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'China's New Economic Policy - 1977 To Today'
'China's New Economic Policy - 1977 To Today'
In the post-Mao era, the Chinese Communist Party leadership was to learn from both the
mistakes of Mao and from the experience of the Soviet Union.
The new accepted leader of the Party, Deng Xaioping, was determined not to return to Mao's ultraleft
policies of war communism, purges and ideological purity. For a detailed account of these go to the
Background section of this Topic.
To begin with Deng simply proposed that the Party adopt the basic position of ‘Boluan Fanzheng’ -
"eliminating chaos and returning to normal”.
Deng then went on to challenge the slavishly pro-Mao philosophy of the Party encapsulated by the
‘Two Whatevers’ approach: "Whatever Chairman Mao said, we will say and whatever Chairman Mao did,
we will do" . This had even been incorporated into China's constitution. Deng famously counterposed to
this a very different approach based on two simple principles: “seek truth from facts” and "practice is the
sole criterion for testing truth".
A first step in the post-Mao healing process was to restore the rights and reputation of the victims of
the purges of the previous 20 years - over three million cases were reviewed and rehabilitated.
Deng’s next step was to approach the economic management of the Peoples Republic in a pragmatic,
open-minded way. One that was aimed at achieving prosperity. That was willing to try out new things and
then to implement what worked.
To this end, Deng and the team of economists who soon surrounded him, began by surveying the
various experiences of socialist economy in the Soviet Union and Eastern Europe. It was during this
process that they identified the continuing relevance to China of Lenin’s New Economic Policy (NEP), the
economic policy that had operated in the USSR for much of the 1920s. And of its chief theoretician,
Nicolai Bukharin.
In Moscow, Deng himself had personally studied the NEP in 1926 and Bukharin’s interpretation of it.
As one of his biographers put it: “The theory of reform and opening that Deng developed several years
after Mao’s death, in the late 1970s and early 1980s, did not originate with him. It was rooted in…
Bukharin’s interpretation of Lenin’s New Economic Policy aimed at developing a market economy under
the control of the Communist Party. Deng studied this concept in the mid-1920s in Moscow during his
sojourn as a student at a Comintern school… The evident superiority of NEP-style socialism was
confirmed by his reading of Marxist-Leninist books and articles as well as contemporary speeches by
Stalin and Bukharin, which made a deep impression on Deng’s worldview ."
Deng’s direct experience in the Soviet Union confirmed the effectiveness of the NEP. The economy
was booming. Markets were increasingly filled with goods produced by state and private enterprises. New
stores, restaurants, and cafes were opening all the time. “We were never short of chicken, duck, fish, and
meat,” recalled one of Deng’s classmates.
Deng Xiaoping drew on the ideas from NEP when he spoke of his own reforms in China. In 1985, he
openly acknowledged that “'perhaps' the most correct model of socialism was the New Economic Policy
of the USSR."
If we just compare China to India, a country with a similarly sized population and level of GDP back in
1990. Now, three decades later, national output in China has reached nearly five times that of India.
Living Standards
Over the last four decades, the miracle that is China’s economy, has translated into a massive increase in
living standards for the people, albeit from a very low level. While there has been a large increase in
inequality, unlike the capitalist countries the growth in the economy has also been shared by the rest of
the population. Annual personal disposable income, the amount of money that households have available
after income taxes, rose from only $263 per person in 1986 to $4462 in 2019. Given the size of China’s
population this is an incredible achievement. Yet, it also underscores how far China still needs to go to
catch up with and overtake living standards in the advanced capitalist countries. This is not planned to
happen until around the hundredth anniversary of the Chinese Revolution in 2049.
Another way of measuring living standards is to look at increases in household consumption – China's
rapidly growing numbers of smartphones, cars, internet users, those taking foreign holidays and so on
clearly reflect its improving living standards which in 2019 were currently rising at three times the rate of
the USA. Living standards are also reflected in rising life expectancy. Starting at only 36 years in 1949, by
2020 China had reached 77.3 years, just behind the USA at 78.54. Indeed, Chinese people will likely be
living longer than their US counterparts by 2025, if not sooner.
Perhaps the most amazing achievement in modern China has been the huge fall in poverty among its
population. Above all, this reflects the priorities of China’s socialistic policies. In late 1978 when the
reforms began, the number of extremely poor rural residents was nearly 770 million. By 2019 this had
been reduced to only 5.51 million or 1.7% of the population. Nonetheless, President Xi Jinping
announced a serious goal of completely eradicating extreme poverty in time for the centenary of the
Communist Party in July 2021. To achieve this, every person and family affected was visited, assessed
and assisted on a continuous basis. And it appears that the goal was already met by 2020.
Conclusions
The last four decades of China’s economic development and the dramatic impact it has had on the well
being of the Chinese people, has forcefully confirmed the effectiveness of Deng Xaioping’s reforms and
his wisdom in adopting the strategy of Lenin and Bukharin’s New Economic Policy. By recognising that
agriculture was the first priority in a rural country and accepting the need for private initiative to move it
forward, Deng and his circle of advisers opened up the way for the farmers and the socialist state to work
together to solve its problems. Through this, China was able to create a solid foundation on which to build
industry, first in the countryside and then in the urban areas. Moreover, the combination of state planning
and public ownership with foreign capital and technology, as well as local private enterprise, has allowed
China to achieve incredible growth rates for the economy and living standards. As such, China’s
experience of socialist economic reform represents a new way forward for poorer, largely rural economies
across the globe.
The mix of dominant socialist and subordinate capitalist forms that has evolved in China has secured
stunning achievements and moved China into the front rank of nations. To such an extent that the
advanced capitalist countries fear its continuing growth and innovation. And see it as a serious threat to
their system.
However, nothing stands still. And China faces many challenges ahead. We will address these
challenges later in this Manifesto and suggest some possible positive and far-reaching solutions to them -
see ‘The Challenges Facing China’.