Reform and Opening Up 1978: Deng Xiaoping Transforms China

Reform and Opening Up was the programme of economic change that China launched in December 1978 under Deng Xiaoping, two years after the death of Mao Zedong. It gradually replaced rigid central planning with markets, allowed private and foreign business, and opened the country to world trade. Over the following four decades it turned China from one of the world’s poorest countries into its second-largest economy.

Background: China after Mao

When Mao died on 9 September 1976, China was exhausted by the Cultural Revolution and decades of political campaigns. Most people still worked on collective farms organised into people’s communes. Incomes were very low, food was rationed and foreign trade was minimal.

Within a month of Mao’s death his designated successor, Hua Guofeng, had the radical “Gang of Four”, including Mao’s widow Jiang Qing, arrested. Hua promised modernisation but insisted on following whatever Mao had decided. Deng Xiaoping, a veteran revolutionary purged twice under Mao, was restored to his posts in July 1977.

Deng and his allies attacked Hua’s position with an influential 1978 article arguing that practice is the sole criterion for testing truth. China’s leaders were also shaken by visits abroad, which showed them how far the country lagged behind Japan, Western Europe and its neighbours such as Hong Kong and Singapore.

The Third Plenum of December 1978

The turning point came at the Third Plenum of the 11th Central Committee, held in Beijing from 18 to 22 December 1978. The party declared that its central task would now be economic modernisation rather than class struggle. Deng became the country’s paramount leader, although he never took the top formal titles.

The goal was summed up as the “Four Modernisations” of agriculture, industry, national defence, and science and technology, a phrase first promoted by Zhou Enlai. Deng’s approach was pragmatic and experimental, often described with a saying attributed to the economist Chen Yun: “crossing the river by feeling the stones”.

Rural reform

The first and most dramatic changes came in the countryside. In late 1978 farmers in Xiaogang village, Anhui province, secretly divided collective land into family plots, agreeing to deliver a quota to the state and keep the rest. Their harvest rose sharply.

Similar experiments spread, and the leadership endorsed them as the household responsibility system. By the early 1980s nearly all farm households worked their own plots, and the people’s communes were formally dismantled by about 1984. Higher state purchase prices and free markets for surplus produce helped grain output and rural incomes rise quickly. China’s grain harvest grew from about 305 million tonnes in 1978 to about 407 million tonnes in 1984, a jump that ended the chronic food shortages of the Mao years.

Rural industry grew alongside farming. Township and village enterprises, owned by local governments and communities, produced consumer goods and building materials and employed tens of millions of people by the late 1980s.

Opening up: the special economic zones

To attract foreign capital and technology, China created special economic zones with lower taxes and freer rules. In 1980 Shenzhen, Zhuhai and Shantou in Guangdong and Xiamen in Fujian were designated. Shenzhen, next to Hong Kong, was then a small town in a farming and fishing district.

Investment poured in, much of it from Hong Kong, Taiwan and overseas Chinese communities. In 1984 fourteen coastal cities were opened to foreign investment, and Hainan island became a special zone in 1988. Shenzhen grew into a metropolis of more than 17 million people by 2020.

Diplomacy supported the economic opening. Building on the Nixon visit of 1972, China and the United States established full relations on 1 January 1979, and Deng toured the United States that same month.

Problems and the crisis of 1989

The reforms created tensions. A “dual-track” system, with planned prices alongside market prices, invited corruption, and inflation soared in 1988 after an attempt to free prices. Conservatives such as Chen Yun wanted the market kept within the plan like a bird in a cage.

Reform-minded leaders Hu Yaobang and Zhao Ziyang were both removed, Hu in 1987 and Zhao in 1989. Popular anger over inflation and corruption, combined with demands for political freedom, fed the Tiananmen Square protests of 1989, which the army crushed on 3-4 June. Deng supported the crackdown, and for a time reform stalled.

The Southern Tour and the market economy

In January and February 1992, aged 87, Deng made his Southern Tour, visiting Wuchang, Shenzhen, Zhuhai and Shanghai. He praised the special zones and warned that those who did not support reform should step aside. The trip revived the reform drive. Deng had already given up his last formal post, the chairmanship of the Central Military Commission, in 1989-1990, but his authority remained decisive until his death on 19 February 1997.

In October 1992 the party’s 14th Congress adopted the goal of a “socialist market economy”. State enterprises were restructured in the late 1990s, with millions of workers laid off, and China joined the World Trade Organization on 11 December 2001, deepening its role as a global manufacturing centre. Some headline indicators show the scale of the change:

Costs and criticisms

Rapid growth came at a price. The gap between the booming coast and the poorer interior widened, as did inequality between city and countryside. Hundreds of millions of rural migrants moved to factory towns but, under the household registration (hukou) system, often lacked equal access to schools, housing and health care.

Air, water and soil pollution became severe in many industrial regions. Corruption flourished where officials controlled land, permits and credit. The same era also saw the one-child policy, introduced from 1980, which was enforced with heavy pressure and sometimes coercion until it was relaxed in 2015.

Political reform, discussed in the 1980s, was largely shelved after 1989. Critics, including many of the 1989 protesters, argued that economic freedom without political accountability left ordinary people unprotected against abuses of power.

Myths and facts

The slogan “To get rich is glorious” is widely credited to Deng, but historians have found no record that he said it. What he did say, in various forms, was that some people and regions should be allowed to prosper first.

Another myth is that China simply adopted Western capitalism. The Communist Party kept its monopoly on power, the state retained control of land, banks and strategic industries, and change came step by step rather than through the rapid “shock therapy” seen in parts of Eastern Europe.

Timeline

• 1976, 9 September: Mao Zedong dies; the Gang of Four is arrested in October.
• 1977, July: Deng Xiaoping is restored to his party and state posts.
• 1978, 18-22 December: The Third Plenum launches reform as the party’s central task.
• 1979, 1 January: China and the United States establish diplomatic relations.
• 1980, August: Shenzhen, Zhuhai and Shantou are approved as special economic zones.
• 1984: Fourteen coastal cities are opened to foreign investment.
• 1992, January-February: Deng’s Southern Tour revives reform.
• 2001, 11 December: China joins the World Trade Organization.

Why it matters

Reform and Opening Up produced one of the fastest and longest economic expansions in history, with growth averaging close to 10 per cent a year for three decades. It lifted hundreds of millions of people out of extreme poverty and reshaped global trade. It also showed that a communist party could embrace markets without giving up political control, a model that continues to shape debates about China today.