China’s New Economic Policy

Deng Xaioping’s reforms prepared the ground for China’s meteoric rise

Published: 16 October 2020
Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism’

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 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 ‘Socialism and China – the Maoist Era.

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“.

The 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.

The Soviet Union’s NEP was a policy which was based on an alliance between the workers and the peasants. It was a policy that sensibly sought to combine socialist planning and state ownership of the commanding heights, with private cultivation of the land, and the importation of foreign capital and technology. A policy that in the Soviet Union was tragically abandoned by Stalin in 1928 in his ultraleft war against the peasants and the cadres of his own communist party.

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.”1

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.2

Bukharin’s Influence On China’s New Economic Policy
In July 1979 at the behest of Deng and Hu Yaobang, Party General Secretary, a special Institute on Marxism-Leninism and Mao Zedong Thought was established to begin a serious study of the Yugoslav and Hungarian experiences in building socialism. But their main attention was devoted to the Bolsheviks’ NEP and the works of Nikolai Bukharin, its main theoretician.

The fact that Bukharin had been repressed and executed by Stalin actually increased their interest in his works and in his person. Having lived through the Cultural Revolution, the intelligentsia hated any kind of terror. Interest in Bukharin was particularly stimulated by an international conference on him organized by the communist movement in Italy. In September 1980 an academic forum on Bukharin was held near Beijing: “About sixty social scientists gathered and over many weeks discussed the theory of NEP, trying to understand why it was not fully implemented in the USSR and how applicable it is to China.” 3 The conference agreed to translate and seriously study Bukharin’s works. To this end, Hu Yaobang allotted the entire upper floor of the Beijing Party School to the task. Thirty seven of Bukharin’s works were published in Chinese including his biography. Several Chinese Bukharin specialists began to give lectures at the newly established Department of Foreign Socialist Studies at the Higher Party School, and a national tour on the subject was organised. Within intellectual circles, there was enormous interest: “The halls were jam packed. People sat on the window sills, and everybody wanted to hear something new.” 4

In 1981 Chinese scholars began publishing their own articles on Bukharin. They noted “his insistence that the growth of industry directly depended on the growth of agriculture. And his support of the harmonious combination of planned and market regulations“. 5

How To Move Forward
Armed with a general economy strategy, Deng Xaioping and the increasingly collective leadership had to work out how to move forward. Despite being the fourth largest country in the world, and having by far the biggest population at 956 million, China’s output in 1978 was only ranked at 34th place. Its population was hard put to even feed itself with extreme poverty levels above 60%. How was the party to tackle such massive problems and unleash the system’s potential?

In the face of what seemed insurmountable problems, socialist China had some major advantages over its capitalist rivals:

  • A political system geared to public benefit for all, not private profit for the rich
  • A willingness to consciously develop the economy through planning and experimentation
  • The necessary tools for implementation of economic policy through public ownership of the banks and key industries
  • A stable and powerful government able to collect taxes and implement long term policies

But how were such advantages to be best put to use?

After the almost constant upheavals of the Maoist era with its artificial political ideology of class struggle from above, the party leadership recognised that future change would have to be gradual and experimental. Thus Deng’s famous expression “Crossing the river by feeling the stones” became China’s approach, implementing reforms in a trial-by-error manner.

Often such reforms would start in a few regions, and if successful then be extended throughout China: “This gradual strategy reinforced the credibility of reform over time. By making reforms one step at a time, and starting with those most likely to deliver results, the government built up its reputation for delivering on reform. With every successful reform, the likelihood that the next one would be a success as well undoubtedly increased. It also gradually built up the experience and skills for the design and implementation of reforms.6

Countryside the First Priority
Change had to come first in the countryside where the overwhelming majority of Chinese people lived. And it had to end the problem of food shortages and malnutrition. This was a major change from the Soviet economy which prioritised industry over agriculture. A model that China had followed in the first three decades of its revolution.

The first step in the new strategy was to recognise that Mao’s experiment in collective agriculture had failed. In 1979, in response to local demand, elements of individual private farm production and sale through a ‘Household Responsibility System’ were allowed in a few areas. Facing ideological resistance from conservative members in the Party, the leadership held back from making such changes official. However, just as Lenin had experienced when introducing the NEP in Soviet Russia, the peasants in China took matters into their own hands. The new system started to rapidly spread across the countryside. Within three years, approximately 73% of rural farms had been de-collectivised and the Household Responsibility System became the official policy for all of China. 

The results were astounding. By 1984, annual agricultural output increased more than tenfold from what it had been in the years of the Cultural Revolution. For the farmers this translated into an increase in their average income of 166%.

Rural Industrialisation
The big increase in rural income for the peasants naturally led to an increased demand for agricultural equipment for the farms, as well as consumer goods for the home and the individual peasant. In a natural way, rural enterprises nearby began to develop to meet the demand. In most cases these were owned by the old communes and in time became the property of the succeeding local authority bodies. They came to be officially known as Township and Village Enterprises (TVEs) producing a wide range of items. The state banks helped the formation of these enterprises with cheap loans. Already by 1985 there existed 12 million TVEs.

Fortunately, the fast growth of productivity in the agricultural sector was releasing large amounts of labour which was taken up by these rural enterprises. In this way the total number of employees in the Town and Village Enterprises rose rapidly from 28 million in 1978 to 94 million in just a decade. This was soon reflected in China’s national income which by 1996 saw the share from non-agricultural activities jumping to over 30%.

Just as Bukharin had predicted for the Soviet Union’s New Economic Policy if it had been allowed to develop, China saw a natural process of industrialization in the countryside. A process that expanded organically from the field to the city rather than the other way round. And this process didn’t just stop at the borders of the Chinese domestic market but with provincial and national encouragement began to expand into production for export. The TVEs even managed to become major international brands such as Haier supplying half of the US home refrigerator market. In their heyday, the TVEs came to account for 40% of China’s industrial production and 27% of the country’s exports.

As one commentator put it: “Agriculture in China grew steadily with favourable tax policies and other encouragements from the state and advances in processes of mechanization and productive specialization leading to record harvests. In contrast to the continuing weakness of Soviet agriculture, the Chinese farming sector while declining as a relative factor in the economy became a success story that helped the country’s development rather than hindering it.7

Opening Up a Closed Economy
Another side to the economic reforms in China was the policy of opening up the economy to outside investment and foreign technology. In line with its cautious and experimental approach to reform, the Party leadership thought it best to test out the new open policy in a few limited areas. To this end, between 1980 and 1984 China established what came to be known as Special Economic Zones in Guangdong and Fujian Provinces, and the island of Hainan. Such zones allowed foreign companies to come and set up jointly-owned operations with Chinese companies. The results were effective with many overseas wealthy Chinese investing in the new Zones to take advantage of China’s huge supply of cheap labour. Soon after, capital from the advanced capitalist countries began to take an interest. Having proven the concept, the government decided to increase the number of zones. In 1984, China opened 14 other coastal cities to overseas investment including Shanghai. Then in 1985, the central government established a series of such economic zones further inland including the Beijing area.

Tiananmen Square Protests
The success of the big economic reforms in the countryside and the special zones during the 1980s had its downside. The transition from an almost completely state-owned, centrally controlled, closed economic system to a more decentralised and hybrid economy was bound to create transitional stresses and distortions. The massive growth of rural and special zone business and trading made it possible for individuals to make fortunes. And created all sorts of opportunities for corruption for Party and state officials.
Equality which had been a hallmark of the maoist years began to be replaced by new wealth and ostentatious consumption. This wealth was unequally distributed with uneven results between the countryside and the cities. And with the growing wealth of the Eastern coastal areas leaving behind many other regions.

Worse still was the lifting of some price controls that had kept prices stable and low for decades. For example, between 1987 and 1988 prices rose by 30% in Beijing leading to panic among salaried workers that they could no longer afford staple goods.

Moreover, unprofitable state-owned enterprises were being pressured to cut costs and lay off staff. This threatened many urban workers who relied on the ‘iron rice bowl’ – the wide range of housing, medical and other benefits that usually came with state employment.

Another discontented group were students and academics. Facing a dismal job market and limited chances of going abroad, intellectuals and students began to voice their criticisms. Avenues for such expression had significantly grown in the previous decade. A large number of private publications had emerged which supported the reform process. For Deng and the leadership team around him, this was useful in their ongoing struggles with the anti-reformist conservatives in the Party. 
There was widespread public scepticism over the country’s future. The communist certainties of the old Maoist era were fast disappearing. People wanted change, yet exclusive power to shape events still only remained in the hands of the top Party officials. And these officials were themselves divided over the direction, scope and speed of the reforms:

The reformers (“the right,” led by Hu Yaobang) favoured 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. However, both sides needed the backing of paramount leader Deng Xiaoping to carry out important policy decisions.8

The divisions at the top of the Party were reflected in the media which had become more numerous and diverse. Inevitably, the wider citizenry became drawn into these debates on the problems facing the country. And began to surface openly. Public manifestations of discontent arose in the form of student demonstrations in the capital in April and May 1989. These were sparked by the death of pro-reform former Party General Secretary Hu Yaobang.

A protest encampment was organised in Tiananmen Square which then turned into a popular hunger strike by some of the students on the 13 May in a demonstration attended by 300,000 people. This was only two days before a welcoming ceremony was scheduled in the Square for the highly publicized state visit of Soviet leader Mikhail Gorbachev. The students were hoping to use this to force the Party leadership to negotiate with them, a demand supported by some of the more liberal Party leaders. However, Deng joined forces with the Conservatives and decided to crush the protests which they thought threatened to unravel the Party’s control of society.

Actually, the students themselves were divided over their aims. Those who actually wanted to move China in the direction of capitalism and an American-style democratic system appeared to have been very much in the minority. The large majority restricted themselves to demands for an end to corruption, more democratic freedoms etc.

Nevertheless, the majority of Party leaders feared that the protest movement could escalate in the direction of capitalist restoration, a fear that now seems justified in retrospect with the fall of the Berlin Wall some five months later. The event that sparked off the rapid collapse of the state socialist regimes in Eastern Europe and later the Soviet Union itself.

On the 3-4th of June the Party sent in the army to reach Tiananmen Square and clear it of the protestors. In the approaches to the Square there were violent clashes between the army and Beijing residents who supported the students. Then after repeated appeals from the soldiers, the students left Tiananmen Square and the protest movement was suppressed.

On June 9, Deng Xiaoping, declared that “the goal of the movement was to overthrow the party and the state. “Their goal is to establish a totally Western-dependent bourgeois republic,” Deng argued that protesters had complained about corruption to cover their real motive, which was to replace the socialist system… “the entire imperialist Western world plans to make all socialist countries discard the socialist road and then bring them under the monopoly of international capital and onto the capitalist road.9

Deng’s action in suppressing the protests turned out to be highly unpopular at the time. And he ended up taking much of the blame for it. As a result he was forced to withdraw from his various state and Party positions. However, behind the scenes he was still accepted as the final arbiter between the factions.

The 1990s
The crushing of the Tiananmen Square protest movement represented a victory for the conservatives in the Party leadership. These conservatives felt that the economic reforms had introduced elements of capitalism which were to blame for the outbreak of dissent and threatened the future of socialist China. The collapse of Eastern Europe and the Soviet Union which soon followed only seemed to confirm their fears. Unsurprisingly, the economic reform process stalled.

While Deng Xaioping no longer held any official positions in the party and the state, he was still regarded as the ‘paramount leader’. His conclusions from the fate of the Soviet Bloc was not to halt the reforms but the exact opposite: to accelerate the process. For this purpose, Deng embarked on a highly publicised tour of the southern Special Economic Zones in 1992 ending up in Shanghai. In the tour Deng commented on the various debates about socialist or capitalist ownership with what became one of his famous catchphrases: “I don’t care if the cat is black or white, so long as it catches mice“. He urged the provincial governments to “be bolder in carrying out the Reforms and Opening-up, dare to make experiments and should not act as women with bound feet“. 10 The public reaction was very enthusiastic. Taking advantage of this Deng bluntly threatened that “those who do not promote reform should be brought down from their leadership positions“. 11

The official Party leadership bowed to the pressure and resumed the reform process. This was supported later in the year at the Party Congress which officially accepted that China must create a ‘socialist market economy’. Continuity in the political system but bolder reform in the economic system were set as the goals of the 10-year development plan for the 1990s.

Meanwhile, from 1995 onwards inflation dropped sharply as the government tightened monetary policies and food price controls. The following year, the state banking system was modernised.

Another major problem facing the Chinese economy was the large number of state owned enterprises, many of which were inefficient and loss making. In September 1997 plans were announced to merge, close or sell off many of them. Over the next three years up to 28 million SOE workers lost their jobs as the government strove to make large state-owned enterprises profitable.  

As such, the 1990s turned out to be a period of major economic change in China. It became the second biggest recipient of foreign investment after the US and national output really took off.

As we can see from the graph below, the results speak for themselves.

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.

The Power of Planning
A key to China’s amazing economic achievements has been its five-year planning process. The ability of the government to consciously assess the country’s performance and direct its resources where they are most needed has given China a massive advantage over its capitalist rivals. Part of this has been China’s willingness to incorporate foreign capital as part of its plan.  

A good example can be seen in the auto production sector. China was once famous for its bicycles which were the main mode of transport in the maoist era. Then in the 1980s the new wealth that began to flow from the reforms led to increasing purchase of car imports mainly from Japan. By 1985 the country was spending some $3 billion a year to import more than 350,000 vehicles. This was beginning to create a severe trade deficit. To overcome this, Chinese authorities decided to include an ambitious auto production sector in its plan. The problem was that China did not have the technology to produce modern motor engines and auto bodies. So, it had no choice but to invite foreign capitalist manufacturers to come and produce in China. However, the result of these efforts was dramatic. The number of vehicles produced in China rose from only 5200 in 1985 to 26 million in 2019, 28% of the world’s total and more than the output of the US, Japan and the European Union combined!

Within this total local Chinese brands have a major share of the Chinese market made possible by the joint ownership arrangements that were an original condition for the foreign companies to produce in China. This trend is likely to rise as the government has taken major steps to encourage local manufacturers to produce electric cars and establish Chinese brands as world leaders in this new technology sector.

A New Planning Process
In the Soviet Union, planning was essential in helping to build up its economic strength. But it ultimately failed because of its rigidity, centralisation and lack of innovation. In the maoist era, the soviet planning model was used in China demonstrating many of the same limitations but made much worse by political upheavals which often rendered the plans ineffective.

After Mao’s death, the Chinese planning process slowly evolved into a much more open, effective and flexible system. As with his approach to the NEP, the Chinese leaders took on board Bukharin’s approach to planning which was to: “establish the conditions for dynamic economic equilibrium. Essentially the task of working out a national economic plan, more and more resembling a balance-sheet of the whole economy… a consciously outlined plan, which will at one and the same time be a forecast and a directive.12

In particular, from 1993 onwards central planning in China was relaxed, with competition among regions and their enterprises becoming possible. This decentralisation turned China into a laboratory for experimentation. And vitally, room for experiments and trials became integrated into the planning process. This provided vital feedback during the period of the Plan, allowing for changes and fine-tuning to be made as the plan progressed, rather than having to wait for the plans to finish. “This distinctive Chinese approach to bottom-up program adjustment is very different from both Soviet-style command economies and Western legislation-driven policy making. The decentralized generation of policy options represents a crucial asset for innovation that had never been realized in top-heavy, centralized Soviet-type party-states.13

Moreover, the Chinese planning process has become increasingly sophisticated, involving experts in China and internationally to identify and advise on developing technologies and rising sectors. Now, the world’s fastest supercomputers are used to put the plan together.

The Plan is not just of use to the state sector but also of great benefit for the private sector too. It removes much of the uncertainty typical of capitalist economies, and allows business to focus on meeting the needs of the plan rather than having to work on its own forecasting.

Last but not least, there is a direct link between China’s Plan priorities and the party’s control over the leaders of major institutions and state-owned enterprises. This is known as the ‘plan-cadre nexus’. The ability of officials to achieve Plan targets is an essential part of their cadre evaluation and their prospects for promotion. Criteria for this is largely based on achieving growth, creation of employment, attraction of Foreign Direct Investment (FDI), and control of social unrest.

This ties the bureaucracy directly into the content and outcomes of the Plan.

The Advantages of Public Ownership
Although Deng Xaioping’s reforms introduced private ownership and business into China’s economic mix, it retained a central role for public ownership. Through the state owned enterprises and state banks the government maintains direct control over a majority of the economy. This gives China major advantages in its economic development.

For one thing, it provides the government at national and local level mechanisms through which to invest at scale and for the long-term, both areas that risk averse and short-termist private investors avoid like the plague. In this way, the Chinese public sector has been able to develop infrastructure on a level unseen in human history. The same with public housing and education. And so too in mobilising investment in new technology.

Secondly, the large-scale nature of public ownership in China – in 2020 mainland China overtook America in the Fortune Global 500, with its state-owned enterprises now being 124 out of the largest companies in the world (the US coming second at 121). Among these, China now has three of the top five most highly valued companies in the world. Such massive state companies gain great economies of scale being able to buy resources more cheaply, carry out more research, employ more specialists, and influence the market, than many of its multinational capitalist rivals. These advantages will become more apparent in the coming years.

Thirdly, the government sees the state-owned enterprises as a necessary way to maintain social stability, without which the economy cannot function properly. By providing secure employment and good employee social benefits, periods of dislocation in the private sector and transitions between various technologies can be smoothed out more easily.
Finally, the government uses the state sector to maintain control over the ‘commanding heights’ of the economy. Through this instrument, the government can ensure its planning decisions are implemented and not just ignored as is so often the case in the capitalist economies.

Effects of the 2008-9 Capitalist Great Economic Recession
The entry of China into the World Trade Organisation in 2001 ushered in high hopes among capitalist leaders that China would evolve into a western-style capitalist economy with liberal multiparty institutions to match. Such hopes found their echoes in China itself. Indeed, some in the private sector, academia and inside the Communist Party itself began to argue for China to take its reforms to what they saw as their logical conclusion. They wanted to close down the state-owned enterprises, privatise the state banks and create a full blooded capitalist economy. Among other things, they drew inspiration from the formal inclusion of the right to private property that was written into the country’s constitution in 2004 and carried into law in 2007.

However, events were soon to dash such hopes and expose them as the delusions they really were. Specifically, the financial crisis which sparked off the Great Recession of 2008-9 in America and Europe dramatically highlighted the weaknesses of the capitalist model. And confirmed the strengths of China’s dominant public sector / supportive private sector model.

In China, the initial impact of the capitalist crisis was to threaten the crash of China’s export-oriented industries and create mass unemployment within them. To avoid this, the government launched the Economic Stimulus Plan, a package of massive infrastructure projects. These included new airports, motorways, major water projects, high speed rail lines and so on. Plus, a large house building programme which extended even to whole new cities.

Secondly, the central government loosened credit for local government and private projects. These anti-crisis measures not only boosted the Chinese economy but delivered facilities that were very valuable in themselves, generating future revenue and efficiencies for the country. But in the capitalist countries such state investment is usually blocked as it creates impossible competition for the private sector. And the private sector is their main concern not the benefit of society as a whole.

In the US fixed investment in the Great Recession fell by over twenty five per cent, while in China urban fixed investment rose by over thirty per cent. No wonder that China’s economy sailed through the crisis virtually unscathed, while the USA has not been able to fully recover even by 2020. Even in the previously developmental states of South Korea, Taiwan etc. no significant positive response to the Great Recession was enacted.

The Great Recession turned out to be a historic turning point for the world economy: China surpassed Japan as the second biggest economy of the world; it passed Germany as the greatest trading nation; and the US as the largest manufacturer. In the latter case, China has become known as the “world’s factory” which obviously evokes memories of Britain’s ‘workshop of the world’ label in the 19th century.

The Great Recession also represented a reversal of fortunes for the previously growing private sector in China. Many private Chinese companies went bankrupt or were bought up by their state rivals. The phrase: ‘Guo jin min tui’ ‘the state advances, the private sector retreats’ summed up the process that took place as a result of the crisis.

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.

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’.

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1. ‘Deng Xiaoping: A Revolutionary Life’ by Alexander Pantsov, Steven I. Levine, p.6

2. ‘New Economic Policy’

3. ‘Deng Xiaoping: A Revolutionary Life’ by Alexander Pantsov, Steven I. Levine, p.371

4. Ibid

5. Ibid

6. ‘Reflections on China’s reforms’ by Bert Hofman, 2018, China Daily,

7. ‘The USSR as a “Weak State”: Agrarian Origins of Resistance to Perestroika’, 1989, pp.129-149,

8. ‘The Globalization Paradox’, by Dani Rodrik

9. ‘Beijing Spring, 1989: Confrontation and Conflict: The Basic Documents’ edited by Michel Oksenberg, Lawrence R. Sullivan, Marc Lambert, p.378

10. ‘Deng Xiaoping: Excerpts from his talks in Shenzhen during the 19th – 23rd January 1992 visit’,

11. “邓小平92年南巡时讲话:谁反对改革就让谁睡觉去”. (in Chinese). Archived from the original on 12 December 2018. Retrieved 1 May 2020.

12. Full quote: “He drew the conclusion that one can determine for a society in a period of transition the schema of reproduction, that is, the conditions of an exact, mutual coordination of the different spheres of production, or, in other words, establish the conditions for dynamic economic equilibrium. Essentially the task of working out a national economic plan, more and more resembling a balance-sheet of the whole economy, lies there, a consciously outlined plan, which will at one and the same time be a forecast and a directive”. ‘Notes of an Economist’, in Correspondance Internationale, No. 126, October 20, 1928, p. 1371. as reproduced in Perre Broué important account in ‘The History of the Bolshevik Party (CP) of the U.S.S.R’

13. ‘Maximum Tinkering under Uncertainty: Unorthodox Lessons from China’ by Sebastian Heilmann, May 2009, p.5,


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