Chinese economic reform 改革开放 - Deng´s followers

Despite Deng's death in 1997, reforms continued under his handpicked successors, Jiang Zemin and Zhu Rongji. In 1997 and 1998, large-scale privatization occurred, in which all state enterprises, except a few large monopolies, were liquidated and their assets sold to private investors. Between 2001 and 2004, the number of state-owned enterprises decreased by 48 percent. During the same period, Jiang and Zhu also reduced tariffs, trade barriers and regulations, reformed the banking system, dismantled much of the Mao-era social welfare system, forced the PLA to divest itself of military-run businesses, reduced inflation, and joined the World Trade Organization. These moves invoked discontent among some groups, especially laid off workers of state enterprises that had been privatized.

The domestic private sector first exceeded 50% of GDP in 2005 and has further expanded since. However, some state monopolies still remained, such as in petroleum and banking.

The Hu-Wen Administration has slowed the progress of the reforms. The government has adopted more egalitarian and populist policies; It increased subsidies and control over the health care sector^, halted privatization and adopted a loose monetary policy, which lead to the formation of a property bubble in which property prices tripled. The privileged state sector was the primary recipient of government investment, which under the new administration, promoted the rise of large "national champions" which could compete with large foreign corporations.

China´s economic performance since reform

China's economic growth since the reform has been very rapid, exceeding the East Asian Tigers. Economists estimate China's GDP growth from 1978 to 2005 at 9.5% a year. Since the beginning of Deng Xiaoping's reforms, China's GDP has risen tenfold. The increase in total factor productivity (TFP) was the most important factor, with productivity accounting for 40.1% of the GDP increase, compared with a decline of 13.2% for the period 1957 to 1978—the height of Maoist policies. Per capita incomes grew at 6.6% a year. Average wages rose sixfold between 1978 and 2005 while absolute poverty declined from 41% of the population to 5% from 1978 to 2001.Some scholars believed that China's economic growth has been understated, due to large sectors of the economy not being counted.

Reason for success

Scholars have proposed a number of theories to explain the success of China's economic reforms in its move from a planned economy to a socialist market economy despite unfavorable factors such as the troublesome legacies of socialism, considerable erosion of the work ethic, decades of anti-market propaganda, and the "lost generation" whose education disintegrated amid the disruption of the Cultural Revolution. One notable theory is that decentralization of state authority allowed local leaders to experiment with various ways to privatize the state sector and energize the economy. Although Deng was not the originator of many of the reforms, he gave approval to them. Another theory focuses on internal incentives within the Chinese government, in which officials presiding over areas of high economic growth were more likely to be promoted. Scholars have noted that local and provincial governments in China were "...hungry for investment" and competed to reduce regulations and barriers to investment to boost economic growth and the officials' own careers. A third explanation believes that the success of the reformists are attributable to Deng's cultivation of his own followers in the government.

Chinese economic reform 改革开放 - Deng´s reforms

The Chinese economic reform (改革开放; literally Reform and Opening) refers to the program of economic reforms called "Socialism with Chinese characteristics" in the People's Republic of China (PRC) that were started in December 1978 by reformists within the Communist Party of China (CPC) led by Deng Xiaoping.

First stage

The first stage, in the late 1970s and early 1980s, involved the decollectivization of agriculture; the Household-responsibility system, which divided the land of the People's communes into private plots. Farmers were able to keep the land's output after paying a share to the state. This move increased agricultural production, increased the living standards of hundreds of millions of farmers and stimulated rural industry.

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. Private businesses were allowed to operate for the first time since the Communist takeover, and they gradually began to make up a greater percentage of industrial output. Price flexibility was also increased, expanding the service sector.

The opening up of the country to foreign investment. The country was opened to foreign investment. Deng created a series of special economic zones for foreign investment that were relatively free of the bureaucratic regulations and interventions that hampered economic growth. These regions became engines of growth for the national economy.

Second stage

Permission for entrepreneurs to start up businesses Controls on private businesses and government intervention continued to decrease, and there was small-scale privatization of state enterprises which had become unviable. A notable development was the decentralization of state control, leaving local provincial leaders to experiment with ways to increase economic growth and privatize the state sector. Township and village enterprises, firms nominally owned by local governments but effectively private, began to gain market share at the expense of the state sector.

Corruption and increased inflation increased discontent, contributing to the Tiananmen Square protests of 1989 and a conservative backlash after that event which ousted several key reformers and threatened to reverse many of Deng's reforms. However, Deng stood by his reforms and in 1992, he affirmed the need to continue reforms in his southern tour. He also reopened the Shanghai Stock Exchange closed by Mao 40 years earlier.

Although the economy grew quickly during this period, economic troubles in the inefficient state sector increased. Heavy losses had to be made up by state revenues and acted as a drain upon the economy.Inflation became problematic in 1985, 1988 and 1992 Privatizations began to accelerate after 1992, and the private sector surpassed the state sector in share of GDP for the first time in the mid-1990s. China's government slowly expanded recognition of the private economy, first as a "complement" to the state sector (1988) and then as an "important component" (1999) of the socialist market economy

The foundation of the People´s Republic of China, Mao´s era

                                         The People´s Republic of China was proclaimed in 1949

The new leaders gained popular support by curbing inflation, restoring the economy, and rebuilding many war-damaged industrial installations, set up various institutions to lead changes in rural areas, the military, and the bureaucracy, included legal protection of wome´s rights and the abolition of polygamy. Also adopted the horizontal left–right method of writing. Lands were confiscated by the government from the former landlords and subsequently redistributed to the lower-class peasants en launched.the Three-anti and Five Movements, as well as the beginning of the Anti-Rightist Movement, when property owners and businesspeople were labeled as "rightists" and purged resulting in the killing of about one million  However, people.experienced significant growth between 1949 to 1958.

The newly founded PRCh fought against the UN, leaded by the US, in the Korean Peninsula between 1949 and 1952 and entered Tibet in Oct 1950. In 1964 builded its first atomic bomb.

The Sino-Soviet Treaty of Mutual Friendship was signed in 1950 and the Soviet Union provided considerable economic aid and training to China during the 1950s.

In 1957 Mao launched the Hundred Flower Campaign intended to let a hundred school of thought to contend aimed at fighting bureaucracy, but many took it as an opportunity to critize the Communist Party, then Mao put in place the Anti Rightist Campaign purging many intellectuals and workers.

In 1958 Mao broke with the Soviet model and launched the Great Leap Forward aimed a rapidly raising industrial and agricultural production. The results were disastrous, famine caused between 20 and 40 million deaths. The loudest opponent of Mao, Defense Minister Peng Dehaua, leader of the People´s Liberation Army in the Korean war, was purged.

The disaster of the Great Leap Forward decreased Mao influence as national leader and President Liu Shaoqi, Party General Secretary Deng Xiaoping and Premier Zhou Enlai took over the direction of the party and adopted pragmatic economic policies. But Mao reacted launching the Great Proletarian Cultural Revolution to regain power against the "liberal bourgeoisie" and "capitalist roaders", created the Red Guards whose first targets were Deng Xiaoping and Liu Shaoqi, then they went on to rampage putting China in state of anarchy which actually lasted from 1966 to 1976.

Meanwhile, in 1971 Secretary of State of US, Kissinger led a secret delegation to Beijing to restore their relations. Previously China and SU relations had deteriarated at to the point of armed conflict at their Manchurian border.Nixon visited Beijing in 1972 causing confusion among socialist countries, "social imperialism" was now China´s main enemy.

Mao health was in sharp decline by 1973, however the Gang of Four leaded by his wife Jiang Qing tried to keep Mao´s radical stance. A turning point in the struggle between radical maoist and the pragmatic line leaded by Deng Xiaoping was Zhou Enlai death and his popular morning in Tiananmen converted in a demostration against the Gang.

Despite of Hua Guofeng was elected by Mao as his successor, Deng Xiaoping assumed the facto the leadership when Mao died in 1976.  

The Republic of China

The Republic of China begins in 1912 after in putting an end to over two thousand years of Imperial rule.

Since the republic's founding, it experienced many tribulations as it was dominated by numerous warlords and fragmented by foreign powers.

In 1928, the republic was nominally unified under the Kuomintang (KMT, the Chinese Nationalist Party) after the Northern Expedition, and was in the early stages of industrialization and modernization when it was caught in the conflicts between the Kuomintang government, the Communist Party of China which was converted into a nationalist party, remnant warlords, and Japan. Most nation-building efforts were stopped during the full-scale War of Resistance against Japan from 1937 to 1945, and later the widening gap between the Kuomintang and the Chinese Communist Party made a coalition government impossible, causing the resumption of the Chinese Civil War.

A series of political, economic, and military missteps led the Kuomintang to defeat and retreat to Taiwan in 1949, establishing an authoritarian one-party state that considered itself to be the sole legitimate ruler of all of China. However, since political liberalization began in the late 1970s, the Republic of China has transformed itself into a multiparty, representative democracy on Taiwan.