfare of all its people.

By the end of 1994, China’s aggressive economic approach had already attracted more than 206,000 foreign-funded enterprises. Between 1993 and 1994, about 40,000 new foreign enterprises were registered nationwide with no sign of abating. China’s success in attracting foreign investors to its market, covering all types of businesses, is the envy of all developing countries throughout the region and the world (Wong and Lu 24).

China’s Economic Goals

China’s blueprint for achieving economic leadership in the twenty-first century includes a number of major reforms that will eventually open all of the country to the outside world. In addition, the government continues to make it easier to do business in China, reducing and eliminating trade barriers and also providing incentives to a wide range of businesses that will help the country meet its economic plans. The government has decentralized many of its investment decisions and has allowed interregional and interprovincial competition to replace much of the micro-planning that had traditionally been the function of the State Planning Commission since 1949. The government now offers all kinds of incentives to attract foreign investment in such areas as infrastructure and high-tech manufacturing (Wong and Lu 33-34).

China has also embarked on a number of programs and projects to develop its central and western regions. Government officials have placed a high priority on eliminating the poverty faced by 65 million Chinese at the turn of the century. In addition, China has launched major initiatives to double its agricultural production in the 21st century and feed 22 percent of the world’s population with only 7 percent of the globe’s available land. In the process, the government has undertaken to reduce the total number of people living off farming in rural areas. Local and provincial governments are endeavoring to mechanize farming as well as implement various methods of scientific farming. Government leaders are also promoting local industries such as food processing, light manufacturing, and retailing in order to absorb the surplus farm labor in all rural areas (Wong and Lu 39).
China’s Investments Opportunities

The technology and telecommunication industry has already made great strides. Shown is the Shanghai China central Market for telecommunications products.

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In order to achieve the country’s economic goals, representatives from China are traveling around the world on trade missions promoting the economic opportunities that are available to foreign businesses wishing to invest in China. Furthermore, municipalities, provinces, and autonomous regions are competing against one another to attract foreign investments to high-priority projects in their backyards. The government is not only soliciting foreign investments but is also searching for needed material and equipment to implement its ambitious plans. Finally, these trade missions also include contacting purchasing managers in foreign firms in order to market their products and services.

In 1995, government officials announced their plans to import products valued at US$1000 billion before the turn of the century. This announcement, made for the benefit of industries around the world, alerted interested parties to opportunities in the Chinese market (Wong and Lu 42-43).

Wu Yi, minister of Foreign Trade and Economic Cooperation, has stated that China continues to publish industrial policies in a timely manner in order to provide guidance to foreign investors (Wong and Lu 44). During the balance of the 20th century and into the next, the government will focus on agriculture, energy, infrastructure, communication and materials, using advanced technology. The government will also encourage foreign investments in the relatively backward areas of Central and Western China.

China’s government is also endeavoring to change its industrial mix, which currently is weighted heavily with low-value added products. Instead of promoting such industries as clothing, toys, and novelties, the government is placing high priority on attracting high-tech industries that utilized the most advanced technology. The government is seeking to attract major segments of the electronic industry by offering special incentives for offshore investors. Government plans are to spend $12 billion in the next eight car-markers in ventures to build up its auto industry. Plans are to make sedans and small cars. China’s ultimate ambition is to be the world’s largest automobile manufacturer during the 21st century (Waters 202).

Now that the Central Planning Commission has published its ‘wish list’ of investment needs, all metropolitan areas, provinces and autonomous regions are conducting trade shows with other promotional programs in an effort to match Chinese business people with potential foreign investors, marketers, and procurement officials. Each of the major industries, such as telecommunications, energy, and mining, offers its own trade shows and seminars and also sends trade missions to developed countries in search of needed resources ranging from material to money. Opportunities for enterprising businesses from all corners of the globe are seemingly endless.


        The China that Mao ZeDong built was a China that stood for socioeconomic egalitarianism, material asceticism and continual social revolution in the form of upheavals such as the Cultural Revolution. In Mao’s mind, political and social reform before economic reform was almost always the order of the day, especially in the 1960s and beyond. For decades, his people gave him what he wanted, and China stood as Mao ZeDong’s China.

But upon Mao’s death, China became obsessed with the notions of economic expansion, modernization and westernization. The new order of the day suddenly became aggressive economic policies focusing on private property, free enterprise and international trade. How did this switch in gears come about? As previously explained, it was precisely Mao and his own policies that were ultimately responsible for this sudden and dramatic shift.

Mao’s constant call for asceticism from his rural and urban citizens would force them to make do with so little for so long that they would come to demand and subsequently be very receptive to economic policies and programs emphasizing semi-capitalistic ideals. Moreover, Mao’s Cultural Revolution would tear apart traditional Confucian value structures of trust and loyalty to the point that the Chinese people would inevitably turn to opposing value structures emphasizing material gain and economic success: ideals that necessitated economic policies that would allow for more opportunity and more progress.

The man who came to give the Chinese people what they wanted was Deng Xiaoping. Chosen to be China’s paramount leader in 1978, Deng would provide his people for the next two decades with the modern, near-capitalistic economic policies and programs they so greatly desired.

The public’s reaction to these new policies was overwhelmingly positive. Long stifled under the strict regimentation of Mao, the people yearned for civil and economic liberalization, and they have gradually come alive to the new order. For all their respect for the Great Helmsman, Mao Zedong’s passing was in many ways a relief, slowly lifting the heavy burden of omnipresent politics from their shoulders. They welcome the changes.

            However, despite public support of the new leadership, the pragmatists’ victory remains incomplete. Of its 38 million members, about half joined the party and rose to positions of responsibility during the Cultural Revolution decade. This large group’s indifferent attitude toward the new policies has prompted the expression “The two ends are hot, but the middle is cold.”

            The changes in China signify a shift of approach within the framework of the Chinese Communist system. Rejection of Maoist class struggle and Mao’s adventurous economic policies with the adoption of a more realistic modernization program has caused a new order to emerge, and the Maoist era to end.

It is not just that the Chinese economy has achieved spectacular growth performance over the past two decades. But it is also sufficiently clear that China’s economy is carrying over its high growth momentum into this century, at least for the first two decades. Unlike the other smaller East Asian economies, which can easily exhaust their growth potential, China is a large and diverse continental-sized economy. It has sufficient internal dynamics to sustain growth for a much longer period. This is already evident in 2001 when economic growth in most parts of East Asia has plunged due to the slow-down of the US economy. Only China’s economy is still able to keep to its original target of yearly growth over 7% largely because of its reliance on domestic demand.

            However, for China’s economy to sustain continuing high growth in the next lap, China will have to come to grips with several structural and institutional constraints, including the unfinished business of economic reform. The two-decade long period of rapid growth has effectively strengthened China’s economic power and raised its people’s standard of living. It has also transformed China from a centrally planned economy to a “socialist market economy”, one that operates increasingly in line with capitalist norms. Many structural problems, however, remain. Weaknesses in the half-reformed fiscal system breed widespread rent-seeking activities at the local levels and cause tensions in state budget. The flawed financial institutions and the biased ownership structure continue to distort resource allocation, leading to huge efficiency losses. Inter-provincial and inter-regional disparity is reaching a level that threatens national unity and social stability. Some of these structural issues will get more acute in the future. What needs to be done in the remaining areas of reform and restructuring will present enormous challenges to the Chinese leadership in the next decade and beyond.


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1 The “iron rice bowl” describes the country’s development policy which is life employment through the retirement years and includes housing facilities for the employee and family.
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