1977 – 1988
The Cultural Revolution ended with chairman Mao Zedong’s death in 1976 and the arrest of the Gang of Four. That movement, spearheaded by Mao, caused severe damage to the country’s initially diverse economic and social fabric. The country was mired in poverty as economic production slowed or came to a halt. Political ideology was paramount in the lives of ordinary people as well as the inner workings of the party itself.
In September 1977, Deng Xiaoping proposed the idea of Boluan Fanzheng (“bringing order out of chaos”) to correct the mistakes of the Cultural Revolution. At the Third Plenum of the 11th Central Committee, in December 1978, Deng emerged as China’s de facto leader. He launched a comprehensive program to reform the Chinese economy (Reforms and Opening-up). Within several years, the country’s focus on ideological purity was replaced by a concerted attempt to achieve material prosperity.
To oversee his reform agenda, Deng promoted his allies to top government and party posts. Zhao Ziyang was named Premier, the head of government, in September 1980, and Hu Yaobang became CCP General Secretary in 1982.
Deng’s reforms aimed to decrease the state’s role in the economy and gradually allow private production in agriculture and industry. By 1981, roughly 73% of rural farms had been de-collectivized, and 80% of state-owned enterprises were permitted to retain their profits. Within a few years, production increased, and poverty was substantially reduced.
While the reforms were generally well received by the public, concerns grew over a series of social problems which the changes brought about, including corruption and nepotism on the part of elite party bureaucrats. The state-mandated pricing system, in place since the 1950s, had long kept prices fixed at low levels. The initial reforms created a two-tier system where some prices were fixed while others were allowed to fluctuate. In a market with chronic shortages, price fluctuation allowed people with powerful connections to buy goods at low prices and sell at market prices. Party bureaucrats in charge of economic management had enormous incentives to engage in such arbitrage. Discontent over corruption reached a fever pitch with the public; and many, particularly intellectuals, began to believe that only democratic reform and the rule of law could cure the country’s ills.
In its quest to feed more than 1 billion people, China has undergone economical reforms
Economic reforms aimed to decrease the state’s role in the economy and gradually allow private production in agriculture and industry
Following the 1988 meeting at their summer retreat of Beidaihe, the party leadership under Deng agreed to implement a transition to a market-based pricing system. News of the relaxation of price controls triggered waves of cash withdrawals, buying, and hoarding all over China. The government panicked and rescinded the price reforms in less than two weeks, but there was a pronounced impact for much longer. Inflation soared: official indices reported that the Consumer Price Index increased by 30% in Beijing between 1987 and 1988, leading to panic among salaried workers that they could no longer afford staple goods. Moreover, in the new market economy, unprofitable state-owned enterprises were pressured to cut costs. This threatened a vast proportion of the population that relied on the “iron rice bowl”, i.e. social benefits such as job security, medical care, and subsidized housing.
The party’s nominally socialist ideology faced a legitimacy crisis as it gradually adopted capitalist practices. Private enterprise gave rise to profiteers who took advantage of lax regulations and who often flaunted their wealth in front of those who were less well off. Popular discontent was brewing over unfair wealth distribution. Greed, not skill, appeared to be the most crucial factor in success. There was widespread public disillusionment concerning the country’s future. People wanted change, yet the power to define “the correct path” continued to rest solely in the unelected government’s hands.
The comprehensive and wide-ranging reforms created political differences over the pace of marketization and the control over the ideology that came with it, opening a deep chasm within the central leadership. The reformers (“the right”, led by Hu Yaobang) favored political liberalization and a plurality of ideas as a channel to voice popular discontent and pressed for further reforms. The conservatives (“the left”, led by Chen Yun) said that the reforms had gone too far and advocated a return to greater state control to ensure social stability and to better align with the party’s socialist ideology. Both sides needed the backing of paramount leader Deng Xiaoping to carry out important policy decisions.
Popular discontent was brewing over unfair wealth distribution
Greed, not skill, appeared to be the most crucial factor in success. There was widespread public disillusionment concerning the country’s future