Deng's Economic Policy

• Deng’s Economic Philosophy
• “It does not matter whether a cat is black or white, so long as it catches mice”
• Practicality and pragmatism over dogma¨
• Deng wanted to restore the market as the chief mechanism of the Chinese economy
• “socialism with Chinese characteristics” (though not much socialism was enacted)
• ¨Some of his specific economic goals included
• Invigorate domestic economy
• Open trade with the outside world
• Allow individual enterprise
• Encourage joint ventures with Chinese and foreign capita

Economic Reform 

• ¨1979: Hua’s Ten Year Plan was scrapped
  ¨Two periods of reforms
  ¤1979-84: Agriculture was the focus
  ¤1984 onwards: Industry and commerce
  ¨Means of reform: The Four Modernizations
  ¤Agriculture
  ¤Industry
  ¤Science and Technology
  ¤Military

Agriculture

¨80% of China’s population was based in the countryside, thus agriculture had to be the first to be reformed

¨Decollectivization: Communes were criticized and abolished and replaces with xiang, or villages

¤Not for ideological reasons, but because of the need for higher production levels to finance industrialization

¨The state lowered the amount of produce it appropriated and paid higher prices for it

¨Families leased plots of land and had a quota to fill, but could use the rest for private profit (1980)

¤Known as the Household Responsibility System

Successes

¨By 1984, 98% of farms were in the Responsibility System (some were forced)

¨Agricultural output grew by annual average of 9%

¨Some farmers motivated to start small scale enterprises-rural industries grow (Township and Village enterprises)

¨Per capita income doubled from 1978 to 1984

¨Living conditions improved, higher consumerism resulted

¨Rise in entrepreneurship caused cities to begin to thrive again

Less Successful results

¨Uncertainty about land ownership deterred peasants from doing much to develop their land with an eye towards long term growth

¨Unsustainable agricultural production rate

¤Large drop in 1985

¨Environmental problems-deforestation, flooding

¨Demise of commune-based social services

¨Wage laborers hired by successful farmers were often poor

¨Class divisions began to re-emerge

nSpecialized households vs. ordinary peasants

nCorruption among the Party cadres

nDeng’s pragmatic take: “some must get rich first”

Industry

¨Success in agriculture allowed the focus to switch to the industrial sector in the mid 1980s

¨Individual enterprises were encouraged

¨Heavy industry was the focus (coal, iron, oil, steel) although production of consumer goods also increased

¨Foreign trade and investment was also encouraged

¨Phases of Industrial Reform

¤1978-84

nImprove worker attitude

nIndustrial Responsibility System enacted

nSichuan Experiment

¤1984 onwards

nLoosened government control

nGave managers autonomy to improve production

nPrice controls on consumer goods lifted