Deng Xiaoping and the Economic Reform

35.1.7: Deng Xiaoping and the Economic Reform

The rise of Deng Xiaoping to power after Mao’s death resulted in far-reaching market economy reforms and China opening up to the global trade while maintaining its roots in socialism.

Learning Objective

Determine why Deng Xiaoping created the Special Economic Zones

Key Points

  • Deng Xiaoping was a Chinese revolutionary and statesman, the leader of the People’s Republic of China from 1978 until his retirement in 1989. After Mao Zedong’s death, Deng led China through far-reaching market-economy reforms. While he never held office as the head of state, head of government, or general secretary, he was responsible for economic reforms and opening the global economy.
  • Beginning in 1979, economic reforms boosted the market model while the leaders maintained old Communist-style rhetoric. The commune system was gradually dismantled and the peasants began to have more freedom to manage the land they cultivated and sell their products. At the same time, China’s economy opened to foreign trade. On January 1, 1979, the United States recognized the People’s Republic of China and business contacts between China and the West began to grow.
  • During the 1980s, the Chinese government established special economic zones and open coastal cities and areas as well as designed open inland and coastal economic and technology development zones. The special economic zones were areas where the government of China established more free market-oriented economic policies and flexible governmental measures, allowing them to operate under an economic system that was very attractive to foreign and domestic firms.
  • China’s rapid economic growth under the socialist political system resulted in complex social developments. The 1982 population census revealed the extraordinary growth of the population and Deng continued the plans to restrict birth to only one child per family. At the same time, increasing economic freedom emboldened a greater freedom of opinion, and critics of the Party began to arise.
  • In the late 1980s, dissatisfaction with the authoritarian regime and the growing inequalities caused the biggest crisis to Deng’s leadership: the Tiananmen Square protests or the popular national movement inspired by student-led demonstrations in Beijing in 1989.Deng Xiaoping and other party elders believed the protests were a political threat and resolved to use force. The number of civilian deaths has been estimated at anywhere between the hundreds to the thousands. The Chinese government was widely condemned internationally for the use of force.
  • Considered a watershed event, the Tiananmen Square protests set the limits on political expression in China well into the 21st century while the successful market economy, including the development of the five existing SEZs and other areas operating under a preferential economic system, continues.

Key Terms

Tiananmen Square protest
Student-led demonstrations in Beijing in 1989. More broadly, the term refers to the popular national movement inspired by the Beijing protests during that period, sometimes referred to as the ’89 Democracy Movement. The protests were forcibly suppressed after the government declared martial law. In what became widely known as the Tiananmen Square Massacre, troops with assault rifles and tanks killed at least several hundred demonstrators trying to block the military’s advance towards Tiananmen Square. The number of civilian deaths has been estimated between the hundreds and the thousands.
special economic zones
Designated geographical areas in China, originally created in the 1980s, where the government establishes more free market-oriented economic policies and flexible governmental measures. These special economic rules allow the areas to operate under an economic system that is more attractive to foreign and domestic firms than the economic policies in the rest of mainland China.
Socialism with Chinese Characteristics
The official ideology of the Communist Party of China (CPC), claimed to be based upon scientific socialism. This ideology supports the creation of a socialist market economy dominated by the public sector since China is, as claimed by the CPC, in the primary stage of socialism. The People’s Republic of China (PRC) government maintains that it has not abandoned Marxism but has developed many of the terms and concepts of Marxist theory to accommodate its new economic system. The CPC argues that socialism is compatible with these economic policies.
the one-child policy
A population planning policy of China introduced in 1979 and formally phased out starting in 2015. Provincial governments imposed fines for the violations of the policy and local and national governments created commissions to raise awareness and carry out registration and inspection work.

 

 

China after Mao: Deng Xiaoping

Deng Xiaoping was a Chinese revolutionary and statesman, leader of the People’s Republic of China from 1978 until his retirement in 1989. After Mao Zedong’s death, Deng led China through far-reaching market-economy reforms. While he never held office as the head of state, head of government, or general secretary (the leader of the Communist Party), he nonetheless was responsible for economic reforms and an opening to the global economy.

Born into a peasant background, Deng studied and worked in France in the 1920s, where he became fascinated with Marxism-Leninism. He joined the Communist Party of China in 1923. After the founding of the People’s Republic in 1949, Deng worked in Tibet and the southwest region to consolidate Communist control. As the party’s Secretary General in the 1950s, he presided over anti-rightist campaigns and became instrumental in China’s economic reconstruction following the Great Leap Forward of 1957-1960. His economic policies, however, were at odds with Mao’s political ideologies and he was purged twice during the Cultural Revolution. Following Mao’s death in 1976, Deng outmaneuvered Mao’s chosen successor, Hua Guofeng. Inheriting a country beset with social conflict, disenchantment with the Party, and institutional disorder resulting from the policies of the Mao era, Deng became the paramount figure of the “second generation” of Party leadership. Some called him “the architect” of a new brand of thinking that combined socialist ideology with pragmatic market economy whose slogan was “Socialism with Chinese Characteristics.”

China’s Opening Up

Beginning in 1979, economic reforms boosted the market model, while the leaders maintained old Communist-style rhetoric. The commune system was gradually dismantled and the peasants began to have more freedom to manage the land they cultivated and sell their products on the market. At the same time, China’s economy opened to foreign trade. On January 1, 1979, the United States recognized the People’s Republic of China, and business contacts between China and the West began to grow. The same year, Deng undertook an official visit to the United States, meeting President Jimmy Carter in Washington as well as several congressmen. The Chinese insisted that ex-President Richard Nixon be invited to the formal White House reception, indicative of both their assertiveness and desire to continue with Nixon initiatives. Deng made it clear that the new Chinese regime’s priorities were economic and technological development. Correspondingly, Sino-Japanese relations also improved significantly. Deng used Japan as an example of a rapidly progressing power that set a good economic example for China.

Deng Xiaoping (left) and his wife Zhuo Lin (right) are briefed by Johnson Space Center director Christopher C. Kraft (extreme right), 1979, author unknown.

Deng Xiaoping (left) and his wife Zhuo Lin (right) are briefed by Johnson Space Center director Christopher C. Kraft (extreme right), 1979, author unknown.: During the 1979 visit, Deng visited the Johnson Space Center in Houston as well as the headquarters of Coca-Cola and Boeing in Atlanta and Seattle, respectively. With these visits, Deng made it clear that the new Chinese regime’s priorities were economic and technological development.

Deng, along with his closest collaborators Zhao Ziyang, who in 1980 relieved Hua Guofeng as premier, and Hu Yaobang, who in 1981 did the same with the post of party chairman, took power. Their goal was to achieve “four modernizations”  – economy, agriculture, scientific and technological development, and national defense. The last position of power retained by Hua Guofeng, chairman of the Central Military Commission, was taken by Deng in 1981.

Special Economic Zones

The basic state policy focused on the formulation and implementation of overall reforms and opening to the outside world. During the 1980s, the Chinese government established special economic zones and open coastal cities and areas, as well as designed open inland and coastal economic and technology development zones.

Since 1980, China has established special economic zones (SEZs):  areas where the government of China establishes more free market-oriented economic policies and flexible governmental measures. This allows SEZs to operate under an economic system that is more attractive to foreign and domestic firms than the economic policies in the rest of mainland China. Most notably, the central government in Beijing is not required to authorize foreign and domestic trade in SEZs, and special incentives are offered to attract foreign investors. SEZs were originally created in Shenzhen, Zhuhai, and Shantou in Guangdong Province and Xiamen in Fujian Province. In 1984, China opened 14 coastal cities to overseas investment. Since 1988, mainland China’s opening to the outside world has been extended to its border areas along the Yangtze River and inland. The state also decided to turn Hainan Island into mainland China’s biggest special economic zone (approved in 1988) and enlarge the other four SEZs. Shortly after, the State Council expanded the open coastal areas and open economic zones in seven geographical areas.

The development of the five existing SEZs and other areas operating under a preferential economic system continues in China today. Primarily geared to exporting processed goods, the five SEZs are foreign trade-oriented areas which integrate science, innovation, and industry with trade. Foreign firms benefit from preferential policies such as lower tax rates, reduced regulations, and special managerial systems.

Deng Xiaoping and Jimmy Carter at the arrival ceremony, 1979, author unknown.

Deng Xiaoping and Jimmy Carter at the arrival ceremony, 1979, author unknown. On January 1, 1979, the United States recognized the People’s Republic of China, which meant abandoning the recognition of the Republic of China’s Nationalist government (Taiwan) as the sole Chinese authority. In late 1978, the aerospace company Boeing announced the sale of 747 aircraft to various airlines in the PRC and Coca-Cola made public their intention to open a production plant in Shanghai.

Capitalist Economy vs. Socialist System

China’s rapid economic growth under the socialist political system resulted in complex social developments. The 1982 population census revealed the extraordinary growth of the population, which already exceeded one billion people. Deng continued the plans initiated by Hua Guofeng to restrict birth to only one child under the threat of administrative penalty (“the one-child policy,” very controversial outside of China and challenged for violating a human right to determine the size of one’s own family). At the same time, increasing economic freedom emboldened a greater freedom of opinion and critics began to arise, including famous dissident Wei Jingsheng, who coined the term “fifth modernization” in reference to democracy as a missing element in the renewal plans of Deng Xiaoping.

In the late 1980s, dissatisfaction with the authoritarian regime and the growing inequalities caused the biggest crisis to Deng’s leadership: the Tiananmen Square protests,   the popular national movement inspired by student-led demonstrations in Beijing in 1989. The protests reflected anxieties about the country’s future in the popular consciousness and among the political elite. The economic reforms benefited some groups but seriously disaffected others, and the one-party political system faced a challenge of legitimacy. Common grievances at the time included inflation, limited preparedness of graduates for the new economy, and restrictions on political participation. The students called for democracy, greater accountability, freedom of the press, and freedom of speech, although they were loosely organized and their goals varied. At the height of the protests, about a million people assembled in the Square.

As the protests developed, the authorities veered back and forth between conciliatory and hard-line tactics, exposing deep divisions within the party leadership. By May, a student-led hunger strike galvanized support for the demonstrators around the country and the protests spread to some 400 cities. Ultimately, Deng Xiaoping and other party elders believed the protests to be a political threat and resolved to use force. Party authorities declared martial law on May 20 and mobilized as many as 300,000 troops to Beijing. In what became widely known as the Tiananmen Square Massacre, troops with assault rifles and tanks killed at least several hundred demonstrators trying to block the military’s advance towards Tiananmen Square. The number of civilian deaths has been estimated between the hundreds and thousands. The Chinese government was widely condemned internationally for the use of force. Western countries imposed economic sanctions and arms embargoes. In the aftermath of the crackdown, the government conducted widespread arrests of protesters and their supporters, suppressed other protests around China, expelled foreign journalists, and strictly controlled coverage of the events in the domestic press. The police and internal security forces were strengthened. Officials deemed sympathetic to the protests were demoted or purged. More broadly, the suppression temporarily halted the policies of liberalization. Considered a watershed event, the protests also set the limits on political expression in China well into the 21st century.

Officially, Deng decided to retire from top positions when he stepped down as Chairman of the Central Military Commission in 1989 and retired from the political scene in 1992. China, however, was still in the era of Deng Xiaoping. He continued to be widely regarded as the “paramount leader” of the country, believed to have backroom control. Deng was recognized officially as “the chief architect of China’s economic reforms and China’s socialist modernization.” To the Communist Party, he was believed to have set a good example for communist cadres who refused to retire at old age. He broke earlier conventions of holding offices for life. He was often referred to as simply Comrade Xiaoping, with no title attached.

Attributions