Reform and opening up
Reform and opening-up, also known as the Chinese economic reform or Chinese economic miracle, refers to a variety of economic reforms in the People's Republic of China that began in the late 20th century, after Mao Zedong's death in 1976.
Guided by Deng Xiaoping, who is often credited as the "General Architect", the reforms were launched by the ruling Chinese Communist Party on December 18, 1978 at the third plenary session of the 11th CCP Central Committee, during the Boluan Fanzheng period. In 1979, Deng launched the Four Modernizations, aiming to modernize China's economy. A parallel set of political reforms were launched by Deng and his allies in the 1980s, but ended with the 1989 Tiananmen Square protests and massacre, halting further political liberalization. The economic reforms were revived after Deng Xiaoping's southern tour in 1992. Reform and opening up gradually became the main component of socialism with Chinese characteristics, constituting Deng Xiaoping Theory, and was incorporated into the CCP Constitution in 1997 and written into the Constitution of China in 1999.
Reform and opening up is a major decision and turning point in the history of the People's Republic of China. It began after the Cultural Revolution, and changed the planned economic model of China to what is officially termed as a socialist market economy. The reforms de-collectivized agriculture, abolished the people's communes, relaxed price controls, allowed foreign direct investment into China, and led to the creation of special economic zones, most prominently the Shenzhen Special Economic Zone and the Shanghai Pudong New Area. Private enterprises were allowed to grow, while many state-owned enterprises were scaled down or privatized. Shanghai Stock Exchange and the Shenzhen Stock Exchange were established in 1990, allowing a capital market system, while China joined the Asia-Pacific Economic Cooperation in 1991 and the World Trade Organization in 2001.
The reforms led to significant economic growth for China within the successive decades; this phenomenon has since been seen as an "economic miracle". The reforms turned China from one of the poorest countries in the world to an upper-middle income country, while significantly reducing poverty and increasing wealth; between 1978 and 2018, China reduced extreme poverty by 800 million. The economic growth resulting from the reforms also significantly increased China's global political and economic power, while establishing the country as the world's leading manufacturing power. China's economy has grown from $150 billion in 1978 to $18.74 trillion by 2024. In 2010, China overtook Japan as the world's second-largest economy by nominal GDP, before overtaking the United States in 2016 as the world's largest economy by GDP.
History of the reforms
The Chinese Communist Party carried out the market reforms in two stages. The first stage, in the late 1970s and early 1980s, involved the de-collectivization of agriculture, the opening up of the country to foreign investment, and permission for entrepreneurs to start businesses. However, a large percentage of industries remained state-owned. The second stage of reform, in the late 1980s and 1990s, involved the privatization and contracting out of much state-owned industry. The 1985 lifting of price controls was a major reform, and the lifting of protectionist policies and regulations soon followed, although state monopolies in the commanding heights of the economy such as banking and petroleum remained.In 2001, China joined the World Trade Organization. Not long after, the private sector grew remarkably, accounting for as much as 70 percent of China's gross domestic product by 2005. From 1978 until 2013, significant growth occurred, with the economy increasing by 9.5% a year. Hu Jintao and Wen Jiabao's administration took a more conservative approach towards reforms, regulated and controlled the economy more heavily after 2005, reversing some reforms.
Origin
Before Deng Xiaoping's reforms, China's economy suffered due to centrally planned policies, such as the Great Leap Forward and the Cultural Revolution, resulting in stagnation, inefficiency, and poverty. Prior to the reforms, the Chinese economy was dominated by state ownership and central planning. From 1950 to 1973, Chinese real GDP per capita grew at a rate of 2.9% per year on average, albeit with major fluctuations. This placed it near the middle of the Asian nations during the same period, with neighboring countries such as Japan, South Korea, Singapore and then rival Chiang Kai-shek's Republic of China outstripping mainland China's rate of growth. Starting in 1970, the economy entered into a period of stagnation, and after the death of Mao Zedong, the CCP leadership decided to abandon Maoism and turn to market-oriented reforms to salvage the stagnant economy. In September 1976, Mao Zedong died, and in October, Hua Guofeng together with Ye Jianying and Wang Dongxing arrested the Gang of Four, putting an end to the Cultural Revolution. Hua's break with Cultural Revolution era economic policies were consistent with the 1975 reform agenda of Deng Xiaoping. Hua made national economic development a matter of the highest priority and emphasized the need to achieve "liberation of productive forces". He "combined Soviet-style big push industrialization with an opening up to the capitalist world" and under his leadership, China opened its first Special Economic Zone and launched major efforts to attract foreign direct investment.Economic reforms began in earnest during the "Boluan Fanzheng" period, especially after Deng and his reformist allies rose to power with Deng replacing Hua Guofeng as the paramount leader in December 1978. By the time Deng took power, there was widespread support among the elite for economic reforms. From 1978 to 1992, Deng described reform and opening up as a "large scale experiment" requiring thorough "experimentation in practice" instead of textbook knowledge. As the de facto leader, Deng's policies faced opposition from party conservatives but were extremely successful in increasing the country's wealth. Major reforms almost always began first as decentralized local experiments subject to intervention from high level Communist Party officials before they were more widely adopted.
1979–1984
In 1979, Deng Xiaoping emphasized the goal of "Four Modernizations" and further proposed the idea of moderately prosperous society. The achievements of Lee Kuan Yew to create an economic success in Singapore had a profound effect on the CCP leadership in China. Leaders in China made a major effort, especially under Deng Xiaoping, to emulate his policies of economic growth, entrepreneurship, and subtle suppression of dissent. Over the years, more than 22,000 Chinese officials were sent to Singapore to study its methods.Generally, reforms in this period started with local experiments that were adopted and expanded elsewhere once their success had been demonstrated. Officials generally faced few penalties for experimenting and failing and those who developed successful programs received nation-wide praise and recognition. 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.
The first reforms began in agriculture. 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 percent between 1975 and 1985, setting a precedent for privatizing other parts of the economy.
Reforms were also implemented in urban industry to increase productivity. A dual-price system was introduced, in which 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 promote 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 CCP takeover, and they gradually began to make up a greater percentage of industrial output. Price flexibility was also increased, expanding the service sector.
At the same time, in December 1978, Deng announced a new policy, the Open Door Policy, 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, including Shenzhen, Zhuhai and Xiamen, 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. On January 31, 1979, the Shekou Industrial Zone of Shenzhen was founded, becoming the first experimental area in China to "open up".
In July 1979, China adopted its first Law on Joint Venture Using Chinese and Foreign Investment. This law was effective in helping to attract and absorb foreign technology and capital from advanced countries like the United States, facilitated China's exports to such countries, and thereby contributed to China's subsequent rapid economic growth.
Under the leadership of Yuan Geng, the "Shekou model" of development was gradually formed, embodied in its famous slogan Time is Money, Efficiency is Life, which then widely spread to other parts of China. In January 1984, Deng Xiaoping made his first inspection tour to Shenzhen and Zhuhai, praising the "Shenzhen speed" of development as well as the success of the special economics zones.
File:Hu Yaobang Bronze statue at Yaobang Cemetery.jpg|thumb|200x200px|Hu Yaobang, then General Secretary of CCP, played an important role in implementing the reforms together with Zhao Ziyang, then Premier of China.
Besides Deng Xiaoping himself, important high-ranking reformists who helped carry out the reforms include Hu Yaobang, then General Secretary of Chinese Communist Party, and Zhao Ziyang, then Premier of China. Other leaders who favored Deng's reforms include Xi Zhongxun, Wan Li, Hu Qili and others. Another influential leader was Chen Yun, regarded by some as the second most powerful person in China after Deng with more conservative ideology of the reforms. Though Deng Xiaoping is credited as the architect of modern China's economic reforms, Chen was more directly involved in the details of its planning and construction, and led a force that opposed many of the reforms from Deng's side. The two sides struggled over the general direction of the reforms until Chen died in 1995. A key feature of Chen's ideas was to use the market to allocate resources, within the scope of an overall plan. Some reforms of the early 1980s were, in effect, the implementation of a program that Chen had outlined in the mid-1950s. Chen called this the "birdcage economy ". According to Chen, "the cage is the plan, and it may be large or small. But within the cage the bird is free to fly as he wishes." Chen and some other conservative leaders including Li Xiannian never visited Shenzhen, the leading special economic zone championed by Deng.