The economy during the last thirty three years has grown at an average annual rate of 9.8% largely because peasants, workers and frustrated bureaucrats made themselves into entrepreneurs and pushed their country forward. By ignoring central government decrees, they built private businesses now accounting for as much as half of the Chinese economy.
The startling transformation that began 33 years ago with the accession of Deng Xiaoping has been one of the world's great stories. Deng's great legacy was undoing Mao Zedong's. Mao captured China and then proceeded to regiment, repress and ultimately deny it of vitality. When he died in September 1976, Chinese leaders knew there would have to be reform. The debate in Beijing was how much should be allowed and how fast it should occur. The now-accepted narrative is that Deng argued for a startling transformation of Chinese society.
The story goes that he first debated with his fellow revolutionaries, then experimented and finally decreed change. Yet, in reality, reform progressed more by disobedience than design. Initial failure to meet state-planning goals forced Deng to back away from command-economy tactics and permit individual initiative. Peasants on large collective farms, for example, were permitted to form "work groups" to tend designated plots. Central government policies specifically prohibited these groupings from including just one family. But families started to look after their own plots--and local officials pretended not to notice. Urban subterfuge followed rural subterfuge.
Deng's Beijing strictly prohibited private industry, but entrepreneurs proceeded by operating their businesses as "red hat" collectives and enterprises--private companies operating under the flag of state ownership. Deng's reforms succeeded because the Chinese people disobeyed Deng's rules. Such defiance would have been unthinkable in the Maoist years. Deng's great contribution, therefore, is not so much that he planned China's "economic miracle" but that he let it happen.
December 18, 2008 marked the 30th anniversary of a watershed event in China -- and for the world. Three decades ago, on this date in 1979, the 3rd Plenary Session of the 11th Communist Party of China Central Committee opened. Today, China's 33 years of economic reform have brought about profound changes in the world's most populous nation.
A look at the statistics, and a comparison between 1978 and now, shows what this means: Economy: China is a major power today mainly because of its huge export-driven economy, now on the way to overtaking Germany as the third largest in the world. It has come a long way from 1978, when the gross domestic product, at current prices, stood at 364.5 billion yuan. By 2007, it had grown 68-fold to 25.1 trillion yuan. Foreign Trade: Foreign trade has defined China's miraculous rise during the reform years.
In 1978, China's total trade with the outside world was $20.6bn and it ran a deficit of $1.1bn. In 2007, trade had risen 105-fold to $2.17 trillion, and the deficit had been turned into an enormous surplus of $262bn. Education: Education used to be free in the cities in China but in the post-reform years it has become a major expense for many families. However, it is undeniable that education has exploded, especially at university level. In 1978, nine people left university with a post-graduate degree.
In 2007, that figure had risen to 311,839. Population: When reforms began, China had the world's largest population of 963 million people. It is still the world's largest, at 1.32 billion in 2007, but is likely to be overtaken by India in the coming decades. The main reason is the one-child policy, in place for a generation, which has reduced the growth rate of the population to 0.5 percent a year now, from 1.2 percent in 1978. Employment: In 1978, 150,000 Chinese employed themselves, typically as small vendors or repairmen. There were no Chinese working for private enterprises.
By 2007, the number of Chinese who either worked in private enterprises or employed themselves had risen to 127.5 million. Environment: One of the victims of China's economic success. Many of the world's most polluted cities are in China. More than 70 percent of China's waterways and 90 percent of its underground water are polluted. Incomes: Chinese both in the cities and, to a lesser extent, rural areas, have been beneficiaries of the reform. In 1978, the average annual disposable income of urban households was 343.4 yuan, while in 2007, it was 13,786 yuan, a 40-fold increase. For rural households, the increase was 31-fold to 4,140 yuan from 133.6 yuan.
However the wealth divide in China is one of the world's biggest. Housing: The Chinese used to be squeezed into tiny apartments, and many still are, but a growing number of middle-class families live more comfortably due to one of history's great housing booms. In 1978, city dwellers had 6.7 square metres (72 square feet) to themselves on average, and in 2006, the most recent year for which figures are available, it had risen to 27.1 square metres (291 square feet). Life Expectancy: In 1981, the average Chinese woman could expect to live until she was 69.3 years old, while in 2000 her life expectancy was 73.3. For men, the numbers were 66.3 in 1981 and 69.6 in 2000. The increase is not dramatic and reflects that basic healthcare was fairly widespread in pre-reform China.
The flipside
On the flipside, there is much that is still poor, chaotic and isolated about China, if not on the self-delusional national scale of the Cultural Revolution. The wealth gap between the cities and countryside has widened. Unemployment is straining the social fabric. The current global economic slowdown has given a jolt to modern China's progress and self-confidence, and reinforced the instinct that the application of state planning and appropriate party discipline is the solution.
Timeline of China's 30 years of economic reform.
Chinese leader Deng Xiaoping began economic reforms that have transformed China and remain the country's guiding political and economic philosophy to this day.
Following are key milestones in what China called its "reform and opening up" process:
1966-76
Chaos reigns in China during Mao Zedong's Cultural Revolution, a radical attempt to upend Chinese politics and society. Economic pragmatist Deng Xiaoping is one of those purged. December 1978: Deng, now supreme leader following Mao's 1976 death, announces start of market-based reforms in a major break from Mao's disastrous collectivization schemes.
1980
China designates the southern city of Shenzhen as the first of many Special Economic Zones (SEZs), intended as laboratories for Deng's reforms and magnets for foreign investment.
Early 1980s
China begins period of stellar economic growth that will make it the fastest growing major economy for most of the next three decades. Inflation, corruption and other ills also boom.
April-June 1989
Tiananmen Square demonstrations led by students and others who feel Deng's economic reforms should include political openness. They are violently suppressed.
November 1990
Shanghai Stock Exchange is re-established for the first time since its closure in 1949 after the communists took power. Shenzhen Stock Exchange established the following month.
Spring 1992
Amid opposition to his reforms by hardliners, Deng tours Shenzhen SEZ. During the visit, Deng praises the reform process there, giving it a shot in the arm. Mid-1990s: China begins major push to restructure or close inefficient state-controlled enterprises. Millions lose their "iron rice bowl" of cradle-to-grave employment.
February 1997
Deng dies; his successors pledge to continue his reforms.
July 1997
Capitalist Hong Kong reverts to Chinese control after more than 150 years as a British colony.
July 2001
China wins right to host 2008 Summer Olympics.
December 2001
China formally joins the World Trade Organisation, obliging it to adhere to global trade rules.
July 2005
China delinks its currency, the yuan, from the US dollar, allowing it to gradually strengthen.
February 2006
China's foreign exchange reserves officially become the world's largest, ahead of Japan's.
August 2008
China stages Beijing Olympics. (AFP)
N Janardhan Rao, Senior Economist.
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