Theme II 2b Transformation of East Asian Economies (China, 1978-2000)

Theme II 2b: Transformation of East Asian Economies (China, 1978-2000) 1 It doesn’t matter whether the cat is black or white, as long as it catches mice Deng Xiao Ping during a speech at the 1962 Communist Youth League 1 https://www.chinadaily.com.cn/china/2014-08/21/content_18462132_15.htm

Remarks 1. The gapping problem in this set of notes is the length of LOAs, examples and its analysis. None of them should be this long 2. Some of the analysis might be a bit similar. 3. Some of the LOAs might be similar to each other (esp for Open-Door Policy)

Criteria for Significance 1. Transition from central planning command economy to a socialist market economy. 2. Integration into the global economy (Since for China, its economy was closed under Mao’s leadership) 3. Economic growth (Characterised by high growth rates and other economic indicators) Problems of Maoist Economy 2 1. Due to the inherent flaws of Mao’s central economy, their economic activities were planned by planners who possessed inadequate and inaccurate information. Consequently, with most of the plans and activities ill-informed and unsound, they hindered productivity and industrial efficiency. Hence China’s industries were undermined and China’s economic growth handicapped. These issues served as impetus for Deng to introduce sweeping changes. a. Failure to formulate sound policies were evident as there were frequent shifts in production. By 1956, 90% of the rural population were in 485,000 collective farms. This was reduced to 26,000 communes in 1958 but then expanded into 74,000 communes in 19644. These constant shifts fostered a state of uncertainty among local administrators as well as among workers and peasants, disrupting production. This loses potential revenue and diminishes the agriculture sector’s ability to achieve economic growth. b. SOE’s primarily used to fulfil the government’s production and distribution objectives. As a result, there were no monetary incentives owing to the lack of competition and any profits were to be handed to the government. Combined with poor management led by unqualified party cadres, SOEs were prone to poor performance. As a result, being the economic units in industrial enterprises, their failures would significantly hinder the industrial sector to contribute to China’s GDP and hence economic growth to only 20% 2. Furthermore, Mao’s economic policies were envisioned with ideological objectives and executed without any pragmatic consideration. Hence they often slanted towards achieving ideological goals instead of what is needed by China’s economy to grow. Without any considerations for the economy in mind, these politics fail as they are incompatible with the 2 Must be careful since this is technically out of the syllabus timeframe. But “Problems of Maoist Economy” is still listed on the syllabus document. Sorry I forgot how to solve this problem

requirements needed for the economy to function. They resulted in an economic catastrophe that served as an urgent impetus for Deng to rectify. a. Mao used the Great Proletarian Cultural Revolution to get rid of his political rivals and key personnel such as engineers and scientists who were instrumental in the running of industries. By replacing them with party cadres chosen for their loyalty over their expertise, industries and enterprises were led by those without knowledge as to how to manage them. Consequently, this resulted in long-term economic damage to government administration and factory management. This led to a 14% decline in production and thus reducing revenue in 1967, decreasing China’s economic growth b. As a result of the Anti-Rightist Campaign and Cultural Revolution, rampant xenophobia curtailed imports of foreign technological equipment which was required for technological advancements while the purging of intellectuals and experts limited China’s ability to develop new technology. Without advancements in technology, industries were unable to benefit from increased productivity and output that these technologies bring. By 19786, China’s technology lagged 30 years behind world standards, denying their industry’s potential and thus undermining their ability to contribute to China’s economy, hindering growth. State Intervention 1. Deng’s governing style and political sagacity prioritised a collective leadership decision-making process that ensured the political stability that China needed to recover from Mao’s devastating rule as well as long term stability that provided a favourable environment for China’s agricultural and industrial economic reforms to thrive from the late 1970s. a. Attributing the failures of Mao’s economic policies due to his revolutionist fervour and lack of opposition against Mao, Deng introduced a collective leadership decision-making process to avoid the mistake of over-accumulating power in a single person. This way, by not making the leader of CCP, the sole authority over decisions, all decisions made were derived with a consensus achieved between dissenting ideology and policy ideas and all factions in the government would have their visions fulfilled without political instability derived from incompatible visions, giving businesses the confidence to operate in such an environment. b. Deng, with other elders, designated like-minded political succession in advance. This way, with no ambiguity in who should take over, Deng ensured that there would be no political instability caused by fighting between party

members, fragmentising and paralysing the party from effectively governing China’s economic and peaceful transitions of power would ensure long term political stability, enabling economic growth. 2. Recognising the need for China’s backward industries to modernise after Mao’s xenophobic economic policies, Zhou En Lai’s “4 Modernisations” were employed for technological modernisation. This boosted China’s technological prowess by opening up nascent industries that enable China to benefit from innovation commercialisation and focusing on developing talents which help facilitate China’s industrial modernisation, resulting in economic growth. a. To facilitate research and development, the CCP invested heavily in research centres It started the 863 program to promote (R&D) in strategic fields such as semiconductors with dual-use programs for civilian and military use as well as funded high-tech