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Encyclopedia > Economic history of the People's Republic of China

When the Communist Party of China came to power in 1949, its leaders' fundamental long-range goals were to transform China into a modern, powerful, socialist nation. In economic terms these objectives meant industrialization, improvement of living standards, narrowing of income differences, and production of modern military equipment. As the years passed, the leadership continued to subscribe to these goals. But the economic policies formulated to achieve them were dramatically altered on several occasions in response to major changes in the economy, internal politics, and international political and economic developments. Image File history File links Broom_icon. ... The Communist Party of China (CPC) (Simplified Chinese: ; Traditional Chinese: ; pinyin: ), also known as the Chinese Communist Party (CCP), is the ruling political party of the Peoples Republic of China, a position guaranteed by the countrys constitution. ...


An important distinction emerged between leaders who felt that the socialist goals of income equalization and heightened political consciousness should take priority over material progress and those who believed that industrialization and general economic modernization were prerequisites for the attainment of a successful socialist order. Among the prominent leaders who considered politics the prime consideration were Mao Zedong, Lin Biao, and the members of the Gang of Four. Leaders who more often stressed practical economic considerations included Liu Shaoqi, Zhou Enlai, and Deng Xiaoping. For the most part, important policy shifts reflected the alternating emphasis on political and economic goals and were accompanied by major changes in the positions of individuals in the political power structure. An important characteristic in the development of economic policies and the underlying economic model was that each new policy period, while differing significantly from its predecessor, nonetheless retained most of the existing economic organization. Thus the form of the economic model and the policies that expressed it at any given point in Chinese history reflected both the current policy emphasis and a structural foundation built up during the earlier periods. “Mao” redirects here. ... An artistic rendition of Mao Zedong and Lin Biao as his heir apparent in the style of socialist realism in the prime of the Cultural Revolution. ... This does not cite its references or sources. ... This is a Chinese name; the family name is 劉 (Liu) Liu Shaoqi (Simplified Chinese: ; Traditional Chinese: ; pinyin: Liú Shàoqí; Wade-Giles: Liu Shao-chi) (November 24, 1898 – November 12, 1969) was a Chinese Communist leader. ... Zhou Enlai (Simplified Chinese: ; Traditional Chinese: ; pinyin: ; Wade-Giles: Chou En-lai) (March 5, 1898 – January 8, 1976), a prominent Communist Party of China leader, was Premier of the Peoples Republic of China from 1949 until his death in January 1976, and Chinas foreign minister from 1949 to... Deng Xiaoping   (Simplified Chinese: ; Traditional Chinese: ; pinyin: ; Wade-Giles: Teng Hsiao-ping; August 22, 1904–February 19, 1997) was a leader in the Communist Party of China (CCP). ...

Contents

Recovery from war, 1949-52

In 1949 China's economy was suffering from the debilitating effects of decades of warfare. Many mines and factories had been damaged or destroyed. At the end of the war with Japan in 1945, Soviet troops had dismantled about half the machinery in the major industrial areas of the northeast and shipped it to the Soviet Union. Transportation, communication, and power systems had been destroyed or had deteriorated because of lack of maintenance. Agriculture was disrupted, and food production was some 30 percent below its pre-war peak level. Further, economic ills were compounded by one of the most virulent inflations in world history.


The chief goal of the government for the 1949-52 period was simply to restore the economy to normal working order. The administration moved quickly to repair transportation and communication links and revive the flow of economic activity. The banking system was nationalized and centralized under the People's Bank of China. To bring inflation under control by 1951, the government unified the monetary system, tightened credit, restricted government budgets at all levels and put them under central control, and guaranteed the value of the currency. Commerce was stimulated and partially regulated by the establishment of state trading companies (commercial departments), which competed with private traders in purchasing goods from producers and selling them to consumers or enterprises. Transformation of ownership in industry proceeded slowly. About a third of the country's enterprises had been under state control while the Guomindang government was in power (1927-49), as was much of the modernized transportation sector. The Communist Party of China immediately made these units state-owned enterprises upon taking power in 1949. The remaining privately owned enterprises were gradually brought under government control, but 17 percent of industrial units were still completely outside the state system in 1952. The Kuomintang (KMT) or Nationalist Party of China (Traditional Chinese: 中國國民黨; Simplified Chinese: 中国国民党; pinyin: Zhōngguó Guómíndǎng; Wade-Giles: Chung-kuo Kuo-min-tang; Tongyong Pinyin: Jhongguo Guomindang; literally the National Peoples Party of China...


In agriculture a major change in landownership was carried out. Under a nationwide land reform program, titles to about 45 percent of the arable land were redistributed from landlords and more prosperous farmers to the 60 to 70 percent of farm families that previously owned little or no land. Once land reform was completed in an area, farmers were encouraged to cooperate in some phases of production through the formation of small "mutual aid teams" of six or seven households each. Thirty-nine percent of all farm households belonged to mutual aid teams in 1952. By 1952 price stability had been established, commerce had been restored, and industry and agriculture had regained their previous peak levels of production. The period of recovery had achieved its goals.


The First Five-Year Plan, 1953-57

Having restored a viable economic base, the leadership under Mao Zedong, Zhou Enlai, and other revolutionary veterans was prepared to embark on an intensive program of industrial growth and socialization. For this purpose the administration adopted the Soviet economic model, based on state ownership in the modern sector, large collective units in agriculture, and centralized economic planning. The Soviet approach to economic development was manifested in the First Five-Year Plan (1953-57). As in the Soviet economy, the main objective was a high rate of economic growth, with primary emphasis on industrial development at the expense of agriculture and particular concentration on heavy industry and capital-intensive technology. Soviet planners helped their Chinese counterparts formulate the plan. Large numbers of Soviet engineers, technicians, and scientists assisted in developing and installing new heavy industrial facilities, including many entire plants and pieces of equipment purchased from the Soviet Union. Government control over industry was increased during this period by applying financial pressures and inducements to convince owners of private, modern firms to sell them to the state or convert them into joint public-private enterprises under state control. By 1956 approximately 67.5 percent of all modern industrial enterprises were state owned, and 32.5 percent were under joint public-private ownership. No privately owned firms remained. During the same period, the handicraft industries were organized into cooperatives, which accounted for 91.7 percent of all handicraft workers by 1956. “Mao” redirects here. ... Zhou Enlai (Simplified Chinese: ; Traditional Chinese: ; pinyin: ; Wade-Giles: Chou En-lai) (March 5, 1898 – January 8, 1976), a prominent Communist Party of China leader, was Premier of the Peoples Republic of China from 1949 until his death in January 1976, and Chinas foreign minister from 1949 to... This article does not adequately cite its references or sources. ... Soviet redirects here. ... Nationalization is the act of taking assets into state ownership. ... Collective can also refer to the collective pitch flight control in helicopters A collective is a group of people who share or are motivated by at least one common issue or interest, or work together on a specific project(s) to achieve a common objective. ... This box:      A planned economy is an economic system in which a single agency makes all decisions about the production and allocation of goods and services. ... World GDP/capita changed very little for most of human history before the industrial revolution. ... Heavy industry does not have a single fixed meaning compared to light industry. ... For the Technical Symposium of NITK Surathkal Engineer , see Engineer (Technical Fest). ... A technician is generally someone in a technological field who has a relatively practical understanding of the general theoretical principles of that field, e. ... This article or section does not adequately cite its references or sources. ... 1956 (MCMLVI) was a leap year starting on Sunday of the Gregorian calendar. ... Wall Street, Manhattan is the location of the New York Stock Exchange and is often used as a symbol for the world of business. ... 1956 (MCMLVI) was a leap year starting on Sunday of the Gregorian calendar. ...


Agriculture also underwent extensive organizational changes. To facilitate the mobilization of agricultural resources, improve the efficiency of farming, and increase government access to agricultural products, the authorities encouraged farmers to organize increasingly large and socialized collective units. From the loosely structured, tiny mutual aid teams, villages were to advance first to lower-stage, agricultural producers' cooperatives, in which families still received some income on the basis of the amount of land they contributed, and eventually to advanced cooperatives, or collectives. In the advanced producers' cooperatives, income shares were based only on the amount of labor contributed. In addition, each family was allowed to retain a small private plot on which to grow vegetables, fruit, and livestock for its own use. The collectivization process began slowly but accelerated in 1955 and 1956. In 1957 about 93.5 percent of all farm households had joined advanced producers' cooperatives. Farming, ploughing rice paddy, in Indonesia Agriculture is the process of producing food, feed, fiber and other desired products by cultivation of certain plants and the raising of domesticated animals (livestock). ... Traditional Eastern European Farmer Woman. ... For cooperative as used in biochemistry, see cooperative binding. ... Collective can also refer to the collective pitch flight control in helicopters A collective is a group of people who share or are motivated by at least one common issue or interest, or work together on a specific project(s) to achieve a common objective. ... See stock (disambiguation) for other meanings of the term stock A stock, also referred to as a share, is commonly a share of ownership in a corporation. ... Collective farming is an organizational unit in agriculture in which peasants are not paid wages, but rather receive a share of the farms net output. ... 1955 (MCMLV) was a common year starting on Saturday of the Gregorian calendar. ... 1956 (MCMLVI) was a leap year starting on Sunday of the Gregorian calendar. ... 1957 (MCMLVII) was a common year starting on Tuesday of the Gregorian calendar. ...


In terms of economic growth the First Five-Year Plan was quite successful, especially in those areas emphasized by the Soviet-style development strategy. A solid foundation was created in heavy industry. Key industries, including iron and steel manufacturing, coal mining, cement production, electricity generation, and machine building were greatly expanded and were put on a firm, modern technological footing. Thousands of industrial and mining enterprises were constructed, including 156 major facilities. Industrial production increased at an average annual rate of 19 percent between 1952 and 1957, and national income grew at a rate of 9 percent a year. General Name, Symbol, Number iron, Fe, 26 Chemical series transition metals Group, Period, Block 8, 4, d Appearance lustrous metallic with a grayish tinge Standard atomic weight 55. ... The steel cable of a colliery winding tower. ... Surface coal mining in Wyoming. ... In the most general sense of the word, cement is a binder, a substance which sets and hardens independently, and can bind other materials together. ... Lightning strikes during a night-time thunderstorm. ... 1952 (MCMLII) was a Leap year starting on Tuesday (link will take you to calendar). ... 1957 (MCMLVII) was a common year starting on Tuesday of the Gregorian calendar. ...


Despite the lack of state investment in agriculture, agricultural output increased substantially, averaging increases of about 4 percent a year. This growth resulted primarily from gains in efficiency brought about by the reorganization and cooperation achieved through collectivization. As the First Five-Year Plan wore on, however, Chinese leaders became increasingly concerned over the relatively sluggish performance of agriculture and the inability of state trading companies to increase significantly the amount of grain procured from rural units for urban consumption. Rural area in Dalarna, Sweden Qichun, a rural town in Hubei province, China Rural areas (also referred to as the country, countryside) are sparsely settled places away from the influence of large cities. ... The city of San Francisco, an example of an urban area. ...


The Great Leap Forward, 1958-60

Main article: Great Leap Forward

Before the end of the First Five-Year Plan, the growing imbalance between industrial and agricultural growth, dissatisfaction with inefficiency, and lack of flexibility in the decision-making process convinced the nation's leaders-- particularly Mao Zedong--that the highly centralized, industry-biased Soviet model was not appropriate for China. In 1957 the government adopted measures to shift a great deal of the authority for economic decision making to the provincial-level, county, and local administrations. In 1958 the Second Five-Year Plan (1958-62), which was intended to continue the policies of the first plan, was abandoned. In its place the leadership adopted an approach that relied on spontaneous heroic efforts by the entire population to produce a dramatic "great leap" in production for all sectors of the economy at once. Further reorganization of agriculture was regarded as the key to the endeavor to leap suddenly to a higher stage of productivity. A fundamental problem was the lack of sufficient capital to invest heavily in both industry and agriculture at the same time. To overcome this problem, the leadership decided to attempt to create capital in the agricultural sector by building vast irrigation and water control works employing huge teams of farmers whose labor was not being fully utilized. Surplus rural labor also was to be employed to support the industrial sector by setting up thousands of small-scale, low-technology, "backyard" industrial projects in farm units, which would produce machinery required for agricultural development and components for urban industries. Mobilization of surplus rural labor and further improvements in agricultural efficiency were to be accomplished by a "leap" to the final stage of agricultural collectivization--the formation of people's communes. This article or section does not adequately cite its references or sources. ...


People's communes were created by combining some 20 or 30 advanced producers'cooperatives of 20,000 to 30,000 members on average, although membership varied from as few as 6,000 to over 40,000 in some cases. When first instituted, the communes were envisaged as combining in one body the functions of the lowest level of local government and the highest level of organization in agricultural production. Communes consisted of three organizational levels: the central commune administration; the production brigade (roughly equivalent to the advanced producers' cooperatives, or a traditional rural village), and the production team, which generally consisted of around thirty families. At the inception of the Great Leap Forward, the communes were intended to acquire all ownership rights over the productive assets of their subordinate units and to take over most of the planning and decision making for farm activities. Ideally, communes were to improve efficiency by moving farm families into dormitories, feeding them in communal mess halls, and moving whole teams of laborers from task to task. In practice, this ideal, extremely centralized form of commune was not instituted in most areas. This article or section does not adequately cite its references or sources. ...


Ninety-eight percent of the farm population was organized into communes between April and September of 1958. Very soon it became evident that in most cases the communes were too unwieldy to carry out successfully all the managerial and administrative functions that were assigned to them. In 1959 and 1960, most production decisions reverted to the brigade and team levels, and eventually most governmental responsibilities were returned to county and township administrations. Nonetheless, the commune system was retained and continued to be the basic form of organization in the agricultural sector until the early 1980s.


During the Great Leap Forward, the industrial sector also was expected to discover and use slack labor and productive capacity to increase output beyond the levels previously considered feasible. Political zeal was to be the motive force, and to "put politics in command" enterprising party branches took over the direction of many factories. In addition, central planning was relegated to a minor role in favor of spontaneous, politically inspired production decisions from individual units.


The result of the Great Leap Forward was a severe economic crisis. In 1958 industrial output did in fact "leap" by 55 percent, and the agricultural sector gathered in a good harvest. In 1959, 1960, and 1961, however, adverse weather conditions, improperly constructed water control projects, and other misallocations of resources that had occurred during the overly centralized communization movement resulted in disastrous declines in agricultural output. In 1959 and 1960, the gross value of agricultural output fell by 14 percent and 13 percent, respectively, and in 1961 it dropped a further 2 percent to reach the lowest point since 1952. Widespread famine occurred, especially in rural areas, according to 1982 census figures, and the death rate climbed from 1.2 percent in 1958 to 1.5 percent in 1959, 2.5 percent in 1960, and then dropped back to 1.4 percent in 1961. From 1958 to 1961, over 14 million people apparently died of starvation, and the number of reported births was about 23 million fewer than under normal conditions. The government prevented an even worse disaster by canceling nearly all orders for foreign technical imports and using the country's foreign exchange reserves to import over 5 million tons of grain a year beginning in 1960. Mines and factories continued to expand output through 1960, partly by overworking personnel and machines but largely because many new plants constructed during the First Five-Year Plan went into full production in these years. Thereafter, however, the excessive strain on equipment and workers, the effects of the agricultural crisis, the lack of economic coordination, and, in the 1960s, the withdrawal of Soviet assistance caused industrial output to plummet by 38 percent in 1961 and by a further 16 percent in 1962.


Readjustment and Recovery: "Agriculture First," 1961-65

Faced with economic collapse in the early 1960s, the government sharply revised the immediate goals of the economy and devised a new set of economic policies to replace those of the Great Leap Forward. Top priority was given to restoring agricultural output and expanding it at a rate that would meet the needs of the growing population. Planning and economic coordination were to be revived- -although in a less centralized form than before the Great Leap Forward--so as to restore order and efficient allocation of resources to the economy. The rate of investment was to be reduced and investment priorities reversed, with agriculture receiving first consideration, light industry second, and heavy industry third.


In a further departure from the emphasis on heavy industrial development that persisted during the Great Leap Forward, the government undertook to mobilize the nation's resources to bring about technological advancement in agriculture. Organizational changes in agriculture mainly involved decentralization of production decision making and income distribution within the commune structure. The role of the central commune administration was greatly reduced, although it remained the link between local government and agricultural producers and was important in carrying out activities that were too large in scale for the production brigades. Production teams were designated the basic accounting units and were responsible for making nearly all decisions concerning production and the distribution of income to their members. Private plots, which had disappeared on some communes during the Great Leap Forward, were officially restored to farm families.


Economic support for agriculture took several forms. Agricultural taxes were reduced, and the prices paid for agricultural products were raised relative to the prices of industrial supplies for agriculture. There were substantial increases in supplies of chemical fertilizer and various kinds of agricultural machinery, notably small electric pumps for irrigation. Most of the modern supplies were concentrated in areas that were known to produce "high and stable yields" in order to ensure the best possible results.


In industry, a few key enterprises were returned to central state control, but control over most enterprises remained in the hands of provincial-level and local governments. This decentralization had taken place in 1957 and 1958 and was reaffirmed and strengthened in the 1961-65 period. Planning rather than politics once again guided production decisions, and material rewards rather than revolutionary enthusiasm became the leading incentive for production. Major imports of advanced foreign machinery, which had come to an abrupt halt with the withdrawal of Soviet assistance starting in 1960, were initiated with Japan and West European countries.


During the 1961-65 readjustment and recovery period, economic stability was restored, and by 1966 production in both agriculture and industry surpassed the peak levels of the Great Leap Forward period. Between 1961 and 1966, agricultural output grew at an average rate of 9.6 percent a year. Industrial output was increased in the same years at an average annual rate of 10.6 percent, largely by reviving plants that had operated below capacity after the economic collapse in 1961. Another important source of growth in this period was the spread of rural, small-scale industries, particularly coal mines, hydroelectric plants, chemical fertilizer plants, and agricultural machinery plants. The economic model that emerged in this period combined elements of the highly centralized, industrially oriented, Soviet-style system of the First Five-Year Plan with aspects of the decentralization of ownership and decision making that characterized the Great Leap Forward and with the strong emphasis on agricultural development and balanced growth of the "agriculture first" policy. Important changes in economic policy occurred in later years, but the basic system of ownership, decision-making structure, and development strategy that was forged in the early 1960s was not significantly altered until the reform period of the 1980s. Hydraulic turbine and electrical generator. ...


Events During the Cultural Revolution Decade, 1966-76

The Cultural Revolution was set in motion by Mao Zedong in 1966 and called to a halt in 1968, but the atmosphere of radical leftism persisted until Mao's death and the fall of the Gang of Four in 1976. During this period, there were several distinct phases of economic policy. This article or section does not adequately cite its references or sources. ...


High Tide of the Cultural Revolution, 1966-68

The Cultural Revolution, unlike the Great Leap Forward, was primarily a political upheaval and did not produce major changes in official economic policies or the basic economic model. Nonetheless, its influence was felt throughout urban society, and it profoundly affected the modern sector of the economy. Agricultural production stagnated, but in general the rural areas experienced less turmoil than the cities. Production was reduced in the modern nonagricultural sectors in several ways. The most direct cause of production halts was the political activity of students and workers in the mines and factories. A second cause was the extensive disruption of transportation resulting from the requisitioning of trains and trucks to carry Chinese Red Guards around the country. Output at many factories suffered from shortages of raw materials and other supplies. A third disruptive influence was that the direction of factories was placed in the hands of revolutionary committees, consisting of representatives from the party, the workers, and the Chinese People's Liberation Army, whose members often had little knowledge of either management or the enterprise they were supposed to run. In addition, virtually all engineers, managers, scientists, technicians, and other professional personnel were "criticized," demoted, "sent down" to the countryside to "participate in labor," or even jailed, all of which resulted in their skills and knowledge being lost to the enterprise. The effect was a 14-percent decline in industrial production in 1967. A degree of order was restored by the army in late 1967 and 1968, and the industrial sector returned to a fairly high rate of growth in 1969. In the Peoples Republic of China, the Red Guards (Chinese: 紅衛兵; Hanyu Pinyin: Hóng Wèi Bīng) were civilians who were the frontline implementers of the Chinese Cultural Revolution (1960s-1970s). ... The Chinese Peoples Liberation Army (PLA) (Simplified Chinese: 中国人民解放军; Traditional Chinese: 中國人民解放軍; pinyin: // Organization Within the PRC government, the PLA maintains a semi-autonomous existence. ...


Other aspects of the Cultural Revolution had more far-reaching effects on the economy. Imports of foreign equipment, required for technological advancement, were curtailed by rampant xenophobia. Probably the most serious and long-lasting effect on the economy was the dire shortage of highly educated personnel caused by the closing of the universities. China's ability to develop new technology and absorb imported technology would be limited for years by the hiatus in higher education. This article or section does not adequately cite its references or sources. ...


Resumption of Systematic Growth, 1970-74

As political stability was gradually restored, a renewed drive for coordinated, balanced development was set in motion under the leadership of Premier Zhou Enlai. To revive efficiency in industry, Communist Party of China committees were returned to positions of leadership over the revolutionary committees, and a campaign was carried out to return skilled and highly educated personnel to the jobs from which they had been displaced during the Cultural Revolution. Universities began to reopen, and foreign contacts were expanded. Once again the economy suffered from imbalances in the capacities of different industrial sectors and an urgent need for increased supplies of modern inputs for agriculture. In response to these problems, there was a significant increase in investment, including the signing of contracts with foreign firms for the construction of major facilities for chemical fertilizer production, steel finishing, and oil extraction and refining. The most notable of these contracts was for thirteen of the world's largest and most modern chemical fertilizer plants. During this period, industrial output grew at an average rate of 8 percent a year. Zhou Enlai (Simplified Chinese: ; Traditional Chinese: ; pinyin: ; Wade-Giles: Chou En-lai) (March 5, 1898 – January 8, 1976), a prominent Communist Party of China leader, was Premier of the Peoples Republic of China from 1949 until his death in January 1976, and Chinas foreign minister from 1949 to...


Agricultural production declined somewhat in 1972 because of poor weather but increased at an average annual rate of 3.8 percent for the period as a whole. The party and state leadership undertook a general reevaluation of development needs, and Zhou Enlai presented the conclusions in a report to the Fourth National People's Congress in January 1975. In it he called for the Four Modernizations (see Glossary). Zhou emphasized the mechanization of agriculture and a comprehensive two-stage program for the modernization of the entire economy by the end of the century. The Great Hall of the People, where the NPC convenes The National Peoples Congress (全国人民代表大会 in Pinyin: Quánguó Rénmín Dàibiǎo Dàhuì, literally Pan-Nation Congress of the Peoples Representatives), abbreviated PNCOTPR, is the highest... The Four Modernizations (Simplified Chinese: ; Traditional Chinese: ; pinyin: ) were the goals of Deng Xiaoping’s reforms. ...


The Gang of Four, 1974-76

During the early and mid-1970s, the radical group later known as the Gang of Four attempted to dominate the power center through their network of supporters and, most important, through their control of the media. More moderate leaders, however, were developing and promulgating a pragmatic program for rapid modernization of the economy that contradicted the set of policies expressed in the media. Initiatives by Zhou Enlai and Deng Xiaoping were vehemently attacked in the press and in political campaigns as "poisonous weeds." Using official news organs, the Gang of Four advocated the primacy of nonmaterial, political incentives, radical reduction of income differences, elimination of private farm plots, and a shift of the basic accounting unit up to the brigade level in agriculture. They opposed the strengthening of central planning and denounced the use of foreign technology. This does not cite its references or sources. ...


In the face of such contradictory policy pronouncements and uncertain political currents, administrators and economic decision makers at all levels were virtually paralyzed. Economic activity slowed, and the incipient modernization program almost ground to a halt. Uncertainty and instability were exacerbated by the death of Zhou Enlai in January 1976 and the subsequent second purge of Deng Xiaoping in April. The effects of the power struggle and policy disputes were compounded by the destruction resulting from the Tangshan earthquake in July 1976. Output for the year in both industry and agriculture showed no growth over 1975. The interlude of uncertainty finally ended when the Gang of Four was arrested in October--one month after Mao's death. The Tangshan earthquake (唐山大地震) of July 28, 1976 is one of the largest earthquakes in loss of life to hit the modern world. ...


The Post-Mao interlude, 1976-78

After the fall of the Gang of Four, the leadership under Hua Guofeng--and by July 1977 the rehabilitated Deng Xiaoping-- reaffirmed the modernization program espoused by Zhou Enlai in 1975. They also set forth a battery of new policies for the purpose of accomplishing the Four Modernizations. The new policies strengthened the authority of managers and economic decision makers at the expense of party officials, stressed material incentives for workers, and called for expansion of the research and education systems. Foreign trade was to be increased, and exchanges of students and "foreign experts" with developed countries were to be encouraged. This new policy initiative was capped at the Fifth National People's Congress in February and March 1978, when Hua Guofeng presented the draft of an ambitious ten-year plan for the 1976-85 period. The plan called for high rates of growth in both industry and agriculture and included 120 construction projects that would require massive and expensive imports of foreign technology. Hua Guofeng (Simplified Chinese: ; Traditional Chinese: ; pinyin: Huà Guófēng; Wade-Giles: Hua Kuo-feng) (born February 16, 1921) was Mao Zedongs designated successor as the paramount leader of the Communist Party of China and the Peoples Republic of China. ... International trade is defined as trade between two or more partners from different countries (an exporter and an importer). ...


Between 1976 and 1978, the economy quickly recovered from the stagnation of the Cultural Revolution. Agricultural production was sluggish in 1977 because of a third consecutive year of adverse weather conditions but rebounded with a record harvest in 1978. Industrial output jumped 14 percent in 1977 and increased by 13 percent in 1978.


Reform of the economic system, beginning in 1979

At the milestone Third Plenum of the National Party Congress's 11th Central Committee in December 1978, the party leaders decided to undertake a program of gradual but fundamental reform of the economic system. They concluded that the Maoist version of the centrally planned economy had failed to produce efficient economic growth and had caused China to fall far behind not only the industrialized nations of the West but also the new industrial powers of Asia: Japan, the Republic of Korea, Singapore, Taiwan, and Hong Kong. In the late 1970s, while Japan and Hong Kong rivaled European countries in modern technology, China's citizens had to make do with barely sufficient food supplies, rationed clothing, inadequate housing, and a service sector that was inadequate and inefficient. All of these shortcomings embarrassed China internationally. Maoism or Mao Zedong Thought (Chinese: 毛澤東思想, pinyin: Máo Zédōng Sīxiǎng), also called Marxism-Leninism–Mao Zedong Thought or Marxism-Leninism-Maoism (MLM), is a variant of communism derived from the teachings of Mao Zedong (1893&#8211... World map showing the location of Asia. ...


The purpose of the reform program was not to abandon communism but to make it work better by substantially increasing the role of market mechanisms in the system and by reducing--not eliminating-- government planning and direct control. The process of reform was incremental. New measures were first introduced experimentally in a few localities and then were popularized and disseminated nationally if they proved successful. By 1987 the program had achieved remarkable results in increasing supplies of food and other consumer goods and had created a new climate of dynamism and opportunity in the economy. At the same time, however, the reforms also had created new problems and tensions, leading to intense questioning and political struggles over the program's future. Communism is an ideology that seeks to establish a classless, stateless social organization based on common ownership of the means of production. ... Market Mechanism is a term from economics, it refers to the use of money exchanged by buyers and sellers with an open and understood system of value and time trade offs to produce the best distribution of goods and services. ...


Period of readjustment, 1979-81

The first few years of the reform program were designated the "period of readjustment," during which key imbalances in the economy were to be corrected and a foundation was to be laid for a well-planned modernization drive. The schedule of Hua Guofeng's ten-year plan was discarded, although many of its elements were retained. The major goals of the readjustment process were to expand exports rapidly; overcome key deficiencies in transportation, communications, coal, iron, steel, building materials, and electric power; and redress the imbalance between light and heavy industry by increasing the growth rate of light industry and reducing investment in heavy industry. Agricultural production was stimulated in 1979 by an increase of over 22 percent in the procurement prices paid for farm products.


The central policies of the reform program were introduced experimentally during the readjustment period. The most successful reform policy, the contract responsibility system of production in agriculture, was suggested by the government in 1979 as a way for poor rural units in mountainous or arid areas to increase their incomes. The responsibility system allowed individual farm families to work a piece of land for profit in return for delivering a set amount of produce to the collective at a given price. This arrangement created strong incentives for farmers to reduce production costs and increase productivity. Soon after its introduction the responsibility system was adopted by numerous farm units in all sorts of areas.


Agricultural production was also stimulated by official encouragement to establish free farmers' markets in urban areas, as well as in the countryside, and by allowing some families to operate as "specialized households," devoting their efforts to producing a scarce commodity or service on a profit-making basis.


In industry, the main policy innovations increased the autonomy of enterprise managers, reduced emphasis on planned quotas, allowed enterprises to produce goods outside the plan for sale on the market, and permitted enterprises to experiment with the use of bonuses to reward higher productivity. The government also tested a fundamental change in financial procedures with a limited number of state-owned units: rather than remitting all of their profits to the state, as was normally done, these enterprises were allowed to pay a tax on their profits and retain the balance for reinvestment and distribution to workers as bonuses.


The government also actively encouraged the establishment of collectively owned and operated industrial and service enterprises as a means of soaking up some of the unemployment among young people and at the same time helping to increase supplies of light industrial products. Individual enterprise--true capitalism--also was allowed, after having virtually disappeared during the Cultural Revolution, and independent cobblers, tailors, tinkers, and vendors once again became common sights in the cities. Foreign-trade procedures were greatly eased, allowing individual enterprises and administrative departments outside the Ministry of Foreign Trade (which became the Ministry of Foreign Economic Relations and Trade in 1984) to engage in direct negotiations with foreign firms. A wide range of cooperation, trading, and credit arrangements with foreign firms were legalized so that China could enter the mainstream of international trade.


Reform and opening, beginning in 1982

The period of readjustment produced promising results, increasing incomes substantially; raising the availability of food, housing, and other consumer goods; and generating strong rates of growth in all sectors except heavy industry, which was intentionally restrained. On the strength of these initial successes, the reform program was broadened, and the leadership under Deng Xiaoping frequently remarked that China's basic policy was "reform and opening," that is, reform of the economic system and opening to foreign trade.


In agriculture the contract responsibility system was adopted as the organizational norm for the entire country, and the commune structure was largely dismantled. By the end of 1984, approximately 98 percent of all farm households were under the responsibility system, and all but a handful of communes had been dissolved. The communes' administrative responsibilities were turned over to township and town governments, and their economic roles were assigned to townships and villages. The role of free markets for farm produce was further expanded and, with increased marketing possibilities and rising productivity, farm incomes rose rapidly.


In industry the complexity and interrelation of production activities prevented a single, simple policy from bringing about the kind of dramatic improvement that the responsibility system achieved in agriculture. Nonetheless, a cluster of policies based on greater flexibility, autonomy, and market involvement significantly improved the opportunities available to most enterprises, generated high rates of growth, and increased efficiency. Enterprise managers gradually gained greater control over their units, including the right to hire and fire, although the process required endless struggles with bureaucrats and party cadres. The practice of remitting taxes on profits and retaining the balance became universal by 1985, increasing the incentive for enterprises to maximize profits and substantially adding to their autonomy. A change of potentially equal importance was a shift in the source of investment funds from government budget allocations, which carried no interest and did not have to be repaid, to interest-bearing bank loans. As of 1987 the interest rate charged on such loans was still too low to serve as a check on unproductive investments, but the mechanism was in place.


The role of foreign trade under the economic reforms increased far beyond its importance in any previous period. Before the reform period, the combined value of imports and exports had seldom exceeded 10 percent of national income. In 1980 it was 15 percent, in 1984 it was 21 percent, and in 1986 it reached 35 percent. Unlike earlier periods, when China was committed to trying to achieve self-sufficiency, under Deng Xiaoping foreign trade was regarded as an important source of investment funds and modern technology. As a result, restrictions on trade were loosened further in the mid-1980s, and foreign investment was legalized. The most common foreign investments were joint ventures between foreign firms and Chinese units. Sole ownership by foreign investors also became legal, but the feasibility of such undertakings remained questionable.


The most conspicuous symbols of the new status of foreign trade were the four coastal special economic zones (see Glossary), which were created in 1979 as enclaves where foreign investment could receive special treatment. Three of the four zones--the cities of Shenzhen, Zhuhai, and Shantou--were located in Guangdong Province, close to Hong Kong. The fourth, Xiamen, in Fujian Province, was directly across the strait from Taiwan. More significant for China's economic development was the designation in April 1984 of economic development zones in the fourteen largest coastal cities- -including Dalian, Tianjin, Shanghai, and Guangzhou--all of which were major commercial and industrial centers. These zones were to create productive exchanges between foreign firms with advanced technology and major Chinese economic networks. Shenzhen (Sham Chun or Shamchun in old documents) is a sub-provincial city of Guangdong province in southern China, located at the border with the Hong Kong Special Administrative Region. ... Geographic coordinates: 116º14 - 117º19 E, 23º02 - 23º38 N Area: 234 km² Shantou (also known as Swatow or Suátao) is a city of 1. ... Guangdong, often spelt as Kwangtung, is a province on the south coast of the Peoples Republic of China. ... A view of the Xiamen University campus Xiamen (Simplified Chinese: 厦门; Traditional Chinese: 廈門; Hanyu Pinyin: ) is a coastal sub-provincial city in southeastern Fujian province, Peoples Republic of China. ... Fujian (Chinese: 福建; pinyin: Fújiàn; Wade-Giles: Fu-chien; Postal System Pinyin: Fukien, Foukien; local transliteration Hokkien from Min Nan Hok-kiàn) is one of the provinces on the southeast coast of China. ... Dalian (Simplified Chinese: ; Traditional Chinese: ; pinyin: Dàlián; Japanese: Dairen; Russian: Далянь, Dalian or Дальний, Dalny) is the governing sub-provincial city in the eastern Liaoning Province of Northeast China. ...   (Chinese: ; pinyin: TiānjÄ«n; Postal map spelling: Tientsin) is one of the four municipalities of the Peoples Republic of China. ... This article or section does not adequately cite its references or sources. ... Guangzhou is the capital and the sub-provincial city of Guangdong Province in the southern part of the Peoples Republic of China. ...


Domestic commerce also was stimulated by the reform policies, which explicitly endeavored to enliven the economy by shifting the primary burden of the allocation of goods and services from the government plan to the market. Private entrepreneurship and freemarket activities were legalized and encouraged in the 1980s, although the central authorities continuously had to fight the efforts of local government agencies to impose excessive taxes on independent merchants. By 1987 the state-owned system of commercial agencies and retail outlets coexisted with a rapidly growing private and collectively owned system that competed with it vigorously, providing a wider range of consumption choices for Chinese citizens than at any previous time.


Although the reform program achieved impressive successes, it also gave rise to several serious problems. One problem was the challenge to party authority presented by the principles of freemarket activity and professional managerial autonomy. Another difficulty was a wave of crime, corruption, and--in the minds of many older people--moral deterioration caused by the looser economic and political climate. The most fundamental tensions were those created by the widening income disparities between the people who were "getting rich" and those who were not and by the pervasive threat of inflation. These concerns played a role in the political struggle that culminated in party general secretary Hu Yaobang's forced resignation in 1987. Following Hu's resignation, the leadership engaged in an intense debate over the future course of the reforms and how to balance the need for efficiency and market incentives with the need for government guidance and control. The commitment to further reform was affirmed, but its pace, and the emphasis to be placed on macroeconomic and microeconomic levers, remained objects of caution. A free market is a market where price is determined by the unregulated interchange of supply and demand rather than set by artificial means. ... Hu Yaobang (Chinese: 胡耀邦 Pinyin: Hú Yàobāng, Wade-Giles: Hu Yao-pang) (November 20, 1915 – April 15, 1989) was a leader of the Peoples Republic of China. ...


References

China and the Knowledge Economy - World Bank Institute The Country Studies are works published by the Federal Research Division of the Library of Congress ( USA), freely available for use by researchers. ... The U.S. Constitution, adopted in 1789 by a constitutional convention, sets down the basic framework of American government in its seven articles. ... The public domain comprises the body of all creative works and other knowledge—writing, artwork, music, science, inventions, and others—in which no person or organization has any proprietary interest. ...


[1] - "This Time, China Is Different by Chinese economist Chen Jing


 
 

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