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ECON 461 Lecture 4 [Compatibility Mode] The Most Influential Person in China after Mao was Deng Xiaoping Intelligent and popular figure within CCP. Went to Paris in 1920 (when he was 15), and later studied in Moscow. Returned in 1927. Jiangxi Soviet, Long March, married in Yan’an, commanded army, Chongqing mayor in 1949. Headed CCP Secretariat under Mao during Anti- Rightist campaign, worked under Zhou Enlai and Liu Shaoqi during Recovery period. Pragmatic “black cat, white cat” approach. Purged in 1966, sent to work in a Jiangxi tractor factory. Zhou brought him back in 1974 as vice-premier to run economy. After Zhou died in 1976, Deng was purged again by Gang of Four. Chairman Hua Guofeng Radical deputy chairman of Hunan revolutionary committee, brought to Beijing in 1971 to be vice-premier, then premier. Mao to Hua: “With you in charge, I am at ease.” Sided with Gang of Four in Tian’anmen Incident in 1976. After Mao died, arrested Gang of Four - rumors of coup. Hua became only leader to serve simultaneously as premier and head of CCP (party chairman, plus military commission). Known for “Two Whatever” policy, and “Great Leap Outward.” Allowed Deng to return to his posts after pledging loyalty. Paramount Leader Deng’s proteges chosen for high positions in December 1978, Hua remained chairman, but Deng and his comrades were really in charge. Democracy Wall in 1978-79: “Beijing Spring” and Wei Jingsheng, criticism and suppression. “Politics in Command” ended: Authority based on skills, rehabilitation of rightists, end of class labels. Political reforms to prevent future personality cults. Chairman position abolished by 1982, term limits eventually put on highest positions. Party legitimacy still depended on Mao’s reputation, so CCP repudiated most of Mao’s policies without repudiating him. 1 Hu Yaobang and Zhao Ziyang Hu Yaobang was early supporter of Mao in Jiangxi, and long-time Deng lieutenant. He was purged with Deng Xiaoping during Cultural Revolution. Zhao Ziyang joined party in 1930s, but too late for Long March. Rose to leadership in Guangdong in 1950s, was seen as a moderate and purged during CR. Brought back by Zhou Enlai for work in Inner Mongolia. Implemented early agricultural reforms to combat poverty as Sichuan party chief. Second Generation Leadership Chinese Communist Party Chairman: Hua Guofeng (1976-81), Hu Yaobang (1981-82) General Secretary: Hu Yaobang (1982-87), Zhao Ziyang (1987-89) Administration Premier: Hua Guofeng (1976-80), Zhao Ziyang (1980-87) National People’s Congress President: Li Xiannian (1983-88), Yang Shangkun (1988-93) Besides Deng Xiaoping, other members of the leadership included Chen Yun, Ye Jianying, Song Ping, Bo Yibo, and Xi Zhongxun. Economic Reforms Four Modernizations: in 1983, Zhou Enlai gave a speech on the need to strengthen the fields of agriculture, industry, national defense, science and technology. In addition to the four modernizations and the dramatic political changes, there were three major areas of economic reform: Foreign Trade and Investment Rural Reform Urban and Industrial Reform 2 Open Door Policy Chinese students abroad. SOE Forex retention. Special Economic Zones: • 1980: Shenzhen, Zhuhai, Shantou, Xiamen. • 1984: Shanghai, Tianjin, Qingdao, Wenzhou, Guangzhou, and nine other cities. • By 1990: Hainan, Shanghai Pudong, dozens of others. Joint-Ventures with foreign firms. Creation of dual currency system: • FEC and RMB. Gradual opening to tourism. Rural Reform Decentralization of collective farming (Communes, Brigades, Teams), reliance on production contracts. Successful reforms in Sichuan under Zhao Ziyang. Encouragement of rural and urban farmers’ markets, and increased state purchase prices. Division of land by household in Anhui, adopted by CCP as Household Responsibility System ( Baogan Daohu ). Reforms pushed top-down by 1984. Effects of Rural Reforms Rapid productivity improvement. End to extensive growth. Release of surplus labor: rural teams, floating population. Rising rural wealth near cities: “To Get Rich is Glorious!” 3 Industrial Reform Urban Reforms launched in 1984: Decentralization to provinces. SOE managerial autonomy, with contracted responsibility systems and particularistic terms. Profit retention for bonuses, investment. Dual-track pricing system, ending ratchet effect. New Types of Firms Collective Enterprises. Rural Township and Village Enterprises ( Xiangzhen Qiye ). Getihu Enterprises system for very small service and retail firms. Basic problem of competition, profits, and inflation. Banking and Investment Reform Old system: state allocation of investment funds to enterprises. Banking reforms and commercialization to replace People’s Bank of China (PBC) converted to central bank. Four new commercial banks: Bank of China (BOC), Agricultural Bank of China (ABC), Industrial and Commercial Bank of China (ICBC), Construction Bank of China (CBC). People’s Insurance Corporation of China (PICC), China International Trust and Investment Corporation (CITIC). New system: state firms take out loans from state banks, repay with interest. From 1985 to 1990, total urban household savings in banks rose from 63% of annual urban resident consumption to 130%. 4 Crossing the River by Feeling the Stones Kane’s Regulatory Dialectic in Reverse Chen Yun’s and the Birdcage Economy Naughton’s “Growing out of the Plan” Economic Performance in Reform GDP Per Capita growing much faster (8.3% 1978-88) Agriculture productivity rose dramatically, but inputs fell. Industrial productivity also improved, and became largest share of GDP in mid-1990s. However, investment was inefficiently high due to excessive borrowing. Savings and Investment rising significantly, but much investment wasted. Exports and Imports rising, but trade deficits increasing. SOEs improved productivity in 1980s but also started to borrow heavily from state banks, and by late 1980s competition, rising productivity from other sectors, and SOE inefficiency was leading to falling profits and falling market shares. Double-digit inflation and the income of urban residents. Corruption much more noticeable (Hainan car imports). Protest 1985-86 student demonstrations against corruption and authoritarianism. Hu Yaobang removed as CCP General Secretary in 1987, replaced by Premier Zhao Ziyang. New premier Li Peng, who launches “bourgeois liberalism” campaign and slowing economic reform. Hu Yaobang’s death on April 15, 1989 sparks student demonstrations in Beijing. These grow and move to Tian’anmen square. In spite of People’s Daily criticism by CCP, millions join the students in marches. 5 The Six-Four Incident In May, Gorbachev arrives for Sino-Soviet summit, foreign press arrives. Demonstrations continue, students begin a hunger strike. Zhao Ziyang appeals to students. PLA initially tries to end protests unarmed, but is blocked by Beijing residents. On night of June 3-4, PLA breaks through blockades and clears square. Soldiers and citizens both die. Estimates of death toll range from 241 killed plus 7000 wounded (Chinese government) to 10,000 killed (Soviet intelligence). The Aftermath Foreign relations Re-education TVE policy Conservatives in charge of CCP. Slowing GDP growth, flood of rural migrants, eroding profits of SOEs. The end of reform? Born under the Red Flag http://www.youtube.com/watch?v=rHfXzG46faA 6.
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