Today, China’s socialist market economy is the world’s second-largest economy, trailing only behind the United States. However, over forty years ago, this was not the case for China when Deng Xiaoping (???) came to power after the death of the CCP’s founder, Chairman Mao Zedong (???). At Mao’s death in 1976, China was in the middle of the Cultural Revolution and still remained closed off to the idea of a capitalist economy, with their communist ideals greatly ingrained within China’s way of living. When Deng came to power in 1978, China was in dire poverty. Despite political opponents and hesitancy towards changing the country’s communist ideology, Deng introduced reforms to ignite an economic revolution in China. Deng Xiaoping’s realized that China cannot prosper on an international level without a capitalist-based economy, Therefore, Deng shifted the government-owned economy to one that promotes private property, open markets, international trade, and foreign investments, opening up the Chinese economy to the world and allowing for China’s economic prosperity. For China faces only one major transition: from a command to a market economy. Post-Communist regimes face a daunting “dual transition,” attempting a historic transformation of the economy while at the same time trying to build stable and effective democracies out of the ruins of a single-party dictatorship. Some of these new democracies face problems of legitimacy as deep as China’s regime at the end of the 1980s. Gu Mu (??), Vice-Premier of the PRC, traveled to different countries to gather potential technologies and ideas China could apply to aid with Deng’s vision of reforming the economy. Deng’s instructions for Gu Mu was to,”have broad contacts, make detailed investigations, and carry on deep research into the issues… Look at how they manage their economic activities. We ought to study successful experiences of capitalist countries and bring them back to China.” With Gu Mu as his right-hand man for taking note of the success of other countries, Deng’s broadened his scope on China’s current economic state as he traveled to more countries too. He summarized the effects of the trips as: “The more we see, the more we realize how backward we are” reflecting on China’s status as a communist state. As though acknowledging the stubbornness of Chinese culture as a whole. “The basic point is: we must acknowledge that we are backward, that many of our ways of doing things are inappropriate, and that we need to change”. The study tours further reinforced Deng’s urge and its political officials to modernize. In November 1978, Deng’s tour to Bangkok, Kuala Lumpur and Singapore heightened Deng’s interest in Singapore’s economic development. He sent Chinese scholars to study the economy in Singapore and other countries around the world to understand their growth. With knowledge coming in, Deng stopped implementing Communist ideologies in Southeast Asia, beginning China’s footing into a socialist economy.”Gu Mu advocated quickly introducing factories that would produce synthetic fibers as needed… to drive the takeoff of light industry in China.” Back home, it seemed for a time that Deng’s openness to economic reform would lead him to support significant democratic reforms. He told party leaders that he endorsed the spirit of China’s new democracy movement. ”Democracy has to be institutionalized and written into law,” he said. Deng argued that the democracy with the political turmoil of the Cultural Revolution. ”Our people have just gone through a decade of suffering” and ”can not afford further chaos,” he said. Mr. Deng wanted the energy of the economic reformers, but could not tolerate the political challenge. The support Deng Xiaoping’s policies were positively received amongst China’s elitists for economic reforms to increase the country’s wealth but faced opposition from party conservatives. Deng argues that China’s current system is a copy of the Soviet Union – there’s no uniqueness to its current structure. “our nation’s system is basically taken from the Soviet Union… It is backward, deals with issues superficially, duplicates structures, and advances bureaucratism.” “His economic reform programme and the autonomy from state control that he created for Chinese from many walks of life inexorably decreased the Party’s previous hegemony” China’s new willingness to work with capitalist countries as a result of the Gu Mu trip required not only rethinking specific industrial plans but also revising government rules and bureaucratic procedures to allow foreign firms to operate in China.” New questions began to arise from the rapid changes in the economy, from how foreigners will be integrated and how Chinese will remain in control of their planning system. Furthermore, how will the people contribute to the free market? “The Chinese never resolved the differences between this two point of view, but the more radical reformers were steadily gaining support through the 1980s”AT THE THIRD PLENUM of the Tenth Party Central Committee in July 1977, Deng from political disgrace for a second time and began to aggressively reassert his leadership. When the historic Third Plenum of the Eleventh Central Committee convened in December 1978, Deng declared reform and opening up as the new party line. In the ensuing years, he skillfully outmaneuvered his political opponents by systematically purging the supporters of the Gang of Four and other Maoist radicals, while gently pushing thousands of aging senior leaders upstairs to “honorable” retirement. Deng focused his first reforms within agriculture to stabilize and establish a mutual trust with the working class. Deng introduced the household-responsibility system, diving communes to private plots that could be divided amongst peasants. By doing so, the government had less of a handling on the peasants, now free to exercise more control over their lands. This marked the beginning of private businesses within other parts of China’s economy, as more people could open businesses outside of agriculture. Upon learning young teenagers are escaping their home Guangdong for jobs in Hong Kong, Deng argued that physical borders and tightened security would not change Guangdong’s youth’s security problem; instead, it is “improving the economy of Guangdong so young people would not feel that they had to flee to Hong Kong to find jobs.” Still, in cities and in villages, incomes more than doubled in the Deng era was reflected by the access the Chinese had. “Most Chinese who have watched a television or used a washing machine or dialed a telephone have done so only because Mr. Deng came to power. The struggle to survive in the Chinese countryside has greatly eased.” The group of realistic economists introduced in the past two years changes in the priorities of economic policies and development, placing particular emphasis on an increased pace of development in agriculture and light industry, restraints on development in heavy industrial production and investment, and on accelerating progress in housebuilding and development in the network of services. Besides, they also conducted significant theoretical and practical activities chiefly as regards the summary assessment of positive and negative results of three decades of economic development and the concrete lessons that can be drawn from them for the benefit of a new economic reform to be drawn up. These economists followed with keen attention the experience accumulated in other socialist countries in the field of economic development and economic control and management. A large number of publications appear in Chinese dailies and periodicals; contributions from the group of advanced economists. Although few of them have so far climbed to the top bodies and organizations of the party and the state their impact on ideology and economic policies is so significant that both major groups referred to above have to be increasingly aware of their presence”The rapid rate of growth in the production of agricultural and light industrial products far outpaced the rate of population,” Deng realized it was crucial for China to open its policy of “opening” to capitalist investment and capitalist global markets for China to thrive. Deng’s special economic zones in China’s coastal provinces of Guangdong and Fujian, where tax subsidies attracted Hong Kong’s manufacturing tycoons. Deng focused on coastal provinces, believing SEZs would rapidly prosper first. However, Deng feared the real strategy was incrementalism because Mr. Deng feared failure and discredit at the party’s mercy. The zones have continuously multiplied, forming a domino effect of coastal wealth, but only extending inland to major cities like Beijing and Sichuan. The SEZs In Guangdong Province — including Shenzhen and other “special economic zones” — businessmen from Hong Kong flowed in to establish new enterprises and set new standards for efficient management. When they worked, lessons were extended elsewhere. China badly needs political and social reform. To Deng, reform was a continuing process, and he would have moved boldly forward. Among the lessons from Deng:In introducing bold reforms, experiment first. Deng thought it wise to try new ideas in areas where leaders supported reforms and conditions were favorable. When new programs worked, Deng brought in leaders to observe the successes and sent those who led the experiments around the country to explain how they succeeded. With the institutions of SEZs in place, reforms were able to reduce pressure and investments in the economy by easing shifting resources towards. 4.4.8 Initial Macroeconomic Stabilization Achieved Through the Plan When China’s reformers faced serious macroeconomic imbalances in 1979-1981, they used the institutions of the planned economy to cut back investment and relieve pressure on the economy. Rather than combining stabilization and reform into a single rapid but traumatic episode as in a “big bang” transition the Chinese used the instruments of the planned economy to shift resources toward the household sector and relieve macroeconomic stresses at the very beginning of reform. This dramatic shift in development strategy created favorable conditions for the gradual development of markets. Inflationary pressures were vented off as supplies grew, rather than being resolved in a quick transition from suppressed to open inflation. In a related fashion, the planning structure was used to provide an initial impetus away from the capital-intensive Big Push strategy and toward more sustainable labor-intensive sectors This initial shift toward a more labor-intensive strategy was given urgency by the need to provide jobs for a large group of unemployed young people, including many who had returned to the cities from the countryside. planning would be an unwieldy and ineffective instrument to carry such a shift over the long term. But the temporary use of this instrument to lower unemployment tended to preserve stability and solidify support for the reform orientation. Deng argued that physical borders and tightened security would not change Guangdong’s youth’s security problem; instead, it is “improving the economy of Guangdong so young people would not feel that they had to flee to Hong Kong to find jobs.”The second thing is that economic growth came to be counted in a different way than previously. In the socialist period, individual remuneration and purchasing of consumer goods were not the major aspects of economic growth; rather, it was national-level manufacture and heavy industrial output along with agrarian provisioning that “counted”. From the late 1980s onwards, what counted towards economic growth (and thus prosperity) changed: individuals’ salaries, purchasing power, disposable incomes, etc., all became important indicators of “growth.” This means that how economics is accounted for and who counts in economic prosperity is vastly different from before. It also means that the base level from which counting began was very low, thus providing the opportunity for dramatic and sustained growth numbers. “By not only increasing the pace of growrth in an already rapidly grwing economy, but also reducing the amplitude of the nylical behavior of that growth, the chinese accomplished a record of growth that stands out not only in comparison with the past, but also comparision with other countries of the world”As a result of the economic reforms, therefore, full employment of the nonag ricultural labor force is no longer assured, and job security for those who do have jobs is much less secure than in the past (and will be even more so if the Bankruptcy Law is effectively implemented).