Dilemmas of Economic Reform in China

By Xiaonong, Cheng | World Affairs, Spring 1992 | Go to article overview

Dilemmas of Economic Reform in China


Xiaonong, Cheng, World Affairs


Well before 1989, China was the bell-whether of economic reform among the world's socialist - or, more properly, communist - countries. Ironically, however, while reformers in the former Soviet Union and other countries of the bloc were greatly encouraged by the achievements of Chinese economic reform - and by now have modified or even buried socialism in their own countries - China remains the last and biggest refuge of socialism anywhere in the world. And, although the Chinese communist regime attempts to convince its own subjects and the outside world of its stability, it has been shaken to its very roots and is struggling for survival. The regime has been trapped in a fundamental dilemma: the reforms have set in motion certain trends that now appear to be irreversible; basic to them all, moreover, is that democratization is a necessary precondition both to modernization and to increased reliance on free markets; as a consequence, democracy itself may well have become inevitable, and in the not too distant future.

THE FIRST DECADE OF REFORM:

CONSOLIDATING THE REGIME

Chinese economic reform began before the end of the 1970s. But the expectations of the regime and of the West always have been at variance: while western observers believe that such a process must lead to a market economy and a democratic political system, the Chinese leadership declares, and apparently anticipates (or did so initially), that economic reform will improve and thus strengthen the socialist system under the continuing and "necessary" hegemony of the communist regime. The dual objective: both economic modernization and the consolidation of Communist party rule. Contrary to the regime's expectations, however, the reform already has begun to generate the transition from socialism - a transition that arguably is irreversible.

At the outset, the motivation for reform was to prevent the decline or even the collapse of the regime. The experiments in orthodox socialism promoted by the former supreme leader, Mao Zedong, from the 1950s to the mid-1970s - huge rural collectives and those famous communal iron foundries, for example - had been complete failures, both economically and politically. The results had been economic stagnation and widespread social dissatisfaction. By the end of the 1970s, Mao's successor, Deng Xiaoping, had no alternative but to accept some ideological changes and to open the door to reform. As he then warned the party's Central Committee, "Unless we make some changes in governance, our socialist system will be brought to ruin. . . . We can hardly convince the masses of the advantages of socialism if its productivity is always lower than that of capitalism." Deng and his party colleagues thus decided on a series of pragmatic policies, some even patterned after capitalism, as long as they were effective in enhancing productivity and did not directly threaten the supremacy of the party.

The earliest major institutional change was rural reform - initiated, in fact, by the peasantry itself. The leadership did not openly encourage the reform experiments until they began significantly to stimulate agricultural output. Gradually and without violent disruption, rural reform began to change the character of the economy. The peasantry, deprived of all economic freedom during the two decades of the Maoist era, regained it in some measure, and the free-market system began to be dominant in the rural economic sector. The results in the period from 1979 to 1990 (as official statistics attest) were a 6 percent average annual growth rate in agriculture and a 22 percent growth rate in rural industrial output. Because the peasantry is less educated than the urban population, and less mobilized politically, and because the regime always has relied on an urban support base, grounded in the public sector, this transition in the rural economy has been a substantial stimulus to economic modernization while posing no direct threat to the regime. …

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