Chinese Reforms after 1978

1.The End of the Cultural Revolution

One of the events that slowed down the cultural revolutionary fervor was the death of vice chairman of the Chinese Communist Party Lin Biao, long Mao’s designated heir. Mao’s longevity made Lin Biao despair of his chance to be the next number one leader of Communist China. Mao’s tendency to purge all around him made Lin Biao suspect he could be next victim. On Sept.13, 1971, Lin Biao crashed his plane in Mongolia en route to the Soviet Union. Lin was trying to flee China after his plot against Mao was discovered. Frustrated with his frail health and Mao’s increasingly suspiciousness of every one around him, Lin Biao feared that before he was able to succeed Mao, he would become his next target of persecution. In early 1971, Lin Biao plotted to place a bomb on the railroad where Mao’s train was to cross. The plot was found out. Before Mao completely ascertained that Lin Biao was behind it all, Lin decided to run for his life. Along with his wife and son, the latter being the head of the Chinese air force, they boarded a not sufficiently fueled plane. Perhaps as a sign of magnanimity to someone who had been so close to him, Mao let him go without having the plane shot down. The so-called “Lin Biao Incident” significantly dampened Mao’s political zeal.

One of the consequences of Mao's disillusionment was the improvement of Sino-U.S. relations. Even Mao started to question his own radical revolutionary beliefs and tactics. Thus he was ready to improve relations with his archenemy the United States. Nixon was eager to improve relations with China to prove that China was more nationalist than Communist, hence providing the rhetoric for the U.S. to evacuate her troops from Vietnam: leaving Vietnam would not leave Vietnam a power vacuum for a Communist takeover from China. Nixon visited China in Dec. 1971 and signed a Communiqué with China’s premier Zhou Enlai in Jan. 1972, paving the way for normalizing the relationship between the two countries, which eventually happened in 1979 under the Carter administration.

Another event that helped bring about the end of the Cultural Revolution was Mao’s death in Sept. 1976. The moderate elements in the Communist party that survived the CR immediately arrested Mao’s wife and three of her cohorts (together called the Gang of Four) on charges that they started the Cultural Revolution and wanted to usurp the power of the country. View posters against the Gang of Four. The arrest of the Gang of Four was followed by the reinstitution of Deng Xiaoping. He was the right-hand man to the Communist Party technocrat Liu Shaoqi before the Cultural Revolution, and he was denounced as the second biggest “capitalist-roader” in the Cultural Revolution and put under house arrest for ten years. Over the next twenty years Deng served as the number one leader who directed China’s modernization program. Starting from January 1978, Deng declared that China needed to modernize in order to become strong. On his agenda were industry, commerce, and the return of Hong Kong to China. With the new policy, China slowly but gradually reopened to the outside world. Scholarly communications were reestablished with Western countries, foreign investments were encouraged, first in four coastal cities, then in a greater number of cities.

2. Economic reforms since 1978

1978 was a watershed in Communist chinese history, when Deng xiaoping formally announced the end of the cultural revolution and the beginning of an economic reform. The reform started from the countryside, as deng realized that the long time communist policy to use the countryside to subsidize the urban areas led to endemic poverty in the chinese countryside and it was important to reduce that poverty before greater reform could be implemented in urban areas. thus communist egalitarianism was replaced by the slogan to allow some people to become rich first. In particular, the chinese government allowed peasants to contract land from the people'scommune for a period between 50-100 years. the result was stunning. by the mid 1980s, some peasants had become fabulously wealthy by the then standards.

1. The regional distribution of rural economic growth and their characteristics.

Rural economic prosperity has concentrated in primarily three regions:

Sunan (southern Jiangsu Province), historically China's wealthiest region and its proximity to Shanghai also meant it was in a position to develop industries tied to Shanghai's industrial needs and expertise.
Wenzhou: across from Taiwan, a hilly region unsuitable for agriculture and long ignored by the Chinese government because of its likelihood to be Taiwan's first target should a war break out between mainland China and Taiwan. Consequently the Wenzhou people developed their unique surviving strategies: even at the height of the Cultural Revolution, they would make their own shoes and umbrellas for sale on the side.
The Pearl River delta: the Canton region, historically exposed to trade with Western countries (the Canton system), with proximity to Hong Kong to attract Hong Kong investments, and with political patronage by the Communist government because of ties with members in the central government.
The wealth in these regions not only relied on agriculture, but also the TVEs--the township and village enterprises, ranging from food processing to making automobile or electronic parts. These enterprises were encouraged by the government, and these regions were either located near big industrial/commercial centers to benefit from them (Sunan, Pearl River delta) or ready to purchase technology from abroad and export directly to the world market(Wenzhou).
Those TVEs have played a tremendous role in slowing down rural migrations to the cities, but they have also played a big role in polluting the rivers and causing workplace accidents because they have not been sufficiently regulated with laws.


2. Catching up with the West industrially: step one: the development of special economic zones.

The SEZs were Deng Xiaoping's experiment with capitalism: like lab tests, he wanted to make sure the capitalism he wanted to introduce would not develop into a nationwide virus to kill the Communist government instantly. In an unpleasant way, it also resembled the foreign concessions before 1949, when Britain, France, Japan, the U.S., etc., all had their special zone of jurisdiction in major Chinese cities. These SEZs were open only to certain people and ordinary Chinese migrants needed something equivalent to a visa or permit in order to get in these areas. These SEZs have developed rapidly and attracted huge volumes of foreign investments because of their tax benefits, and many more of them have been opened up since the opening of the first four in the early 1980s. But like the TVEs in the rural areas, the SEZs also suffer from a series of problems:

Sweatshops unregulated by government laws.
No or nearly no safety measures for the workers (e.g. bolted doors and windows in factories to prevent the workers from escaping, but also preventing them from fleeing when there was a fire).
Too rapid development led to a bubble economy (an economy based on over-building and over-investment, ending in quick collapse like a soap bubble).
Government leaders and their children putting themselves into leadership positions of certain or many of the companies in the SEZs.


3. Privatization of enterprises

Reform of the industrial sector proved to be difficult from the very beginning. Although easier compared with the Soviet Union where 80% of the population worked in the industrial sector and where reform meant drastic changes to their lives over night, in China industrial reform happened gradually, beginning with encouragement of private or collective enterprises, before actual reform of the State Owned Enterprises (SOEs). The reform of the SOEs however has proved to be an excruciating experience for many. They suffered from a multitude of problems:
Inefficiency and inability to compete with the private enterprises, joint ventures with foreign enterprises, or even the TVEs (township and village enterprises), and so had to be shut down or sold. Theoretically China has remained a socialist economy, and shutting down the SOEs often took the form of paying the workers a minimum amount of salary to keep their lives going, so that they did not have to report for work.
Many of the ailing state enterprises are in the heavy and traditional industries, which are gradually becoming obscure as China starts to encourage the newer industries such as electronics and newer technologies. Many of the state enterprise employees, for lack of new skills, could not find suitable jobs.
The dual track economy China still has enables many heads of state enterprises to embezzle money or to falsely report company earnings in the stock markets because of their connections with people high in the government, making the stock market eager to woo them and relax on background checks.
The lack of pension and social security for the unemployed workers sometimes leads to social protest.

The following is a list of some problems with the Chinese economic reform:

Guandao (government profiteering): as the Chinese reform opened a dual track economy--limited market economy plus state regulated economy, members of the state often used their position and access to resources to embezzle and influence enterprises, and often with their influence have their children placed in the top leadership of private enterprises.
Guanxi, zouhoumen (connections, using the back door): instead of following legitimate channels, people get things done through connections in the government or in companies.
Such practice aroused great anger among the people, especially university students, in the late 1980s, as with the market economy they now would have to find jobs themselves in the marketplace instead of having the government assign them jobs as in the past. They realized they were competing on a very unequal position with children of the Communist leaders who would invariably get good jobs because of their fathers or mothers. Starting from March 1981, they demonstrated on Tiananmen Square in Beijing, asking to "down with government profiteering," and restructuring the Chinese government along democratic lines. The situation became very tense as the government did not want to comply completely with the students, and the students insisted on the state's 100% endorsement of their package. The negotiations reached an impasse, eventually solved with martial law and armed confrontations: from 300 to 3,000 people were killed by the People's Liberation Army that finally ended the three month long student movement. The Tiananmen Incident, as it was called, led to a momentary reversal to the reform, although the government expanded economic reform in 1990 and later to compensate for a lack of political freedom.

4. The development of consumerism:

With economic growth, the Chinese were finally becoming consumers, shedding the habit of frugality and saving, wearing the same clothes for dozens of years if they were still usable. Fashion, style, and design all became popular terms. Commercials started to appear in China. That does not mean every one in China is a consumer. The income gap between the rich and the poor is increasing in recent years, rendering many farmers incapable of consuming considerably. Consumerism, on the other hand, most often means the consumption of Western goods, from ice cream to foreign movies, despite state regulation over cultural products such as movies.