World politics explainer: Deng Xiaoping’s rise to power



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Chinese stamps commemorating Deng Xiaoping, a leader widely regarded to have modernised the country and made it a formidable economic power, 1998.
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James Laurenceson, University of Technology Sydney

This article is part of our series of explainers on key moments in the past 100 years of world political history. In it, our authors examine how and why an event unfolded, its impact at the time, and its relevance to politics today.


By orchestrating China’s transition to a market economy, Deng Xiaoping has left a lasting legacy on China and the world.

After becoming the leader of the Communist Party of China in 1978, following Mao Zedong’s death two years earlier, Deng launched a program of reform that ultimately saw China become the world’s largest economy in terms of its purchasing power in 2014.

Last year it accounted for 18.2% of total global purchasing power, compared with 15.3% for the United States.

What happened?

A major turning point was the 3rd Plenum of the 11th Central Committee of the Communist Party of China, which took place in December 1978. For the three decades prior, production in China was structured around a central planning model: collectivised agriculture in rural areas and state-owned industrial firms (SOEs) in urban regions. The prices of goods and services were also fixed by the government rather than determined by supply and demand.

Deng recognised that the outcomes produced by the planned economy were poor, with more than 60% of the population living in poverty. That’s why he launched a series of measures such as opening up the economy to foreign trade and investment.

He summarised his distinctly pragmatic rather than ideological approach to development with the phrase, “It doesn’t matter whether the cat is black or white, so long as it catches mice”.

Under Deng, the market wasn’t given free rein immediately. There was no reform of the “big bang” variety seen in former centrally-planned economies of Central and Eastern Europe.

Rather, in the words of Barry Naughton, China’s economy was simply allowed to “grow out of the plan”.

For example, state-owned firms were not sold off to private entrepreneurs at the outset. Rather, privately-owned companies were permitted to emerge alongside SOEs. This gave Chinese consumers choices and the competition forced SOEs to become more responsive to market demand and efficient in their production practices.

The impact of the reforms

The outcomes of Deng’s reforms have been without historical peer.

Deng Xiaoping billboard stating
Wikicommons/Brücke-Osteuropa

The latest data put the proportion of China’s population living in poverty at less than 1%. Of course, despite hundreds of millions being lifted out of poverty, this does not mean that all Chinese are rich: average incomes are still only around one-third of those in Australia.

The reasons Deng’s reforms proved successful can be traced back to two key factors.

The first is policy logic.

John McMillan and Barry Naughton showed that the newly-emerged private sector played a crucial role in improving the Chinese economy’s overall efficiency.

Another key consideration was that China benefited from its starting point.

Jeffrey Sachs and Wing Thye Woo pointed out that in 1978, most Chinese people were poor and living in rural areas. Compared with other centrally-planned economies such as the former Soviet Union, this made the task of shifting labour from producing low-productivity agricultural output to higher productivity industrial goods easier.

Just how far along the path to a market economy has China come?

That depends on the measure and the part of China’s economy under focus.

Last month, Meixin Pei, a professor at Claremont McKenna College in the United States, pointed to China’s state sector as evidence its economic growth would slow. He wrote that China’s economy was “nowhere near as efficient as that of the US”. And the “main reason for this is the enduring clout of China’s state-owned enterprises (SOEs), which consume half of the country’s total bank credit, but contribute only 20% of value-added and employment”.

Yet, perhaps unwittingly, Pei makes an important observation. SOEs may account for one-fifth of China’s value-added output and employment. But that means four-fifths now comes from Deng’s private sector.

Contemporary relevance

Careful work by Nicholas Lardy at the Peterson Institute for International Economics has concluded that by 2011, China’s public sector, including SOEs, only employed 11% of China’s labour force. As a comparison, in 2013, Australia’s public sector accounted for 18.4% of total employment. In other words, at an aggregate level and in terms of employment, the private sector is more prominent in China than in Australia.

An OECD study in 2010 found that 87% of China’s 523 industrial sectors were highly competitive. They observed that this compared favourably with international standards, including with the US.

Commentators like Minxin Pei are correct that China’s SOEs do benefit from government policy support, such as cheap loans from state-owned banks.

But the data nonetheless point to China’s private sector being hyper-competitive in the sense that despite such discriminatory policies, the sector as a whole has continued to thrive.

In a 2016 paper for a Reserve Bank of Australia conference, Nicholas Lardy highlighted that in terms of output growth, profitability and indebtedness, private Chinese industrial firms outperform SOEs by a wide margin.

The prominent and vibrant role the private sector plays in China today means that its economic growth may be more sustainable than some of its critics imagine.

That said, the pace of economic reform has slowed under current Chinese leader, Xi Jinping, who took over in 2012.

Arguably the slowdown dates back even further. For example, in terms of subjecting Chinese firms to increased competition from overseas firms, China’s trade-weighted average tariff in 2000 stood at 14.7%. After entering the World Trade Organisation (WTO) in 2001, this fell dramatically to 4.7% by 2005. Since then, no further progress has been made. In fact, in 2016 the figure was higher at 5.2%.

Similarly, four decades after Deng began to allow foreign investment into the manufacturing sector, other parts of China’s economy, particularly the so-called “commanding heights” of the economy such as energy, telecommunication and finance, remain curtailed or off limits entirely. Overall, China is less open to foreign investment than high-income countries and many emerging markets as well.

This lack of reciprocity is at least partly responsible for much of the international community’s criticisms of China’s economy today. Jason Young, the Director of the New Zealand Contemporary China Research Centre wrote last week that the current US-China trade war is really a “dispute over what models of political economy are deemed fair and legitimate economic policy-making in today’s highly-integrated global economy”.

Over the past decade, around one-third of the world’s economic growth has emanated from China. Countries like Australia have been leading beneficiaries, with China buying $116 billion last year.

China’s economic growth, and therefore the world’s, will be more assured if Deng’s reform legacy is reclaimed by China’s current crop of leaders. Just announced tariffs cuts and new openings for foreign investment are steps in that direction.The Conversation

James Laurenceson, Deputy Director and Professor, Australia-China Relations Institute (ACRI), University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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CHINA: CHRISTIANS WARY AS RECESSION, UNREST HIT


Beleaguered government officials could view church as threat – or a force for stability.

BEIJING, February 25 (Compass Direct News) – With China’s central government last December issuing a number of secret documents calling on provincial officials to strive to prevent massive unrest in a rapidly collapsing economy, observers are watching for signs of whether authorities will view Christian groups as a threat or a stabilizing influence.

While the Sichuan earthquake last May proved that Christians were willing and able to assist in times of national crisis, raids on house church groups have continued in recent weeks.

The secret reports have come in quick succession. A central government body, the Committee for Social Stability (CSS), issued an internal report on Jan. 2 listing a total of 127,467 serious protests or other incidents across China in 2008, many involving attacks on government buildings or clashes with police and militia.

“Recently every kind of contradiction in society has reached the level of white heat,” the CSS warned in an earlier document issued on Dec. 16.

The document said some officials had “ignored the welfare of the masses … piling up pressure until the situation exploded,” and concluded that, “The relevant Party and State organs must … give daily priority to the task of getting rid of all the maladies which produce social instability and the present crisis.”

On Dec. 10, the Central Committee of the Chinese Communist Party and the National People’s Congress issued an internal document calling on senior provincial officials to make every effort to alleviate social and political problems exacerbated by the current recession.

On Dec. 12, the Ministry of Public Security authorized provincial officials to tighten control of all communications in the sensitive period prior to Chinese New Year, which this year fell on Jan. 25. Fearing turmoil as millions of newly-unemployed factory workers headed home for New Year celebrations, the government cancelled all leave for Public Security Bureau (PSB) officers, placed them on high alert and mobilized an additional 150,000 police and armed militia for the holiday period.

On Dec. 15, the public security ministry issued a further document calling for tightened security at government ministries, military bases, armament stores, state borders, airports and railway stations.

In its Dec. 16 report, the CSS warned that provincial authorities must try to resolve grievances by non-violent means before protestors begin attacking factories and government offices or stealing, looting and burning property.

The scale of demonstrations and riots has already reached frightening proportions. In the Jan. 2 internal assessment leaked in Hong Kong, the CSS said the 127,467 serious incidents across China last year involved participation of around 1 percent of the population. Of these cases, 476 consisted of attacks on government and Party buildings, while 615 involved violent clashes with police and militia, leaving 1,120 police and Party officials and 724 civilians killed or injured.

 

Church as Subversive

Concerned by the growth of unregistered house church groups in an uncertain political and social climate, the Chinese government has ramped up efforts both to identify Christians and to portray Christianity as a subversive foreign force.

Local governments in China last year reported on continued measures to prevent “illegal” religious gatherings and curb other criminalized religious activities, according to reports from the U.S. Congressional Executive Commission on China (CECC) on Dec. 20 and Feb. 2. (See “Tortured Christian Lawyer Arrested as Officials Deny Abuses,” Feb. 11.)

In recent months authorities have quietly gathered data on church growth using surveys at universities and workplaces, and called meetings at various institutions in the capital to discuss the supposed dangers of foreign religious influence. (See “Officials Grapple with Spread of Christianity,” Feb. 4.)

Raids on unregistered church groups have continued in recent weeks, with police perhaps prompted to ensure tighter controls on church activity. On Feb. 11, police arrested two South Korean pastors and more than 60 Chinese house church leaders from four provinces who had gathered for a seminar in Wolong district, Nanyang city, the China Aid Association (CAA) reported. The police also confiscated personal money, cell phones and books, and forced each person to register and pay a fine before releasing some of the elderly leaders.

Authorities held six of the detained leaders for several days but by Sunday (Feb. 22) had released all of them, Compass sources confirmed.

In Shanghai, police and members of the State Administration of Religious Affairs on Feb. 10 ordered Pastor Cui Quan to cancel an annual meeting for house church leaders, and then ordered the owner of the hall used by Cui’s 1,200-member congregation to cease renting it to Cui within 30 days, according to CAA.

Senior staff at Beijing’s Dianli Hospital on Feb. 6 ordered elderly house church pastor Hua Zaichen to leave the premises despite being severely ill, CAA reported. Government officials had refused to allow Hua’s wife, Shuang Shuying, an early release from prison to visit her dying husband unless she agreed to inform on other Christians, according to Hua’s son. After refusing their offer, Shuang was finally able to visit Hua on her release date, Feb. 8; Hua died the following day.

Both Shuang and her husband have suffered years of persecution for their involvement in the house church movement.

On Feb. 4, police seized Christian lawyer and human rights defender Gao Zhisheng from his home in Shaanxi province, CAA reported. At press time his whereabouts were unknown.

While other incidents have gone unreported, house church leaders in northern China told Compass in January that despite tighter restrictions in the current economic and political climate, they were optimistic about the ability of the church to survive and flourish.

 

SIDEBAR

Disenchantment, Dissent Spread Across China

In December, China celebrated the 30th anniversary of Deng Xiaoping’s “open door” economic reform policy, which had led to a high annual growth rate of some 10 percent. While Party leaders publicly congratulated themselves, an internal party document warned that 75 percent of the financial benefits had gone to only 10 percent of the population, mainly high and middle-ranking Party members and some entrepreneurs.

With the growth rate now seriously dented, relations between Party members and the general public were “about to explode,” the document warned.

The document also referred to an “ideological vacuum in Party and state,” a “moral vacuum in upholding regulations,” and a “vacuum in spiritual civilization,” in stark contrast to the moral and spiritual values held by religious groups.

According to the Research Institute of the State Council, urban unemployment among young people had already risen to 10.5 percent by last June. If foreign investors continued to withdraw funds, the institute warned, this figure could rise to 16 percent or higher, sparking more outrage against the government.

Tens of thousands of factories closed down in the first six months of 2008, well before the full impact of the global recession hit China. By November, 10 million migrant workers were unemployed; most recent estimates put the figure at 20 million, and officials admit this figure will reach at least 35 million by the end of 2009.

Vice-Premier Hui Liangyu, responsible for agricultural affairs, warned in a recent report that 30 percent of all villagers have set up peasant organizations to challenge local government officials and crime bosses. Some groups also have plans to launch armed insurgencies and their own peasant governments.

Several million university graduates will also face unemployment this year, potentially lending their voices and leadership skills to mass protest movements.

An increasing number of intellectuals have already signed Charter 08, a petition issued in December calling for multi-party elections, human rights, press freedom and the rule of law.

On Jan. 7, a prominent Chinese lawyer, Yan Yiming, filed an application with the Finance Ministry demanding that it open its 2008 and 2009 budget books to the public. On Jan. 13, more than 20 Chinese intellectuals signed an open letter calling for a boycott of state television news programs because of “systematic bias and brainwashing,” while a Beijing newspaper ran an article arguing that freedom of speech was written into the constitution, The Washington Post reported in late January.

In response, Public Security Minister Meng Jianzhu warned China’s leaders via state media that, “The present situation of maintaining national security and social stability is grave.”

Many analysts agree that the Chinese Communist Party may be facing its greatest challenge to date.

Report from Compass Direct News