Economic history of China (1949–present)
Throughout the Mao era, the CCP attempted to demonetize and de-commodify the Chinese economy through top-down policy interventions, having developed institutions that bring economic life under greater state control.
[7] However, despite these policies, Chinese citizens continued to engage in market-based transactions in an informal economy that constituted a substantial proportion of economic output throughout the Mao era.
[9]: 6 The Common Program approved in late September 1949 by the Chinese People's Political consultative Conference prioritized ownership of the state-owned economy, although it also gave consideration to some private interests.
[14]: 90 Commerce was stimulated and partially regulated by the establishment of state trading agencies (commercial departments), which competed with private traders in purchasing goods from producers and selling them to consumers or enterprises.
[16]: 45 Having restored a viable economic base, the leadership under Mao Zedong, Zhou Enlai, and other revolutionary veterans was prepared to embark on an intensive program of industrial growth and socialization.
[13]: 73 The 8th National Congress of the Chinese Communist Party made these measures public in September 1956, announcing that "minor commodities" could be traded on the market and peasants could develop sideline work like handicrafts or raising poultry.
[20]: 337 Before the end of the First Five-Year Plan, the growing imbalance between industrial and agricultural growth, dissatisfaction with inefficiency, and lack of flexibility in the decision-making process convinced the nation's leaders – particularly Mao Zedong – that the highly centralized, industry-based Soviet model was not appropriate for China.
[20]: 363 In the view of historian Maurice Meisner, this created a concern for CCP leadership: while rapid economic development and ideological transformation was necessary to release the productive energy of the masses, it also raised a risk that China could backslide into capitalism.
Motivated by fears of invasion by the Soviet Union or the United States, China implemented a major campaign to develop industry and national security facilities in remote areas, along with the necessary infrastructure.
[24] Although the economy was not on the verge of collapse as some post-Mao historical narratives portray, it nonetheless faced pervasive economic difficulties caused by political instability and the consequences of China's developmentalist model, which prioritized growth in industrial and military capacity rather than consumption.
[27]: 55 The World Bank's first report on China assessed the Mao era positively, citing rapid growth and industrialization as well as the "virtual elimination of the worst aspects of poverty," although it also identified room for improvement.
[14]: 104 For example, Hu Qiaomu's July 1978 report to the State Council, "Act in Accordance with Economic Laws," described the situation of the peasants during as grave and estimated that grain output had merely kept pace with population growth.
[25]: 89 In the "Governing China: From Revolution Through Reform," Kenneth Lieberthal mentions, "In the 1980s, the difference was that Deng understood the inadequacies of previous policies and encouraged more significant change as required.
[citation needed] Economist Thomas Rawski summarized China's economic development from 1957 to 1979, writing that "a nation that until 1957 could not manufacture tractors, power plants, or wristwatches now produces computers, earth satellites, oral contraceptives, and nuclear weapons.
The most successful reform policy, the household responsibility system in agriculture, began development in 1979 as a way for poor rural units in mountainous or arid areas to increase their incomes.
[14]: 162 Agricultural production was also stimulated by official encouragement to establish free farmers' markets in urban areas, as well as in the countryside, and by allowing some families to operate as "specialized households," devoting their efforts to producing a scarce commodity or service on a profit-making basis.
[15]: 59 The period of readjustment produced promising results, increasing incomes substantially; raising the availability of food, housing, and other consumer goods; and generating strong rates of growth in all sectors except heavy industry, which was intentionally restrained.
[1]: 40 In industry the complexity and interrelation of production activities prevented a single, simple policy from bringing about the kind of dramatic improvement that the responsibility system achieved in agriculture.
Nonetheless, a cluster of policies based on greater flexibility, autonomy, and market involvement significantly improved the opportunities available to most enterprises, generated high rates of growth, and increased efficiency.
Enterprise managers gradually gained greater control over their units, including the right to hire and fire, although the process required endless struggles with bureaucrats and CCP cadres.
A change of potentially equal importance was a shift in the source of investment funds from government budget allocations, which carried no interest and did not have to be repaid, to interest-bearing bank loans.
Unlike earlier periods, when China was committed to trying to achieve self-sufficiency, under Deng Xiaoping foreign trade was regarded as an important source of investment funds and modern technology.
[1]: 51 Researcher Zongyuan Zoe Liu writes that "[t]he success of these cities as 'red' treaty ports represented another step in China's overall reform and opening-up plan while legitimizing the leadership of the CPC over the Chinese state and people.
[39]: 179 Under the pre-1994 system of fiscal contracting, township and village enterprises had been an important mechanism of industrialization and most peasants who sought a factory job chose to stay in their hometowns and work at TVEs.
[1]: 53 Lessons learned by policymakers also became an important factor in China's evolving approach to managing state-owned assets, particularly its foreign exchange reserves, and its creation of sovereign funds beginning with Central Huijin in 2003.
[16]: 85 During the 15th National Congress of the Chinese Communist Party that met in September 1997, Jiang announced plans to sell, merge, or close the vast majority of SOEs in his call for increased "non-public ownership" (feigongyou or privatization in euphemistic terms).
[1]: 56 In Jiang's view, continuing development in China required active participation in global economic competition and that the state should support Chinese enterprises in gradual foreign investment and multi-national operations.
[39]: 139 After its entry into the World Trade Organization (WTO) in December 2001, China began pursuing export-led growth and became a key link in global supply chains.
The Fifth Plenum in October 2005 approved the 11th Five-Year Economic Program (2006–2010) aimed at building a socialist harmonious society through more balanced wealth distribution and improved education, medical care, and social security.
[46] Although China was significantly affected by the crisis due to the export oriented nature of the economy which depends heavily upon international trade,[47] by nearly all accounts its stimulus was hugely successful[48] and an important contributor to global economic recovery.
