After the Cultural Revolution, Deng Xiaoping steered China onto the stage of pragmatic reform. The forces unleashed by the reforms have challenged not only China's planned economy but also the party-state itself. Market reform, because it was accompanied by only limited political reforms and lacked a legal and regulatory framework, gave rise to bouts of inflation, rampant corruption, growing social and regional disparities, and economic and political decentralization. (Merle Goldman & Roderick MacFarquhar, "Dynamic Economy, Declining Party State," in idem, eds.,The Paradox of China's Post-Mao Reforms (Cambridge, MA: Harvard University Press, 1999), 4.) Nonetheless, these reforms ended the political chaos and economic stagnation of the Cultural Revolution. Deng and most of his colleagues rejected Mao's utopian visions of the egalitarian society of the Great Leap Forward, the unending class struggle of the Cultural Revolution, and state control of the economy, collectivization of agriculture, and emphasis on heavy industry. The failures of the Mao era led Deng to believe the only way for the party to hold on to its weakened mandate was to improve the standard of living for the majority of the population. Despite the student demonstrations of 1989 which were a reaction to some of the problems in the growing commercial economy, e.g. government profiteering, uncertainty about losing the iron rice bowl and finding a job on their own, inflation, unfair competition in the job market against children of government leaders, in 1992, Deng Xiaoping reemphasized the need for greater economic reforms in order to stave off a Soviet style collapse.

In the process of economic reform Deng Xiaoping withdrew the power of the party from many areas of life except for two: birth control (because of China's 1 billion + population) and politics because of a market economy and because Deng wanted to repair Chinese life damaged under Mao's rule when politics dominated everything. But even in the area of politics, the party control of the state has changed from the Mao era. The Party state's loosening grip of the economy set in motion, however, processes in society, the political structure, and the cultural arena that it could not control. The establishment of the special economic zones in the 1980s (four coastal Chinese cities in the south) and foreign-Chinese joint ventures helped reduce the Party-state's control. Their appearance was concomitant with the state's decision to develop private and collective enterprises. Many state enterprises, formerly subsidized by the state, now were allowed to go bankrupt if they did not turn a profit. By the late 1990s, the state enterprise (or work unit) made up less than half of China's economic production was shrinking at an accelerating rate. In December 2001, China joined the WTO (World Trade Organization) which stipulated that by 2006, China should become a market economy and except for in a few areas, completely open its market to the outside world.

Deng did realize the need for political reform, although he did not want a checks and balances system. He did try to introduce measures into the Party that would limit the concentration of political power in the hands of one or a few individuals. First government leaders, and now the highest party leaders, came to have fixed terms. The Chairman of the Communist Party, the chairman of the People's Republic of China, and the chairman of the People's Liberation Army, have all got fixed terms and it was by these rules that the chairman of the party Jiang Zemin, successor to Deng Xiaoping (d.1997) as the number one leader of China, and the Chinese premier Li Peng both retired in September 2002, their positions filled by new Party chaiman Hu Jintao and premier Wen Jiabao.

A new phenomenon in the 1980s at the local government level was the implementation of the electoral system in the countryside. In the cities, it was tried out in 1980 but soon given up because the candidates elected did not please the party. The democratically elected village cadres are "relatively successful in securing popular compliance with state policies in return for defending villagers against the illegal predatory exactions of township and county officials, on whom they no longer need to depend for their positions." The estimate of the percentage of villages holding their own elections was 10 per cent by 1999.(Goldman, 13) In 1990, Deng Xiaoping also saw to the passage of a law on administrative procedure, which "gave ordinary people the right to bring suit against rapacious, arbitrary officials. Villagers, for example, brgan bringing suit against local officials who had confiscated their land for village industries or projects. In 1995 alone it was reported that 70,000 citizens filed suit against government agencies and officials." (Goldman, 14)

Although there have been much reform, most was done by the directives of individuals. Deng Xiaoping's death in 1997 further weakened the party's authority as he had carried out many policies by relying on his personal prestige and this style--emphasizing personal rule over institutional procedures, was carried on by his successor Jiang Zemin, who had already become the party chairman seven years before Deng's death, when Deng officially "stepped down," although Jiang complied with his wishes in real policies. By now, the Communist party's power has been significantly weakened. The "paradox of the post-Mao era is that an expanding, dynamic economy has undermined the authority of the political leaders who have made it possible. Despite some limited political and legal reforms, there is an increasing dichotomy between China's economic growth and its increasingly fragmented party-state. As long as such a contradiction exists, China will be haunted by the specter of political instability." (Goldman, 16)

Increasingly, the party "has difficulties regulating an increasingly complex and fluid society in which the relationships between state and society are in flux." (Goldman, 21) China's expanding business class has its interests "served by maintaining its present relationship with officials. The subordinate status of the rising economic forces--the self-employed, collectives, clans, and small and large scale private businesses--has been reinforced by the party's efforts to coopt their associations and head off any challenge to the political system. Even the non-governmental associations, which are self-financing, function under some sort of official supervision. Professionals and academics, some of whom--lawyers, doctors, engineers, and educators--are establishing private practices, also have set up smaller, more flexible groups, which have replaced the official professional federations as their main source of association. Yet the degree of even influential nongovernmental groups of professionals and academics is delineated and policed by officials." Even so, associations established under official supervision have been more assertive of their members' views than their sponsors'.(Goldman, 17-18.) We do see a degree of pluralism, although this pluralism stopped at direct criticism of the state. Several chapters in Perry Link's Popular China (e.g. chaps.2, 3, 5, 6) reflect on this pluralism in the mass media.

Despite the gradual growth of cultural pluralism (although not necessarily political pluralism) in China, according to political scientist Andrew Nathan, despite the liberal and conservative divide in Chinese society in the 1990s, both who wanted more liberalization and economic freedom and those who were against such stand on the left by Western standards: they want big government and egalitarianism. The liberals wanted government to fight privileges with more economic and political reform, and the conservatives wanted government to protect citizens' welfare with less reform. Those who wanted to fight inflation, corruption, crime, bureaucratism, inequitable income distribution, and inadequate government investment in education, as well as jobs, housing, shoddy goods, environmental pollution, etc. a substantial number of people explored the weakness of government in the traditional realms of government responsibility. (their agenda is also called the "Tiananmen Agenda" since they were fought for by student demonstrators at Tiananmen Square in May 1989.) Those who were concerned with the issues about daily lives (Tiananmen) agenda and reform agenda are largely young, male, urban, and educated, while those toward the economic welfare agenda were largely older, rural, and female. The ideological divide was similar to that in the West: they represented the winners and losers of reform. Reform dissolved the commune and the limited social benefits associated with it. Nathan's conclusion regarding future Chinese politics is interesting: "This urban-rural gap may likely shape the future of Chinese politics. Deng's reform may thus have bequeathed to China not only a soft transition to the market but also the beginnings of relatively clear, institutionalized, interest based cleavages that can either shape a post-Deng authoritarian corporatist structure or undergird a democratic party system if one should emerge." (Andrew Nathan, China's Transition (Columbia University Press, 1998), chap.12.)

Nathan's conclusion is insightful not only because it points to the continued urban/rural divide that might have sharpened due to the newly introduced market economy, but also a possible alternative to political liberalism--interest group politics within the framework of the Communist Party leadership. The Maoist political lines will perhaps leave no more trace behind ten or twenty years from now and the Communist party will focus on economic development while not permitting a direct criticism against it, much like in Singapore or South Korea and Taiwan a decade ago. On the other hand, it will also be more seriously addressing people's grievances and complaints, who may have greater access to the state through the formation of interest groups, perhaps not just in one urban and one rural group, but also many subdivisions within each, e.g. among the urban groups would include one for the private entrepreneurs and one for the unemployed workers.

In a way, Nathan's argument is supported by Ross Terrill's chapter 6.  Similarly pointing out the disparity between a Communist state that tries to hold onto other aspects of society when market economy is being implemented in China, Terrill argues that the Communist state tries to maintain control by serving as a paternalistic government, treating the Chinese (including overseas Chinese) as children who were not allowed to criticize their parents in an authoritarian family.  Nationalism is tacitly encouraged by the Chinese government as its Communist ideology goes on a decline.  And Jiang Zemin, successor to Deng Xiaoping, tried to improve the tension between Communist rule and a growing capitalist society through ideologically incorporating the new social groups in China in Communist ideology, as shown in the new policy of "Three Represents" in 2002: