In 1978, under the leadership of Premier Deng Xiaoping, China embraced a series of economic reforms designed to dismantle its Soviet-style economy, adopt elements of a market-driven economy, and encourage economic growth. Deng insisted that China could combine capitalism with socialism in four sectors: agriculture, industry, national defense, and technological development. To promote his reforms, Special Economic Zones (SEZs) were established throughout China. These SEZs welcomed foreign investment and provided incentives to Chinese investors to launch new companies.
Initial results of Deng’s reforms were most impressive. State participation in the economy decreased while private, cooperative, and individual ownership of businesses dramatically increased. Between 1981 and 1991 China’s economy grew at an annual rate of 10 percent; between 1991 and 1995 China enjoyed a growth rate of 12 percent. Yet, China still faced huge problems. Deng’s reforms promoted economic growth, but they did not allow for democratic reform. On 3 June 1989, Deng ordered troops and tanks into Beijing’s Tiananmen Square to quash the student pro-democracy movement. The brutal Tiananmen Square massacre of more than 700 demonstrators clearly signaled that, despite economic growth, hard-line communists still controlled China.
By the late 1990s China’s economic prospects had dimmed considerably. Even the return of the former British colony of Hong Kong in 1997 did not prevent a deep recession. Jiang Zemin, Deng’s successor, continued Deng’s policies, but encountered severe problems. Because of bad loans, by 1998 more than half of China’s state banks were insolvent. Twenty million workers in state enterprises were without work, and 120 million Chinese peasants who had left the countryside were ill-housed in its already overcrowded cities. The savage Yangtze River floods of 1998 killed more than 3,000 people and affected 250 million people living in its floodplain.
Scholars such as He Qinglian, author of the authoritative China’s Pitfall (1998), and Julia Kwong, author of The Political Economy of Corruption in China (1998), argue that Deng’s reforms have secured economic growth at the price of institutional, political, and financial corruption. Until the corruption is rooted out and true structural reforms compatible with a free market economy are adopted, these scholars insist that China will not repeat the robust economic growth of the 1980s or enjoy true economic development.
Suggestions for Term Papers
1. Investigate Deng Xiaoping’s economic policies and write a paper discussing his views of free market capitalism.
2. In 1989 Deng Xiaoping ordered the military into Tiananmen Square to crush the student-led pro-democracy movement. Discuss the political and economic repercussions of this decision.
3. Although China and Japan would seem to be natural trading partners, political problems have interfered at times. Write a paper focusing on the current bilateral trade between China and Japan.
4. In 1997 China reasserted its control over the former British colony of Hong Kong. How has this change of governance affected Hong Kong’s economy? How has it affected China’s economy?
5. Chinese military armaments, especially missiles, have increasingly become an important export. Write a paper reviewing and assessing the Chinese sale of military hardware to other countries.
6. Coca-Cola, Jeep, McDonald’s, and IBM are a few of the American companies that have invested in China’s Special Economic Zones. Write a business report on one of these firms covering experience to date in China and prospects for the future.
In addition to the boldfaced items, look under the entries for “The Victory of the Chinese Communist Party, 1949” (#46), “The Japanese Economic Miracle in the 1950s” (#47), “The Great Proletarian Cultural Revolution in China, 1966–1976” (#73), and “The Asian Economic Meltdown at the End of the 1990s” (#97). Search under multinational corporations and human rights.
Deng Xiaoping. Fundamental Issues in Present-Day China. New York: Pergamon Press, 1987. A good overview of Deng’s views of the role of the state in economic planning.
———. “A Market Economy for Socialist Goals.” In Selected Works of Deng Xiaoping.Vol. 3, (1982–1992). Beijing: Foreign Languages Press, 1994. The clearest statement of Deng’s economic thinking.
Ash, Robert F., and Y. Y. Kueh, eds. The Chinese Economy under Deng Xiaoping. New York: Oxford University Press, 1996. A good overview of Deng’ s economic policy.
“China’s Economy: Red Alert.” The Economist, 24 October 1998, 23–26. A crisp analysis of the reasons for China’s slow growth rate.
Davis, Deborah, and Ezra Vogel, eds. Chinese Society on the Eve of Tiananmen: The Impact of Reform. Cambridge, Mass.: Harvard University Press, 1990. A valuable starting point for understanding Deng’s reforms. Excellent bibliography.
Gilley, Bruce. Tiger on the Brink: Jiang Zemin and China’s New Elite. Berkeley: University of California Press, l998. An astute insight into Jiang’s economic and political leadership.
Kwong, Julia. The Political Economy of Corruption in China. Armonk, N.Y.: M. E. Sharpe, 1998. Well-researched, critical portrayal of corruption as a way of life in China.
Liu, Binyan Lin, and Perry Link. “A Great Leap Backward?” New York Review of Books, 8 October 1998, 19–23. Two China experts review He Qinglian’s Zhongguo de xianjing [China’s Pitfall] and provide a good summary of China’s economy in the late 1990s.
Nathan, Andrew J. China’s Transition. New York: Columbia University Press, 1998. An incisive look at the political and economic problems of China after Deng.
Schell, Orville. Mandate of Heaven: A New Generation of Entrepreneurs, Dissidents, Bohemians, and Technocrats Lays Claim to China’s Future. New York: Simon and Schuster, 1994. Written by a premier China scholar, this is a lively and wide-ranging report on China in the nineties.
Steinfeld, Edward S. Foreign Reform in China: The Fate of State-Owned Industry. Cambridge: Cambridge University Press, 1998. A careful examination of the place of China’s state-run businesses in its new economy. Vogel, Ezra F. One Step Ahead in China: Guangdong under Reform. Cambridge, Mass.: Harvard University Press, 1989. An in-depth look at Deng’s economic and social reforms in one province.
World Wide Web
“The National Security Archive.” http://www.gwu.edu/~nsarchiv. Good documentation on Tiananmen Square and Deng’s policies.