CHINA, long before the Soviet Union and the Eastern European countries, initiated its own version of perestroika. The purpose of this change was using economic and legal means to control the economy indirectly, which was a great departure from controlling the economy through administrative directives. At the end of 1991, China had accumulated 13 years of experience, saturated with ebbs and flows. During those years, a great number of policies -- and policy adjustments -- each with its own mixed results went into effect. And the results came to be a bittersweet legacy. Nothing better than a live workshop may be educating, irrespective of environmental differences. In fact, the lessons learned from this experience are eye opening for both socialist states and Third World countries. China is both.
In December 1978, at the Third Plenum of the 11th Central Committee of the Communist Party a new economic. policy was basically accepted. In this historic meeting, the egalitarianism of Mao Zedong was put aside and Deng Xiaoping began encouraging 'a part of the population ... to become well off first'. Under Mao Zedong, China sacrificed growth for equality. Deng Xiaoping reversed Mao Zedong's priorities, condoned inequality, and urged the Chinese to compete for wealth in a drive for economic efficiency and prosperity. The main contents of decisions made in this meeting were: to delegate decision-making power to local authorities and production units, and to allow local authorities and enterprises to retain more revenue, so as to stimulate their initiative. This reform was summarized in the slogan |Delegate Power and Relinquish Revenues'. No precise timetable was presented for introduction or implementation of the reforms, although most of them were expected to have taken place within five years. Price, banking, and monetary reforms were expected to require additional time. The various pieces of the reform were gradually put into their appropriate places, and after five years of wide-ranging experiments, the lessons learned were consolidated in a national programme -- Reform of the Economic Structure -- at the Third Plenum of the 12th Central Committee of the CPC on October 1984.
Despite careful planning, and great strides in implementing the economic reforms, ten years later, the Deng decade -- after Chinese leader Deng Xiaoping -- had run into a series of difficulties, involving both economic and political factors. These can be grouped under several general headings: economic bottlenecks, overheating, structural problems, issues of corruption and social morale, and problems of political structure and philosophy.4 In order to rectify the disturbing situation, the Chinese government backtracked on domestic reforms, and in the mid-1980s initiated a number of plans to reassert central control over major segments of the economy. Austerity programmes which would last at least until the end of 1991 went into effect. The dual pricing structure was abandoned, and the financial credits tightened. However, the resulting fiscal pressures which led authorities to reassert their grip, rendered the |capitalistic' trend in China meaningless.
The great debate of the decade is how the transition from a centrally planned economy to a market one should take place, and what steps must be taken in order not to make |mistakes', which would hamper, delay or postpone the transition, although there could not be found a country that is immune from making policy mistakes. Some observers advocate an earthquake approach where over night prices are decontrolled, and an invisible hand is allowed to work itself out through the process. Opposing this method, others press for minor earth shakes, and incremental implementation of policies. As China's experience and today's developments in Eastern Europe have demonstrated, a panacea does not exist, and in fact such a transition is entrapped in a bind. The quick track is politically and socially inapplicable, and the incremental approach generates a kind of hybrid, or |two-track' system. …