CHINA UNDER DENG XIAOPING

Also by David Wen-Wei Chang

ZHOU ENLAI AND DENG XIAOPING IN THE CHINESE
LEADERSHIP SUCCESSION CRISIS
CHINESE COMMUNITIES AND POLITICAL DEVELOPMENT IN
SOUTHEAST ASIAN COUNTRIES
China under
Deng Xiaoping
Political and Economic Reform

David Wen-Wei Chang

University Rosebush Professor of Political Science
University of Wisconsin, Oshkosh

Foreword by Robert A. Scalapino

Institute of East Asian Studies
University of California, Berkeley

Palgrave Macmillan
ISBN 978-0-333-55220-9 ISBN 978-1-349-12391-9 (eBook)
DOI 10.1007/978-1-349-12391-9

©David Wen-Wei Chang, 1988

Reprint of the original edition 1988
All rights reserved. For information, write:
Seholarly and Referenee Division,
St. Martin's Press, Ine., 175 Fifth Avenue, New York, NY 10010

First published in the United States of America in 1988

Reprinted 1991

ISBN 978-0-312-04811-2

Library of Congress Cataloging-in-Publieation Data

Chang, David W., 1929-
China under Deng Xiaoping: political and economic reform/by
David Wen-Wei Chang.
p. cm.
Bibliography: p.
Includes index.
ISBN 978-0-312-04811-2: $40.00 (est.)
1. China-Economic poliey-1976- 2. China-Politics and
government-1976- 3. Political planning-China. I. Title.
HC427.92.C3331988 87-34906
338. 951-dc19 CIP
To my wife Alice
and sons Christopher and Victor
Contents
For~word xi
Preface and Acknowledgements XIl

ProLogue XIll

1 Introduction 1
1.1 Sources of Research Materials 3
1.2 New Dynamism in the Reform 4
1.3 Deng's Unique Preparation in Leadership
Succession 5
1.4 The Challenge of Economic Reform 6
1.5 The Challenge of 'One Country, Two Systems' 7
1.6 The Crisis of Ideological Void 9
1.7 The Promise of G NP Quadrupling by the Year
2000 10
1.8 The Impact of a New Open Door Policy 11
1.9 New Orientation in Historical Perspectives 13
1.10 Many Questions but No Answers 16

2 Deng's Return and Reform 21

2.1 His Leadership Dimension and Uniqueness 21
2.2 The Uphill Struggle After Mao's Death 29
2.3 Deng's 'Four Cardinal Principles' and Need for
Popular Support 46
2.4 Ideological Void and Socialist Democracy 51
2.5 Reform Experiment and Future Challenge 54

3 New Political Orientation and Economic Development 60

3.1 The Scope of Deng's Reform and the Reason for it 66
3.2 The New Economic Development Strategy 80

4 Broad Implementation of the New Economic Strategy 92

4.1 Economic Structural Reform 92
4.2 Economic and Social Development through
Budget Planning and Execution: Problems
and Solutions 106
4.3 Prospect and Challenge of the Seventh Five-year
Plan: 1986-90 116
viii Contents

5 Rural Economic Development 126

5.1 Agricultural Development 126
5.2 Rural Development and the Responsibility System
in Farming 135
5.3 Case Interview in Nanhai Rural County 144
5.4 Conclusion 159
6 Urban Economic Reform and the Case of Shenzhen 161
6.1 Introduction: Mao's Economic Failure and Deng's
Innovation 162
6.2 Thirty years of Unstable Political Economy in
China 164
6.3 The Case of Shenzhen as a Capital-Technology
Transn:tission Belt in Chinese Economic
Enlivenment 176
6.4 Introduction to the Shenzhen Experiment 177
6.5 China Merchants and its Shekou Industrial Zone 183
6.6 Special Economic Zones, Educational Reform and
the Prospect for Capitalism 185
6.7 Special Zones Benefit Both China and Foreign
Investors 190
7 'One Country, Two Systems' 196
7.1 The Hong Kong Experiment 196
7.1.1 The Crisis of its Return to China 199
7.1.2 Analysis of Popular Anxiety and the Joint
Declaration 202
7.1.3 Hong Kong as aChallenge to the PRC 208
7.2 The Taiwan Tangle 215
7.2.1 The Evolution ofTaiwan's Status 216
7.2.2 The PRC Overtures for Unification 220
7.2.3 Democratisation and the Independence
Movement in Taiwan 230
7.2.4 Conclusion 235
8 Conclusion: Revolution, Continuity and Synthesis 237
8.1 New China of Three Traditions 237
8.2 The Indigenous Cultural Tradition 240
8.3 The Legacy of the Revolution of 1911 245
8.3.1 The Emergence of the DPP in 1986 249
8.3.2 The KMT stand on Reunification 251
8.3.3 Succession issue in Taiwan 253
8.3.4 Conclusion 254
 Contents ix

8.4 Socialism with Chinese Characteristics 255

8.4.1 Recent Economic Success 258
8.4.2 Continuing Economic Problems 259
8.4.3 A Short Macro-analysis ofthe Economic
Reform 261
8.5 Is Political Reform Possible After Hu Yaobang? 267
8.5.1 The Crisis of Hu Yaobang's Downfall 269
Notes and References 279
Index 291
Foreword
Professor David Chang spent the fall of 1985 with us at the Institute
ofEast Asian Studies, University ofCalifornia, Berkeley. In addition
to his research and writing, he organised a seminar that brought
together our visiting scholars, enabling an exchange of ideas among a
variety of intellectuals from East Asia. It was an idea sufficiently
valuable to be continued after Professor Chang's departure.
Now, he presents us with the broadly gauged study upon wh ich he
was working at Berkeley. It is a highly instructive work, covering the
major facets of recent political, economic and social developments in
China. Ample in data, provocative in its analysis of personalities and
events, and carefully balanced, this work captures much that is China
at a particular point in time. The author is the first to acknowledge
that predictions regarding China's future are fraught with difficulty,
with various scenarios possible. Even in recent months, unexpected
developments have occurred, particularly in the political realm.
However, he provides us with many of the facts pertaining to recent
Chinese history that should make possible a deeper understanding of
the challenges that lie ahead.
Upon reading this work, one has a stronger realisation of the
advantages of being thoroughly at horne with the culture and
language of China, able to communicate with the diverse individuals
who make up this highly complex society. It is with the aid of scholars
like David Chang that all of us will be able to grasp new aspects of an
old society at a transitional point in its difficult journey toward
modernity.

Berkeley, California ROBERT A. SCALAPINO

Preface and
Acknowledgements
This book is the result of six summer trips to the People's Republic of
China, two of which were university study tours. The others were
either lecture tours when I was in vi ted by the External Affairs
Bureau of the Chinese Academy of Social Sciences, or private travel
in which I visited relatives. I have been to several dozens of major
cities and many parts of rural China. As a former native of the land, I
was easily able to reach many people of different ranks and
responsibilities. They allowed me interviews, formally and informal-
ly, with no restrictions to any kinds of questions so long as I would
not identify them with specific answers. They were teachers,
professors, factory managers, commune leaders, governors, party
functionaries, personnel directors, students, workers, county govern-
ment officials and special economic zone directors. As a result, I feel
able to fully share their views of their own lives and their genuine
expectations for their country. After thirty years under communist
rule, many of them had much to tell or to reflect in order to impress
me often deeply with a personal message of protest or new
expectation. At the policy-making level, I am grateful to many party
and government officials in Beijing and in the provinces.
I am grateful to the Institute of East Asian Studies and its center
for Chinese Studies of the University of California, Berkeley for
allowing me as their visiting scholar in 1985. The University of
Wisconsin-Oshkosh, my horne institution, granted me the sabbatical
leave to make my stay at Berkeley possible. My research tours to
Taiwan and Hong Kong were partially sponsored by the Pacific
Cultural Foundation in 1984 and 1985. I am grateful to the
foundation for its generosity.
This publication represents a personal summary of what I have
learned about China after thirty years of communist rule, its people,
culture, progress and problems. In the last one hundred years, the
country has undergone several major reforms and revolutions. Yet it
is still struggling in revolutionary transition to achieve, politically and
economically, what Japan and other east Asian countries have long
succeeded. The story of communist rule is much the story of Mao
Zedong's failure in misleading his party and the masses toward
XIV Preface and A cknowledgements
excessive revolutionary radicalism. The success of Deng Xiaoping's
reform so far has been pre-determined by Mao and his followers
whose knowledge of the outside world was too limited for them to
realise that they were wrong. Today, under Deng, much has to be
changed. New economic standards and political reforms have to be
adopted. Mao's ideological idealism has to be modified or
abandoned. Practical solutions must be found to new problems in
many fields. This book is a description of Deng's partial policy
response to some of the problems. However, the emphasis is on the
following: Deng's reform itself is achallenge for more basic
innovations to come; factional conflict within the Communist Party
makes reform difficult to achieve or implement; rural and urban
economic reform is critical to the livelihood of the people and the
modernisation of the country; and challenges from Hong Kong and
Taiwan and a solution for their return to the motherland must be
found. These problems are further compounded by new demands for
more institution al and democratic reforms. It is my personal view
that, at long last, China will have to find a new way to reconcile three
fundamental traditions, namely, the Confucian historical tradition,
the modern tradition introduced by the revolution of 1911, and the
Marxist revolutionary experience itself. It may take many decades of
chaotic struggle within the Communist Party and throughout the
country before China is able to catch up with the rest of the world in
economic standard and in genuine democracy. Hong Kong's
continuing prosperity, Taiwan's political evolution, and the Japanese
model of democracy through party politics and open election may, in
the end, be strong influences on the Chinese people in pursuing their
modernisation effort.
For their individual assistance, I wish to thank the following:
Professor David M. Jones, Carol Klein, Linda Olsen, and Janet Bohn
of the Political Science Department of the University of Wisconsin-
Oshkosh; Professor Robert A. Scalapino, director of the Institute of
East Asian Studies, and his staff, especially Elinor Levine, of the
University of California, Berkeley; Professor Chao-Cheng Mai of the
Institute of the Three Principles of the People, Academica Sinica of
Taiwan, and the library staff of the Institute of International
Relations, Mucha, Taipei, Taiwan; Professor Kwang-sheng Liao,
Professor Byron Wendy and Dr Terry Lautz of the Chinese
University of Hong Kong; and those in the People's Republic of
China including Mr Luo Yuanming, Senior Economist of the State
Economic Commission; Mr Wang Yibing, Division Director and
 Preface and Acknowledgements xv

Researcher of Policy Research Centre of the State Education

Commission; Mr Yang Shangkun, Vice-chairman of the Communist
Party Military Commission; Mr Hu Qili, member of the Politburo
and a member of the Party Central Secretariat; Mr Hu Qiaomu, a
leftist Marxist theoretician; Madame Deng Zingchao, a former
member of the party politburo and wife of late Premier Zhou Enlai,
and Mr Xi Zhongxun, a present member of the party Central
Secretariat. 1 am particularly grateful to Vice-chancellor Fang Sheng
of Shenzhen University for his stimulating views as a well-known
economist on economic reform in China today. To many others in
rural China and urban factories or elsewhere as teachers, officials and
housewives, etc., I am most grateful for allowing me to share their
views and feelings relevant to my study. None of them, however, is
responsible for what I have said in this book.

University of Wisconsin-Oshkosh DAVID WEN-WEI CIIANG

Prologue
This book concentrates on the broad outline of Deng Xiaoping's
political-economic reform which began seriously after 1979. The
reform on such a grand scale followed Deng's own political victory in
factional struggle against former Premier Hua Guofeng. His return
was made somewhat inevitable by the crude and cruel mann er in
which Mao had earlier dismissed hirn in January 1976, thus also
destabilising the communist regime. Deng would have been happily
endeared as the logical and pragmatic successor of Mao as the party
leader had Mao died earlier than the late Premier Zhou Enlai, who
had, since 1973, succeeded in convincing Chairman Mao to bring
Deng back as his First Deputy Premier to undertake all of Zhou's
own duties while the latter was ill and long hospitalised, The 'Gang of
Four' would not have attempted to achieve power had Chairman
Mao hirnself not been so cruelly selfish and politically self-misguided.
This long history of leadership struggle was Mao's own making since
the cruel period of the Cultural Revolution (1966-76). Readers may
wish to consult my other book on the crisis of Communist leadership
struggle (Zhou Enlai and Deng Xiaoping in the Chinese Leadership
Succession Crisis, 1984).
By the end of 1987, one can safely comment that Deng's economic
and political reform, at long last, has proved to be successful in itself
and overwhelmingly desired by a huge majority of the population.
The only critical opposition comes from the ideological left-wing
faction from within the Communist Party itself. The leftists are
fighting a losing battle, even though they put together temporary
coalitions to block the progress of reform. Politically or personally it
is understandable that they fight to retain their high positions of
power and influence. The leftist opposition is in fact defensive
ideologically, given the intellectual new atmosphere of the post-Mao
anti-leftist movement. Factional conflicts will continue because
Deng's 'grand reform' will require decades before its general goals
are achieved or when the 'four modernisations' are considered
accomplished. Until then, China will remain in astate of continuous
transition and rapid peaceful change. Indeed, there is a long and
zig-zag road ahead in transforming Mao's China to an industrialised
socialist state, to practise 'socialist legality and socialist democracy'.
This publication concentrates on an outline of political-economic
xviii Prologue

reform as introduced during the few years since 1978. It avoids

making detailed evaluative analysis of the reform performance. To
do so would require much more statistically reliable data from the
Chinese government. Emphasis is on the gradual experiment and
extension of the economic reform from the rural to the urban
spheres. Until recently there was much less effort in political-
structural reform. Political reform has lately been increasingly urgent
and unavoidable. Serious political reform was promised in the 1984
reform declaration. Recent experience has demonstrated that it is far
more difficult in political restructuring of the communist system than
in the area of economic change. This has been so primarily because of
Deng's refusal to employ the cruel Maoist method of political purge
against opponents in the party. Demands for greater democracy,
better bureaucratic performance and new measures against corrup-
tion are far more serious and obvious now than just a few years ago.
It seems theoretically possible to assurne that lesser economic reform
success breeds the needs for more economic reform and that success
in the economicsphere breeds popular demands for more
fundamental democratic reform. The current reform has, indeed,
been able to generate its own momentum. Many reform measures
continue to be at the experimental stages.
The experimental nature of the Chinese reform may be divided
into three periods: (1) the first stage was in rural management and
production changes, and in transformation towards commodity
privatisation between 1979 and 1982; (2) the experiment in urban
factory management autonomy to improve production efficiency and
profit-sharing between 1980 and 1984; and finally, (3) the adoption of
the grand reform resolution of October 1984 in favour of an overall
economic restructuring that has required more reform measures in
almost every production and management sphere, including prices
and wages, currency, trade, taxation, etc. In short, China has been
committed to brave peaceful reform in order to achieve the 'four
modernisations' before the end of the twentieth century. This
commitment requires the opening up of the country to the outside
world and the introduction of a degree of capitalism at horne. To
achieve both depends on the further opening up of the political
process through decentralisation and liberalisation. Given the
ideological inflexibility and the lack of a new reform theory, political
conflicts and economic debates have multiplied problems for the
Chinese leadership. However, the reform group under Deng's
leadership has won the struggle. At the party's 13th Congress in
 Prologue xix

October in 1987 the reform leadership again appeared to be in full

contro!. Deng's successors are now in charge to map out the
long-term strategy for the coming decades, while Deng and his old
colleagues have retreated from the political front stage. The
following paragraphs summarise parts of Premier Zhao's speech
relevant to reform as reported to the 13th Party Congress in October
1987.
In Premier Zhao Ziyang's report, a new blueprint for greater
reform in political restructuring was unavoidably and seriously
emphasised. The reform leadership seems more conscious now that,
without political power, decentralisation, democratisation and
institutionalised limitations against party dominance, economic,
social and intellectual reform cannot succeed. Socialist legality and
socialist democracy cannot long remain as empty promises without
encountering intellectual and social (student) unrest. He declared
that during the next sixty years China would still be at the 'primary
stage' of socialist development. Zhao's report has also offered some
theory to guide the ambitious blueprint. A political restructuring will
soon take place throughout the country. Basic principles and content
of the new reform have been mapped out in Zhao's reports. These
include elimination of functional confusion between the Communist
party and the government, dismantling of over-centralisation of
power, administrative overstaffing, inefficient bureaucracy and the
imperfect socialist democratic system. In separating the government
from the party, the latter shall concentrate only on itself as 'the core
of the leadership of China's socialist cause, without interfering in the
day-to-day administrative affairs of the government'. The political
leadership of the party will focus on 'setting political principles and
political orientation' in policy decisions and personnel recommenda-
tions. The party shall work among the citizens to motivate them to
follow 'party principles and policies'. Against overcentralisation,
Zhao's report proposes to delegate power to 'the lower levels' to
allow local affairs to be 'handled by the locality, and affairs of the
people by the people themselves'. Unwieldy government organisa-
tion and bureaucracy, from top to bottom, will be 'amalgamated or
simplified' to separate governmental administration from production
enterprises. The State Council (cabinet) will proceed immediately to
implement the proposed changes and report to the 7th National
People's Congress in the spring of 1988. A civil service system will be
established to increase administrative merit efficiency. A new system
of 'public consultation and dialogue' will be established to promote
xx Prologue

communications between levels of government and groups among the

people to overcome problems of corrupt bureaucracy.
The practice in the principles of democratic centralism will be
improved through the system of the People's Congresses, multi-party
cooperation and political consultation under the Communist
leadership. These are new systems considered appropriate for the
Chinese traditions. The National People's Congress will improve its
own performance, and strengthen its downward legal supervision.
The Chinese People's Political Consultative Conference (CPPCC), as
a patriotic united front, and other democratic political parties will
also regularly conduct 'political consultation and democratic supervi-
sion' over major issues of state policy. The election system has been
singled out for reform to institutionalise democratic life at the
grass-roots levels. The achievement of these reform goals will help
lay the ground for socialist democracy. In short, political reform has
become unavoidabIe to meet the needs for deepening economic
reform and the need for democratisation in socialist modernisation.
How aIl these wiIl be impIemented and received by the people in both
urban and rural China wiIl be cIosely watched by aIl concerned
parties inside China and the outside world .
Premier Zhao decIared that 'profound changes' have taken place in
the country in the past nine years: 'The national economy has
registered a sustained and stable growth to double the gross national
product, state revenue and average citizen's income. During the
nine-year period, 70 million urban residents have found new jobs,
while some 80 miIlion rural citizens have now shifted partiaIly or
wholly from farming to industry. Market supplies have greatly
increased to reduce the acute shortage of consumer demands.' The
imbalanced development in the major sectors of the economy has
improved. These successes, Zhao reported, prove that the policy line
of the party since 1978 has been correct. He praised Deng Xiaoping
for 'his courage in developing Marxist theory, his realistic approach,
his rich experience and his foresight and sagacity' . In advancing the
ideology of the 'peaceful revolution', Zhao pointedly decIared that
China is now in the primary stage of socialism. It will be 'at least 100
years from 1950s to the time when socialist modernisation will have
been in the main accomplished'. Uniquely different from Marxist
application elswhere, this is 'the specific stage China must go through
while building socialism under conditions of back ward productive
forces and an underdeveloped commodity economy'. Zhao went
further to assert theoreticaIly that 'we must persevere in socialism
 Prologue xxi

and never deviate from it' and, second, 'we must proceed from this
reality and not jump over this stage'. He warned those who might
disagree by saying: 'Under the specific historical conditions of
contemporary China, to believe the Chinese people cannot take the
socialist road without going through the stage of fully developed
capitalism is a mechanistic view on the question of the development
of revolution, which is the major cognitive root of right-deviationist
mistakes. On the other hand, to believe that it is possible to jump
over the primary stage of socialism in which the productive forces are
to be highly developed is a utopian view on this question, which is the
major cognitive root of leftist mistakes.' Thus the correct and basic
theory at this 'primary stage' must be for the party to lead the nation
in a united, self-reliant and pioneering struggle to convert China into
a rich, strong, democratic and modern socialist state by concentrating
on economic development as the central task without abandoning the
four cardinal principles (democratic dictatorship, the Communist
leadership, Marxism-Leninism and Mao Zedong Thought, and the
socialist path). In policy practice, Zhao's report accentuated the need
rapidly to advance educational, scientific-technological and economic
development through rational reforms at horne and widening the
contacts with the outside world. The 13th Congress has adopted
Zhao's theory of 'primary-stage socialism' unique to China alone,
This itself is a major revision of Marxism to add 'Chinese
Characteristics' .
On economic restructuring, Zhao emphasised socialist reforms to
incIude different types of ownership, maintenance of predominant
public ownership, and development of private sectors in the
economy. The main focus is to change the 'managerial mechanism of
enterprises' and to institute 'systems of planning' on investment,
allocation of resources, finance, currency policy and international
trade. Together these measures will enable China to establish a basic
'framework for a planned commodity economy' which should be able
to integrate planning with the market. The Premier admitted the
difference in ownership as the major variation between socialist and
capitalist commodity economies. In short, he asserted in the report
that 'the state regulates the market, and the market guides the
enterprises' .
On party-building, Zhao reported that the existing policy is correct
in making ranks of cadres 'more revolutionary, younger, better
educated and more competent' . This reform effort should be
implemented at the central level among leading bodies of the party.
xxii Prologue

The central committee must practise 'collective leadership and

democratic centralism'. He advocated in the speech the following: (1)
establishing a system of regular working reports to the Political
Bureau by its Standing Committee and to the plenary sessions of the
Central Committee by the Political Bureau; (2) increasing the
meetings of the plenary sessions of the Central Committee each year
to augment its collective decision-making opportunities; and finally
(3) establishing work rules and a system for holding democratic
meetings of the Political Bureau, its Standing Committee and the
Secretariat of the Central Committee to assure an institutionalised
collective leadership so as to 'put central party leaders under strict
supervision and control'. Zhao insisted in the report that party effort
against 'self corruption' must continue and 'corrupt members' must
be expelled.
In conclusion, Zhao's long report was a blueprint of long-term
reform and transformation to institutionalise a new system of
leadership for efficiency and revitalization to lay a foundation for
socialist democracy and socialist economic modernisation. (He made
no serious proposal to institutionalize an election system to produce
central level leaders accountable to the general public.)
Can the Party put into practice all these reform proposals? Can
Zhao and his reform colleagues forge ahead in strong collective
leadership acceptable to the military and to other factions? The four
cardinal principles, especially the leadership of the party, convey a
rigid sense of a single-party dominance in a progressively democra-
tised industrialising society. Can the new forces resulting from
economic progress be easily contained by the restructured political
framework? Can intra-party conflicts be silenced or balanced
peacefully after Deng's complete departure from the political scene?
On the other hand, Zhao's report represents a complete victory of
the reform leadership over the leftists in the party. In practice, this
report suggests that Marxism-Leninism has been further put aside.
China is on her way to blaze a new trail of theory in socialism that will
ioevitably bear 'Chinese characteristics'. In other words, the criteria
of socialism, democracy and the rule of law of the West may, in the
end, lose their original moral persuasion and institutional implication
when they are variably understood and skilfully implemented by the
Chinese communists. However, success in political and economic
reform will inevitably continue to generate new conflicts. China is
likely to remain in astate of peaceful transition until a popularly
acceptable political harmony is achieved between the government on
the one hand and the people on the other. Such a new state of affairs
 Prologue XXIII

presume the existence and practice in fundamental constitutional

rights by the population throughout the country.
Many China-watchers in Asia are doubtful of major successes in
political-institutional reform in the immediate future. To maintain
peaceful stability requires factional consultation inside the Commun-
ist Party. For example, it took a full summer for the factions to
reconcile their differences in order to show a smooth unity at the 13th
Party Congress. Experts do not believe that, in the short run, the
proposed greater intra-party democracy and collective leadership are
possible. Such frequency of meetings between members of the
Political Bureau and the Central Committee will probably increase
the 'unwanted influence' of the older and retreating generation.
Many observers fear that the next Central Advisory Commission and
the Commission for Discipline and Inspection may exercise a strong
pressure on the new collective leadership under Zhao because these
commissions have large numbers of old-guard conservatives. One
bright prospect, however, is likely to be progressive development of a
new socialist legal system by the next National People's Congress
whose new head is known to be the present Deputy premier Wan Li.
He is said to favour the need for legal and institutional reform. He
may encourage that partial experiment in direct popular election at
the provincial, and even national-level elections may be instituted to
give the regime popular representation.
What concerns China-watchers most is the continuing need for
Deng to remain as the arbiter to balance conflicts between the
reformers and the conservatives in the party. Deng needs to move
fast to build an institution al stability. Should Secretary-General Zhao
Ziyang fail to assert and dominate the next Standing Committee and
its Political Bureau (the standing Committee consists of Zhao
hirnself, Hu Oili, Oiao Shi, Li Peng, and Yao Yilin) a continuing
power struggle beyond Deng is unavoidable. Deng is aged 83. After
hirn, there may be a short moment of leadership adjustment and
instability. Certainly there will be some period of power struggle
between the reformers and the leftists or the conservatives. Reform
progress will no doubt continue beyond Deng's time. It may however
suffer from a slower pace. There is no real likelihood of a military
coup or a conservative takeover after Deng's departure. Popular
demands for major political liberalisation and economic forces for
greater economic reform are likely to remain of paramount
importance for a long time to come.

D.W.-W.C.
1 Introduction
This book is an interpretation of events in China from which various
concIusions can be drawn. What has happened in China since Deng
Xiaoping's last return to power has occurred within a time span of only
a few years. There is a continuing sense of revolutionary urgency for
change, adjustments, reorganisation, decentralisation or broad
reform. The process in Deng's words is 'an experiment'. I Indeed
research into the last several years on public policy indicates that Deng
and his administrators did not at first have a blueprint for policy
changes on many fronts. They have carefully allowed minor and
regional initiatives in economic development, for example, to
experiment and to succeed before the adoption of a major policy by
the central government. This process of peaceful reform is so great in
its ultimate impact that Deng Xiaoping, the leader of the regime and
the mastermind of all major changes, has called the process 'a second
revolution,.2 This book will pinpoint and interpret some of these
changes in the current revolutionary process in China. The author fully
recognises the risk and danger involved in making this 'simplified'
description and 'preliminary' or tentative interpretation of some of the
possible or likely consequences of Deng's experimental and revolu-
tionary reforms in China today.
My interpretation will be influenced by my understanding of
changes since the Hsinhai Revolution in 1911 under Sun Yat-sen's
non-Marxian democratic leadership. J must admit also that my
understanding of Imperial China's more than 2000 years of institu-
ti on al and cultural heritage has strongly influenced my judgement.
Some of the revolutionary leaders have, in fact, exercised their
politicalleadership with only minor behavioural changes in themselves
from that of past tyrannical emperors. Furthermore, the monumental
ideological and eeonomic differenees between Sun's democratic
revolution of 1911 and Mao Zedong's Marxist revolution of 1949 have
turned out to be of no major signifieance to the broad masses of the
nation, although such an 'ideological divide' caused many battles for
deeades among Chinese intelleetuals, who themselves have gone
through many uncomfortable times in twentieth-eentury China. They
now find a new ideologieal cIimate in the nation.
My interpretation of eurrent events will foeus on the two major
revolutions of 1911 and 1949 and several other major and bitter events.
I shall not review the history of major events in detail. However, J trust

1
2 China Under Deng Xiaoping

that informed readers will easily see my views (and biases too) which
can be taken as reflections of a former citizen of that nation who
attempts to understand and interpret changes and events within the
Chinese historical and modern revolutionary context. These views
may seem somewhat out of li ne or strange to my Western colleagues,
but I simply convey the views of many other Chinese in China. I am
still affected by my past education in China some thirty years ago. In
this book, more than anything else I am more concerned about trends
of future change, ideology in politics, and the long-term consequences
of current major policies which have been relentlessly implemented
since Deng's return to power. China experts, especially policy makers
of the West in the last seventy years or so, have also frequently
changed their views about China. Often they were caught by
unexpected surprises that suddenly occurred in China contrary to their
expectations or earlier conclusions. The same is also typically true
even for some Chinese intellectuals who for forty years argued about
the corruption ofthe Nationalist government before 1949. They were
themselves soon suppressed and humiliated by Mao Zedong during
the cultural revolution. They have, today, awakened to a new reality
that truth and ideology can only come from practice. In fact the whole
Chinese population has come through a nightmare it experienced
during Mao's last decade as an 'imperial ruler' in China. My position
has been greatly influenced by research and interviews with many
simple or educated Chinese who are factory workers, farmers,
schoolteachers, party cadres, factory managers, university intellec-
tuals, merchants, and students. I have also held discussions with a few
of high-level party officials in China today. Wh at I have seen and what
they have told me during the last few years constitute the basis for my
views in this volume of interpretation. I am grateful to those who
spoke to me in plain Chinese language with such intimacy not usually
extended to a Westerner. I am equally thankful to those cadres and
officials who asked me not to quote their names and positions in the
government.
Briefly, this book will concentrate on Chinese political leadership
succession, ideological void, socialism with Chinese characteristics,
rural economic change, urban economic restructuring, and the
problems concerning Hong Kong and Taiwan. All of these issues have
been central to Deng's careful examination of policy making. These
issues are intimately related to the ideologically struggling factions
now within the communist party, or to their emotional commitment to
unify the country through a formula of 'one country, two systems'.
 Introduction 3

Thus, the following chapters cover Deng's leadership and the

suspension of the ideological battle, the 'Socialist State with Chinese
Characteristics', a new model of rural economic prosperity and
industrialisation, urban economic restructuring, and 'One country,
Two Systems'.

1.1 SOURCES OF RESEARCH MATERIALS

My researched materials have involved a variety of sources. First of

all , over aperiod of six years, I have visited China five times in
different capacities, as a private tourist, study tour director, and an
invited lecturer at the Chinese Academy of Social Sciences in Beijing.
These tours have secured me opportunities for visits to schools,
universities, factories, communes, and hospitals. I attended many
private meetings, speaking forums, seminars, and interviews as I
travelled to the four corners of the huge country.3 Altogether I have
been to some fifteen cities and their rural suburbs, to my isolated
village of birth in northwestern China, a special interview tour to
Nanhai county in South China, and the Shenzhen Economic Special
Zone. My interviews in Beijing included Hu Qiaomu, Ma Hong, Huan
Xiang, Hu Qili and a few others. These visits and interviews provided
me with certain original points of view and interpretations of the way
my hosts see things. I shall not attempt to alter their views as I come to
describe them. My second source of material comes from my trips to
Hong Kong where interpretations of events in China are quite diverse
and divided. Yet, Hong Kong provides one of the most valuable
sources of interpretation for academic research on the People's
Republic of China. In addition, the return of Hong Kong itself in 1997
calls for a common challenge to the people there in the interests of
maintaining their autonomy as agreed upon during the Sino-British
negotiation. Hong Kong itself is achallenge to the Beijing govern-
ment's ability to keep it as a free port and self-governing dtiring the
next sixty years. 4 As a result, Hong Kong's free press is able and eager
to cover all major events happening on the other side of the border. I
have also collected extensive data in Taiwan on the issue of
unification. The policy positions ofTaipei and Beijing are presently far
apart. Yet both continue to insist that unification is a common goal for
the future. On the other hand, the majority of people in Taiwan
maintain a unique third position in favour of rapid Taiwanisation in
political and democratic· development. One of the most difficult
4 China Under Deng Xiaoping

problems to anticipate is whether the two societies, one under the

Communist and the other the Nationalist Party, will either move closer
in internal development or still keep further apart. Much of the answer
depends on the evolution of events surrounding the future of Taiwan
and on liberalisation on mainland China. 5
This study will not cover any discussion of aspects of China's foreign
policy or such international issues as are relevant to China's internal
development, or of Beijing's change of direction in response to
external challenge. In respect of politics, discussion will be limited to
ideological issues,leadership succession, party reform. local election,
etc., to the exclusion· of such other major issues as freedom of the
press, development of independent political parties, human rights,
judicial independence, and intellectual freedom. The discussion of
rural and urban economic development will exclude many important
aspects of transportation, energy supply, applied science and research,
although these are closely related to rural and urban development. If
these related issues are mentioned, they are mentioned only to
highlight their general importance but not to discuss them in detail.

1.2 NEW DYNAMISM IN THE REFORM

In Mao Zedong's time, Chinese policy-making was preceded and

followed by mass mobilisations which always produced high momen-
turn for tension, stress and mobility. Today such mass involvement is
no longer intensive nor visible in the street. However, the politics of
mobilisation for economic development is still an important element in
China. There seems, however, a strong popular acquiesence or
genuine approval of the official campaign to succeed in birth control,
economic progress, party reform and educational reorganisation. The
masses fully enjoy the current politics in rural economic innovation,
expansion in domestic commerce and free marketing, decentralisation
toward enterprise decision-making autonomy, the campaign against
the 'iron rice bowl' (job security), and the retirement of senior leaders
in favour of the young leadership alignment. Current media campaigns
seem both rational and necessary for the nation to maintain a
long-term political stability. People will no longer accept the
nightmare of the intensive ideological mobilisational campaigns of the
past. A kind of new dynamism for the success of the 'four
modernisations' seems to be a voluntary response from the people who
welcome new opportunities for material progress and spiritual
 Introduction 5

relaxation in their daily life. They endorse whole-heartedly both the

new economic policies and the younger leaders in charge of daily
policy execution. If the people and the government can continue to
remain uni ted in this new dynamism for progress in science and
technology, the nation may be able to redeem itself for having wasted
the last twenty years du ring which Mao erratically imposed on the
country his commune system, 'Great Leap Forward', and the cruel
cultural revolution. The new dynamism in production seems to come
quite naturally from the people in enthusiastic response to the policies
of a rational government now at the centre. This does not imply,
however, that all is weil in planning and policy making by the central or
provincial leadership. Ambitious thrust, excessive campaigning or
optimistic promises by the government often produce disappoint-
ments. In economic development, many decades of investment in
education, transportation, public administration and enterprise
management skill, etc., is critical for greater future success. China has
not done so weil in the past. Yet the people desire progress and cannot
wait for the effects of long-term capital investment. It is, therefore,
expected that, in planning, the people and their government will make
mistakes in learning by doing. In short, the spontaneous dynamism for
speedy development in all fields, in the wasteful aftermath of the
cultural revolution, is understandable provided that occasional
setbacks will not upset anyone.

1.3 DENG'S UNIQUE PREPARATION IN LEADERSHIP

SUCCESSION

For the first time in the history of the communist world a country's
leader has sought out individuals of different age groups to succeed
hirn in leadership before his own departure from the other scene.
Stalin and the East European Communist leaders did not do so, nor
did Sukarno of Indonesia, Nehru of India, Park Chung-hee of South
Korea and Marcos of the Philippines. It is also curious to note that all
Chinese leaders (except perhaps Sun Yat-sen), that is Chiang
Kai-shek, Lee Kuan-Yew and Mao Zedong, have each, during their
lifetime, guided their followers implicitly toward leadership succes-
sion. But none acted in the same unselfish way as Deng. Deng hirnself
refuses to occupy the official se at of power. He does so to impress upon
his fellow colleagues to do likewise within the Communist Party
(CCP). More research should be done at the appropriate future time
6 China Under Deng Xiaoping

to understand the actual inner politics of the CCP since the 3rd Session
of the 11th Central Committee (CC) in 1978 when Deng's supporters
won out against those who followed the then Premier Hua Guofeng.
Not only did Deng hirnself decline to occupy the highest position
officially, he was also able to persuade many others to retire. In
addition to those who will succeed hirn immediately after his death, he
has brought together many much younger leaders into high office to
succeed his immediate successors. This provision will be described in
detail. That Deng has done such an expert job with leadership
succession is a unique tribute to his ingenuity and ability to act within
the political system. Party reform itself has been a crucial factor in
leadership transition. Intra-party unity in many communist states was
achieved through purges, something which Deng skilfully avoided.
Deng's succession is certainly an exception to communist rule. The
transition from one-man helmsmanship under Deng to a form of
collective leadership will be tested on its workability when Deng is no
longer available to lead and arbitrate. The criteria by which Deng has
chosen younger leaders seem to assure that a substantial degree of
harmony will continue through the division of labour at the top level.

1.4 THE CHALLENGE OF ECONOMIC REFORM

This is the most pressing area for reform in view of continuing poverty
in China as compared with Hong Kong, Taiwan and the other
surrounding countries of South Korea, Japan, Malaysia and Singa-
pore. China did follow the Soviet economic model at first and failed. It
went on to experiment in Mao's own model of the commune and the
Great Leap Forward in the late 1950s. This, too, failed. Instead of
abandoning his revolutionary radicalism, Mao put the country under
his personal domination from 1966 until his death in 1976. His
uncontrolled cultural revolution disrupted the leadership and
unleashed Lin Biao and Jiang Qing in a cruel power struggle. The
common people paid an untold price and sacrificed a great deal in their
economic well-being when production in many cities and factories was
stopped, transportation interrupted, and civil government replaced.
Economic reform today under Deng not only has replaced the 'decade
of horror', but has also set down a new realistic order of priority in
economic development: rural recovery and free marketing, urban
enterprise responsibility autonomy, expansion of light industry, and
rational planning in heavy industrial development. The story of
 lntroduction 7

rural economic recovery is a fascinating one in wh ich initiative comes

directly from the people. The expansion of rural initiative for overall
agricultural prosperity has led to many other economic and commer-
cial activities wh ich had been forbidden under Mao and Hua. 6
A second land reform to return land to the efficient tiIIers under
Deng is a communist revolution in reverse. Presently many things are
happening in rural China: dismantling of the commune, restoration of
township government, elections in local self-government, restoration
of rural commerce, investment, formation of commercial companies,
population shift from farming to other jobs, and emergence of
specialised rural family industries. There is an enormous potential for
an expansion of rural light-industrial development provided the
government is efficient and capable of supplying rural needs to satisfy
people's economic creativity. 7 I shall highlight such changes in
succeeding chapters. On the other hand, urban economic restructur-
ing is, indeed, a follow-up on rural experiments by politicalleaders at
the national level. It seems that incentive to work efficiently and
enthusiastically is not a common trait in Marxist economics, whether
in Russia or East Europe. Today China has changed this. Five years
after rural responsibility farming had begun in 1979 the central
government finally announced on 20 October 1984 urban production
and enterprise decentralisation in decision making. 8

1.5 THE CHALLENGE OF 'ONE COUNTRY, TWO SYSTEMS'

Hong Kong and Taiwan are, of course, Chinese territories. Their

return to China is irreversible. There have been no international legal
complications regarding either one of them since the Shanghai
Communique between Beijing and Washington in 1972. The
Japanese and the Russians have made no legal protest against
Taiwan's return to China. However, the new challenge is an internal
one that will test the possibility of coexistence among Taiwan, Hong
Kong and the People's Republic of China (PRC) on Beijing's own
formula: 'one country, two systems'. This promise has beeen written
into the Sino-British Agreement in 1984. The formula is also intended
to apply to the return of Taiwan. Much of Beijing's policy develop-
me nt toward Taiwan has long been known, but the policy remains
unacceptable to the government of the Republic of China (ROC) on
Taiwan. In short, the challenge of unification is a political and
economic one. If the PRC proposition is accepted by Taiwan, for
8 China Under Deng Xiaoping

example, the latter will become a local government of thc PRC despite
all other favourable promises. Likewise, Hong Kong will definitely
hope to become an 'un-interfered' free port at best under a central
government which must still deal with many issues directly affecting
Hong Kong's autonomy. Tbe stationing of defence forces in Hong
Kong, for example, is an obvious serious concern and controversial
issue.
Will Beijing policy officials understand the various needs, including
self-government, of the Chinese in Hong Kong? Can the central
government help Hong Kong to be independent in its commercial
relations with the outside world? How will the free flow of Hong
Kong's experience affect the economic and political development
inside China? Will Hong Kong be an asset or a liability to the central
government in its impact after the return? Many similar questions and
concerns can be raised about the unification with Taiwan, which is in
all respects an independent state with a long working relation with
many countries of the world. The political system which has emerged
in Taiwan is a unique one. Tbrough reforms and modifications the
system is basically acceptable to the people on the island who do not
feel at all eager to join the PRC. However, pressure for unification and
from internal factors compel the government of both the PRC and the
ROC to insist on their separate stands so far taken on unification.
Chapter 7 will deal in detail with 'one country, two systems' , especially
the attached conditions of both sides on unification and the difficulties
in finding reconciliation between them. Tbe island of Taiwan is
presently a majortrading partnerofthe United States which it ranks as
number five in volume of trade. The Taiwan Relations Act of the US
Congress promises defensive arms supply to the island since the formal
diplomatic severance between Washington and Taipei. These close
relations bring Washington's measure of influence on the scene
concerning the ultimate destiny of Taiwan. On the other hand,
relations between the United States and the People's Republic of
China will never be correct, let alone friendly, as long as the United
States is angrily perceived as being interventionistic in China's internal
affairs and as being a dishonest party to the joint Shanghai Communi-
que of February of 1972, in which it pledged non-interference in the
Chinese internal affairs in clear language: 'There is but one China, and
Taiwan is apart of China ... " 'unification is for the Chinese to
describe'. US involvement will also be discussed in detail in view of
Beijing's pledge to resolve the issue of unification before the end of the
century.
 Introduction 9

1.6 THE CRISIS OF IDEOLOGICAL VOID

Since the beginning of the twentieth century, Chinese intellectuals and

revolutionaries have been influenced by the foreign ideologies of
liberty, equality, individualism, human rights, democracy and capital-
ism. But they were strongly affected by the victory of Marxist
Communism in 1917 in the Soviet Union. After the failure of Kang
Yu-wei's 'Hundred Day Reform' in 1898, all Chinese patriots came to
embrace either the Western democratic ideology or the Marxian
centralist one-party dictatorship. Both of these mutually antagonistic
ideologies have now been implemented in China and failed. And both
have been modified and adapted to the Chinese political and cultural
environment. Chiang Kai-shek failed to implement Sun Yat-sen's
'Three Principles of the People' (nationalism, democracy, livelihood)
in the mainland (1927-49). However, a modified Western democracy
involving a one-party system in Taiwan has succeeded since 1949.
Chiang Kai-Shek's formula was further liberalised and improved by his
son, Chiang Ching-Kuo. Mao's ideological failure has been replaced
by Deng's leadership with very little modification or change in the
political system's intra-organisation al structure. However, Deng has
literally abandoned Mao's leftist revolutionary radicalism which was
preached by the 'Gang of Four' under Mao's wife, Jiang Qing, in the
later years ofthe cultural revolution. Jiang Qing and her collaborators
were tried and are now in gaol. Mao's radicalism has been criticised but
not totally condemned.
Mao Zedong earned for himself a deified position in the hearts of
devotees and among his allies in the political power structure.
Politically, it has not been easy for any new leader to condemn Mao in
the same manner as N.S. Khrushchev had indicted Joseph Stalin in
1955. Deng has dealt with Mao's legacy skilfully in lowering hirn from
the altar of worship. Therefore, Mao's mi stakes from his radical
ideology or Mao Zedong Thought could be rationally revised or
ignored. In short, only lip service is today given to Mao's impractical
writings and past leadership. Moreover, his concept of 'continuing
revolution' or revolutionary immortality, condemnation of intellec-
tuals, or his 'Great Leap Forward' are rejected. As political
pragmatists, Deng and his followers uphold the Marxist political
power structure and ignore certain tenets of Marxism. He has, in fact,
reduced the entire tenets into four cardinal principles to justify new
policy legitimacy and his 'Socialism with Chinese Characteristics'.
What Deng's socialism really amounts to has to await implementation.
10 China Under Deng Xiaoping

One American China specialist has said at a symposium on East Asia

that 'Socialism is what the Chinese say it is'. 9 There is today in China
what I call 'an ideological void' in contemporary politics. No one talks
much about ideology. Many people quote from Marx, Lenin and Mao
in their speeches or writings simply for form's sake. Deng's 'truth from
practice' is a popular criterion to judge policy success or failure. But it
is hardly adequate as an intellectual or theoretical proposition to be
developed into a system of ideology. An ideology foundation will have
to .be structured to interpret the fundamental experiments: 'Socialism
with Chinese Characteristics', 'Socialist Legality', 'Collective Lead-
ership' and the abolition of lifetime tenure in office.

1.7 THE PROMISE OF GNP QUADRUPLING BY THE YEAR

2000

The entire thrust of the Chinese effort has been devoted to 'double the
GNP twice' by the year 2000, using China's GNP of 1980 as the base.
Several major policy documents will be examined and described to
provide a fresh basis for the new economic planning and reform. I shall
report on my case study of rl!ral interviews and on my visit to Shenzhen
Economic Special Zone in 1985. I have learned from several industrial
cities in Manchuria (Da Qing Oilfield, Chang Chun, Shenyang,
Dalian and Harbin, etc.) through interviewing factory leaders on
decision-making practice in their enterprises. My visit to Nanhai
county in rural China was most interesting. I discovered how local and
country cadres from 1979 onward have stimulated and promoted the
campaign for rural economic changes. The replacement of rural
communes set up at Mao's insistence in 1958 was politically too
dangerous for any cadre to advocate officially. There seemed to have
been no national policy discussion on the fate of the communes until
the peasants themselves slowly started dividing up land for more
efficient farming. Without anational policy, the pe asants had only the
half-hearted support or acquiescence of some courageous commune
cadres. The increase in working incentive for farmers suddenly
demonstrated to officials at the highest level that the 'truth has come
from practice'. Premier Zhao Ziyang and Vice-premier Wan Li in
Sichuan and Anhui provinces further demonstrated their initiatives in
policy leadership in the field of agricultural reform. Their success may
be responsible for earning them the leadership at the national level.
Today they are the two front leaders in national economic reform. The
 Introduction 11

rural sueeess eneouraged experiment in new urban eeonomie poliey.

Changes in various sectors were needed to gain ineentive for
produetion inerease. The climax of urban eeonomic restrueturing
occurred finallyon 20 Oetober 1984, when the eentral government
adopted the poliey of deeision-making deeentralisation to gain
produetion and management efficiency.
At the 12th Party Congress in 1982, Deng promised the nation the
redoubling of the country's GNP by the year 2000. Can this promise be
kept, given eonstraining factors in the eeonomy, in centralleadership
transition, and in the nation's emerging economic relations with foreign
countries? For example, trade, investment, technology, transporta-
tion, energy expansion, and human resouree development are but a
few of the eentral faetors that will determine whether redoubling of the
eeonomy will be possible. Current signs and indieations seem to assure
the fulfilment of the promise, whieh may even be surpassed.
However, there are faetors whieh are beyond anyone's eontrol, such as
global eeonomie reeession, trade decline, and reduetion of foreign
investment in China. Wh at ean be assured with eertainty is the
mobilisation al dynamism and eareful, rational planning so far under-
taken by the Chinese government. The sueeess of the Fifth Five-Year
Plan (198(}-5) and the eautious planning of the Sixth Five-Year Plan,
wh ich was reeently passed in September, 1985, by the second CCP
National Conferenee, are positive indications of a eonfident govern-
me nt determined to eontinue the current economic policies at horne
and to expand China's economie relations abroad.

1.8 THE IMPACT OF A NEW OPEN DOOR POLICY

China's door has been opened and closed several times: in 1842,
1899, and 1949. Eaeh time when the door was either opened or closed,
there were major implieations. For example, after 2000 years of
self-sufficiency and voluntary isolation, she was forced to stay open in
1899 under pressure from Secretary of State John Hay, presumably for
the nation's own survival. This was a time when China had suffered
half a century of foreign invasions from the West and Japan and was
likely to be cut into 'Spheres of infIuence'. The foreign yoke of
imperialism, as guaranteed by the unequal and humiliating treaties
were not completely removed until after the Second World War. The
term 'open door' of that period carried with it a very ugly connotation.
The Chinese and Sun Yat-sen wanted to keep the door open on 'equal
12 China Under Deng Xiaoping

terms under internationallaw' after the Hsinhai Revolution of 1911.

This was rejected by the West and Japan. Chinese patriots and
progressive intellectuals, then, 'opened the back door' to Marxist
revolution after the Bolshevik victory in 1917. Chiang Kai-shek tried
to dose the door against communism but failed. His defeat in 1949led
Mao Zedong to dose it tight against the West. He followed literarily
the Soviet model in building a strong, industrial and modern state.
Mao, too, failed and turned against 'revisionist Russia' in the 1960s.
Mao hirnself and his chief followers, Zhou Enlai and Deng Xiaoping,
surprised their countrymen and shocked the world by opening up the
country to the West in 1972. China today, only sixteen years after
President Nixon's first visit, is so open that it depends almost totallyon
the Western nations and Japan for high technology, investment, trade,
and, in short, the critical succeess of Deng's four modernisations in
defence, agriculture, industry and science. What a zigzagging path full
of conflict in modern China's foreign relations! Presently, the Chinese
leadership is fully determined to keep the Chinese door open to the
rest of the world, induding a new effort to reconcile her tense relations
with the Soviet Union. The most important long-term question to be
asked is wh at will be the ultimate consequences this time when the
Chinese themselves, having gone through the two revolutions of 1911
and 1949, have insisted on a non-aligned policy to keep China open to
the rest of the world? Obviously, the Chinese will acquire scientific
and technological skills, increase trade and other economic and
cuItural relations, and develop friendly diplomatie relations for
self-interest and world peace. However, this is a world of global
ideological conflict between political totalitarianism and democracy.
It is a divided globe saturated with conflicts and competition between
two superpowers seeking to dominate and survive at the other's
expense. China is fully aware of this reality. It used to be a loyal
supporter of one superpower.
With the opening of China to the West, the intellectual demand for
freedom, young people's preference for the Western way of life,
partial restoration of the practice of religion, the impact of cultural
exchanges with Western nations and Japan, and many other contacts,
may sooner or later make their unexpected marks in influencing the
way of life in China. When economic mutual dependence and
politico-diplomatic relations with the Western nations are becoming
stronger and when a new generation of Chinese leaders are trained in
the West and will make their weight feit in future China, how can the
Chinese political system be kept insulated from the Western views of
 Introduction 13

those managers and diplomats who will be policy decision makers of

the Chinese nation? It is in this long-term impact that we may see a
different China emerge in future decades. In the concluding chapter,
such related questions will be raised and explored again for the
long-term understanding of China's raad ahead. 10

1.9 NEW ORIENTA TION IN HISTORICAL PERSPECTIVES

How much is Deng's new political orientation going to change the

nature of the current political Marxist line? How much will the
economic development and the Western cultural influence affect the
political style and the economic relations between individuals,
families, and the central government's planning and its political
power? Since the present political and intellectual life in Taiwan are
much influenced by Taiwan's strang ties with the Western nations, it
is, therefore, possible to expect the same kind ofWestern influence to
permeate the Marxist government on mainland China. The case of
Japan and India are additional examples that illustrate future trends
under Western influences. Japan has achieved enormous economic
wealth and a democratic political system since 1947. Nevertheless, the
Japanese have preserved the major tenets of their own traditional
culture. New wealth and democracy of Western origin in Japan seem
to have reconciled weil with the traditionallifestyle. India, like China
itself, could not easily mobilise to rapidly acquire economic wealth and
to bring the nation out of the traditional religious and linguistic
conflicts, although it has been committed to a secular state with a
democratic constitution since independence nearly forty years ago. My
point is that alliarge nations with a long cultural heritage, such as India
and China, do not change much in the short-run. The contemporary
transformation in China would not seem to be able to substantially
alter Chinese tradition al culture. Cultural values in China were
developed over several thousands of years. Western values, Marxian
or non-Marxian, reached China in the twentieth century. This fact may
be responsible for Deng's insistence on 'Socialism with Chinese
characteristics' . Deng has to develop a modern state within the context
of a Chinese historical perspective, having experienced the failure to
create a communist state in the Russian style. Political indoctrination
and election politics, for instance, do not really change the substance
of tradition al values. Taiwan's political system, for example, has not
affected Chinese cultural values since the Second World War.
14 China Under Deng Xiaoping

However, no government can res ist the cry for democratic participa-
ti on and the respect for human rights, although few non-Western
nations can fully implement them successfully. 11 This common cry for
democracy constitutes part of the essence of modernisation. The May
4th movement of 1919 in China succinctly pointed out the
long-term political orientation, namely, democracy on the one hand
and science on the other. They constituted seemingly the only
long-term way to modernise China. The same 'democracy' and
'seienee' of 1919 remained valid in 1949 and in 1976 to persistently
ehallenge both the Nationalist government and the eommunist
government for their fulfilment.
Given this historical eontext and modern revolutionary expectation,
it may not be diffieult to speeulate what Deng Xiaoping should do for
China at the end of the four modernisations, namely, to build an
independent, demoeratie, respected, modern industrial state eapable
of self-defenee and willing to contribute to international pe ace and
seeurity. Ideologieal specification of whatever artifieial brand remains
merely a teehnique, a trade mark, an artifieially devised intelleetual
meehanism to inspire unity and support at horne and to attraet foreign
followers see king a way toward the future. Deng, Mao and others have
all been Chinese patriots first. They each sought politieal power to
make strategie poliey decisions, although Mao seemed to have
pursued the vanity ofpower to satisfy his personal ego. Vanity and ego
satisfaetion usually lead to corruption of power and the downfall of the
individual. More discussion on this will be included in the last chapter.
As a matter of historical perspeetive, what have the Chinese people
and their leaders learned through their sueeessive revolutions and the
rise and fall of severalleaders? Sueh questions surely ean not be easily
and adequately answered. They ean, however, be approaehed
indireetly. One may feel that the Chinese people, including the
intelleetuals, ought to realise that, like the Japanese and the Indians,
they eannot eradieate their historieal heritage through a eultural
revolution. Any form of modernisation must reeognise a nation's past
legaey as a valuable experienee and a powerful influenee. Sun Yat-sen,
for example, eould not easily introduee into China a 'strange Western
demoeratie politieal system' at the turn of the eountry. Chiang
Kai-shek and his advisers did not know how and when to implement
Sun's 'Three Prineiples of the People'. Mao and his followers
vaeillated between their support of the Nationalist Government
betweenl923-45, and the making of a revolution of their own whieh
Mao led to vietory in 1949. But Mao unwisely destroyed his early
 Introduction 15

achievement before his death. Deng today profits from these valuable
experiences as the single most powerfulleader in China who is guiding
the Chinese ship in a stormy ocean through peaceful reform. He wants
peaceful reform not violent revolution.
Still, what do the Chinese intellectuals and average people
themselves want in their national development? They honestly think
about preserving their historical heritage and enjoy fair treatment at
the hands of their own government. They do not want to be treated as
'stinking intellectuals' who desire to express views that are different
from those of their government. They want eventually a democratic
political system to channel popular and genuine participation. They
prefer the system of rule of law which Deng calls 'Socialist legality'.
They expect political equality for all citizens and individuals who shall
resist any privileged party seeking to perpetuate dass or political
power. They want certain fundamental constitutional rights which no
government or any leader in power can take away from them. It seems
these are the long-term fundamental concerns that many Chinese
today think about seriously. They have been taught a bitter lesson
since 1911 and during the cultural revolution when mad Mao Zedong
became a 'tyrannical human god' .
In short, the following chapters will deal explicitly or implicitly with
the various issues raised in this introduction. It is a study of reflection
which will inevitably hinge on my personal bias and preference. I shall
allow my former experience and recent travels in China to guide me to
formulate observations and judgements. The entire study may imply
an effort to speculate constantly about how a different China may
emerge through Deng's leadership and his policy of peaceful reform
which he calls 'a second revolution'. And finally, it will be argued,
explicitly and implicitly, that in the next thirty to fifty years China may
have a good opportunity to emerge as a relatively 'open democracy
with Chinese characteristics'. The dividing line between Sun's
democracy of the 'Three Principles of the People' and Deng's
'Socialism with Chinese Characteristics' may be much blurred, if it
does not disappear totally. Until then, the unification between Taiwan
and the mainland will not be easily advanced, although both
governments in Beijing and Taipei will continue to pledge effort for
unification on their own separate terms. Any sign ofTaiwan's moving
away from the irreversible trend toward unification will be suicidal. It
is useful for both sides of the Taiwan Strait to be reminded of the words
in the famous Shanghai Communique of 1972 that 'there is but one
China, and Taiwan is apart of China'. Non-political and non-negoti-
16 China Under Deng Xiaoping

able contacts between the two governments may in time be considered

unharmful to either side. Reaffirmation toward peaceful merger of the
two under whatever future terms is a periodic necessity to prevent a
dangerous drift of the two governments, and the search for mutually
acceptable terms for unification is a useful practice.

1.10 MANY QUESTIONS BUT NO ANSWERS

Given the far-reaching prospect of Deng's reform consequences in

various fieIds, thefact remains that every major reform is undertaken as
an experiment which can be easily revised or abandoned. The
ideological umbrella for reform legitimacy is still Marxism, although
Marxism itself has been reduced to nothing more than the party's four
official cardinal principles. Economic development is moving away
further and further from Marxism in the name of 'socialism with
Chinese Characteristics'. Does anyone know what these Chinese
characteristics are? The failure of Mao's cultural revolution created a
crisis of confidence in Marxist ideology and in the ability of thc Chinese
Communist Party to lead the nation. Can reform in time allow the
Communist party to regain the full confidence ofthe people, especially
from Chinese intellectuals who supported the revolution in 1940s and
suffered under the new regime in the 1950s, 1960s and 1970s? Can
reforms and innovations succeed without accepting some of the values
of the capitalist countries and their methods for efficiency and policy
making? Will there not be conflicts and crises in China between the four
cardinal principles and the broad ideology ofWestern democracy? How
can the four cardinal principles be implemented by the future leaders
who will be influenced by their contacts with and knowledge of the
non-communist world? What is a 'spiritual pollution' from the West, or
Hong Kong, Taiwan, or Japan? Why have the people, young and old,
been so easily influenced by the so-called 'spiritual pollution' in so short
a time since the opening of the nation to the outside world? Will there
not be more conflicts and cultural interactions with the Western world
so long as China continues to expand its relations with the Western
nations? How can the government fight against what it advocates on the
one hand, and objects to, on the other, over the inevitable
accompanying results deemed unacceptable?
What does 'Socialist legality' include, besides a few new pieces of
legislation in recent years? For example, constitutional guarantees for
fundamental human rights, basic political rights of participation and
 Introduction 17

criticism, and freedom of the press and assembly, etc. are essential
individual rights which must be enforced by the government on behalf
of every citizen. Such rights are in conformity with the human rights
charter of the United Nations. How can China avoid value conflicts of
this sort in dealing with the foreign nations whose people are coming
into individual contact with Chinese citizens in China and abroad?
Another set of unanswerable questions at this stage concerns the
prospect of how far China will be reformed politically, especially in
terms of political structure and process. For example, will there be a
constitutional separation of powers between the party, the executive,
the legislature and the judiciary? Can we assurne that China will
abandon the Soviet model of institutions and politics? Will there be
open competition in the election process, such as an open system of
nomination of candidates and campaign activities of different political
parties? Can the Chinese legislative body acquire equality in policy
making with the State Council? Can judicial process be free of political
and ideological influence to apply law and punishment on the basis of
the rule of law only? These kinds of questions have, perhaps, little
significance now. They will, however, be likely to assurne greater
significance when Chinese society becomes more open and as China
moves away from the Soviet model. Further questions can be asked.
Will the Chinese political system emerge into a non-Western consulta-
tive polity which accepts power monopoly by one strong party, with
non-adversarial participation gran ted to several minor political par-
ties? Or will 'Socialist legality' be developed along the Japanese
experience of one party dominance in the executive, with minor
parties confronting the cabinet through legislative inquisition but
unable to affect policy outcome?
Is it correct to assume that standard Western parliamentary
democracy is alien not only to China but also to many other
non-Western states? China has, in particular, a long political tradition
of its own. And there is no such Westernised political culture in favour
of standard Western democracy in China. Therefore, it is impractical
to expect China to follow Western political development. It can also be
observed that one-party government is common in East Asia in both
communist and non-communist states, Korea, Taiwan, and even in
Singapore, where single party rule remains a fact, althoughJapan has a
few minor opposition parties in the Diet. These Japanese opposition
parties have since 1947 never been able to form a single cabinet.
Perhaps it is unfair to expect China to become a two-party or
multi-party democracy. Wh at kind of democracy do Chinese people
18 China Under Deng Xiaoping

want and what kind can they get is as yet an unanswerable question.
For nearly eighty years since the revolution of 1911, Chinese
revolutionaries and intellectuals have fought for political democracy
and freedom. So far they have not succeeded. Perhaps they did not
truly understand that Western parlimentary democracy cannot be
transplanted to Chinese soil either from the USA or England.
However, Democracy as a way of life and an ideal value concept can
never die among Chinese intellectuals and revolutionaries until they
truly know wh at democracy is and until China can independently
institutionalise her own form of democracy. The Japanese, for
example, developed their own version only after the Second World
War. Perhaps, this is what Deng has in mi nd about China's 'Socialist
democracy' in the future. Deng, too, may not know as yet what is to be
the precise content and practice of his 'Socialist democracy'. Thus, it
remains to be seen how a 'democracy with Chinese characteristics' is to
be defined.
As the chief architect of the current reform, Deng must take all
things into consideration. What he must insist upon includes what he
must not say. Political necessity dictates what is to come about through
experimental reform. There is a long listof major themes he always
emphasises. It is, perhaps, very appropriate to summarise what he said
at the September 1985, party conference. The highlights of his speech
there included the progress already made and the task still ahead. He
made an evaluation of the past seven years of reform achievement and
offered an agenda of issues to stress in the coming decade. They
include in summary as folIows: 12

1. Present circumstances and reform. 'Every one has seen that the last
seven years have been the best and key significant period since
1949. We did two things during the difficult period: eliminate
disorder and return to normal, and initiate the overall or
comprehensive reform. For years we were victimised by emphasis
on class struggle in neglect of production forces ... Now, on the
basis of the four cardinal principles ... our result of success has been
the struggle against leftist mistakes. Without the four cardinal
principles we could not have preserved unity in the country. Our
reform in rural areas stirred up three years of conflict since
1978 ... Since the Third Plenum of the Twelfth Congress emphasis
has been concentrated on urban reform. On the basis of agricultu-
ral success, we have now launched urban comprehensive
economic restructuring. Reforms have increased production
forces, but also brought on aseries of in-depth changes in our
 Introduction 19

economic, social and work methods and spirituallife. Reform is a

socialist system's self-correction which, within certain limits, has
brought a certain degree of revolutionary change. This change is a
major event to prove that we have-begun to discover a new road to
construct Socialism with Chinese Characteristics ... '
On the other hand, Deng quickly reaffirmed that the publicly
owned sector of the economy will remain predominant. Everyone
will enjoy better living standards with some improving faster than
others. Concrete methods of economic restructuring still 'remain
experimental'. He confidently said 'I believe whatever is in
harmony with the interest of the majority of the people and receives
their support will invariably succeed regardless of whatever
difficulties lie ahead.'
2. His confidence in the future success of the Seventh Economic
Plan. Seven per cent economic rate of increase annually is not
too high. Faster growth creates too many management problems.
Our main emphasis is on management skill, product quality
and economic and social efficiency. If our economic structural
reform can achieve regularised continuity, stability and harmo-
nious development, we will, then, feel sure of reaching our growth
goal fixed for the year 2000. The middle of next century will,
then, see great changes when China makes a greater contribution
to mankind. This is c1early an expression of cautious confidence in
the future socialist economic prospect. Will the future still be a
socialist phenomenon relevant to Marxist 'scientific prediction'?
3. Development of 'Spiritual Civilization'. Deng expressed disap-
pointment in this area in spite of his acknowledgement of much
work already done by the party, the central and local governments,
and among the masses. He asserted socialist superiority over
capitalism in developing productive capacity and in preventing
greed, corruption and injustice. He complained: 'Although
production has increased in recent years, diseases of feudalism and
capitalism not only fail to be reduced to the most possible low level,
many of the long disappeared evils since 1949 have now been
resurrected ... Without emphasising spiritual construction,
material civilisation will suffer ... and our revolution and construc-
tion cannot achieve victory.' Here lies China's dilemma: to choose
between continuity of her socialist past, economic inefficiency and
the evils hidden in capitalist efficiency in management and
production. Deng emphasised reform and the fight against
'spiritual pollution' as the key path to exercise seIf-control and
criticism. How weil the party will set an exampie against economic
20 China Under Deng Xiaoping

crimes, bureaucratic corruption and the misuse of authority

should become clear when the task of party reform completed in
1987 as targeted.
4. Leadership transition and the need to study Marxism: Deng
advised the younger leaders to faithfully continue the good and
dedicated revolutionary tradition of the older generation. He
warned them against 'false speech, vanity, misuse of public
authority for private gains and nepotism'. Continuity of party
policies depends on successful leadership transition and recruit-
ment. Deng's policy emphasis includes 'national independence,
democracy and rule of law, open dOOf policy toward the outside
world, and the economic growth and liveliness. These policies will
not change. The basis for these policies is our insistence on the
four cardinal principles. Otherwise, our society will be disorderly
without stability and unity, let alone reform and rejuvenation.'
His last emphasis in the speech was that all must 'study the theory
of Marxism .. , It is not indoctrination. Marxism is a compass to
action and a method to resolve new problems in accordance with
new circumstances.' In short, experiment brings about choices
which may require new changes and more reforms. Deng's grand
reform is, therefore, a revolution by peaceful methods. Much
depends on the end-products of the experiment. One can expect
China to be under this 'peaceful revolution' for many decades to
come, barring unexpected circumstances which may intervene
drastically in this process. 'From the time of the Opium War in the
1840s to the year 2040', Deng predicted in his speech, 'China will
have changed very much in 200 years', so that the country will
probably appear neither majestically imperialistic as in its distant
past, nor as a Western democracy as Sun Yat-sen expected through
his revolution of 1911, nor yet socialistically Marxian as the
communists expected to achieve in their revolution of 1949. China
will more than likely emerge in its rejuvenated cultural tradition
with modernised material circumstances and in accord with the
nature and conflict in a vastly expanded global community of
nations. China has to preserve its identity as all nations do. But it
cannot ignore the global forces which influence the destiny of all
mankind. The outcome will remain speculative until the result of
long-term reforms are visible. Deng's ideological commitment, or
the four cardinal principles, may not be able to control the future
forces for new reform to be initiated by the government and even
by the people themselves.
2 Deng's Return and
Reform
2.1 HIS LEADERSHIP DIMENSION AND UNIQUENESS

If modern Chinese revolutionary leaders can be ranked on some fixed

criterion for their contribution in the areas of freedom, equality,
democracy, material progress, peace and political stability, Deng's
achievement, in only a few years after Premier Hua Guofeng's
removal, has been phenomenal. His accomplishment can be viewed
not only in material progress, but also in the people's mood and
confidence. His leadership as areformer demonstrates in many
dimensions its unique responses to various challenges. Although Deng
was not a forefront leader in the communist revolution in China to be
ranked with Chen Tu-hsiu, Mao Zedong and Zhou Enlai unti11978, he
has achieved, in the last half dozen years, more than his predecessors
for the average person in material progress, social stability, freedom
for initiative, and in policy implementation of the four modernisa-
tions. While Mao was asentimental visionary and Zhou a consensus
builder, Deng has been a courageous reformer and a confrontationist
who persists to fight and fights to win. Previously, he was known to
have given up a struggle easily. His policy views in the past were weil
known. Almost thirty years aga in one of his reports as the Communist
Party Secretary-General, he said: 1
Ours is aland with a population of 600 million. To unite such vast
population for the cause of building socialism is a glorious yet
arduous task. To achieve this unity we must constantly consult and
work with all the people. We must handle correctly internal
contradictions among the people. We need to create a political
situation in which we have both centralism and democracy, both
discipline and flexibility, both unity of will and personal ease of
mind and liveliness.
He was then fighting against Mao's attempt to introduce the rural
commune system and 'Great Leap Forward' proposal. Deng realised
long ago that China was too big to be totally controlled by a distant
central government. The people must be allowed to do wh at they can for
themselves. This is precisely wh at has happened in rural China during
the last eight years when the farmers themselves went on to divide

21
22 China Under Deng Xiaoping

up the commune lands before the central government policy was even
formulated. Deng is different from Mao who preferred to impose on
the people what he thought was absolutely right and ideologically
progressive. Deng is prepared, on the other hand, to consult and take
advice from the people so as to 'have both centralism and democracy' .
To combine discipline with flexibility under Deng today is to build
unity with diversity. If more people are able to see hirn as a modern
revolutionary with a tradition al pragmatism, Deng's socialist demo-
cracy will easily be seen as a genuine substitute' for the Communist
utopia.
Deng is a unique leader in modern China in a number of unusual
ways. For example, twice he was ousted and twice he wrote personal
letters to Mao Zedong and Hua Guofeng to get hirnself back into a
leadership position. Before he was reinstated in 1973, he had written
to Mao for an opportunity to rededicate hirnself in service to the
nation. Mao circulated his letters among top party leaders before his
reinstatement. 2 While Zhou was hospitalised in 1974-5, Deng was
effectively in charge of the military affairs (as Chief of Political
Department of the PLA) , the Party Affairs (as one of the
Vice-chairmen of the party) and as the First Vice-premier of the State
Council. He was the busiest politician and the third in the leadership
hierarchy next to Mao and Zhou. He worked diligently in new policy
orientation and in party rebuilding after Lin Biao's downfall. He was
in confrontation and in conflict with the 'Gang of Four'. 3 He
antagonised them so much as to cause his second downfall immedi-
ately after Zhou's death.
Deng wrote to Premier Hua immediately after Mao's death in
September, 1976, for an opportunity to return to the government. Hua
was cautious in handling his reply. But he wrote to Hua again. The
support for Deng's return was so overwhelming that Hua had no
choice but to reinstate hirn in 1977. The 'shared leadership' in the
decision-making process since his reinstatement lasted fifteen months
only, prior to the Third Session of the Eleventh Central Committee in
late 1978. During the session Deng's policy on new political
orientation and economic adjustment received the majority support.
Although Hua's 'little leap forward' in the economic field was
criticised and defeated, Hua hirnself remained as Premier and party
chairman.
The uniqueness in Deng's leadership might have come from the fact
that he is the only centralleader who has travelled widely abroad since
the 1920s. He has a living experience of several years in liberal-de-
 Deng's Return and Reform 23

mocratie France. He has travelled often since 1949 in many foreign

countries. In particular, in the aftermath of destruction that took pi ace
during the cultural revolution, he went to Europe and to the United
States in 1974 to speak to the emergency sessions of the United
Nations. And as the 'strong man' of China he came as the state guest of
the US government immediately after the formal opening of the
diplomatie relations in 1978. Thus Deng, like Zhou before hirn, was
privileged to know more about contemporary progress and living
standards in other countries. These unique opportunities might have
contributed to his new policy of reform and emphasis on the four
modernisations which Zhou announced to the National People's
Congress in January 1975. The Four Modernisations represent Deng's
programme whieh is supported by the moderate groups within the
party. The leftish faction was thus compelled in 1974 to carry out a new
political campaign against the Zhou-Deng 'Confucian-nonrepentant'
capitalists during Zhou's last year in hospital. This again illustrates
that Deng is a confrontationist willing to pay any politieal price in
orderto reform the system and serve the country. Zhou, on the other
hand, was a reconciliationist who was prepared to pay any price at
personal cost as a crisis manager in order to rebuild inter-group
consensus within the party and the government.
Another part of Deng's uniqueness is his preference for the
organisational approach, being an institutionalist bureaucrat hirnself.
As a party bureaucrat du ring the years of ~he Second World War, he
often represented the party leadership ob his various assignments
within the 8th Route Army and later in the People's Liberation Army
(PLA). In that capacity , he had to make decisions that not only
represented a higher party authority but which also received the
coordinated support of the military leaders. This experience as a
horizontal and vertical intermediary authority gave hirn an institution-
alised decision-making habit as weil as an understanding of and
acquaintance with the military commanders. This was especially true
during the 1947-50 period when he virtually exercised top authority as
party and military supreme leader marching along with the field
commanders to cross the Yangtze River to liberate the Nanking-
-Shanghai region and to southwest China to sweep in vietory the entire
region all the way to the Vietnam and Burma border. These years of
civil ·war helped his politieal power in the PLA and his personal
relations with field commanders who later supported his return to
government and party before and after Mao's death in 1976. This
unique background is exceptionally useful in his 'helmsmanship' today
24 China Under Deng Xiaoping

in China without fear of military disloyalty. It was this dose

relationship between Deng and the PLA leaders that made former
Premier Hua's struggle to retain central leadership difficult, because
the military had a major voice in the politiburo of the party. Since
Deng has the support of the armed force - the barrel of the gun - he has
political power.
Still another unique feature in Deng's leadership has been his
appearance not to have formally organised any faction of his own in the
party, the bureaucracy or the army. He was well-known to all factions
in the party hierarchy. Deng was much like Zhou in this respect within
the government bureaucracy as weil. He had loyal friends and
subordinates everywhere but was above formal factional alliances. In
his fight to return to government after Mao's death, he received
support from nearly all quarters because of what he had stood for and
his ability and infIuence within the power structure in the party, the
army and the government. More than Zhou, Deng had intimate
working experience with all echelons of leaders vertically and
horizontally in both regional and in central government units. His
sharp mind, quick tongue and administrative talent have been
well-known since the early 1950s when he was promoted from the
southwest region of the country to become both finance minister of
Zhou's cabinet and the party's secretary-general. He remained as
party secretary-general for more than twenty years until his rem oval in
1966 at the start of the cultural revolution. In short, no one in the
People's Republic of China had such a broad administrative experi-
ence as he. Even Mao or Zhou never had the experience and dose
contact below the central leadership level. Given broad experience
and administrative capacity , he would have been ideal to succeed
Zhou, had it not been for the 'Gang of Four' who surrounded Mao and
persuaded hirn to remove Deng in favour of the little-known Hua
Guofeng, as acting premier at first. His rem oval by Mao was
universally though silently disapproved. The whole nation was
angered and, therefore, acted in violent retaliation on 5 April 1976, in
Beijing at Tiananmen Square where they avenged Zhou and Deng.
One other unique trait in Deng's leadership is his absolute control
over the hierarchy after his victory against Hua. The new political
circumstances since then have allowed Deng to be the first and
definitely the last voice in all major policies. He is the final arbiter of all
things, like Mao, but without being surrounded by a personality cult.
In practice, he chooses to delegate decision-making authority to others
in accordance with their respective institution al capacity. Much of his
 Deng's Return and Reform 25

time is reserved in thinking about problems, strategies, personnei,

policy goals and institution al coordination. In short, his position is
supreme and unique in the entire communist world. Mao did not have
such a political and decision-making environment. He had to fight
against the majority in the party or divide them up in order to prevail.
He had to fight laboriously for the implementation of his commune
and the 'great leap' in the late 1950s. He also had to rely on purging and
cruelty to eliminate those who were against his policies. Zhou, on the
other hand, never really made major and independent policy decisions
on his own. He merely expertly participated in the decision-making
process and was responsible in implementing policy decisions made
elsewhere. In contrast Deng overrode decisions already made and known
to the public. In 1984, Deng suddenly announced at a press interview that
China would have to station a certain number of troops in Hong Kong
after its return in 1997. This stand contradicted several high officials
who had long stated that China would not dispatch troops to Hong
Kong for purposes of defence in view of the fact that Hong Kong would
be allowed to exist as an autonomous region of China after 1997. This
example illustrates a potential source of embarrassment if Deng in
future repeats the exercise of such supreme authority. On the other
hand, it is clear that Deng, by his volition and by political necessity, has
chosen not to occupy a formal institution al position in the government
and the party in order to impress other leaders to accept retirement in
the transfer of power. Deng has been far more concerned about
bureaucratic and systematic decision-making through formal institu-
tional infrastructure. Thus, Lord Acton's dictum that 'power corrupts
and absolute power corrupts absolutely' may not be applicable to
Deng. It remains to be seen how Deng will conduct hirnself in future
years. It is clear Deng hirnself refuses to become another Mao, but
health and mental capacity often work against the best interests.
How did Deng achieve this unique leadership position? There are a
few important factors which suggest explanation. First of all, it was a
matter of destiny that Deng's experience and positions before the
cultural revolution had given hirn unique advantages over many other
well-known purged politicians, such as Peng Zhen, the former Mayor
of Beijing, and Chen Yun, the former chairman of Economic
Planning Commission. Secondly, Deng's age qualifies hirn as a younger
and well-experienced statesman who is from the old generation that
experienced the famous Long March. He can best command the
loyalty and respect from those younger than he. Thirdly, Deng was
26 China Under Deng Xiaoping

purged as the 'Number 2 Capitalist Roader' next to Liu Shaoqi, the

then real bureaucratic head of the party and the head of the state and
also designated by Mao to succeed hirnself. But Liu died too soon.
Fourthly, Deng was highly praised for his policy of restoring the
purged colleagues to their personal honour, to former or new positions
in the government, by overturning the unfair accusations of the
cultural revolution. Deng did so as a matter of necessity to control the
party and political power for the good of the state. The moderates, and
other anti-Jiang Qing and anti-Lin Biao senior leaders were returned
to positions of responsibility at the expense of the radical leftists.
Deng's 'de-purge' policy received nationwide accIamation because
many millions of former leaders and cadres were waiting and eligible to
be rehabilitated. He rectified the abuse and damage done to the
civilian population during the cultural revolution through monetary
compensation. Such compensation by the government or return of
confiscated property to the owners was appreciated. As a result of
correcting the wrong deeds of the government of the past, Deng
benefited from public accIamation concerning his statesmanship.
Fifthly, his struggle against the leftists and their influences within the
government, the party and the army earned for hirn gratitude of many
individuals and groups who, like Deng hirnself, had suffered various
kinds of humiliation and mistreatment from Mao's followers during
the cultural revolution. The cIimax of Deng's courage and justice
against the followers of Lin Biao and Jiang Qing was finally highlighted
in the televised court trials. These trials further exposed the hated
individuals through the media coverage. By reversing the result of the
cultural revolution, he actually ended the era of Mao and launched the
era of Deng. Finally, Deng's popularity and statesmanship as an old
revolutionary resulted from his new policies to save the economy, to
benefit the people, and to retain political power for the Communist
Party to finally make good their revolutionary promise to build a
strong industrial state. His programme of four modernisations was the
answer which Deng had calied for publicly through Zhou Enlai's last
speech to the National People's Congress in J anuary 1975. Deng was then
already in confrontation with the Gang of Four twenty-one months before
Mao's death and Jiang Qing's arrest in October 1976. Taken together,
these factors helped to transform politics and to distinguish Deng, the
pragmatist, from Mao, the radical leftist, during and after the cultural
revolution.
Deng's return to power in 1977 was made inevitable by the then
political circumstances. He was so welI-known for having drawn up the
blueprint of the four modernisations which was welI-publicised and
 Deng's Return and Reform 27

received nationally. Secondly, Deng's dose association with Zhou as

fellow pragmatists in their political and policy views and Zhou's open
preference for Deng to succeed hirn to resist the radical leftists were
also major factors in Deng's popularity and leadership image. After
his return to leadership in 1973 as Vice-premier, party vice-chairman,
and commissar of the political department of the PLA, he was not only
in daily charge of all three areas administratively but also began to
implement reforms within the three branches. For example, in his
speech to the PLA leaders above the level of regiment in 1975, he told
them forthrightly that

our practice has always been the party in control of the gun, not the
gun in control of the party. This tradition was interrupted by Lin
Biao as defence minister since 1959 and especially during his later
years. Now the good tradition is gone, military budget is too
large ... training for battlefield is inadequate. Chairman Mao lately
has suggested reforms in the armed forces. The size of the army must
be reduced; tradition restored. There is much work to be done in the
three headquarters of the staff division, the political division and the
logistics division. 4

He then warned the audience that those who insisted on practising

factionalism would not be employed or promoted. Military discipline
must be restored. Work efficiency would be promoted.
In March 1975, addressing a group of party leaders in charge of
industrial management at the provincial and city level, he told the
cadres of the need to complete the four modernisations within
twenty-five years. The success depended, he said, on having more
railroad and energy supply. Everywhere he went, Deng spoke of the
four modernisations, on the need of a strong and committed party
leadership, on the struggle against factionalism at the workplace, on
the need to de-purge abused leaders and cadres, and on restoration of
.institutions and accountability of individual responsibility. Economic
recovery and further expansion were constantly in his mind. He often
emphasised the need for political stability and unity. 5 On industrial
expansion strategy, Deng was able in 1975 to insist on first having a
blueprint of development targets: (1) making agriculture the
foundation of industry by modernising agricultural expansion first;
(2) importing new technology and newer equipment from abroad by
the joint contract method with foreign governments and companies.
China should rapidly develop export trade in order to accumulate
foreign currency to purchase what China did not have; (3) the need to
28 China Under Deng Xiaoping

build up scientific research; (4) enterprise reorganisation to utilise

management science and skill; (5) enhancing the quality ofproducts to
assure market expansion abroad; (6) stressing the personnel system and
organisational efficiency in work accountability; and (7) allowing wage
discrepancy to reward efficient workers. These seven guidelines of 1974
were basic and still constitute part of the reform cornerstone. In short,
before his downfall for the second time in January 1976, Deng had
launched his four modernisations campaign. His determination to
return to power after Mao's death was based on his desire to again
continue his reform work for a modernised China by the year 2000.
This goal has now included a new target to 'redouble the GNP by year
2000'.
The dimension of his leadership is wide and inclusive. His goal is to
create material progress and spiritual advancement in the quality oflife.
Besides the living standard, the cultural, moral and recreational
activities of the people have also been much stressed in Chinese media
campaign. Educational expansion, for example, is the key to industrial
technology and human resource training. He has set the key concepts or
criteria for reform, according to his many speeches in recent years:
1. A void ideological entanglement: 'work more, speak less'.
2. Speed up leadership transition: leaders and cadres must be 'young,
knowledgeable, revolutionary, and with specialised skill or capabi-
lities'. .
3. On political reform: follow the socialist path, insist on communist
leadership, practice democratic centralism, and continue with
Marxism, Leninism and the Thought of Mao (the four cardinal
principles).
4. On immediate goals: economic expansion, unification with Taiwan,
and preservation of world peace.
5. On urban economic restructuring: enterprise autonomy, wage
differentiation, bonus incentives, separation of government from
economics, emphasis on worker's participation in enterprise deci-
sion-making, and implementation of new tax systems.
6. On party reform: emphasis on the disciplinary approach at all
levels, institutionalisation of central collective leadership via the
secretariat, abolition of party chairmanship, institution of retire-
ment system at all levels with full material compensation, elimina-
tion of leftists or followers of the leaders of cultural revolution.
To better understand the dimensions and uniqueness of Deng's
leadership it is necessary to discuss what he has actually done about the
 Deng's Return and Reform 29

leadership succession. How has he dealt with the tenets of Mao

Zedong's Thought, Marxism, and Leninism in the context of his
reform? How can he support and reconcile the four cardinal
principles? Whether Deng and his followers can operate without their
own revised or new and fresh ideological foundation is worth
exploring. It is true that no popular interest exists at this stage for
having a strong ideological commitment. Most people in China are
tired of and disgusted with ideological argument or debate. Their
minds need a rest. The population wants material progress and
opportunity to advance personally. Life without ideology and with less
politics is better and more satisfying. However, in the long run there is
likely to be a serious conflict between material and spiritual progress
on the one hand and the four cardinal principles on the other. Unless
these principles are revised or disregarded, they must be in accord with
future new reality of Chinese socialism which itself must be ideologi-
cally reconciled with the new political, cultural, social and economic
relations that will be in existence by the end of the year 2000 or later.
Finally, it would be interesting to explore the new implications from
Deng's grand experiment in various fields, especially the likely future
domination by the new industrial elite vis-a-vis the younger
generation of party leaders.

2.2 THE UPHILL STRUGGLE AFTER MAO'S DEATH

Trained throughout his life in dialectical thinking, Deng clearly gave a

lot of his time during his down fall to analysing dialectically what had
gone wrong since the eighth party congress in 1956. He read a great
deal in those years of 'reform and study'. This was, perhaps, the best
time in life when he could calmly and peacefully formulate judgement
and conclusions on mistakes of the past and problems in China's
future. His daughter's re cent work confirms what her father went
through in those years of study, work, rest and thinking about future
reform. 6
Deng has never been and is not now a 'capitalist roader'. His
philosophical commitment to a Marxian society appears irreversible,
although his readiness to adapt and to reform is unquestionable. He
was always open to alternative methods to achieving practical success.
It is, perhaps, helpful to paraphrase Deng's current goals and
strategies for his socialist China as folIows: (1) a socialist economy with
many non-socialist subdivisions or capitalistic components; (2) an
30 China Under Deng Xiaoping

advanced stage of elective socialist democracy with top-level central-

ism; (3) a modernised country in terms ofwealth, science, defence and
a relative equality of material and spiritual life for all citizens; (4) a
socialist legal system defined as rule of law without class privileges; (5)
coUective leadership in government and within the Communist party in
conjunction with other minor political parties through the institution-
alised mechanism of CPPCC (Chinese People's Political Consultative
Conference); (6) a political or ideological commitment to the four
cardinal principles of communist leadership, a socialist path, people's
democratic centralism, Marxism, Leninism, and the Thought of Mao;
(7) the party's need to regain popular support through rapid
improvement in rural economic reform and industrially diversified
development; (8) urban economic decentralisation to assure produc-
tion efficiency and completion; (9) upgrading of and respect for
intellectuals to regain their faith in the Communist party and its
leadership: (10) thorough reform of the Communist party to lead
the country into the 21st century in peaceful reconstruction; (11)
abandonment of ideologically futile arguments to liberate the creative
intellectual power of the people and leaders; (12) domestic policy
experiments in all fields when necessary, such as the system of
responsibility farming, etc.; (13) 'socialism in one country', to
cooperate with and aid socialist movements abroad, and to maintain
China's independence for world peace through contacts with the two
superpowers. These thirteen categories of goals and strategies may not
exhaust what is in Deng's mind as areformer or as the remaker of
China in a different mould from what Mao and the Russians had hoped
for. Mao seemed to want a China in permanent revolution, while the
Russians wanted a weaker and dependent China subordinate to the
Soviet domination. Deng clearly hopes to build a modernised China
which is proud of its heritage, capable of self-defence, respected by all
nations and eager to make a positive contribution to world peace.
When he returned to power in 1977, he was faced with a formidable
situation in which Hua Guofeng was the premier whose legitimacy to
leadership derived from Mao's decree. Hua could not lead any fight
against Mao's ideological leftism. Instead, he had to hoist higher
Mao's flag of leadership to help himself retain power and to inspire
other Mao followers. Hua could not do less than to work harder to
unite his supporters and Mao's devotees to consolidate his own
leadership position against Deng's moderate faction.
After the Tiananmen Square Riot on 5 April 1976, Mao immedi-
ately made Hua the Premier from his position of acting Premier. After
 Deng's Return and Reform 31

Mao's death on 6 September Hua was able to get himself elected by the
Politburo to be chairman of the party to succeed Mao and Chairman
of the powerful Military Affairs Committee of the Communist party.
This was a position from which Mao dominated the armed forces. It is
the same position Deng holds today. Secondly the majority of the
members in the Politburo were still Maoist. Hua had resisted strongly
and artfully Deng's return to power. As mentioned earlier, Deng
himself wrote to Hua to indicate his wishes to serve the country and the
party. Hua did his best to postpone Deng's return in order to better
fortify his own defence. However, pressure came from many
directions demanding his return. Several strong military leaders also
urged his resumption of power, induding Deng's dose friend Xu
Shiyou of the Guangzhou military command. Vice premier Li
Xiannian, now president of the country, and defence minister Yi
Jianying, 'the king maker after Mao's death' , were the strong voices of
the moderate faction on Deng's behalf. The media and the public
eagerly expected his resumption of leadership in some major posts in
the party and in the government.
Meanwhile, the Gang of Four sat in goal. But those who had been
dose associates of Jiang Qing were still in high posts. Some of them
were members of the highest policy-making body, the politburo.
Others were in the State Council or cabinet as ministers and vice
premiers. And a few high military commanders had also been strong
supporters of Jiang Qing, induding Chen Xilian, the Beijing military
district commander. These factionalleaders had lost their chiefs since
the arrest of the Gang of Four through joint efforts of Hua and the
defence minister, Yi Jianying, and Wang Tong Xing who had been
dosest to Mao as director ofthe party central office. In short, Hua was
in a very precarious position. On the one hand, he dearly needed the
support from all anti-moderate forces against Deng. However, he had
to arrest the Gang of Four who were Deng's arch enemies. Hua could
not hold on to his leadership without the support of moderate Li
Xiannian, Yi Jianying and several military commanders. Without a
strong base of political power of his own in the party and the
government, Hua eventually gave up in 1977 and Deng came back to
power in J uly 1977.
It is easy to understand the lack of leadership stability in Beijing
when Mao died. The Gang of Four made a bid for power. They wanted
Zhang Chunqiao to be the premier. Jiang Qing hoped to become the
party chief. Even Wang Hung Wen expected to be the head ofstate. It
was rumoured that Wang Hung Wen had had his official photo made
32 China Under Deng Xiaoping

as head of state long in advance in preparation for the leadership

takeover. The arrest on the Gang of Four quickly silenced many
rumours. Some Mao followers resented Mao's wife, Jiang Qing, and
helped Hua retain his leadership longer than he deserved. Wang Tong
Xing was the strongest among those loyal to Mao only. It was, in fact,
Mao's 8341-strong security force, the palace guards, who made the
arrest of the Gang of Four in October. 7 The alliance between Wang
Tong Xing and Hua Guofeng made Deng's return more difficult. This
and many other complicated factors were responsible for explaining
why Deng did not come return to power immediately after Mao's death.
These same factors in party factional struggle were responsible for
Hua 's election to become the Chairman of the Communist party and the
Premier. Illegally he had been made Premier by Mao's handwritten
edict, not by election of the politburo or the Central Committee of the
party. Chairman Mao, the cause of all conflicts toward the end ofhis life,
was hirnself unwilling and unable to trust anyone around hirn - not
Deng, not Jiang Qing nor Zhang Chunqiao. He chose Hua as acting
premier instead of the 'presumed automatie promotion' of Deng as
premier upon Zhou Enlai's death. Presumably, Mao chose Hua either
as a transitionary caretaker or for a test period to try his ability.
However, after the 5 April violence at the Tiananmen Square, Mao
nervously and quickly enpowered Hua as Premier to strengthen his
rising leadership . Mao expressed his fear and suspicion of everyone else
by writing to Hua the following: 'when you are in charge, I am at ease'.
Without being elosely identified as a Maoist, Hua slowly gained the
support of all those who had been Mao's devotees, ineluding Jiang
Qing's followers. Such was the environment when Deng attempted to
return to power.
Once in power, Deng patiently watched Hua's own 'Iittle leap
forward' fail. He observed Hua's lack of sensitivity by trying to imitate
Mao's style; while Deng's own motto was 'speak less and work more'.
Slowly but steadily, individual Mao followers were forced to leave their
posts. The media and the public began to criticise indirectly the policies
of the cultural revolution. 'Democracy Wall' in Changan Road
vehemently condemned the corruption in the government through 'Big
Letter Pao' in the Democracy Wall. Several military leaders were
removed for their elose association with the Gang of Four, ineluding
Chen Xiiian, the Beijing Military District Commander.
In late 1978, at the Third Plenum Session of the Eleventh Party
Congress, Deng's supporters finally achieved a majority in the party
leadership, while Hua Guofeng remained as premier with less and less
 Deng's Return and Reform 33

actual power over policy making of his own government. Deng won
the struggle without advancing himself into higher offices. He
remained as Vice-premier until his official retirement from govern-
ment, but not from his important post in the party as chairman of the
Military Affairs Committee. 8 Deng's success resulted from several
major steps. First of all, he speeded up the rehabilitation process to
bring back to leadership many well-known victims of the cultural
revolution. For example, Chen Yun had been chairman of state
planning commission since the early 1950s. Peng Zhen was the
powerful mayor of Bei jing before his purge in early 1960s as a elose ally
of Liu Shaoqi. General Wang Zhen and Field Marshall Luo Ruiqing
were well-known leaders of the People's Liberation Army. Other
leaders, ineluding Yang Dezhi, Keng Biao, Wan Li, and most
important of all, Hu Yaobang, were all back in power shortly after
Deng's own rehabilitation for the second time in 1977. His second
major action was to remove those who 'helicoptered' themselves to the
membership of the political bureau as benefactors of the cultural
revolution. They had been elose allies of Jiang Qing or 'unconditional
yes men' of chairman Mao. After the removal ofWu De, the mayor of
Beijing, Chen Yongqui, the hero of Dachai, Ji Dengkui, a vice-
premier and Wang Dong Xing, a party vice chairman, Hua's position
in the political bureau was drastically weakened, while Deng's suppor-
ters grew more numerous. It was, however, a zigzag struggle. Some of
the members in the political bureau did not want to be closely
identified with apower struggle. For example, General Li Desheng,
the commander of the Zhenyang military district and a benefactor of
the cultural revolution, and Deng's own early elose ally, General Xu
Shiyou, objected to campaigns against Mao. Even Li Xiannian and Yi
Jianying feit that Hua Guofeng could be preserved to join the
moderate new leadership under Deng. However, by the Fifth Plenum
of the Eleventh Congress in 1979, Hua's position in the political
bureau was much weakened. His resignation from the premiership and
party chairmanship was expected but he fought to delay it again.
On the other hand, Deng advocated party collective leadership
against Mao's era of 'deified helmsmanship' . He suggested the
abolition of party chairmanship in the new draft party consitution in
favour of restoration of the party secretariat which Mao abolished dur-
ing the cultural revolution. Deng also gained from nationwide TV
broadcasting the open trial of the Gang of Four to fully discredit the
'tyrants' of the leftist radicals. The final most critical reason for Deng's
political victory was his ability to instigate are-evaluation of Mao's
34 China Under Deng Xiaoping

place in the communist revolutionary movement. Without this major

step, the moderate pragmatist Deng and his followers could have had
many more difficulties ahead in ousting Hua.
Implementation of the four modernisations required a drastic
change of attitude toward a realistic evaluation of the past mistakes
made by Mao both in policy and in ideology. A liberation of mind from
Mao's ideology of the cultural revolution was essential in opening up
the country to foreign science and technology, management methods,
and capital investment. Readjustments and reform in China's rural
and urban economic development required removal of the rigid
central control and egalitarian ideology. Without an evaluation of
Mao's achievements and mistakes, it was almost impossible to unite,
under Deng, miIIions of party cadres and hundreds of top-level
Maoists in the government and the armed forces. An evaluation of
Mao's pi ace in the revolutionary struggle was unavoidable in order to
remove Hua's Maoist claim to leadership. Mao's personality cult, for
example, helped Hua to consolidate his position and to unite Mao's
blind followers. As expected, at the time of the party's Sixth Plenum of
the Eleventh Congress in June 1981, the evaluation of Mao's record
and the resignation of Hua as premier came about simultaneously.
The unanimously approved official party document on Mao was
titled 'The Resolution of the Central Committee of the Chinese
Communist Party on some Historical Problems Since 1949,9. This
document, indeed, was a review of all major intra-party conflicts and
factionalism, with emphasis on Mao's policy mistakes in two decades,
1956-76. It was a document allowing Deng to advance rapidly his
modernisation and reform. In it, Mao's policy failure in the late 1950s
and du ring the cultural revolution was bitterly described. The
document also reviewed China's overall revolutionary circumstances
under Sun Yat-sen and described how the Communist Party was born
and taken into alliance with the Nationalist party prior to 1927. Mao
was credited with great leadership during the first twenty-eight years
before victory in 1949 (1921-49), especially his role in setting up the
Soviet base in Jiang Xi, during the long march and his creative
contribution as a theoretician, a strategist, and a reform leader in
Yanan shortly before the victory of the Second World War. The
document also credited the communist victory in 1949 as a victory over
feudalism and imperialistic foreign capitalism as weil as a victory for
national 'true independence and unity' under proletarian 'democratic
centralism' for socialist construction in a new pledge for a c1assless
society. It further hailed the success in economic rehabilitation, rural
 Deng's Return and Reform 35

land reform, and successful urban socialist construction during the first
Five-year Plan (1952-6). The document complained that Mao depar-
ted from and compromised the party's correct position on economic,
political and social development as adopted at the Eighth Congress in
1956. The nation in 1954 began its orderly constitutional practice of the
'New People's Democracy' and successfully persuaded the intellec-
tuals in the early 1950s to join in national development. However,
Mao personally initiated the 'catastrophic failure' plan of economic
development since 1957 against the loyal and patient advice of Liu
Shaoqi, Zhou Enlai, Chen Yun, Deng Xiaoping, Zhu De and others
who collectively tried to persuade Mao to agree to and to adopt, for
example, Chen Yun's proposal on economic planning on the basis of
actual reality. In the interest of the country and with a concern for the
well-being of the masses, Deng Xiaoping's proposal on reform of
industrial enterprises, improvement over enterprise management and
worker's participation in enterprise decision making was ignored by
Mao. Zhu De's suggestion on the need to diversify cottage industry
and the need for a multiple management approach toward agriculture
and Deng Zihwei's urgent recommendation for the adoption of a farm-
ing responsibility system were also rejected by Mao in the late 1950s.
All these critical proposals for adjustment and reform in the late
1950s could have been adopted had it not been for Mao's opposition in
favour of his own commune and the 'great leap' policy. Tbe document
admits that the party under Mao's leadership mistakenly classified
many loyal intellectuals within and outside the party as 'anti-regime
rightists' and subjected them to unjustifiable humiliation and purge.
Mao's radical leftist subjectivism, blindness, arrogance and the
unrealistic expectation of very high agricultural and industrial
production were indefensible. The failure of Mao after the Lu-shan
conference in July 1959 to reverse his fatal mistakes of the 'commune'
and the 'leap' was compounded by his mobilisation within the party to
oppose comrade Peng Dehuai and other so-called 'rightists'. Mao
arrogantly insisted on his subjectivism to cause political and economic
sacrifice and suffering by the masses. Fortunately, later at the party's
Central Working Conferenee in January 1962, some of Mao's
political and eeonomic poliey mistakes were adjusted or partially
eorreeted. The majority of those wrongly aeeused by Mao at the
Lu-shan eonferenee were rehabilitated. However, Mao persisted in
wrongly expanding 'the dass conflict' whieh again caused in 1964-5
many cadres to suffer. Mao's subjeetive ideological eriticism was again
intensified against intelleetuals in 1964-5. He failed to appreeiate the
36 China Under Deng Xiaoping

party's effort to bring the economy back on the right course toward
modemisation in industry and defence. The mistakes of the anti-right-
ist movement and economic catastrophe during the ten-year period,
1956-66, should mainly fall on Mao's shoulders. His personal
dictatorship seriously damaged the party's democratic centralism.
'Personality cult was not corrected ... these mistakes led eventually to
the outbreak of the cultural revolution. 10
The document correctly summarised Mao's worst behaviour which
contradicted Mao's own writing during the cultural revolution,
1966-76. He personally led the 'ten years of horror' on the false
accusation that the party, the army, the government and the cultural
sphere had been infiltrated by 'a great number of capitalist representa-
tives and anti-revolutionary revisionists'. They had penetrated, he
insisted, all levels of the government and organisation. Mao further
insisted, the document says, that there was no other way but to
mobilise the masses to 'openly and completely' uncover them in order
to regain political power by the proletarian dass. Events proved that
Mao himself violated the precepts of Marxism and misjudged the
existing reality. The document repudiates Mao's charges as follows:
(1) there were no facts to prove the takeover of the country by the
capitalists and the revisionists; (2) the cultural revolution purged
those who were actually the leading cadres of the party and in the
country; (3) only in name did the cultural revolution rely on the
masses. It, in fact, deviated from the masses and the party; (4) events
proved that the cultural revolution was not and could not in any sense
be called a revolution or social progress. It was not 'a struggle against
enemy'. It was a 'self-distortion and confusion'. The cultural
revolution itself had 'neither economie nor politieal basis. It could not
propose any constructive policies. It merely created serious disorder
and destruetion ... It brought for the party, the country and the citizens
of all nationalities internal ealamities. ,11
The document against Mao further specifies how Premier Zhou
Enlai worked to preserve order and unity and how the Lin Biao and
Jiang Qing factions plotted against Zhou and against each other. It
described how Mao vacillated and failed to support Deng after Zhou's
death and failed again after the 5 April 1976 revolutionary incident at
the Tiananmen Square. The rest of the document turns to Deng's
struggle to rehabilitate many leaders and cadres since 1977 and the
failure of Hua Guofeng to create his new leadership after Mao's death.
Instead, Hua followed dosely in almost every respect Mao's footsteps,
especially in his support for Mao's Dachai agricultural poliey and a
 Deng's Return and Reform 37

tendency to create a personality cult of his own. The document

describes the need for Deng's effort to restore the party leadership, the
correct role of Marxism-Leninism and Mao Zedong Thought as the
guiding signposts in 'socialist construction with Chinese characteris-
tics'. In short, the document concludes that Mao's contribution to the
communist revolution up to 1976 was far greater than his mistakes.
And Mao's Thought shall remain to guide the party. It ends with a call
for unity to develop a modernised strong nation.
Having evaluated Mao's place in revolutionary history , criticised
Hua's leadership failure, and publicly tried Jiang Quing and her
cohort, Deng was now able to convince more colleagues and the
people of his genuine devotion to go a long way in reforming the
political system, the party internal leadership structure, and the
economic changes. He had, by 1981, broken down the political
resistance within the party and in the army to criticism of Mao. The
next major concentration for Deng was to choose his own successors to
Hua as party chairman and as new premier. Deng hirnself could have
easily retained and occupied the major posts, the practice in nearly all
other communist countries. But he deviated from the usual practice in
favour of what can be called a personal sacrifice for genuine 'peaceful
revolution' under his own control.
Deng himself was approaching the age of eighty when Hua resigned
in 1981. No one was as strong politically or in as good health from among
his own generation. Old Marshall Yi Jianying was dosest in prestige
and reputation to Deng's stature. But he had been suffering from ill
health. Deng would have lost a great deal of prestige and leadership
capacity had he himself remained officially in the top posts of the party
and the government. He would not have been viewed as such a great
reformer and been so weIl respected had he not reached out for
younger leaders to divide up Hua's leadership role as party chairman
and premier. As a pragmatist, Deng chose successors not on the basis
of ideology, but on the merit of efficiency and ability to succeed, to
innovate, to experiment and to share politicalleadership with others.
Thus he selected Zhao Ziyang as 'premier apparent' months before
Hua's resignation (as vice-premier in charge of daily administration
routine). On the other hand, he selected Hu Yaobang as party
chairman temporarily, pending the revision of the party constitution to
abolish the post of chairman in favour of restoration of the post of party
secretary-general which, in fact, becomes the highest party post. 12 Mao
abolished the post of the secretary-general at the 9th Party Congress in
1969, a post Deng himself had occupied during 1954--66.
38 China Under Deng Xiaoping

One of Deng's major reform proposals has been the restoration of

'party collective leadership' as reaffirmed at the Eighth Party Congress
in 1956. But Mao as chairman ignored the past practice of collective
decision making. Mao's personality cult grew out of his chairmanship
that gathered the prestige and power in the hands of the single
occupant of ·the post. The secretary-generalship is a chief administra-
tion post only, at least in theory. Its occupant is 'one and the first
among equals'. It is, therefore, far more difficult for the secretary-gen-
eral to usurp the shared leadership roles of his fellow secretaries of the
secretariat. At the Twelfth Party Congress in 1982 Hu Yaobang
became the secretary-general. What do we know about Deng's chief
successors? What are their major qualifications and their relations
with Deng? Are they acceptable to the rest of the party? Can they lead
the nation effectively after Deng's departure? How do they share
power with Deng on the one hand, and with other fellow decision-
making contributors on the other? It is impossible to answer precisely
all these questions at this time. With regards to Hu Yaobang and Zhao
Ziyang, it appears by now that, after six years of actual exercise of
power since Hua's resignation in 1981, they each have acquired a
sufficient amount of administrative skill and experience to have met
the approval of the nation and Deng's satisfaction. Hu worked closely
with Deng in the 1950s and 1960s as an organisational leader of the
party's Youth League. He joined the party as a young boy and
experienced the Long March. He was assigned to various party and
military posts before the cultural revolution. Mao purged hirn in the
196Os. Deng rehabilitated hirn in 1977. He seems to be aleader with an
open mind and a spontaneous frankness. He is ideologically well-in-
formed on Marxism-Leninism and Mao Zedong Thought. Thus he was
the 'official party theoretician' who proved eager to implement
changes and reform and to share power with others.
Deng rehabilitated Hu only one month after his own last return to
power, as a partner in the struggle to regain leadership in order to
implement the four modernisations. Deng may have had Hu in mind in
1977 as his successor, but Hu, in fact, was merely one of Deng's several
dose associates. They induded Zhao Ziyang, Wan Li and others. Hu
has had more party experience than Wan Li and others. Thus, Hu is
more familiar with party work in contrast to those who have been
better acquainted with government work. For example, Hu, at one
time, was a director of the organisation department of the Eighth
Route Army, later a political director of a branch campus of the
Anti-Japanese War College, a political commissar of the 18th Army
Corps at a stilllater date, and First Secretary of the Communist Youth
 Deng's Return and Reform 39

League in the 1950s. He also worked in Deng's horne province in

Northern Sichuan. In the 1960s he was once the Acting First Secretary
of Shaanxi Province, a Secretary of the Northwestern Bureau of the
party and Deputy Secretary-General of the Chinese Academy of
Science. He remained longest on the top post for fourteen years in the
Youth League. Thus, Hu had closer working experience with Deng
when both were in Sichuan in the early 1950s and also in Beijing in the
late 1950s. Deng knew Hu also through close private friendship as a
bridge-playing partner. In 1975 when Deng was back in power during
Zhou's premiership, Hu became Deng's very close intimate. Hu's
greatest assets, which no one else seemed to possess, include his
organisational ability, propaganda experience in the cultural field, and
his working knowledge of non-communist thought through the United
Front organisations. Finally but most important of all , Hu has
achieved very great skill and knowledge in interpreting Marxism-
Leninism and Mao Zedong Thought. Hu's own political power base
includes the rank and file leaders of the Youth League and its mass
membership. Presently, the party favours choosing top leaders from
those with strong League background. In comparison with others around
Deng, Hu has the best credentials as party leader and enjoys Deng's best
confidence. 13
In his early years, Hu did not receive much formal education. How-
ever, he was always an eager learner. Indeed, he acquired asolid
foundation in working knowledge and tested ability. As a political-
organisational leader his knowledge and experience include: (1) a
good foundation in history ,literature and ability to write, especi-
ally on Chinese history and Chinese classic literature which are
often cited in his speeches; (2) his communication skills demon-
strate logical consistency in written manuscript and richness in
content, although he may not be a inspiring speaker because of
his shrill voice; (3) his administrative ability has an accumulated
advantage of many decades in the party, the army and in the Youth
League which is almost as long as Deng hirnself in similar capacit-
ies with the party. Since 1977 he has helped Deng enormously
as the party's organisation department director and later as propa-
ganda department director to defeat the followers of Mao and Jiang
Qing. Hu communicates best with younger people. As aperson, Hu
is very frank and courteous, unlike Deng who is direct and
confrontational. Hu is also deeply respectful of intellectuals who see a
great difference between Hu and Mao in their disposition toward
intellectuals. He is also an efficient and persistent leader who demands
quick implementation of policies in spite of overwhelming difficulties.
40 China Under Deng Xiaoping

But he is a faetion-oriented reformer who, sinee the early 1980s, has

made major appointments largely from his own followers. One of his
traits is his impromptu and often sentimental remarks that receive un-
favourable media reaetion, one of the reasons for his removal in 1987.
Sinee his return to power, Hu has helped Deng speed up his
rehabilitation programme and has participated in the reform poliey
formulation and exeeution. It was important to Deng when Hu
replaeed Guo Yufeng as the Organisation Department direetor ofthe
party in late 1977. Hu's faithful exeeution of Deng's poliey to return
loyal eadres to positions of power in the party and government
weakened Hua Guofeng's leadership at all levels, including the army.
The seeond most important eontribution from Hu was his persistent
effort to formulate a theoretieal basis for Deng's pragmatie poliey.
Deng's realism needed a well-supported and aeeepted eriterion to 'test
truth from praetiee' . Hu persuaded the Kuang-ming Daily and several
party sehool publieations to publish professor Hu Fuming's philo-
sophieal article in 1978 whieh advoeated 'praetiee as the only test of
truth'. The party's theoretieal journal, Red Flag, under Hua's
eontrol, refused to diseuss and publish professor Hu Fuming's article
on truth eriterion. The Party's propaganda department under Zhang
Pinghua as its direetor stonewalled the theoretieal debate. It was,
indeed, Hu's effort to eonvert the blaek-and-white eat speeeh into a
broad theoretieal foundation that justified Deng's poliey of reform.
Thirdly, Hu was influential also in eneouraging students and
underground papers and publieations to speak up via the 'Demoeraey
Wall' in Beijing. This praetiee for aperiod of two years (1979-80)
attaeked some of Mao Zedong's Thought and the followers of Mao
while Hua was still the head of the party and the government.
Pressures were being built up gradually before the Third Plenum of the
Eleventh Party Congress in late 1978. It was at this meeting that
Deng's followers opened their attaek against Hua and his supporters.
The Deng-Hu pragmatists aehieved a majority at this meeting for the
first time. Shortly after the Third Plenum, Hu beeame the direetor of
the Party's propaganda department to replaee Hua's man, Zhang
Pinghua. In short, Hu beeame Deng's right-hand strategist and fighter
against Hua Guofeng and other Maoists after his own rehabilitation in
1977.
The seeond most important 'heir apparent' as premier was Zhao
Ziyang, now Seeretary-General. Zhao is from the North eentral
China provinee of Henan. He was born in 1919 and, is therefore, four
years younger than Hu. Zhao had remained a loeal party eadre in his
 Deng's Return and Reform 41

horne province during the war years of Japanese aggression. He

became influential only when he followed the liberation army in its
move southward in 1948-49. Zhao was merely a party local function-
ary at this time. Shortly after reaching Guangdong, Zhao became one
of the provincial party secretaries. He was later promoted to the
position of first secretary at the young age of forty-five. During the
cuItural revolution, he was purged. In 1973, Premier Zhou rehabili-
tated hirn. He was appointed to a post of regional party secretary in
Inner Mongolia. Shortly thereafter Zhao was returned to his former
post as first party secretary in Guangdong province and director of the
Guangdong provincial revolutionary committee (equivalent of the
post of Governor). His continuing success in Guangdong convinced
the leadership in Beijing that he would be the best administrator to be
sent to Sichuan province where for years, in addition to poor
government leadership, terrible famine and poor harvests had plagued
the population. Sichuan has always been known as 'the richest state
under heaven', yet starvation remained continuous for years. The
people lost initiative in production and in self-help. A reformer was
needed.
Zhao came to Sichuan to change the plight of living, to courageously
reform and innovate. While there, he was the First Party Secretary of
the Province and simultaneously the chairman of the Provincial
Revolutionary committee (the provincial government set up to replace
regular government during the cultural revolution). Soon Zhao was
also made the political head of Chengdu Military District. Thus he
became the most powerful leader in Sichuan and the Southwestern
region of China. With such overwhelming authority, he began to
reform Mao's commune system of production and distribution. He
broke up the commune land and distributed it to individuals, families
and to sm all production teams. They could freely produce whatever
they thought best according to tradition al farming experience. The
farmers could keep for themselves any amount of surplus over what
had to be handed over to the state on a quota basis. The commune's
own brigade, production team and the commune administration itself
were thus rendered redundant and without power over production.
The farm people welcomed Zhao's reform overwhelmingly. Their
initiative and incentive to work soared. Increases in production
multiplied. Zhao also encouraged the rural population to resurne
tradition al marketing among themselves. People could exchange or
seIl for the first time any goods without any restriction from
government regulations. Zhao hirnself went from village to village to
42 China Under Deng Xiaoping

investigate and suggest what the people could do best for themselves.
He also permitted urban small shop owners to open their own little
business in self-help. In only a few years between 1975-8, Zhao's new
reform policy had produced great positive results. There was no more
starvation in Sichuan. People's income increased. New jobs multiplied
and absorbed the surplus labour in both rural and urban areas.
Economic activities diversified and multiplied. There was other new
innovation and new momentum as a result of a new profit-making
incentive on the part of the people. In short, Governor Zhao created a
'Sichuan model' of economic reform. His experience became known
nationwide. In addition, Sichuan is Deng's home province. Deng
could not help he ar about the miraele-like reform success. The whole
nation should now benefit from such a success in the aftermath of the
commune's catastrophic failure.
Deng and Zhao had very little direct working experience together.
Their paths did not cross until after the cultural revolution. However,
Zhao was an expert in economic reform in the late 1970s and Deng
needed such leaders to execute his policy of four modernisations. Zhao
is a self-taught innovative leader who 'learned by doing'.
In 1976, while Deng was out of office and stayed in Guangdong,
Zhao joined Deng's cause in common opposition against the Gang of
Four who were then strong in Beijing. When the Deng-Hu group in
1978 publiely deelared their 'Truth through Practice' , some supported
it while it was opposed by others. Many remained non-committal as an
indirect expression of approval. Zhao, however, enthusiastically
advocated it, and so entered the leadership core of Deng's camp. With
his economic expertise and reform experience, Zhao is best suited
today to translate Deng's four modernisations into policy execution.
Besides, Zhao is an impressive and confident individual who handles
the media and media people expertly. He thinks fast and is good at
public relations. He is also known for his skill at reconciling conflicts in
the decision-making process and in handling personnel issues. Zhao
has been highly praised by colleagues and bureaucratic followers as an
efficient and effective administrator. He appears to have some of the
unique qualities of former premier Zhou Enlai. Therefore, Deng and
Zhao today share a division of leadership, with each enjoying an
exclusive sphere of control. For example, Deng is the final arbiter of
policy conflict and chief innovator of policy measures and directions.
Zhao remains in daily elose charge of party bureaucracy and party
control of ideology and personnel policy-making. Zhao, on the other
hand, is the supreme administrator and innovator of programme
 Deng's Return and Reform 43

planning. This leadership structure is bound to govern smoothly until

Deng's departure. Hu is no longer on the top but may rise again.
On the other hand, Zhao, like Enlai before hirn, is in immediate
daily contact with a much larger bureaucracy. Zhao is better known
throughout the country. He maintains a closer relation with the masses
in general. His popularity is rising. In style, Zhao is a polished and
impressive leader. Since his takeover ofthe premiership in 1980, much
success in economic and social reform has been achieved. Within the
party circle Zhao has been highly praised for his sense of stability and
his quick mind. He is also quite prudent and capable in public relations
and in diplomatie visits abroad. Like Zhou, Zhao has travelled very
widely, recently to some forty countries on state visits. He has built
global understanding of China and made an acquaintance with many
contemporary world leaders. He is, in addition, appearing younger
than his age. Nothing seemed to encourage hirn in his top leadership
ambitions. He seems to have shown no desire to succeed Deng and to
have concentrated only on economie decision-making power in his
office. Around hirn are several young rising stars, including Li Peng
and Tian Jiyun as vice premiers who are competing to succeed Zhao's
premiership in early 1988.
In 1985 a party conference was held in Beijing to restructure the
party's top leadership.14 At this time 131 senior veteran top level
leaders resigned. A half dozen members of the Political Bureau had
also resigned a week earliei. They included, for example, Marshall Yi
Jianying, and Madame Zhou Enlai and Wang Zhen. These resig-
nations created a grand opportunity for the conference to elect about
179 young leaders during the week-Iong session. This was an
extraordinary party meeting to accomplish an extraordinary recruit-
ment task. As reported, fifty-six seats of the Central Committee and
thirty-four on its alternative body were filled. Fifty-six older indivi-
dual colleagues were elected to the party's Central. Advisory
Commission and thirty-three to the Central Commission for Disci-
pline. This smooth transition in leadership was an achievement of
unusual persuasion on the part of Deng and Hu. This was another
large measure against lifelong tenure as practised in nearly all other
communist states. The conference was presided over by Hu Yaobang.
It was itself clear evidence of Hu's leadership role next only to Deng.
During the conference, a total of ten seats were designated for new
occupancy on the Political Bureau. Such a large-scale election has
drastically lowered the average age of the centralleadership. The first
generation veterans are practically all gone. Their seemingly voluntary
44 China Under Deng Xiaoping

resignation has avoided the impression of a purge. The retired leaders,

however, still can help around in other advisory capacities. Deng and
Hu do not push them away from Beijing. They still retain their official
automobile, government residence and all other benefits as if they
were still in office. Mao did not want to deal with colleagues in this
way. Deng must be credited for such an accomplishment. One report
indicated that China is 'left more thoroughly prepared than ever in its
modern history to transfer power when an aging top politician leaves
the scene' .15 With the election of several well-known younger leaders,
the second-tier group will succeed Deng's successors toward the end of
this century. The result of this leadership transition has been credited
to Deng's hard work in three years since the Twelfth Party Congress in
1982. Among the elected in September 1985, the following attract
special attention: 16

1. Hu Qili, age fifty-eight, a new member of the political bureau,

groomed to succeed Hu Yaobang (they are not related). Young
Hu is also a member of the Central Secretariat and an efficient
organiser. Deng considers hirn the 'talent for Secretary-General'.
He was a student leader ofBeita in 1948-51, a former high official in
the Youth League, was purged during the cultural revolution, and
became mayor of Tianjin upon rehabilitation in 1978, standing
Committee member of Politburo in 1987.
2. Li Peng, age fifty-nine, educated in the Soviet Union, presently
also a vi ce premier with special responsibility (since July 1985) to
develop educational expansion and reform to meet the moderni-
sation needs in coming decades. He was adopted by the late
premier Zhou. At the recent party conference he was promoted to
be a member of the Secretariat and the Political Bureau. Li is an
engineer by training in the Soviet Union in the 1950s. He is
considered an expert on energy development. His parents were
revolutionaries and were killed. He grew up for some years in
Hong Kong before it was occupied by Japan after the Pearl
Harbour incident. In 1985, Li accompanied President Li Xi an ni an
on astate visit to the United States. He was made a member of
Party Central Committee only in 1982 and acting Premier after
Zhao in 1987.
3. Tian Jiyun, age fifty-eight, a vice-premier for several years, a
protege of Premier Zhao Ziyang since their days in Sichuan
province in the middle 1970s, thus a contender for Zhao's
premiership some day. He is now also a member of the Political
Bureau and the Secretariat. Tian has the Sichuan experience as a
 Deng's Return and Reform 45

rural reform expert. He was one of the authors to draft the urban
economic restructuring package in 1984.
4. Wu Xueqian, age sixty-five, foreign minister since 1982, a Hu
Yaobang confidant. This year he was promoted to be a member of
the Political Bureau.
5. Qiao Shi, age sixty-three, a new face in top leadership. In 1985 he was
made a member of the Political Bureau and the Secretariat. There
is very little known about his distant or recent past. In 1987 became
a member of the Standing Committee of Politburo.
6. Yao Yilin, age seventy, has been one of the four vice-premiers
and until now an alternate member of the Political Bureau. He has
been known as an economic expert on oil development. Yao is a
confidant of President Li Xiannian of the Republic. In 1987 become
a member of the Standing Committee of Politburo.
7. Hao Jianxiu, age fifty-two, the only woman among the eight to be
promoted to the Secretariat.
8. Wang Zhaoguo, age forty-six, a former car factory manager, the
youngest among the eight. He is now a member of the Secretariat.
In short, from 1977 to 1985, Deng has fought all the way to create
and stabilise a pragmatic leadership in the party and government. It
can be said that he has succeeded weil in peacefulleadership reform.
Mao could not do this without a blood bath. Deng has done it with
popular acclamation. There lies the difference between an ideological
visionary and a pragmatic realist. One leader's failure created the
circumstances politically and ideologically for another to succeed.
Deng came back to power at the right time when the abused nation
was waiting for such aleader to emerge. Hua Guofeng was not
prepared nor experienced enough to initiate what Deng had long
prepared to do if the opportunity should come, which it finally did.
Could Deng's sucessors afford to do less than Deng? In January 1987
Deng removed Hu in order to balance off resistance from the leftists to
save his continuing reform.

2.3 DENG'S 'FOUR CARDINAL PRINCIPLES' AND NEED

FORPOPULARSUPPORT

Before Mao's death, Zhou and Deng had acquired their popular
approval and support throughout the country. This was repeatedly
expressed by the common citizens and those who resented Mao and his
46 China Under Deng Xiaoping

wife during the cultural revolution and during the succession struggle
immediately after Zhou's death on 8 January 1976. The people were
bitter and sad when the Gang of Four did not allow the media to be
more fully used during the mourning for Zhou. They were stunned
when Deng was not made Zhou's successor. Most citizens in China
were happy three months later when the people in Beijing expressed
their mourning for Zhou on the memorial day at the Tiananmen
Square which led to Jiang Qing's angry decision to suppress such
spontaneous shows of emotion and respect for Zhou. Thus, on 5 April
1976, violence occurred.
Zhou and Deng have shared a common cause against the Gang of
Four. Deng also inherited Zhou's legacy of popularity to add to his
own. Without this popularity throughout the country, Deng could not
easily and realistically dream of areturn to leadership. He knew weil
the country and people were on his side in the leadership struggle. He
understood, of course, that more was at stake than his personal cause.
The supporters of Jiang Qing, Lin Biao and Hua Guofeng within the
party, the army and the government knew also the outrage of the
people against them. Deng's task was to fight the Maoists, the Huaists,
and the followers of Jiang Qing and Lin Biao. He had to win the
majority support of the party, army and those who would make
political decisions. But how to win support was still a problem and a
major crisis for Deng, in addition to strengthening his own popular
support. To broaden the party's support, he declared his Four
Cardinal Principles once back in power. Furthermore, to redeem the
party Deng had to reform the party which had been radicalised and
controlled by his political enemies. He had to consolidate the armed
forces under the command of the party and within his personal control.
However, the military was dangerously divided ideologically between
those supporting Jiang Qing and those loyal to the Lin Biao faction or
devoted to the defence of Mao's legacy. Deng had worked with all
these factions and divisions at every level of government, party and the
army. As a political pragmatist, he mended their conflicts, divided his
enemies, and won them over to his point of view. This immediate
political crisis for unity under hhn required Deng to pledge his loyalty
to Marxism, party leadership, the socialist path, and proletarian
democratic centralism. In the long run, these four principles will also
help him retain all the necessary support to build a 'New Socialism with
Chinese Characteristics'. Therefore, he had to assure those in the
 Deng's Return and Reform 47

party, the army and the government that he would not abandon any of
the fundamental tenets of the communist revolution.
In the realm of ideology, Deng hirnself has always been a Marxist
revolutionary. He could not possibly abandon any single one of the
four cardinal principles, especially the leadership of the party and Mao
Zedong Thought in order to silence his opponents who are still doubtful
of his ideological commitment. In the long run, his reform would no
doubt work only at the expense of his ideological rivals. Thus Deng
had to reasure them that a new capitalist China would not emerge.
Moreover, Deng hirnself might not know the long-term ideological
implication of his reform or 'peaceful revolution'. Where will China be
ideologically twenty or thirty years from now as a result of Deng's
experiment in reform? How will Deng's 'reform experiment' end in
terms of changes in the political system and a new economic entity? It
is quite possible that Deng hirnself could not tell in 1978 shortly after
his victory at the Third Plenum of the Eleventh Party Congress. It is
also possible that Deng did not wish to anticipate ideological
development. The future can be left to future generations to decide
that issue. He only needed to be sure that whatever he did was right
and necessary at the time. Therefore, ideologically in both the short
and the long run, Deng's insistence on the four cardinal principles has
been realistic and expedient. These principles summarised weIl wh at
all Marxists can agree upon and want to follow or achieve. It is within
these guiding principles that a new ideological framework can emerge
as 'truth from practice'. This stand as taken in late 1978 by Deng and
his associations has provided them with the freedom of choice to
experiment in 'Socialism with Chinese Characteristics'. Within the
scope of these four cardinal principles, they can promote also new
policies to carry out their other concrete pledges which include (1)
socialist legality; (2) collective leadership; and (3) a united front with
other political parties through the CPPCC (Chinese People's Political
Consultative Conference, which has existed since 1949 but largely as
window dressing). What is the extent of practice of the rule of law as
suggested by 'socialist legality'? At what level of practice will Deng's
'collective leadership' be implemented? What are the 'characteristics'
of his 'Chinese Socialism'? There are no precise answers, but one can
speculate that this is precisely what Deng intends now in order to
provide definitive alterations in future years. It may be quite possible
that by the year 2000 AD China's economic and cultural relations
48 China Under Deng Xiaoping

with Japan, North Ameriea and West Europe will have become so
dose that ideological and politieal reform will occur with ease. A
rieher middle-dass society will emerge eventually. We can, then,
determine ideologically the new guidelines for 'Socialism with Chinese
Characteristics' .
For immediate domestic political necessity against factionalleader-
ship struggles in China today, the four cardinal principles have been
officially supported by the party through its propaganda department
and government controlled media. The public cannot compromise it at
all. Tbe official basis for political unity comes from Marxism-Leninism
and Mao Zedong Thought. In short, Deng's four cardinal principles
have performed weil satisfying the immediate or short-term needs of
the reformers. Following the official line, the four principles can be
easily summarised.
Insistence on the four cardinal principles (socialist path, people's
democratic centralism, communist party leadership, and Marxism-
-Leninism-Mao Zedong Thought) is perceived politically as a
fundamental necessity to assure the success of the four modernisations
(in agriculture, industry, defence, and in science and technology). The
argument of the official party line 'on primary conditions' is to provide
a basis for politieal education to guide the whole nation toward
socialist revolution. Without unity of the party on rededication to
these 'high sounding' and 'guiding' principles, confusion, defeatism
and unexpected new conflicts may emerge within the party and
disorient the masses. Deng seems sincere in his commitment to these
four principles. His power would have been at risk if he had lost party
support and if he had suggested any strange revolutionary ideology
which none could understand. Deng had to reaffirm his dedication to
the four principles before party reform is achieved. Changes in
ideology must wait for new experience in coming decades. As a
pragmatist, Deng certainly was not prepared to decIare, for example, in
1978 that Marxism, being more than one hundred years old, cannot be
expected be solve China's problems. 17 Ideology cannot be abandoned
overnight. Any shift to new ideology is, by the same token, difficult to
accept. Deng knows only too weil the urgency to reform from past
failures. He does not need to worry about the ideology of his reform
experiment. He only needed to announce the basis and goal of his
reform poliey. The broad goal that all wanted to he ar and strive to
achieve induded, for example, better living standards for all citizens,
rural and urban economic reforms, party unity, school reform, and
 Deng's Return and Reform 49

importation of Western and Japanese investment and technology. The

four cardinal principles is a strategy, politically and ideologically, to
assure and unite the nation and meet an immediate need at the current
stage of development.
Deng has reaffirmed the advantages of socialism over capitalism
despite the failures of misguided Maoist leadership in the economic
and ideological spheres in Mao's last twenty years. Why did Deng
insist on communist party leadership? Many people in China today
accept that 'without the communist party, there could not be the
revolutionary victory of 1949'. Party leadership is the beginning of
everything in China. No communist wishes to lose power. Party
leadership, for the foreseeable future, is to be a fact of life and a
necessity for reform. There cannot possibly be the emergence of a new
alternative party capable of competition with the communist. Why,
then, did Deng insist on 'Democratic Centralism'? It is meant to be a
proletarian dictatorship against only those opposed to the regime of
the working cIass, although the workers have little to say on policy
initiative of whatever sort. The enemy of the people turned out to be
Maoist communists, incIuding Lin Biao, Jiang Qing and a few others.
The fourth principle perceives Marxism-Leninism-Mao Zedong
Thought as the 'guiding compass for action'. Why did communists Lin
Biao and Jiang Qing violate the 'guiding compass' themselves? China
under Deng has reaffirmed officially its philosophical faith in Marxism
and also decIared its inapplicability in many respects. Until the time
when new experiment leads to new theory, there is no need for
ideological debate in the coming decades. For the foreseeable future,
China will insist on being governed ideologically by the forces
radiating from the four cardinal principles. 18
Marxist ideologists in China insist that the socialist path is the
inevitable path of human history in China and for all nations. It will final-
Iy replace capitalism. The Chinese communist party officially does not
share the view that capitalism has worked better economically than
socialism. They accept, however, that science and technology in
certain capitalist countries have made greater advances since the end
of the Second WorId War. Overall, Marxists believe that capitalists
and capitalism have done poorly and have become weaker. Economic de-
velopment in leading Western countries and Japan peaked in the 1950s
and 196Os. All ofthese countries since 1970s and 1980s have decIined
in their economic rate of production, and their future is bleak.
Therefore only socialism can save China. Sun Yat-sen tried in his
50 China Under Deng Xiaoping

revolution to save China by following the capitalist path but failed.

Obviously the Chinese media and party theoreticians considered the
commune and the great leap as Mao's personal mistakes and his
deviation from classical Marxism. Many Chinese propaganda special-
ists in the media have related the economic failure since 1949 to
Chinese feudalism of the past and to foreign exploitation during the
preceding one hundred years before communist victory in 1949. China
could not, therefore, advance on equal footing with other countries in
the world. 19 Such an argument is really very unconvincing and narrow-
minded. These propaganda experts have failed to take into analysis
the economic success in Hong Kong, Taiwan, Singapore, South Korea
and Malaysia. None of these Asian nations and half nations has the
blessings of natural resources as China has, nor the internal unity of
democratic dictatorship which China achieved under the communists.
There is no apology sufficient enough to explain the failure of the
Soviet model of political economy in China since 1949. The British did
not make much investment in Hong Kong. Hong Kong has prospered
due to efficient management and people's working incentive for profit.
Singapore had neither raw materials of any kind nor independence
from British colonialism before full sovereignty in 1965. It has proudly
achieved the second highest standard of living in all of Asia, next only
to that of Japan.
In short, the four cardinal principles are of political necessity. They
are superficial policy guiding premises without ideological depth. The
four principles are politically necessary for the leadership to disarm
internal resistance. At the propaganda level, these principles help
build unity and permit the government-controlled media to indoctrin-
ate the public in the view that communism shall win out at last, that
only socialism can guarantee adecent living for all citizens in relative
equality, that socialist democracy and legality is superior to Western
rule of law and capitalist democracy, and that China can be strong only
through the practice of socialism. These may be perceived as the
genuine faith and belief of the communist leadership in China. And
indeed, the current leadership has accomplished many great feats
toward a more open and free society under these four principles. The
irony of it all is that the four principles have not won all the intellectuals
and the former victims of the Maoist dictatorship. Experience teIls the
people what to believe. The experiment to develop 'Socialism with
Chinese Characteristics' will inevitably need to meet the people's
expectations.
 Deng's Return and Reform 51

2.4 IDEOLOGICAL VOID AND SOCIALIST DEMOCRACY

It can be amply demonstrated that in China today there exists an

ideological void which is necessary to allow freedom to experiment
with democracy. Since the death of Mao and the elimination of the
Jiang Qing group in 1976, only Premier Hua and followers have
attempted to preserve Mao's ideological front but failed. Nearly every
intellectual or moderate politician in China today is reluctant to talk
about Marxism or Maoism. People have lost interest in politics and
ideology entirely. Upon his return to power, Deng declared in 1977
'speak less and work more'. In his conversation with other high level
comrades even before his return to power, he insisted that if 'Mao had
been right ideologically, it is a contradiction for the party to
rehabilitate me. Furthermore we cannot, then, declare the 5 April
incident in Tiananmen square in 1976 a correct and revolutionary
one. ,20 In the field of ideology, Deng insists that no one can be always
right and consistent, 'not Marx, not Lenin ... Chairman Mao never
said he himself was always right'. 21 Ideology, Deng believes, can be
misused and misinterpreted. For example, Deng argued that Lin Biao
abused Mao's thought. Worse than Lin Biao, Zhang Chunqiao revised
Mao's thought to suit his own need. In short, ideology can be easily
twisted. On the eve of the 3rd Plenum of the CCP's 11th Congress in
December 1978, Deng insisted in his speech on 'thought liberation'
from ideological misinterpretation of Marxism and Mao Zedong
Thought. Deng said: 22
Liberation of thought, open-mindedness and emphasis of practice
are essential for unity in forward achievement ... when our minds
are open we can, therefore, properly interpret Marxism and Mao
Zedong Thought as guiding instruction to solve our inherited
problems and decide on new issues ... many comrades are close-
minded. They live in thought paralysis or semi-paralysis.

Deng attributed this thought paralysis to disruption by the Gang of

Four, by the destruction of democratic centralism in the party, by
development of the bureaucracy, and the lack of disciplinary criterion.
When thought is paralysed into a formula, many strange phenomena
will occur. For example, Deng complained that 'party leadership'
was misinterpreted as 'party in charge of all things' -party and
government unwisely became one. It seems to Deng that ideology can
become a constraint, a yoke or chain to prevent vitality, creativeness
52 China Under Deng Xiaoping

and adaptation to reality. Thus, in order to change and experiment,

Deng wants ideological truth to emerge from practice. With this
attitude toward ideology, he advocated the four cardinal principles
and left all other ideological issues to future adaptation and
innovation.
Deng's ideological commitment to experimental socialism is
unshakable. But he would not allow the need for ideological abstrac-
tion to disrupt the need for policy flexibility. Ideology does not change
easily. Policy, however, must derive from certain particular circumst-
ances which themselves can change overnight. We can easily under-
stand current ideological premises through reading the revised party
constitution at the Twelfth Party Congress. The policy goals and
structural changes in the constitution reflect 'thought liberation' as
advocated by Deng in 1977.
Deng and Hu have been party organisational bureaucrats. They
believe that the party constitution of each given period of time must be
revised to highlight certain work emphasis. Ideological dogmatism,
personality cult, and radicalleftism were eliminated in the new 1982
constitution. The new policy line of Marxism, new guidelines on new
organisational changes must, at this stage of development, emphasise
'socialist democracy' and 'improved socialist legality'. One of the
features of the new constitution is its restoration of intra-party
democracy and its pledge of cooperation with minor parties and other
non-party individuals in future policy-making. Contrary to the Ninth,
Tenth and Eleventh Congresses, the Twelfth Congress wiped out the
leftist mistakes, while it restored the good tradition of the Seventh and
Eighth Congress experience of 1945 and 1956. Another feature of the
party's new constitution is to raise four qualifications for membership
recruitment: more education, youthfulness, professional specialisa-
tion, and revolutionary rededication. 23 To achieve these goals, the
constitution advocates emphasis on discipline, retirement of senior
officers, creation of a party advisory commission and expansion of
disciplinary inspection. Thirdly, the new constitution insists on
genuine practice of democratic centralism to assure normal political
life within the party for the purpose of unity and command. No one can
seek a personality cult for self-glorification. To achieve it, the new
constitution has abolished party chairmanship in favour of a central
secretariat which consists of a large number of equal colleagues who
are responsible for collective administration decision making in
pursuit of policy decisions made by the political bureau which itself
 Deng's Return and Reform 53

now consists of a younger and larger membership since the restructur-

ing in September 1985.14
It is critical for the party to rede em itself after the popular crisis of
confidence that arose after the havoc of the cultural revolution.
Besides, many problems have internally plagued the party's strength
and its leadership image. Hu Yaobang in his report to the 12th
Congress in 1982 enumerated a few of these internal problems. They
are: weak and ineffective leadership, cadres' lack of a sense of
responsibility in their work, bureaucratic corruption, abuse of power
to further their personal interests and 'seeking privileges to live in
style ... getting involved in corruption, embezzlement and other
serious malpractices in the economic fields'. 25 Much reform and
consolidation remain to be done yet, especially in areas of discipline
concerning economic crimes committed by party members and their
relatives. In July 1985, for example, it became open knowledge that
the highest party and government authorities in Hainan Island
conspired for a long time in automobile purchase and resale for
profit-making in violation of the law. Party reform was expected to be
completed step-by-step by the end of 1986. Without reform in party
leadership, unity and rejuvenation, the party cannot lead the nation
toward the hope for accomplishment of the four modernisations.
On the positive side, it must be observed that the removal of
ideological entanglement has itself been a universally welcome
departure from the days of the cultural revolution. The current
de-emphasis on ideological debate gives the current reform leadership
a freer hand to experiment in socialist democracy, collective leader-
ship and socialist legality without justifying ideologically whatever
policy measure is taken to meet the reform need. The current
ideological void does not, however, imply an abandonment of
Marxism and Mao Zedong Thought. It simply postpones to a proper
future time the revision of the ideological front which will be an after
event without failure. The four cardinal principles will likely be
reviewed or replaced to meet ideological consistency with new reality
under future leadership. On the other hand, a new interpretation of
Marxism and Mao Zedong Thought now would inevitably open a new
battlefield of debate and legitimacy. Without an ideological confronta-
tion, Deng's leadership can easily condemn the leftist adventurism of
Mao's fatal ideology. The Lin Biaoists, the Jiang Qingists, and the
Huaists have all been criticised or tried by the court for their abuse and
misinterpretation of Mao Zedong Thought. Therefore, technically
54 China Under Deng Xiaoping

there is an advantage to be gained from an ideological void. Future

ideology may condemn classical Marxism and Mao Zedong Thought as
they stand today.
There is, however, a future necessity for ideological clarity when the
four cardinal principles (Communist Party leadership, people's
democratic dictatorship, the socialist path, and Marxism-Leninism
and Mao Zedong Thought) shall be no longer adequate to harmonise
and synthesise the new reality with old Marxism and Mao Zedong
Thought. When that time does come, a new interpretation ofMarxism
will emerge. Future criticism against Mao and Maoism will likely be
more condemnatory when his devotees shall have long gone 'to see
Marxism in heaven'. Presently, the pragmatists will continue to
maximise their freedom at ideological expense. In short, it is difficult
to forecast what will emerge ideologically through peaceful trans-
formation. Decades from now China may become very democratic by
parliamentary or Western standards and remain socialist only in name.
Or it will reimpose more non-democractic practices. With current
de-emphasis on ideological rigidity, the void will become less notice-
able or relevant to the general public. Intellectual rationalism and
bureaucratic meritocracy may fill this void as the new criteria for
reward and punishment. In short, genuine democracy and rationalism
in the name of socialism may emerge in the long run.

2.5 REFORM EXPERIMENT AND FUTURE CHALLENGE

Deng Xiaoping and Chen Yun are the most senior leaders since the
retirement of Marshall Yi Jianying in 1985. Their entire life history
since the 1920s has been filled with experiments and challenges.
Success or failure in the past symbolised their party's idealism and
mistakes which brought for the Chinese People many memories
between hope and despair . As an objective observer of the communist
movement in China, one is forced to conclude that in domestic policies
the Communist party leadership seemed blind on many fronts. In the
area of land policy alone, for example, there were the following:
Autumn Harvest Uprising in 1927; Land Reform in Northwestern
China without substantial improvement of the rural living standard;
land to the tillers in 1949-52, land confiscation from the family tillers
in 1955-7, and the commune disaster of 1958-79. These zigzag
 Deng's Return and Reform 55

changes in land policy for whatever reasons brought enormous

instability and suffering in the rural economy. Perhaps, this land policy
of the Communist party under Mao Zedong's grandfatherly leadership
is enough to explain why the Chinese standard of living today is one of
the lowest in the world, although much better than at any time in past
history . It is particularly useful to view Deng's new land policy since
1979 in this historical perspective. The abolition ofthe rural commune
and the implementation of 'responsibility farming' by family or
individuals on long-term contract with the state is an innovation
unprecedented in Chinese land policy history. It is a policy of popular
demand. People love the land. Maoists did not see m to know this or
disregarded the people's wishes in order to experiment with the Soviet
land model in China. In restrospect, the people may ask why the
Communist Party divided land in their favour in 1952 but took it away
only a few years later. At long last, the government has realised it
is better to give land to the farmers who can produce more than they
did under the commune. No nation wants to starve. The Chinese
people for the last thirty-five years have struggled just to avoid starva-
tion. The experience seemed to remind Chen Yun to warn his fellow
comrades not to neglect food production. In his September 1985,
speech he stated: 26 'One billion people must have food and clothes.
This must be one of our greatest concerns. It is also one of political
problems. "Chaos emerges from lack of food". We must not belittle
food issue. '
Land policy failure of the past is an example indicative of other
failures elsewhere, such as urban economic mistakes, disregard for
higher education, political purges of fellow comrades, condemnation of
intellectuals as 'stinking number 9' and blind imitation of the Soviet
model of socialism. In view of all these mistakes, Deng's grand
peaceful reform takes great significance in the Chinese revolutionary
history after 1911. It is a new revolution in peaceful experiment.
Circumstances have afforded Deng the grandest opportunity to
launch this wholesale reform. However, it is also the man who ex-
panded the opportunity in order not to just correct past mis-
takes, but to inaugurate new fundamental changes in the Chinese
political and economic system. Courage for foresight aided by
revolutionary experience has made the post-Mao era an era of
communist redemption in the systematic overhauling reform wh ich
Deng hirnself has called 'a second revolution'. This is why the chal-
lenge is very difficult to overcome because too much is at stake in build-
56 China Under Deng Xiaoping

ing a strong and modernised China. These are multiple kinds of

challenges in this peaceful revolution. To name just a few, they may
include:

1. A rigorous test for the communist leadership after Deng;

2. An introduction of collective party leadership in unity to pursue
the four modernisations and to resist the rise of a personality cult;
3. The development of form and conte nt of 'socialist democracy and
legality' through institutional device and procedure;
4. A drastic increase in national gross income and people's standard of
living to meet and control the popular revolution of expectation;
5. The creation of more jobs and educational opportunities for young
Chinese whether the four modernisations succeed or fail. Young
people cannot remain unemployed without creating disorder;
6. The prevention of party and government bureaucratic corruptions
of all possible sorts, especially the economic crimes by the
privileged few;
7. The retention of popular support in favour of continuing reform
experiment against political instability and ideological revolt or
struggle;
8. An improvement in democratic, elective popular participation in
government, such as allowance for relative expansion of freedom of
speech, the press, assembly, etc.

There are also external challenges that may come from uncertain-
ties, confusions, threats and trade competition in the international
arena. The following may be illustrative of an unending list of issues:

1. Political relations with major powers and Asian neighbours to test

China's peaceful intention against war of any sort, revolutionary or
imperialistic ;
2. Foreign investment and foreign markets in China and their impact
on China resulting domestically from economic and trade
interaction with the rest of the world;
3. The extern al conflicts and pressures against Chinese choices in the
handling of Taiwan and Hong Kong in future decades;
4. The crisis of unification with Taiwan and Beijing's ability to
implement the Sino-British treaty over Hong Kong after 1997 on
the latter's autonomy as prescribed in the treaty of 1984.
 Deng's Return and Reform 57

While Deng is on the political scene, these problems may not even
exist or assurne any great significance. Looking beyond hirn and even
beyond his immediate successors, however, many unexpected difficul-
ties may occur. Deng's reform experiment has been under way only a
few years. Much remains to be institutionalised, routinised, revised or
changed. On the positive side, Deng remains physically healthy. He
has anticipated many of the problems just cited. For example, party
reform is under way and has progressed as planned. New, young and
dedicated cadres equipped with greater professional skill, better
educational background, and a vigorous revolutionary spirit are being
placed vertically at all levels of the party. The economic growth is
moving ahead better than expected, especially in rural development
where people are much more able to organise themselves with only
minor assistance from the government. Intellectuals are much
appreciated and better paid than in the past. Thus, the capacity to
sustain challenge has been more than sufficient.
For the first time since the revolution of 1911, the Chinese people
are promised a definable long period of peace in economic develop-
ment. Civil war, warlordism, and foreign aggression are all out of the
question. The government under Deng provides rational guidelines to
allow the people to work and experiment for their own material
benefit. The people welcome such an opportunity wh ich should have
come to them in the early 1950s. When the government retreats, the
people are able to take care of the interest of the country and those of
their own. In short, China is a nation on the move today. Ironically,
the greater the improvement in the people's living standard, the faster
their expectation rises. This is the common challenge for all Third
World nations. In order to build a new nation both materially and
spiritually Deng must accept the Chinese cultural heritage, not the
foreign utopian model of democratic socialism. But only a modernised
open and democratic society is capable of meeting global challenges
and the internal demand for freedom and equality in the long run.
Democracy cannot be accomplished in one or two generations.
However, faithful dedication and liberal experiment must be
maintained without any interruption. Deng appears willing and
capable of contributing to such a strong foundation. Otherwise, his
effort is but another short-term experiment in peaceful reform, which
may end with his departure.
An account of Deng's success in reform during the last several years
since his return in 1977 looks, indeed, impressive. For example, he has
58 China Under Deng Xiaoping

removed and discredited the Gang of Four, Hua Guofeng and his
associates, the major blind followers of Mao from within the party, the
army and the government. Above all, he has successfully and artfully
criticised and evaluated Mao in order to unite the party, the army and
the masses against the personality cult. A giant step was taken in
September 1985 in placing the third tier leaders at all levels in the
party.27 Rapid economic development is under way in both rural and
urban areas. In short, Deng, as an experienced fighter and shrewd
planner, has carried out his 'grand reform' step by step and stage by
stage through persuasion and with dignity for all in the process of
leadership transformation. Deng himself has provided much counsel
on the goals of his reform through speeches at different times. At the
Twelfth Party Congress in 1982, he said: 28

Since the Third Plenary Session of the Eleventh Central Committee

in December 1978, the party has returned to its correct policies in
the economic, political, cultural and other fields and, in
addition, ... our party today has attained a much deeper understand-
ing of the laws governing China's socialist construction, acquired
much more experience and become more conscious and determined
in implementing correct principles. We have every reason to believe
that the correct programme to be decided at this congress will create
a new situation in all fields of socialist modernisation and bring
prosperity to our party, our socialist cause, our country and the
people of all our nationalities.
In carrying out our modernisation programme we must proceed
from Chinese realities. Both in revolution and in construction, we
should also learn from foreign countries and draw on their
experience. But the mechanical copying and application of foreign
experience and models will get us nowhere. We have had many
lessons in this respect. We must integrate the universal truth of
Marxism with concrete realities of China, blaze a path of our own
and build socialism with Chinese characteristics - that is the basic
conclusion we have reached after summing up long historical
experience.

Having confidently staked out a new course for socialism with

Chinese characteristics, Deng repeatedly asserted China's independ-
ence, self-reliance, and willingness to 'unswervingly follow a policy of
opening to the outside world'. There are three major tasks Deng has
 Deng's Return and Reform 59

repeatedly insisted on accomplishing in the current decade, namely, to

step up socialist modernisation, to work toward national unification
and to oppose hegemonism in the preservation of world peace.
Economic construction, however, is at the core of his plan.
3 New Political Orientation
and Economic
Development
In the nineteenth century, Karl Marx was clearly the most revolution-
ary political economist. His Communist Manifesto argued scientifi-
cally that means of production and private ownership determine the
economic relationship between the ruling elite and the exploited. The
state, he claimed, is an instrument in the hands of the rich to exploit the
poor, and the most advanced countries industrially should first have a
violent revolution by the working class. All such claims are now
debatable because events did not occur as he predicted. His followers
in subsequent generations had to reinterpret his ideology. Lenin,
Stalin, and Mao Zedong all made their revisions and reinterpretations
to meet their own immediate national circumstances. But none so far
has succeeded in creating a classless society to get rid of the state as an
'instrument of exploitation'.
Before 1917, no intellectuals and revolutionaries in China had
known anything at all about Marxism or communism. China was
governed by various warlords and remained a divided state. Lenin
skilfully interpreted 'colonialism and imperialism' as an inevitable
expansion of Western capitalism into the poor exploited countries. A
world communism united against Western imperialism everywhere was
necessary and inevitable. This propaganda sounded extremely
pleasant to a few Chinese intellectuals and disappointed revolutionar-
ies who had followed enthusiastically Sun Yat-sen's democratic
revolution of 1911. Thus, China soon became an arena for two
revolutions which joined in 1923 and split in 1927. Neither the
democratic revolution of the Western model nor the Communist
revolution of the Soviet Union style has succeeded in China in carrying
out its promises to the masses. Both are today still struggling to deny
full validity and legitimacy to the claim ofthe other. The Kuomintang
Party failed between 1927 and 1949 while on the mainland, Mao's
own Communist revolution deviated from its course and failed in
Mao's own lifetime. At the end of his cultural revolution, Mao left
behind a nation divided between factions within the Communist Party.
His lifetime comrades had been purged and humiliated by millions.
The country was in a poor state of agricultural and industrial

60
 New Political Orientation and Economic Development 61

development. At the time of Mao's death,after a quarter of a century

under communism, the Chinese people were still suffering from one of
the lowest living standards in Asia. Those who had been purged by
Mao and Jiang Qing's faction could not easily be reinstated because
Mao's radical followers were still in charge in 1976-8.
Deng Xiaoping was too young to know much about communism and
the Soviet Revolution in 1917. He was only thirteen years old living in
land-Iocked Sichuan. Upon his return from a study tour in France in
1926, and by way of the Soviet Union, he became a loyal folIower of
Mao. (He was even purged once in the early 1930s because of his
loyalty to Mao. l ) He rose in power and leadership during the Second
World War and the civil war years in the late 1940s. By 1954, Deng was
considered the fourth most powerfulleader in Beijing, next to Mao,
Liu Shaoqi and Zhou Enlai. Even Mao hirnself often cited Deng as the
most capable leader on party affairs and in leadership. However, Deng
and many comrades of Deng's calibre in high leadership roles were
purged in the 1960s. Even through Deng hirnself publicly admitted his
mistakes, he could not escape Mao's heavy axe of humiliation - twice.
All of these loyal followers were stunned by Mao's leftist radicalism
and his erroneous economic policies since the 1950s. During Mao's last
ten years he did not even follow his own writings. Mao brought
anarchy and disorder to the whole country. He terminated education
and closed all schools. He destroyed the party as the best institution al-
ised source of leadership for stability and control. Civilian government
was replaced by Revolutionary Rebel Committees at all levels except
Zhou Enlai's premiership. Mao's madness was clearly incomprehensi-
ble to many experienced, moderate, and pragmatic leaders who had
been with Mao for decades before and after 1949.
Mao died after Liu Shaoqi. Liu had been considered Mao's original
chosen successor. Zhou Enlai passed away eight months before Mao's
own death. The only person, most qualified and suitably available, was
Deng Xiaoping as al ready arranged at the time of Zhou's death in
1976. But Mao reversed the decision and removed Deng again as vice
premier after having rehabilitated hirn from the first purge only two
years earlier. Thus, after Mao's death, the struggle between the Gang
of Four under Jiang Qing and Premier Hua Guofeng further delayed
Deng's return to power which was universally awaited when Hua
sought to consolidate his position in the party and the government.
What were Deng's choices after his return in 1977? Should he follow
party chairman and Premier Hua Guofeng who was designated by
Mao and replaced Deng when Zhou died? Besides, Hua hirnself had
62 China Under Deng Xiaoping

chosen to follow Mao's policies and Mao's style of leadership.

Therefore, new conflicts between Hua and those who urged Deng's
rehabilitation were unavoidable. Besides, Hua was an unknown
provincial party leader who helicoptered to highest centralleadership
purely by Mao's handwritten decree in disregard of the party's central
committeee and its powerful political bureau. If returned to power it
would appear that Deng had little choice but to continue to dismantle
Mao's erroneous policies of the cultural revolution. He had to, first of
all, restore the party's correct leadership vertically and horizontally
throughout the country. U nity within the party, however, was critically
far more important before any restoration of the purged leaders was to
be initiated at all. A new reform ofthe party itselfwas unavoidable.
Secondly, the army, as Mao's instrument ofthe cultural revolution,
was practically in charge of everything after Mao's death, although itself
factionalised and divided even before Lin Biao's downfall in 1971. Now
'the barrel of the gun' in 1976--8 controlled the party, not the other way
around as Mao's theory has always insisted on. Careful reform within
the armed forces was, therefore, equally unavoidable.
But it was still politically suicidal or at least dangerous for anyone to
criticise Mao directly or unskilfully before the followers and the
influence of the Gang ofFour were removed from politics and the party
leadership. For Deng the new strategy of struggle for reform against
Mao's mi stakes and his erroneous policies had to be accomplished in
Mao's own name. Much blame could be assigned to those who
deserved being condemned as 'betrayers of Mao'. The followers of
Deng made cIear the differences between 'minor mistakes' of Mao and
his 'great accomplishments' as the revolutionary helmsman. This was
artfully done technically as weil as honestly in using Mao's godly image
in politics. And Mao ZedongThought was used against Mao hirnself and
those diehard blind Mao followers. Such, in short, was the political
reality of the leadership and policy struggle between the premier and
party chairman Hua Guofeng and Deng Xiaoping, together with the
fight among their respective followers between 1977 and 1978. Sixteen
months after Deng's return he won. He skilfully achieved this
decision-making majority in the party in December 1978. To further
discredit Mao's and Hua's policies, Deng and his supporters finally
came to evaluate Mao's place in revolutionary history at the 6th Plenum
ofthe 11th Congress in 1981.
Why did Deng and his followers have to struggle so diligently and with
such determination? Because they are devoted pragmatic communists
who have been eager to realistically and successfully pursue their own
 New Political Orientation and Economic Development 63

four modernisations as long-drawn up by Deng and formally

announced by Premier Zhou in January 1975 to the National People's
Congress. They realised then that Mao had led the party into
ideological myth and ended in a revolutionary failure. Their socialist
revolution and the Communist party had suffered from Mao's tyranny
and atrocities. There are several crises of confidence in the party, in
the government, and in Marxism itself. These pragmatic purposes of
socialist revolution could not be achieved without aseries of thorough
reforms. China could not become an industrial modern state capable
of self-defence and economic development without a relentless pursuit
of the four modernisations before the end of this century. Deng and his
followers do not believe in Mao's theory of 'continuous revolution' and
his personality cult. They want to get on with the task of national
construction without 'dass struggle' which, to them, has been fuHy
achieved by 1956 when aH anti-communist groups had largely been
eliminated. They did not believe in Mao's commune system for rural
China. Nor did they support or understand Mao's Great Leap Forward
movement. They failed to see why Mao had to continuously punish
China's intellectuals since the 1960s. In short, they had disagreed with
but had not resisted Mao in the late 1950s and early 1960s before Mao
purged them after 1966. In poliey choiee they are now benefiting from
Mao's failure. As moderate and pragmatic and tested battle field
leaders they have been capable revolutionaries since 1949 and are now
eager to build a new and modernised state in fulfilment of their original
revolution. In addition, the promise of Mao's 'New People's Democra-
cy' did not succeed. Mao violated the party's institutionalised 'collec-
tive leadership' . 'Democratic centralism' within the party and the
nation, according to the 1954 constitution in China, was ignored. Mao
and his supporters in the cultural revolution partially ruined the
revolution, which Deng and his followers wanted to save by peaceful
reform. They hoped to introduce socialist democracy and socialist
legality. They wanted to turn the country toward the Western nations
for science and technology without abandoning the original purpose of
the communist revolution in China. However, new experiments were
necessary since the old and the Maoist methods had failed.
'Socialism with Chinese Characteristics' has emerged as the central
ideology. It does not have well-defined philosophical depth nor
independent variables to form a coherent school of thought. 'Socialism
with Chinese Characteristics', however has a wide appeal to most
Chinese today. Politically, it is being built up on the basis of Marxism
and Mao Zedong Thought. Institutionally, it returns to an organisa-
64 China Under Deng Xiaoping

tional model of Communist party's infrastructure and its leadership

theory. But the interpretation of Marxism itself is now with flexibility
adapted to 'Chinese characteristics' which itself derives from a
political tradition of at least 3000 years. Deng is neither conservative
nOT liberal. He is a 'cat-and-mouse' theorist who is after pragmatic
results by whatever means so long as the result meets popular demand
and revolutionary purpose. If the demand and support from the
masses change, so must be the purpose of the revolution. Revolution
should not be made in the vacuum of needs and approval.
If socialism strictly means the public ownership of means of
production and public distribution of goods and services, Deng's 'new
socialism' falls short of this standard definition. However, his new
socialism is Httle different from Sun Yat-sen's third principle of the
people, namely, 'the principle of the livelihood of the people' wh ich
advocates the following:
1. Constraints against the expansion of private capital ownership;
2. The development of publicly owned national capital for the public
interest;
3. Land distributed to the tillers against exploitation by rural
landowners;
4. Large enterprises, such as railroad and telecommunications,
banking and so forth, which are considered too large an investment
for private ownership and too important to be left in private hand,
should be in the hand of the public; and
5. A progressive tax system should be employed to carry out the
objectives of the above-mentioned 'mixed economy' .
Sun Yat-Sen emphasised the well-being of the entire population
against the evils of private capitalism. Today, Deng advocates aseries
ofpolicies similar to Sun's revolutionary goals of 1911. For example,
he broke up the commune practice to contract land out to the tillers for
long terms of production freedom and for the farmers' own enrich-
ment, however, they were not given legal ownership of the land. Deng
introduced a new tax system in the early 1980s to encourage
production and to prevent excessive private profit. Since 1984 the
People's Republic of China has begun to experiment with decentralisa-
tion of state-owned large enterprises to adopt the management
experience of private capitalism. In short, 'Socialism with Chinese
Characteristics' can be any successful experiment in the decades to
come. Much of this in the economic and industrial fields will be
discussed in later chapters.
 New Political Orientation and Economic Development 65

Politically speaking, 'Chinese characteristics' could include refer-

ence to Chinese authoritarian institutions and traditional leadership
roles, in addition to rights of the people as guaranteed by the state
constitution which may or may not fully embrace the protection of civil
liberties. However, the demand for political participation in the
process of governing was not a 'Chinese characteristic' in the ancient
past, for example. Thus, much depends politically on future develop-
ments as weil as past traditions. Deng is not really committed to any
ideological specifics. Practice success will provide ways for his theory
reconstruction. Flexible and realistic interpretation of Marxism and
Mao Zedong Thought will continue to guide daily policy actions of the
government and its leaders. It is in this mood of flexible adaptation,
that China's newspaper has announced that Marxism is more than one
hundred years old and can not be expected to resolve China's problems
today.2 What, then, is most relevant to resolve China's current
economic problems? The answer is, no doubt that of Western
technology and foreign capital investment if the four modernisations
drive is to have any ho pe of success. This devotion to economic
development compels the new leadership to keep the country open to
theoutside world. China has also developed several Economic Special
Zones to attract foreign investment. In 1984 it announced the opening
of fourteen additional coastal cities for foreign investment and trade.
An elaborate system of new law dealing with foreign economic affairs
has been legislated to arbitrate conflicts and to facilitate business
transactions in China. In short, a change in ideology, the necessity of
political and economic modernisations are the compelling reasons for
drastic reform under Deng because reform alone may save the Marxist
regime from a crisis of confidence.
As a reformer in 'peaceful revolution', Deng has been, since the 3rd
Plenum of the Eleventh Congress in December 1978, in a winning
position. He decides policies on the basis of his experience of the last
sixty years. He has been in a unique leadership position against
challenges to his reform measures. By virtue of his experience as past
party secretary-general, finance minister, economic planner, a
regional supreme leader in Southwest China, a party leader within the
armed forces, a vice-premier (acting during Zhao's absence), and,
most important of all, the author of the blueprint for the four modem-
isations, he finds in the party or the govemment no one who can claim
to be his equal in policy leadership and in party politics. Thus, today
he enjoys the support of his many senior colleagues, Peng Zhen,
Chen Yun, Li Xiannian and Yi Jianying. One of Deng's reform
66 China Under Deng Xiaoping

measures was for hirnself as leader not to occupy any institutional top
position either in the party or the government. Therefore, he can
easily persuade his follow colleagues to be equally unselfish and to
convince the citizens on the basis of his dedication to the future of the
nation. As a result, he has been in a much better position than Mao,
Zhou and Liu Shaoqi, to exercise personalleadership.

3.1 THE SCOPE OF DENG'S REFORM AND THE REASON

FORIT

Having achieved his leadership of reform in 1978, he has been under a

variety of pressures to be responsible to his colleagues and to the entire
nation, to the communist party and to his own future place in Chinese
history. First of all , he has to reconcile many conflicting issues under a
new peaceful revolutionary environment. Chinese history has recor-
ded many reformers of the past. Some succeeded weil enough to
extend the longevity of the dynasty for hundreds of years, such as Liu
Xiao of the East Han Dynasty. Others failed, such as Prime Minister
Wang An-shih of the Sung Dynasty. There were modern reformers
such as Kang Yu-wei and Liang Chi-chao who hoped to create a
rejuvenated modern Manchu Empire by combining the Confucian
state with the Japanese success of the Restoration of 1868. Deng did
not, of course, wish to abandon the socialist revolution. Nor could he
tolerate any more chaos and disorder resulting from Mao's cultural
revolution. He wanted to provide order and normal life through
'peaceful revolution', a revolution of experiment in reform throughout
the polity.
His reform movement is different from Mao's mobilisation cam-
paigns of the past which each time had to target 'innocent victims'.
Deng's approach is constructive and non-accusative. For example, he
removed his opponents with grace and with care of their interests.
After retirement or transfer in post, he provides them with the same
services and privileges as they would have received. As a confronta-
tionist leader of repute, he wasted no time in his planning for reforms
as soon as he was restored to power even in 1974. Much of what he has
been able to implement since 1978 had been spoken of or planned weil
before his second removal from leadership in January 1976. Before
making abrief comment on what he had said before Mao's death, it is
appropriate to relate his reforms to popular beliefs in traditional Chinese
political culture. He is, indeed, a tradition al ist with a socialist outlook.
 New Political Orientation and Economic Development 67

Traditional political culture speaks weil for the reasons of successful

dynastie renewal and political institutional rejuvenation. In China's
three thousand years of well-recorded history , popular support was
indispensable for any successful reform, or for a change of dynasty.
Chinese traditionalleadership of the imperial dynasty did not have an
institutionalised adversarial supervision against royal abuse of power.
This fact did not imply, at all, a lack of imposing constraints on the
exercise of power by opposition factions or by popular expression.
Morally, all emperors had to im pose self-constraints according to their
training in the Confucian tradition of an imperial moral code of ethies
and conduct. For example, an emperor should treat ministers with
courtesy in order to be reciprocated with absolute loyalty from them.
Mao violated this fine tradition in his treatment offellow revolution ar-
ies in their policy and human relations. Ancient Chinese political
culture even justified tyrannicide on the basis of popular revolt against
immoral imperial conduct. Emperor Oie and Emperor Zhou were so
condemned for their misdeeds by popular approval du ring the Zhou
Dynasty. Another popular saying which was often used to justify
rebellion or revolution was as folIows: 'Heaven hears wh at the people
hear. Heaven sees what the people see.' It placed popular judgement
firmly at the centre of education of imperial conduct. If the emperor
acted against public judgement, his dynasty would not last long.
Chinese traditional popular moral approval did not imply popular
sovereignty in the institutionalized or elective sense. However, such
popularism often was used by revolutionaries to try to establish their
own dynasties. Even after the intrusion of foreign political culture, all
contemporary Chinese leaders are still convinced of the need of
popular support for their political success. But Mao manipulated the
masses. He fed them with his dirty propaganda and utopian romantie-
ism. The masses knew how to judge Mao. Deng Xiaoping, Zhou Enlai
and other mistreated victims of Mao's abusive leadership have been
perceived popularly as champions of the people. Today Deng acts with
benefit from such popular support in the post-Mao, era.
Deng and his reform colleagues know of such support from the
entire national constituency. In the past, the 'silent majority', the
people, did not have an independent press to express their protest
against the Mao regime in their demand for a beUer future. One of the
popular demands was the improvement of materiallife, especially in
the rural conditions for 80 per cent of the population. Their specifie
pressing need, in particular, has been food supply. They would work
harder in the field if they could keep a larger portion of their product.
68 China Under Deng Xiaoping

Rural restlessness has always been the major cause of dynastic

overthrow, or leadership downfall. Deng remembers, it seems, one of
the traditional cultural axioms: 'people are the foundation of astate.
And food is the minimal necessity for survival' [author's translation].
Under Mao, there was simply not enough food to prevent starvation in
so me parts of China. This starvation seemed to have caused popular
demand for the reform of Mao's commune system. By comparison,
China's living standard, after thirty years of communist rule, was so
low as to be direct evidence of misrule. Deng knew this. He did not
attribute the low standard of living to socialism, which to hirn is by far a
superior system of production and management to the evils of
capitalism. Mao's own economic wrong policy was, indeed, responsi-
ble for it, in addition to the decade-Iong destruction of the cultural
revolution. Furthermore, intellectuals could not speak and write
under Mao. By 1976, no one wanted to accept independent
responsibility in their posts for fear of purges against innovation or
deviation. In the end, a system of unproductiveness or stagnation
emerged. Thus, Deng's reform was indispensable if the Communist
Party or Marxism was to survive in China at all. It is from this
perspective that Deng is comparable to an ancient dynastic reformer
providing restoration as weil as peaceful change. Ancient Chinese
political culture had a 'theory for change' which literally means 'in
desperation, one must change; and such change will always be
helpful'. Burdened by the need for change from Mao's failure, Deng
was in some sense, desperate for drastic reform of the system. Official
Chinese press and party policy did not want to declare Mao's misrule
of twenty years, 1956-76. Research c1early reveals Mao's deviation
from the collective leadership of the party which was reaffirmed at its
8th Congress in 1956.
How did the Communist political system perform during that twenty
years? Deng and other victims of the cultural revolution knew it better
than anyone else. They could see it more thoroughly from inside the
party, the government, the army, the press, and the decision-making
process. It seems the Western contemporary systems theory can best
examine and explain how the communist political system under Mao
functioned poorly against the interest of the people. First of all, it must
be pointed out that the political system could have functioned more
democratically and efficiently if Mao had not intercepted its natural
course of development and rational evolution. Mao did not recognise
the limits to a system's boundary. As a political system, it invaded the
territory of private life and cultural auto no my too much. It eliminated
 New Political Orientation and Economic Development 69

religion as the 'opium of the people'. 'Politics in command of

everything' was one of Mao's preferred slogans. No autonomous social
forces were tolerated, induding the family institution and its integrity
as a cherished living experience, tradition al forces of social controls,
and the independent intellectuallife. Secondly, Mao's political system
itself was not made up of autonomous parts or units which were also
mutually dependent in the system's performance. The hierarchy of the
internal relations among those of Mao's political system ruined the
need for mutual dependability. For example, the National People's
Congress (NPC) in practice was inferior to the state council, although
in theory the NPC represented the people. The state council obeyed
the party's decisions even though the former was in theory responsible
to the NPC which appointed the council to execute policies at the
former's pleasure. Functionally speaking, there was no division of
power and responsibility possible to perform rationally, efficiently and
accountably. Democratic centralism was not weil practised. It
produced irresponsibility, unaccountability and escapism. Thirdly,
under the system the legislature, the NPC, could only represent the
majority of the people, or respond to their needs or demands. How
could it, then, receive their support? The NPC existed in the vacuum
of power and leadership. The majority of people could not but treat it
with apathy and despair if not sarcasm. The press was without inde-
pendence to discover popular views on anything at all. It was a voice
of the party unilaterally to create popular response by official induce-
ment. For example, Mao's purge of the intellectuals in 1957 began with
the colourful invitation as folIows: 'Let a hundred f10wers blossom; let
a thousand thoughts contend. ' At first, most intellectuals were reluctant
to open their mouth. But more inducements came in the press. Many
were later trapped in voicing their rather frank criticisms of communist
rule. In the end, those who dared to speak and write were condemned
as rightists and were purged with various degrees of humiliation and
losses. When the president of Beijing University spoke out and wrote
to Mao, as an economist, against Mao's policy on population growth,
he was purged. Only some twenty years later, Deng rehabilitated his
reputation and made this well-known population expert professor
emeritus. Such examples as this cost the communist regime much
public confidence. The whole population was locked up silently from
within and the country was sealed off from the rest of the world. In the
end, a bitter price had to be paid for such bad policies. Perhaps, Mao
alone was not totally responsible for all the wrong things. On this,
Deng's leadership has made a proper response in the document
70 China Under Deng Xiaoping

concerning some historical problems at the Sixth Plenum of the 11 th

Congress. 3 In short, Oeng's overhauling ofthe political system results in
saving it by improving it. If socialism is to survive and govern the nation,
it has to meet popular demands from indigenous traditional political
culture and from newly adapted modern foreign political culture. As the
highest voice to initiate reform measures on every fact, Oeng must
speak up in all areas for proper changes. He is, in fact, making his own
revolution today. The Selected Works 0/ Deng Xiaoping, 1975-82,
includes most of his major policy statements. The next few pages
highlight only a few examples. 4
The content of Oeng's speeches followed the curve ofthe rise and fall
in his career relevant to his duties at each given time. For example, as
party secretary-general for twenty years, the only important speech he
made was his black and white cat speech. He said nothingwhen he lived
in oblivion. As vice-premier and chief of the army his policy speeches
covered a wide range of topics. Ouring the first seventeen months of his
last rehabilitation, he was most careful not to frighten his political
opponents by speaking out too loudly. At the end of the Eleventh Party
Congress in July 1977 , he declared 'speak less and work more' . After the
Third Plenum of the 11th Congress, Oeng openly spoke on many
reform ideas. Some of them had been expressed before but not treated
with the same authenticity as policy guides.
On rural policy, he slowly guided the government on specific
measures. For example, as late as May 1980, he insisted on rural
'collective economy' and the 'production team' as the 'main economic
units' although the country was already expanding 'farm output quotas
on a household basis'. He stressed the need to 'expand the productive
forces and thereby create conditions for the further development of
collectivisation' at a higher mechanisation and a higher management
level. He wanted a diversified rural economy to lead to specialised
production teams and an increase in rural income. He spoke out against
certain fears that 'the pace of socialist transformation had been too
rapid... [But] the main problem in rural work is still that people's
thinking is not sufficiently emancipated concerning both organisational
forms and production suitability for each specific locality'. Contrary to
Mao's practice, Oeng emphasised the need to 'take into account the
wishes of the people. We must not propagate one method and require all
localities to adopt it. ,5
Whatever Deng says counts heavily because he is today the most
wanted national leader China has had since the revolution of 1911.
Yuan Shih-kai, Chiang Kai-shek and Mao Zedong were each very
 New Political Orientation and Economic Development 71

powerful. However, their exercise of power was checked by the

environment against which they had to struggle. Deng has conquered
the adverse environment created by his political opponents. He is the
strongest modern leader in the sense that most people in China
support his reform. They benefit from his success, and share his hopes
for a modernised industrial nation by the year 2000. He is strong
because he is guided by rational choice and an understanding of
non-political expertise of modern technology and science. Under his
\eadership there are no personal selfish ideological objectives. As such
he is enjoying an enthusiastic national support wh ich none of his
predecessors ever had. When he spoke of policies on readjust-
ments, political stability and unity, he had only the future of the four
modernisations in mind, because he had won most of the political
battles al ready . A content summary of one such speech may highlight
wh at was central in his mind. 6

1. 'In economic policy making, we must draw correct lessons from

the past thirty-one years as comrade Chen Yun draws on his
personal experience in handling economic problem in the past.
Now he is able to serve as our guide in this field for a long time. We
continue to support his proposal for economic readjustment as
adopted in April 1979, but not to implement it weil until recently
when unanimous understanding of it is now possible. To readjust,
we will curtail some of our construction projects in some areas to
support growth in agriculture, light industry and the production of
daily necessities, along with development of energy resources and
transportation and undertakings in science, education, public
health and culture. In all these areas, we must improve manage-
ment ... professional and technical skills of production workers
and office staff, efficiency and initiative and inventiveness.
Without curtailment in some areas, we will not be able to ensure
the steady growth of the economy. Our economy has all along
been plagued with serious disproportions stemming from the
historical conditions before the liberation and our protracted
over-ambitious drive for success after the First Five-Year Plan
(1952-6) ... damage of the ten years by the cultural revolution,
failures in 1977-8 ... By the time of the Third Plenum (December
1978), all these had created imbalances in finance, credit and
material supplies as weIl as between foreign exchange receipts and
payments. Changing these things is to correct the leftist errors.
Too much currency has been issued and prices have steadily risen.'
72 China Under Deng Xiaoping

2. 'Capital construction must be cut in certain areas. Cut-backs in

production or switches to new areas of production, amalgamation
between enterprises, suspension or c10sure of operations are
simply needed for readjustment. To achieve proper balance
among various sectors of the economy, including defence and
administrative expenses, are important to "shake off the fetters of
erroneous leftist policies that have hampered our work over the
years"'.
3. 'A lot of work has to be done before the people in the whole country
can achieve unity of understanding. We must make c1ear to the
people whyfurther readjustment is'imperative, what problems may
arise in the process and wh at we hope to achieve by it. This way, the
people will understand the necessity for further readjust-
ment ... Then, they will give us their support. ... We should
continue to try to break away from stereotypes, whether old or new,
and gain a c1ear and accurate understanding of China's actual
conditions as weil as the interrelation among various factors in our
economic activities.'
4. 'It is true that in the thirty-one years since 1949 we have made quite a
few mi stakes ... Nevertheless, through our endeavours over these
years the number of industrial and transport enterprises has grown
to nearly 400,000, and the value of the fixed assets of state
enterprises has increased nearly twenty-one times as compared
with early post-liberation days. We have trained large numbers of
skilled workers and nearly ten million specialists and established a
fairly comprehensive industrial system and economic system. The
life of the whole people is far better than it was before liberation.
Compared with so me major developing countries, China has
achieved greater progress and a faster rate of growth ... We are sure
to make steady progress toward our modernisation goals provided
we do the following: heed the principles laid down for economic
work, improve the party's leadership, bring into play the superior-
ity of the socialist system, and the people's initiative and creativity,
utilise our abundant natural resources more rationally, make our
work conform increasingly to actual conditions, constantly sum up
new experience, avoid new shortcomings and errors and, if any
should occur, correctthem in good time. Ourfuture is bright. In this
sense, our readjustment means a step forward, not backward.'
5. 'The Third Plenum called for all party members to "emancipate
their minds, use their heads, seek truth from facts, unite in looking
ahead, study new situations and solve new problems" ... We have
 New Political Orientation and Economic Development 73

worked out aseries of policies and carried out many reforms with
marked success. Since April 1979, we have called for economic
readjustment, restructuring, consolidation and improvement. The
masses and cadres support these correct party policies. But they
fear these to be changed again. These will not be changed, or only
the implementation measures, not the policies, can be shifted.'
6. 'We must firmly maintain the four cardinal principles - namely,
keeping to the socialist road, upholding the people's democratic
dictatorahip, upholding leadership by the communist party and
Marxism-Leninism-Mao Zedong Thought. No one should be
allowed to undermine these principles ... The core of the four
cardinal principles is upholding the leadership by the communist
party. We have said many times that without the leadership by the
party a big country like China would be torn by strife and incapable
of accomplishing anything. Whether inside or outside the party, all
tendencies towards weakening, breaking away from, opposing or
liquidating leadership by the party must be criticised ....
Leadership by the party is the key to the success of the four
modernisations and of current readjustment.'
7. 'The work style of a political party in power has a direct bearing
upon its very survival. We must strictly implement the guiding
principles for inner-party political life and strive unremittingly to
correct all bad trends. In particular, we must oppose the erroneous,
two-faced attitude of those who feign compliance with the line,
principles and policies ... while actually opposing them. Reform of
the system, of the party and of state leadership must be carried out
in an orderly fashion.
8. 'We should continue to develop socialist democracy and improve
socialist legal system ... There are still inadequacies in our
democratic system, so it is necessary to draw up a whole series of
laws, decrees and regulations to institutionalise democracy and
give it legal sanction. Socialist democracy and socialist Iegality are
inseparable. Democracy without socialist legality, without the
party's leadership and without discipline and order is definitely not
socialist democracy. On the contrary, that sort of democracy would
only plunge our country once again into anarchy and make it harder
to truly democratise the life of the country, develop the economy
and raise the people's standard of living.'
9. Democratic centralism and collective leadership 'should be
genuinely practised in inner-party life as weil as in the country's
politicallife. ,7 It is also necessary to take firm action against all
74 China Under Deng Xiaoping

violations of discipline in the party, army and government

organisations. Discipline and legality were strongly emphasised
by Deng as a requirement for all organisations in the government,
in the army, 'in enterprises and schools as weIl as among the
people as a whole'. He resolutely stressed that 'anarchism and
violations of law and discipline must be resolutely opposed and
checked'.
10. To build up a weIl-structured, rational system of institutions seems
to be Deng's way of preventing deviation from the normal course
of decision making. Here he advocates efforts against the 'over
concentration of power'. He asked that 'systematic measures
should be adopted to institute a retirement system of life tenure
for leading cadres'. To prevent protest and opposition, Deng
suggested 'appropriate arrangements be made for the political
status of the retired cadres, for their material benefits and so on'.
This policy has been in progress up to 1986. Mass retirement by
members of the political bureau, the central committee, and the
advisory and disciplinary commissions took place in September
1985, as announced at a party conference to allow Deng and Hu
Yaobang to choose some 200 new and younger cadres to fill the
vacant posts. On party recruitment he proposed a four-fold
criterion for new cadres. They must: be young, weIl-educated,
with professional managerial knowledge, and be revolutionary.
11. He complained that 'at present many [government] units are
over staffed ... Some enterprises may cease operation partly or
whoIly'. Training of new and more capable workers and officials is
apart of an economic efficiency policy which requires the
retirement or transfer or retraining of workers.
12. As proposed by comrade Chen Yun and Comrade Zhao Ziyang
the government should 'make readjustment our main job, with
reform subordinate to readjustment so as to serve it and not to
impede it. The pace of reform should be slowed a little, but that
does not mean a change in direction'.
13. 'In modernising China's agriculture we should not copy the
Western countries like the Soviet Union but should proceed along
our own path, in keeping with specific conditions in Socialist
China.'
14. The number of industrial enterprises experimenting with exten-
ded decision making powers by the end of 1980 had reached 6000
which produced an aggregate output value of 60 per cent of the
national total, an indication of finding a better way to deal with
 New Political Orientation and Economic Development 75

factory autonomy in production, and decision making long before

the official announcement on 20 October 1984, to restructure
through management decentralisation. 'The purpose is to expand
work incentive, production efficiency and enterprise initiative in
reform through adjustment.'
15. Deng is very concerned about new avenues of employment for
millions of new job seekers annually. To expand such job
opportunities, China has opened several 'special economic zones'
in the southeast coastal region. These new economic zones are
also subordinated to the domestic economic readjustment pro-
gram in process. These economic zones are not permitted to
compromise 'national independence and self-reliance'. In his 1984
grand tour of these Special Zones, Deng unconditionally
endorsed the irreversible continuation of importing foreign
capital, technology and management efficiency through these
special zone experiments in coming years.
16. He continued to advocate the emancipation of the mi nd and the
necessity of party self-criticism. But he qualified criticism of Mao
Zedong by looking at Mao's 'contributions as primary and his
mi stakes as secondary. This is in accord with facts, and cannot be
doubted or denied. And his mi stakes absolutely cannot be
attributed to his personal character ... Mao Zedong thought
remains our guiding ideology. We must adhere to it and develop it
in the light of specific conditions.' This policy statement was
crucial before the coming 6th Plenum of the 11th Party Congress
in lune 1981. At that Plenum Mao's place in history was evaluated
as Deng anticipated.
17. A new area of policy stress has been in 'socialist high culture' or
'spiritual civilisation' vis-a-vis 'Material civilization' as a result
of the four modernisations. Deng asked 'how can we educate the
younger generation and lead our country and people in building
socialism if we ourselves are unarmed ideologically?' The recent
resistance against 'spiritual pollution' coming from the outside
was an episode of some future significance as it may occur in a
more challenging manner. Deng called on the people 'to continue
to criticise and oppose surviving feudal influences on ideology and
politics both inside and outside the communist party ... We should
criticise and oppose the tendency to worship capitalism and to
advocate bourgeois liberalisation. We should criticise and oppose
the decadent bourgeois idea of doing everything solely for profit,
seeking advantage at the expense of others and always putting
76 China Under Deng Xiaoping

money first'. What resources Deng's followers will, in the distant

future, appeal to in order to reject capitalist morality should be
observed with great interest in the future. The revolutionary spirit
and dedication disappears now slowly but steadily as the 'Long
March spirit recedes into history' .
18. Deng is very concerned about political stability and unity which is
essential to current economic readjustment and future growth. He
emphasised the need to fight against 'the remnants of the Gang of
Four' and other new economic crimes in violation of regulations by
even very high officials in secure places. He suggested that to
eradicate these crimes we must 'not use campaigns and mobilisa-
tions of the past as means but to depend on new laws and more
detailed regulations and other educational methods' .
19. Finally, he cautioned that 'while persisting [in] our effort to
develop socialist democracy, we call on all our party members and
our people to maintain strict vigilance against anti-party, anti-so-
cialist and criminal activities and to take firm action against
them .. , Marxist theory and objective reality have taught us again
and again that only when the people ... enjoy a high degree of
democracy can dictatorship be effectively exercised over the tiny
minority who are our enemies ... It is in complete conformity with
the desire of the people and the needs of socialist modernisation to
use the repressive power of the state apparatus to 'attack the
counter-revolutionary saboteurs, anti-party and anti-socialist
elements.'

This summary of his speech given on 25 December 1980, reveals

Deng as the supreme leader in complete charge of the reform movement
while Hua Guofeng was still not out of office yet. It is c1ear that Deng's
primary emphasis is to succeed in his four modernisations by the year
2000. All other necessary measures are subordinate to this highest
objective. Unity and stability are essential for economic growth and to
induce foreign investment in China. Socialist legality and democracy,
collective leadership and party reform are necessary me ans and
channels through which a new socialism or 'democratic socialism of
Marxist style' may truly emerge in China. Since this above-quoted long
speech, eight years have gone by during which Deng's reforms and
readjustment in the economic field have been largely successful. His
greatest accomplishment, however, seems to have been in the area of
party reform and institutionalisation ofhis own leadership succession by
Hu Yaobang or Zhao Ziyang and other young on es collectively.
 New Political Orientation and Economic Development 77

Deng has spoken up in nearly all other areas, including reforms in

the army, in education, etc. A brief summary of a few of them may
reveal the following:

1. While still vice-premier and the most likely sucessor to Zhou and
Mao, Deng spoke out on 25 January 1975, about consolidation in
the People's Liberation Army (PLA). The major policy statements
he made include: (1) 'with this army of ours, the party commands
the gun, and not vice versa ... However, it was thrown into
considerable chaos after Lin Biao was put in charge of army work in
1959, and especially in the later period under hirn ... We must
reduce the size of it, confront the problem of over staffing and
restore the army's fine traditions. The Headquarters of the General
Staff, the General Political Department and the General Logistics
Department bear major responsibility. They should be the first to
be consoIidated. We must set things right in the armed forces in
accordance with Comrade Mao Zedong's instruction on stability
and unity ... Future appointment and promotion will deal with
those heavily involved in factional activities or cling stubbornly to
factional ways; (2) Deng re-emphasised Mao's past insistence on
military discipline of the 'three main rules and eight points for
attention,;8 (3) 'There can be no mistake about the principles I have
just mentioned in terms of military consolidation, stability and
unity, and the implementation of party policies. We must restore
party spirit, eliminate factionalism and improve efficiency and
discipline.' What he mentioned as future policy guides began to be
implemented only after his third return to leadership in 1978 and in
1984 with the reduction of one million in size.
2. On 5 March 1975, Deng spoke of building up 'an independent,
comprehensive industrial and economic system by 1980' as the
first step, and as the second step by 2000 to turn China into a
'powerful socialist country with modern agriculture, industry,
national defence and science and technology'. Deng challenged
his political enemies who 'only dare to make revolution but not to
promote production'. He warned of China's weak transporta-
tion system, especially the inadequate railroad system. Again later
in this speech he attacked factionalism and said 'persons engaged
in factionaIism should be re-educated and their leaders
opposed ... If they correct their mistakes, then we will let by-gones
be by-gones, but if they refuse to mend their ways, they will be
sternly dealt with.'
78 China Under Deng Xiaoping

3. In his speech to a group of central party cadres on 4 July 1975, he

cited Mao's three emphases: (1) study theory and prevent
revisionism, (2) work toward stability and unity, and (3)
promote economy and production. He quoted Mao in saying that
not only the army, but the party also must be consolidated,
especially at the level of leading cadres within the party and in the
party's style at all levels throughout the country. Toward the end of
the speech, he emphasised the long-stanoing formula in internal
party rectification: 'Unity - criticism - unity.' Such party reform
work did not truly begin on a massive scale until after the 12th
Party Congress in 1982. And a three-year period was assigned,
1983--6, to complete party reform. 9
4. Minor political parties in China played a major role in early 1950s
and were purged severely at other times. However, as an institu-
tionalised entity to help serve as a link between the communist
party on the one hand and the intellectuals and the masses on the
other, the Chinese People's Political Consultative Conference
(CPPCC) was always maintained to meet and to discuss events.
Deng's new leadership has further pledged to work permanently in
co-existence and cooperation with the CPPCC. I t has been
periodically elected or nominated at various levels of its existence
since 1949. The National People's Congress (NPC) and its corres-
ponding counterparts of the CPPCC have formally and constitu-
tionally served as the centrallegislative arm of the government. On
15 June 1979, Deng pledged quite strongly to work with these
political parties in the decades to come, as folIows: (() 'To realise the
four modernisations, it is essential to promote socialist democracy
and strengthen the socialist legal system. The CPPCC is an
important organisation for promoting people's democracy and
maintaining contacts with people in different walks of life. To
achieve China's socialist modernisation it continues to be necessary
for the participants in the CPPCC to hold consuItations and
discussions on the nation's general principles, its politicallife and
the social and economic questions related to modernisation. It is
still necessary for them to exercise supervision over each other and
over the enforcement of the constitution and law. We must give
scope to the free airing of views and make full use of all talents ... so
that the government can benefit from them, promptly discover and
correct its own shortcomings and mistakes and push forward all
phases of our work:'
 New Political Orientation and Economic Development 79

It appears that the CPPCC has a supportive and modified role to

play in helping the Communist Party and those who may influence the
general public one way or the other. Deng, for example, quite
specifically suggested to the CPPCC to concern itself with the return of
Taiwan in the years to come. The major importance of it all is Deng's
view of restoring some supervisory and constructive role for the body
to play to generate national unity. On the theoretical level. Deng's
institutionalisation of the non-communist intellectuals into the
political system is a good tradition. This vehicle of participation and
transmission of policy information to the non communist people is
itself a unique Chinese practice. Other communist countries do not
have such a practice, nor such a historical heritage. The government is
guiding this political institutional development into non-adversarial
institutional minor entity. Deng's speech on 24 May 1977, further
delineated his position on intellectuals and other parties in China. It
appears all these existing minor parties are to be kept and their future
role in political participation and in socialist democracy can be shifted
flexibly as the Communist party sees fit. However, research by
political scientists on this subject should yield same definitive result in
future decades. Deng pledged again in his 1980 speech to the Chinese
intellectuals the following: 11
We must create within the party an atmosphere of respect for
knowledge and respect far trained personnel. The erroneous
attitude of not respecting intellectuals must be opposed. All work,
be it mental or manual, is labour :Those who engage in mental work
are also workers. As time goes by, it will become increasingly hard
to differentiate between mental and manual labour ... Great
importance should be attached to knowledge and to those who
engage in mental labour. And they should be recognised as
workers.
In China, past tradition has always respected intellectuals who were
most interested in an!i concerned about politics and their participation
in it. Since 1911, most intellectuals have been involved in politics, and
in the revolutions of their own time. They were organised by 1949, for
example, into nine political parties on the eve of the Communist
victory. In the 1960s Mao discredited them and called them 'stinking
number 9 in social hierarchy'. Deng needs intellectuals today for their
advanced training in the educational fields. Tbe success of his four
modernisations depends on their support. Hjs new political orientation
will ineviatably increase their political decision-making power whet-
80 China Under Deng Xiaoping

her they are members of the CPPCC or not. Many of them, as a

socially elite dass, will most likely remain politically neutral or aloof.
But intellectually they are a powerful elite.
As the leaders of this revolutionary reform, Deng has so far been
relatively silent on fundamental human rights. His socialist democracy
and legality have not been weil explored. He must some day speak out
on basic human rights and the political protection for their enjoyment.
Freedom of speech, assembly, press, and religion do not seem to
impress Deng deeply at this moment. He does not emphasise political
equality or the right of political opposition to communist party control
of political affairs and policy making. Nor does Deng seem to
anticipate certain inevitable consequences from the success of his four
modernisations. A system of stability and open dialogue must prevail
to accommodate to economic progress and natural changes among
economic interest groups which will multiply in view of material
improvement. In short, at this stage of political, social, economic and
ideological developments in China, Deng has ushered in a new era of
change and growth. He does not have yet a new ideology of his own to
stand on. He must, therefore, simultaneously defend and oppose
certain portions of Marxism-Leninism and Mao Zedong Thought
because he depends fundamentallyon themall for the legitimacy of his
reform movement.
What Hu Yaobang repeated in his report to the Twelfth Party
Congress had been previously said by Deng. As his successor, Zhou is
carrying out in policy implementation what he has emphasised. This is
the new basis for China's new political orientation and new economic
development which has ushered in new opportunities as weil as new
constraints. As a new era, it is more rational, and far more acceptable
to the Chinese masses than those of Mao's revolutionary
romanticism. 12

3.2 THE NEW ECONOMIC DEVELOPMENT STRATEGY

Given Mao's failure in his economic policy and the resultant poverty of
China vis-a-vis the relative prosperity and higher living standards of
her neighbours, new economic policy emphases were worked out by
1975 under Zhou-Deng and summarised in Zhou Enlai's January
speech on the four modernisations of his government. Seven years
later, Hu Yaobang's Report to the 12th Party Congress on 1
September 1982, gave more detailed emphases to policy priority
 New Political Orientation and Economic Development 81

choices in economic development. These include his new critical

emphases on (1) rural economic recovery through a new land policy
and (2) on light industrial development against Mao's emphasis on
heavy industry. After a quarter of a century of Mao's socialism China
did finally learn the mistakes in theoretical application ofMarxism-Le-
ni ni sm without fully understanding the different objective conditions
between China and the Soviet Union or other Marxist states. Mao's
favoured strategy of priority for heavy industry at the expense of first
expanding light consumer industry was a death-blow to Mao's wishful
thinking. The ignorance of the consumer leadership on incentives for
production efficiency, its blindness toward a sophisticated use of the
theory of price, theory of taxation, a socialist commodity economy,
flexible 'currency management, etc., were fundamental causes of
China's failure in economic constructions between 1949 and 1979.
Incentives and commodity theory have been largely responsible for
the growth in wealth and prosperity in the West.
Since Deng's return to his reform leadership, China has begun to
question her blind application of Marxist economic theory which is
more than one hundred years old. A new soul-searching examination
over the past economic productive strategy has helped to usher in new
strategic priorities in various areas, including new proportional
control between capital accumulation and consumption production,
and a new balance between agricuItural productivity and need for rural
prosperity. Out of these new strategies there has emerged aseries of
new economic policy programmes as instruments of reform. Some of
the highlights in theory, strategy and policy changes are to be touched
upon in the following summary.
First of all, in theoretical debate Chinese economists have only
partially admitted the inapplicability of certain aspects of Marxist
economic theory. They have offered many 'valid reasons' for their
economic failures and called for new needs to study the nature and the
characteristics of economic objective conditions from country to
country, the differences of stages in socialist economic development,
and the long- or short-term goals of a socialist economy. All such
theoretical analyses have been advanced within the very 'theoretical
misconceptions of Marxism and Leninism themselves' . However, such
soul-searching evaluation of economic failures has generously pro-
vided the Chinese leadership a full justification for the necessity of
changing their theoretical interpretation of Marxism in order to
initiate many very different new economic development programmes.
In practical terms, socialist economists in China have liberated
82 China Under Df!ng Xiaoping

Chinese economic planning from the past theoretical rigidity of

Marxism. The Chinese leaders are now able to more effectively and
successfully combine their own new theory and new practice. Their
theorists do not concede to capitalist theorists that Marxism is now, in
fact, extremely inadequate, archaic and must be thoroughly revised in
order to be reconciled with global economic reality. It is no longer a
refuge to hide behind classical Marxism. However, China's economic
theorists have not yet gone this far, so for the purpose of practical
understanding of the changes in China we need to appreciate the
Chinese theoretical reinterpretation of Marxism today.
One of the most astute Chinese economists has been Professor Xue
Muqiao, a teacher and an adviser on rural economy in China all his
life, especially during the time as vice-chairman of the State Planning
Commisssion and Director of the State Statistical Bureau in the 1950s
and 1960s. He has written: 13
China's socialist revolution has entered a new historical era. The
Third Plenary Session of the Party's Eleventh Central Committee
set forth the task of shifting the focus of the party's work to socialist
modernisation and building a powerful socialist state by the end of
this century ... The Party Central Committee has called on theore-
ticians to provide guidance for practical workers. Thus we who work
in the theoretical field are asked to contribute to the country's four
modernisations in our own way.
Both as a theoretician and a practitioner, Xue's study has been guided
by his own three emphases: (1) integration of theory with practice;
(2) concrete analysis of the contradictions in a socialist society; and
(3) the study of socialist relations of production as a process. Socialism
in China has been a new system in the country's three thousand years
of history. Actual conditions in China are very different from both
capitalist and socialist countries elsewhere. Theoreticians in China
today have the task of studying, discovering and applying 'the laws of
the socialist economy to solve theoretical and practical questions of
economic construction'. They admit their 'total dependence on Marx
and Lenin', concerning the laws of transition from capitalism to
communism through socialism. However, the new emphasis in China
today stresses the role of 'Marxist classics as guides only to discover
new laws for Chinese socialist economy' because socialism never
actually existed in China. Xue insists 'we must never take what is said
by Marx, Engels and Lenin in their works as dogma or as panacea'.
With a backward or pre-capitalistic economy, China's transition to
 New Political Orientation and Economic Development 83

socialism and communism has to be one with Chinese characteristics.

Contradictions and conflicts are present in all things; they 'permeate
the course of development of each thing from beginning to end', Mao
once said. Chinese theoreticians today focus on more suitable
solutions to contradictions between economic production and the role
of the state. As a lower phase of transition to communism, socialism is
itself an imperfect socio-economic formation. Therefore, 'socialist
ownership by the whole nation' is in itself imperfect and 'in need of
improvement'. When economic relations of production and produc-
tive forces vis-a-vis the power of the state are in very bad
contradiction, reform becomes inevitable. Transitory conflicts and
contradictions will require a long time before the realisation of
communism. The adaptable system of 'production and distribution of
goods and services in China will be subject to review and change' for a
long time to come. New theory and new laws of change will have to be
discovered to govern the process of change. Seeking truth from
practice is, therefore, quite accurate in guiding future reforms. The
period of transition may last 'several hundred years'. Socialist
ownership may include for a long time various types, including
personal, household or private ones and group (or collective) and state
ones. This variety of ownership willlikely be protected for a long time
in China during the rapid increase in productive force and increase in
GNP. Today's new desire for stability and production incentives is in
total contradiction to the time when the Gang of Four were in control
who argued in favour of rapid change in relations of production in
correspondence with the growth of productive forces. Today such
radical debate for continual change in the social relations of
production is no longer acceptable. Even transition itself, although an
imperfect situation, requires a longer period of stability in social
relations in order to gain first a greater growth in economic
production. China prefers to move 'toward a socialist state step by
step'. The country was basically feudalistic with littIe modern
capitalistic growth in 1949. More than 80 per cent of the population
subsisted on farming. The country went through land reform and
cooperative movement in rural areas. Amistake was made in
emphasising growth in heavy industry at the expense of rural
population. It was 'indeed necessary to obtain some funds from the
peasants, but they cannot be expected to contribute too much' .14 By
1957, the theoreticians in China contended that the nation had
completed the necessary degree toward socialist economic transfor-
mation. There cannot be an advanced stage of socialist ownership
84 China Under Deng Xiaoping

unless modern isa ti on in technology and mechanisation has changed

the productive forces. The system of distribution must follow the
principles of 'to each according to his work'. Therefore, wage and
salary differentiation must be maintained. Bonuses and other rewards
for efficiency must be used to increase production. Egalitarianism has
no claim in the present stage of economy.
Chines6 economic theorists today openly distinguish the differences
between the 'free capitalist economy' of the 1880s when Marx
discovered his objective laws governing economic development and
Lenin's theory to supplement Marx's theoretical inadequacy when
Lenin related 'monopoly capitalism' to 'Western imperialism' as 'the
highest stage of capitalism' which Marx did not anticipate. Sixty years
later after Lenin, the capitalist countries have 'made fresh advances'
and many new situations and problems have appeared which Lenin
hirnself did not or could not anti ci pate in the 1920s. In the 1980s,
Chinese theoreticians openly admit: 15
As capitalist society has not run its course, we cannot say that we
have arrived at a complete understanding of the laws of capitalist
economic growth ... Socialism is a new social system with abrief
history . It has only been thirty years since the socialist revolution in
China and we have not accumulated sufficient experience in our
social practice. Since we had an extremely backward economy to
start with and our present socialist relations of production are far
from mature, we have many difficulties in studying the laws of
socialist economic development.
Such a disclaimer in theoretical absolutism provides an unrestrained
liberty for socialist economic experiment in China. She can now
emphasise both growth and efficiency on the one hand, and seek new
theory and truth 'from practice' on the other. There appears to be a
long period when economic theorists will, through careful research on
socio-economic conditions characteristic of China, derive and discover
new laws governing 'Socialism with Chinese characteristics'. They
must test new principles, new policies and plans to deal with Chinese
realities before a new theory will ultimately emerge. Marxism and
Leninism will simply remain as references to guide Chinese thinking.
As China experiments in reforms and in economic growth, successes
and failures are both expected. And experience will be drawn from
both. In asense, Deng and his close colleagues have put Marxism and
Mao Zedong Thought to a severe test. If any part does not bring about
the expected success, it will be cast out and ignored theoretically.
 New Political Orientation and Economic Development 85

Practical experience becomes the central guiding in China's mod-

ernisation drive under the 'new socialism' . This does not mean that the
reform leaders share enthusiastically the capitalist views and theory of
economic means of production, or on relations between production
and the growth in productive forces. China will probably end up in
having a 'mixed economy' for a long period of time. It will recognise
simultaneous co-existence of individual ownership, collective own-
ership and state ownership. In management and production incen-
tives, China is likely to adopt freely any advantages of the capitalist
economy, including a tax system, wage differentials, and currency
management. In the name of egalitarianism and working-class interest
during the past thirty years, people in rural China were cruelly
exploited by government policy through a regulated low-price system
for agricultural products and compulsory quota sale to the state. On
the other hand, industrial products for consumption were priced high
and were in short supply. Therefore, rural China became more poverty
stricken relative to urban areas. In addition, the failure to realise the
need to first develop the rural economy and light industry before
concentration on heavy industries was the root of the economic
disaster for the thirty years of communist rule. Marxian dogmatism
and Mao's revolutionary radicalism were at the heart ofthe leadership
failure. Ideological politics came to interfere with economic rational-
ism and the advantages of a market economy.
All these mistakes, now viewed in retrospect, were due to blind
imitation of the Soviet economic model and blindness to Chinese
objective economic conditions as of 1949. Mao's own commune
system and the Great Leap forward in the late 1950s and his cultural
revolution during the last ten years of his life further intensified the
economic crisis. In addition the Soviet withdrawal of its aid pro-
gramme in 1960 created new anxiety in China. The nightmare of the
past thirty years has finally led to the new strategy for China's
economic development after 1979.
The new strategy was adopted at a work conference in April 1979 to
reform the economy in a fourfold approach, namely, 'readjusting,
restructuring, consolidating and improving' the economy as a whole.
Changes were to be implemented step by step within the limits of the
nation's own resources. Readjustment was given aperiod of five years
before other measures were to be taken. After the third Plenum in
December 1978, various urban adjustment measures and rural
changes were introduced, especially with emphasis on the responsibil-
ity system in farming and urban remuneration in relation to production
86 China Under Deng Xiaoping

increases. Many new areas of incentive were encouraged in rural

production and private marketing, such as the increase in the size of
private plots, and sideline occupations. The government drastically
increased the price for grain purchases from the farmers. All these
measures were aimed at raising the living conditions of the rural
population. Likewise, experiments in factory management responsi-
bility began in early 1980. The precise problems for the new strategy to
correct were summarised by economist Ma Hong as folIows: 16
China's economic development has been very unstable, with sudden
ups and downs and major swings in direction. Economic results have
been relatively poor and have had a tendency to decline. Thus the
growth in national strength has been fairly slow and the people have
not derived much in terms of material benefits. These are the major
problems in our economic development since the founding of the
People's Republic.
Oue to political or economic policy changes the growth rate remained
unstable in both agriculture and industry. For example, the annual
agricultural growth rate was 14.1 per cent between 1949 and 1952, but
declined to 4.5 per cent 1954-57. Oue to Mao's commune failure,
agricultural growth declined further by 4.3 per cent between 1958 and
1962. Then it registered a growth rate of 11.1 per cent from 1963-5.
The annual growth in the industrial area during the corresponding
periods was 34.8 per cent, 18 per cent, 3.8 per cent, and 17.9 per cent.
Such fluctuation in growth rate is clearly a reflection of poor
management and irrational policy changes. In the construction
industry, for example there was always a marked decline in economic
results, as measured in per hundred yuan of fixed assets from 1957 to
1976. Industrial enterprises under the ownership of the state (or the
whole people) declined for the same time period by 48.8 per cent from
23.6 yuan in 1957 to 12.1 yuan in 1976. Statistics concerning such
shocking failures are quite readily available in China today.17 Oue to
such 'ups and down' in agricultural and industrial production, which
resulted in the overall downfall of economic gains, the growth rate of
national income had frequent tendencies to decline. For example,
during the First Five-Year Plan, the average national rate of increase
was 8.9 per cent according to Chinese statistics. However, national
income declined by 31 per cent during the Second Five Year Plan
period. Ouring the rest of the years from 1963 to 1965, and thereafter
the average increase rate was 14.5 per cent, 8.4 per cent or 5.6 per cent
for the different planned periods. Such fluctuations were inevitably
 New Political Orientation and Economic Development 87

attributed to political instability and the ideological struggle within the

Communist Party. Unlike elsewhere in Asia, the people's living
standard in China did not improve much or improved unevenly from
region to region and between urban workers and rural farmers. White
collar officials did not have salary increases for decades while the
national income went through many irregular ups and downs. The
management system in both rural commune and urban enterprises
simply destroyed any desire or incentive on the part of the working
people to increase productivity. False statistics were reported by cadres
for their job security and political survival. Slogans were shouted and
self-criticisms were organised. But often they were artificially
performed to meet political regulations and party discipline.
On the other hand, until the beginning ofDeng's opening of China to
the outside world, China was a locked up system in stagnation without
much hope of catching up with and competing with other Asian
neighbours in economic development. Foreign capital investment in
China was ideologically unacceptable. International trade expansion
would have violated Mao's ideological stand and belief in self-reliance.
Western and Japanese technology and management skill could not
enter China. Radical Maoist factions and their influences permeated
every level of the communist party and the government units.
Therefore, it was impossible to deviate from the ignorance and stupidity
of ideological rigidity. Because of this, Deng's pragmatist vision since
the Eighth Party Congress in 1956 and Zhou Enlai's crisis management
after Mao's cultural revolution in 1966 wanted to differ quietly from
Mao's approach to modernisation and economic development. But the
Dengs and the Zhous and their moderate followers could not do
anything until Mao neared his death, and until after most of them had
been purged and abused. Some died du ring the secret confinement.
With such chaos and disorder during Mao's time, it is easy to appreciate
the urgency of Deng's return to leadership in 1973 to implement his four
modernisations. A new strategy for economic reform has been,
therefore, indispensable to get the country moving forward, if China is
to join the ranks of modern industrial states.
In order to appreciate the need for a new economic development
strategy, it is helpful to summarise the erroneous practice of the past in
economic development as folIows: 18

1. The violation of economic laws in see king the impossible high

targets in production. Inefficiency and waste were disguised by
falsification of statistics. In reality, the production output declined;
88 China Under Deng Xiaoping

2. The eagerness to expand new construction projects and new

capital formation, and the failure to take care of existing projects
and enterprises through efficient management innovation and
new technology;
3. The failure to produce consumer goods because of the emphasis on
production in heavy industrial sectors, such as steel and mechanical
equipments, whieh were over-produced and remained in ware-
houses to idle;
4. For two decades the foolish commune system stagnated rural
economy to reduce the living standards of the rural population,
while the central government failed to invest in consumer goods
production and in adequate or other essential consumption needs.
And the failure to develop sideline jobs and income to improve
living standard by their own effort.
5. The official policy promoting domestic capital formation by refusal
to allow people to spend on consumption. Many consumer goods
were simply not available.
6. The lack of patience in allowing a gradual and healthy transforma-
tion of production from private individual and collective ownership
to state ownership. The Maoist leadership unrealistically stepped
up the pace of public ownership wh ich caused waste and loss in
productivity as has been statistically revealed: 19
We rashly transformed collective ownership into ownership by
the whole people, and hastily neglected the role of the individual
economy in cities and towns. In 1952 there were 8.83 million
self-employed labourers in cities and towns; this number
declined 1.04 million in 1957 and by 1975 only 240,000 were left.
An over centralised system of economic management was also
carried out within the sector owned by the whole people.
Such a rash poliey had to be reversed after the adoption of the new
economic strategy under Deng. Today, cities and towns are
undergoing a reverse transformation and are becoming richer. The
people like this new development which permits them to help
themselves.
7. An erroneous self-isolation policy against the outside world denied
China the benefit of knowledge, trade, and an understanding of
global realities. A false sense of pride, self-reliance and independ-
ence prevented the nation from the natural contact of normal
relations among states. Mao's sense of revolutionary mission and
purity was a deadly self-delusion.
 New Political Orientation and Economic Development 89

8. Mao's primitive eoneept of population poliey brought about a

burden of one billion people whieh need jobs, edueation, housing,
transportation, ete.
9. The damaging poliey of land reform and eruel dass struggle
allowed the government itself quiekly to beeome the new
master-exploiter and the entire eountry was put under centrally
guided bureaueratie eontrol and management. That the new rural
poliey under Deng has brought peasant prosperity is itself a proof
of the past ignoranee of the Communist leadership. The future of
China still depends on further rural prosperity through peasant
hard work to eontribute to the wealth of the nation. Any visitor to
rural China ean see for hirnself that the pe asants ean be very
innovative in self-help. They ean eontribute enormously to the
building of a light eonsumer industry if the eentral government ean
properly guide and help them with eredits, information, market-
ing, transportation, and a eonstruetive priee system.
10. The fabrication of dass eontradietion and anti-intelleetualism
under Mao's personal insistenee from time to time sinee 1957 was
totally unneeessary.
11. There was also China's failure to understand the role of edueation
as the foundation for ereating seienee and teehnology. Without
mueh investment in pure seienee research no nation ean make its
own teehnology. Today, as a stop-gap at least, China has to
borrow and import teehnology from abroad.

These eleven areas of negligenee eontributed to a result of an un-

sound eeonomie eyde of 'high speed, high eapital formation, low effi-
eieney and low eonsumption', as pointed out by eeonomist Ma Hung.
Since 1978, the new eeonomie strategy of 'readjusting, restrueturing,
eonsolidating and improving' eontains both ehanges in poliey goals and
in methods of implementation. The new poliey goals indude the need
to satisfy the material and eultural desires of the people, an emphasis
on eeonomie efficieney, greater produetion in eonsumer goods, a
strong and healthy agrieulture prior to eoneentration on heavy
industry, and an emphasis on the importanee of transportation, energy
supply and edueation. To aeeomplish these goals requires time and
eareful planning. Before an undue rush to reform, there must be
readjustment. Future produetion inereases will depend on reorganis-
ing or restrueturing the existing eeonomy. China's eeonomy is now
open to influenee from the outside world. Positive poliey for foreign
investment in China and for two-way trade expansion represents a
90 China Under Deng Xiaoping

permanent commitment in China's open door poliey. Another shift is

the policy of deeentralisation in enterprise decision making to allow
eaeh produetion unit to build its own efficieney and accountability for
better economie result and profit. The new strategy will see to it that
the national economy is essentially dominated by those industries
under national ownership; eolleetive ownership and individual
ownership are merely supplementary. The underlying assumption is
that socialist ownership and eapitalist planning are inherently superior
to eapitalist anarehy.
In short, China's new eeonomie growth strategy moves slowly but
steadily from adjustment to reform. Gradually the nation will be able
to restrueture itself for the improvement of the eeonomy. The rate of
eeonomie growth will remain stable, instead of fluctuating as in the
past, in order to minimise inflation and overheating by a high rate of
growth. The economy will not slow down beeause of readily available
measures for stability in its growth speed. Sueh a new strategy will
eventually reaeh a stage in the economy as former Premier Zhao Ziyang
said repeatedly that China will 'blaze a new trail' in developing its social-
ist economy. The long-term success of reform will require continuous
effort on three fronts of the economy: (1) the rationalisation of the
eeonomie strueture uninterfered with by non-economie irrational
faetors; (2) an organisational set up of enterprise to maximise
produetion, marketing and management efficieney free of politieal
heavy handedness; and (3) finally, an eeonomic system of manage-
ment to inerease managerial aeeountability and success. In rural
eeonomie development the new strategy entails sueh implementation
measures as suggested in Ru Yaobang's report: expansion in the
decision-making power of the rural population, restoration of private
plots, individual and family sideline produetion and village marketing,
contraetual system of responsibility farming, fair pricing of farm
produets by the state purehasing ageney, and diversifieation of rural
eeonomie and oceupational development. 2o The govemment has
completed sueeessfully the short-term goals ealled for by the new
strategy during the Sixth Five-Year Plan period (1981-5) in readjus-
ting, restrueturing, eonsolidating and improving as expeeted. The 7th
Five-Year Plan (1986-90) has been a fresh and real take-off stage for
teehnologieal advanee, rational reform of enterprises, energy develop-
ment and transportation expansion, It is expected under the new
strategy that 'the 1990s will witness an all around upsurge in China's
eeonomy whieh will definitely grow at a mueh faster rate than in the
1980s ... They [the people] will see a bright future more clearly and
 New Political Orientation and Economic Development 91

will be inspired to work with greater drive to usher in the new period of
vigorous economic growth.>21 It now appears that China is concen-
trating on control of inflation, economic stability, new expansion in
banking institutions, finance and eredit balance, prevention of trade
imbalance and means of long-term stability. During the past several
years, concentration on long-term goals include: (1) emphasis on key
urgent development projeets; (2) a greater effort to improve the
people's living standards; (3) upholding the dominating position of the
state owned portion of the economy while diversifying economic forms
of production; (4) proper supervision over the leading role of the
planned sector of the eeonomy while eneouraging the supplementary
role of market regulation; and (5) preservation of the basic policy of
economic self-reliance while encouraging foreign investment and
borrowing or purchasing foreign technology. These various emphases
and approaches have been maintained when the Seventh Five-Year
Plan began in 1986. So far it seems to be impossible to oontrol
economic fluctuations during this period of massive reform.
One of the most important documents on reform measures of the
economic restructuring was adopted on 20 October 1984, at the Third
Plenum of the Twelfth Party Central Committee. 22 This was a
document on poliey implementation which sought to institutionalise
the economic structural foundation to meet the greater challenge of
growth in nine basic areas - for example, the training of party cadres,
the industrial and human resouree training, and the development of a
strong and capable managerial class to man the some 40,000
enterprises currently under reform toward efficient and responsible
autonomy. Overheating of the economy in 198~, Ru Yaobang's
resignation affecting adversely foreign capital inflow in 1987, and new
erisis in declining food production in 1987-8 seem to illustrate many
inevitable problems associated with massive economic changes. There
may be future unexpected problems in the 1990s to affect adversely the
economic steady growth.
4 Broad Implementation of
the New Economic
Strategy
This chapter will focus on macro-implementation of the new economic
strategy since the Third Plenum of the Eleventh Party Congress in late
1978. The period of major readjustment is near its completion.
Restructuring, consolidation and improvement are being carried out
simultaneously during the Sixth Five-year Plan (1981-5). The
discovery of the impact from rural economic decontrol, relaxation of
politics and the fresh start toward rapid economic diversification and
expansion has generated additional optimism toward urban economic
reform both in scope and depth. In asense, pressure for rapid urban
economic reform is to acommodate the rural expansion and to bridge
the increasing mutual dependence between the rural and the urban
sectors of the growing economy. Unlike the lock-up rural policy under
Mao, Deng's poliey is to free 80 per eent of the population and let them
foHow their own destiny as being better for growth. The government
has helped them reeover from region to region, while the government
itself has fuHy concentrated on urban heavy industrial reform for
greater expansion. Today, partial economic freedom in rural China
has brought new vitality and strength to the entire eeonomy. This
chapter will touch upon a few major reform documents as a means to
implement broadly the new eeonomie strategy.

4.1 ECONOMICSTRUCTURALREFORM

One of the most important documents on structural reform was

adopted on 20 October 1984 at the Third Plenum of the 12th Party
Central committee. It is a major implementation document which
provides categorical delineation of reform specifics. Broadly speak-
ing, it seeks to achieve the foHowing very specific goals: 1 (1) to secure
'a dynamic socialist economic structure'; (2) to invigorate enterprises
as 'the key to restructuring the national economy'; (3) to devise a
planning system for 'developing a socialist commodity economy'; (4)
to establish a 'rational price system'; (5) to separate government from
enterprise functions to aHow the enterprise to perform its proper

92
 Broad Implementation 0/the New Economic Strategy 93

economic functions; (6) to create various forms of economic responsi-

bility system and to implement the principle of distribution of reward
according to one's work; (7) to develop diverse economie forms to
expand foreign and domestic economic and technological exchanges;
(8) to promote a new generation of cadres and a contingent of
managerial personnel for the future economy; and finally (9) to
strengthen party leadership in the reform process and its success.
This document has clearly pointed out a continuing task of economic
reform with very specific targets. If all the goals are to be reached in
the Seventh Five-Year Plan period as generally expected in 1990, the
Chinese economy will then have truly reached a stage of infra-structu-
ral completion. It willlikely become, then, an institutionalised stable
system with a rational economic decision-making regularity. The.
system will likely be able to resist fluctuations and rash changes.
However, if political instability and unexpected economie disasters
should occur in the next decade after Deng's departure, it will be
diffieult to anticipate what dramatic new shifts may take place. The
October document has declared that, first of all, the growing rural
economic prosperity and success now require much greater economie
interaction with urban industrial centres. Rural agricultural demands
have made urban economie reform urgent in order to meet 'the
growing forces of production'. The present general defects of urban
economie structure include: no clear distinction between functions of
the government and those of the industrial enterprises, bureaucratic
barriers between government departments and among geographie
regions, excessive and rigid control of enterprises by the Communist
Party, lack of well-planned attention to market commodity produc-
tion, lack of understanding between the law of value and the
government regulatory philosophy of the free market. These defects
have plagued enterprises and caused them to suffer from their lack of
decision-making power. Enterprise personnel have followed for some
thirty years the practiee of 'eating from the same big pot'. No initiative,
enthusiasm and creativity in enterprises can be expected unless
decision-making power is granted to them. The document says 'we
must emancipate our minds more, follow our own road and build a
socialist economie structure with Chinese Characteristies that is full of
vigour and vitality so as to promote the growth of the forces of
production. This is the fundamental objective of our present reform'.
This reform is expected also 'to advance social stability' and the growth
of state revenue and living standards.
Urban enterprise is designated by planning to bear 'the chief and
94 China Under Deng Xiaoping

direct responsibility for industrial production and construction and

commodity circulation'. China presently has over one million urban
enterprises which are divided into industrial, building, transport,
commercial and service fields. They employ a total of 80 million
workers. The tax and other profits from industrial enterprises alone
amount to 80 per cent of government revenue. Having such
importance, they must have 'great vitality' to lead the economy. This
vitality can only be built in two ways: it needs to be free from
unnecessary state control and an organised internal vitality needs to
exist between the management leadership and the workers and staff.
An enterprise must have power 'to adopt flexible and diversified forms
of operation; to plan its production, supply and marketing; to keep
and to budget funds it is entitled to retain; to appoint, remove, employ
or elect its own personnel according to relevant regulations; to decide
on how to recruit and use its work forces, and on wages and rewards; to
set the prices of its products within the limits prescribed by the state,2.
Each enterprise must be an independent entity as both a producer and
a dealer of its commodity. The strength and vitality will come from
internal human relations and organisation al managerial efficiency
from which it derives essentially the initiative, wisdom and creative-
ness of its workers. When workers' initiative is linked to their material
benefits, urban workers will respond as rural farmers have in their
recent experiment. Wages and special rewards must be 'given to each
according to his work'. This will increase production and promote
modernisation, wh ich is the 'inevitable trend of history and the wish of
the people'. The workers and staff of any enterprise must learn to
produce what the country needs and what they themselves want. All
units must be represented in the decision-making process of their
enterprise through their own elected representatives. The unity of an
enterprise's leadership and the interest of its staff and workers will be
ensured by the laws of the state. In short, enterprise reform itself will
be carried out step by step in relation to the whole national economy.
Nationwide, the reform should be completed"before 1990. Another
major innovation proposed by the document is the device on the
'planning system for a socialist commodity economy'. The rationalisa-
tion for a socialist commodity economy has won an ideological battle
over the merits between a planned economy and a commodity
economy. No one knows the extent to which the socialist law of value
should be applied to avoid the total anarchy of the market economy of
capitalism. Socialism itself certainly has serious problems with
egalitarianism. Public ownership of the means of production under
 Broad Implementation ofthe New Economic Strategy 95

socialism guarantees the state control over the national economy.

Through government planning, the 'supplementary economy' dealing
with important but non-essential articles and services should be left to
the market forces for their regulation. Lines must be drawn between
the scope of 'socialist command economy' and the market 'commodity
economy'. China is clearly determined to incorporate both of them
into its future economic development. The justification provided by
the document is that China can combine 'at one uniformity and
flexibility'. Dealing with reform implementation, account must be
taken of the vast size of the country, her regional diversity, its huge
population, the lack of transportation, inadequacy of micro-informa-
tion for any detailed planning, and the uneven economic and cultural
differences in various parts of the nation. Recent reform experience
indicates the necessity to 'stimulate commodity production and
exchange'. It is now realised that it is impossible for the central
government to incorporate all the local details into a giant national
plan. Any such effort would create new difficulties through misinfor-
mation and top heavy bureaucratisation. Implementation of a detailed
national plan by administrative orders, rather than through natural
market conditions, can be very inefficient. The document warns 'we
must be realistic and admit that for a long time to come, our national
economic plans on the whole can only be rough and elastic and that we
can do no more than, by striking an overall balance in
planning, ... exercise effective control over major issues while allow-
ing flexibility on minor ones. ,3
From this document, one can easily see that China will, for a long
time to come, have a socialist planned commodity economy. Part of
this economy will be based on public ownership as a form of state
capitalism. A significant private ownership of this commodity
economy seems indispensable in the early stage in the economic
development. This appears the best way to reduce bureaucratic
inefficiency and to reduce the size of state 'mandatory planning' . As a
flexibly planned commodity economy, greater flexibility will carefully
be confined to 'production for rural market exchange' which will
include farm and sideline products, sm all articles, repair services, and
retail trade.
China is also faced with the need for a rational price system. There is
much confusion in the current irrational pricing regulations which
must be reformed if enterprises are to operate on a rational pricing
system of their products. The leadership realises now that 'pricing is the
most effective means of regulation, and rational prices constitute an
96 China Under Deng Xiaoping

important condition for ensuring a dynamic yet not chaotic economy'.

The major irrational pricing in China currently includes; unfair price
ratios among different commodities, inadequate price differentials for
a given product with diverse quality, ridiculous price differences
between farm goods sold cheaper in the open market and the same
goods sold with higher price to the government. The government must
drastically reform its own irrational centralised price control. The key
emphasis of reform is to reduce the scope of uniform price as set by the
state and expand the scope of floating prices as dictated by the market
forces. Prices must be allowed to reflect constant changes in the law of
supply and demand. The future reformed new price system must
protect the interest of the individuals and their market sector in their
living standard. The government seems prepared to deal with a new
price system in relation to a new tax system and an expanded banking
practice. For rapid adjustment macro-economic development, gov-
ernment regulation and growth trend must be taken together for
pricing consideration. As the economy becomes freer and more
flexible, the price system itself will become more sensitive and
important as a regulating instrument.
One of the areas designated for serious reform is the separation of
government interference from the rational and effective operation of
the enterprises. This will affect the role ofthe party. It will require an
enormous decentralisation of decision-making power as weIl as a
hands-off tendency on the part of political cadres who are assigned to
the enterprises. They will be likely to concentrate their activities in the
future on morale building, recreation programmes, and other cultural
matters. Such reform will probably bring about greater responsibility
and freedom to managers and staff of the enterprises to innovate, and
to create a new vigorous team spirit for production in competition with
other related enterprises. The role of the government should be
limited to formulating national production strategy, development
plans, principles and policy for economic and social development. It is
the function of the government at all levels to deal with transportation,
resource development, energy supply, technology and other utility
supplies. For profit or for loss, the government can leave enterprises to
manage their own production, marketing, purchasing, bonus distribu-
tion competition or cooperation with other related enterprises, for
survival or against bankruptcy.
The 1984 document is also eager to introduce various forms of a
'contracted responsibility system' into urban economic development.
The responsibility system which has proved successful in rural practice
 Broad Implementation 0/ the New Economic Strategy 97

should similarly work in the urban situation. It is possible to specify

explicitly 'work post' and 'duties of each worker' of staff member
through 'contracted jobs'. Thus, it will be easy to hold workers
accountable in their merit evaluation for their wages and rewards.
Material compensation can follow strictly according to work welldone
with initiative, creativeness and enthusiasm. This urban 'responsibility
system' is to be a combination of responsibility, authority and benefit
achieved in the interest ofthe state, the collective (enterprise ), and the
individual hirnself. However, it is unlikely that urban enterprises
will follow any particular single model of responsibility system, in view
of the major differences from enterprise to enterprise. Leadership will
come from 'a systems manager' who will assume fullresponsibility.
Party organisations within any enterprise are required to support the
manager in his exercise ·of 'unified authority over prpduction and
management'. Under the unified command of an enterprise manage-
ment, a system of 'enterprise democracy' must be implemented
through the help of party organisations within the enterprise. Within
an enterprise 'the workers are masters' and can exercise mutual
criticism and encourage creativity. The new enterprise reform is to be
strict in following areward system of 'more work more pay, and less
work less pay'. Differences in wage-scales will be sharply recognised
between mental and manual work, and between skilled and unskilled
work. A new wage system will be enacted. Egalitarian thinking in the
socialist wage system is now considered incompatible with scientific
Marxism.
Emphasis in urban reform is also given to the development of more
'diversified economic forms and various methods of management'.
This thrust is linked to pledges to bring in more foreign economic and
technological exchange on the basis of economic independence,
self-reliance, equality and mutual benefit. Non-public and non-collec-
tively owned segments of the new 'individual economy' is considered
quite different from the individual or private ownership which, under
socialism, plays 'an irreplaceable role in expanding production,
meeting the people's daily needs and providing employment,.4 The
October document pledges to remove obstacles in the way of collective
economy and individual economy in both cities and rural towns in
order to facilitate their rapid development. Future policy will
encourage 'diverse and flexible forms of cooperative management and
economic association among the state, collective and individual
sectors of the economy'. For example, some small state-owned
enterprise may be leased to individuals or collective bodies on a
contract basis.
98 China Under Deng Xiaoping

The document recognises the contradictions between antagonistic

international political relations and cooperative and close economic
relations among states. It repudiates the past self-isolation and
declares 'National seclusion cannot leadto modernisation ... We have
taken opening to the outside world to be our long term, basic state
policy, a strategie measure for accelerating socialist modernisation.
Practice has already yielded marked results. We must continue to
pursue flexible policies, reform our foreign trade structure. 'S Pledges
are also made to strive for the success of the special economic zones
and in opening up other coastal cities. Foreign funds, technology, and
foreign businesses for joint ventures are beneficial complements to
China's socialist economy. Domestically, all parts of China should be
open 'to do away with blockades' between more and less developed
regions, between coastal and interior and the border areas. In short,
China pledges to speed up economic rationalism in both organisational
management and geographical distribution, with the help of foreign
technology and investment.
Reform on such a wide scale clearly calls for a 'new generation of
cadres' and 'a contingent of managerial personneI' . The urgent task is
to educate and train 'thousands upon thousands' of middle-aged and
young managers and technicians. Party reform is linked to recruiting
qualified cadres who are free from past factionalism. Completion of
the reshuffling of leadership in key enterprises was to be accomplished
before the end of 1985. The Central Committee of the Communist
Party has called for rapid training of directors, chief engineers and
accountants. Education has been given a special task of developing
human resources in the next several decades.
Finally, the success of economic structural reform depends on the
leadership of the Communist Party. To proceed cautiously, the
document states 'make reforms one by one when conditions are ripe,
and make experiment when we are not sure of success. We must not try
to accomplish the whole task at one stroke'. The party began its own
consolidation after 1985. The Four Cardinal Principles ofthe party are
to be strictly emphasised in cadre recruitment task.
Area by area, the document carefully reviewed the economic
situation and provided detailed reform guidelines. In total, it has set
out an enormous task to be accomplished in the next several years.
There is no arrogance expressed, no dogmatism adhered to, and only a
minimal socialist ideological reference was employed during policy
discussion. The entire document appears most frank, straightforward
in problem analysis, and rational in programme suggestion and
recommendation. In short, the October document calls for an
 Broad Implementation o[ the New Economic Strategy 99

ambitious undertaking. Whether or not the Communist Party or the

country as a whole can fully accomplish what has been called for
remains to be seen. Even if only 50 per cent of the task is accomplished
in the next several years, it will be a success anyway because of the
experimental nature of the reform itself. The document does not
impose a timetable for completion. Many future new problems are
expected during reform implementation. Many unexpected new
circumstances may emerge beyond the leadership's control. The fact
that the party in 1984 drew up such areform document is itself a
significant evidence of rational planning and programmatic progress.
It will be seen how the private individual enterprises in China are to be
linked to the planned command socialist economy as a whole, and how
the small collectively owned enterprises will operate in competition
with the powerful command economy is of great in te rest to economists
and sinologists. The democratic operation of an enterprise under a
single powerful manager, who is to be aided by the Communist Party
leader within that enterprise, may or may not be as smooth and ideal as
now expected. In short, there are many unanswered and unanswerable
questions on the way toward successful reform implementation.
Indeed, the document has dramatised Deng's 'Socialism with Chinese
Characteristics'. However, such characteristics as now perceived in
the reform are not so unique to China itself because they are economic
rational devices, progressively conceived and universally understand-
able. What is quite characteristic is Deng's leadership in the
Communist party, which is able to transform itself and to integrate into
Chinese socialism many classical features of economic free enterprise.
Such a new socialist economy, in my judgement, will be quite
acceptable to all Chinese people everywhere. Deng's new socialism
will bring the benefits of modernisation to the whole country, and it
will be carried out without a Maoist class struggle. Indeed, this reform
document is another evidence of Deng's characteristic statesmanship.
If these major reform items are successfully implemented, China will
have institutionalised its socialist economy which will in itself be a new
model of innovative development.
Three implementation reports are to be discussed briefly as folIows:
one of them is the Premier's Report on Government Work on 27
March 1985, to the sixth National People's Congress. 6 Another
document is the Draft Plan for National Economic and Social
Development. The third deals with Report on the Execution of the
State Budget for 1984 and of the Draft State Budget for 1985. All of
these documents were adopted by the same National People's
100 China Under Deng Xiaoping

Congress as official policies for implementation. Together, these

documents help explain the state of the economy as viewed and dealt
with by the different departments of the executive branch of
government. Each document contributes to a better understanding and
solution to the economic situation as seen in fiscal year 1985.
The premier declared 1984 the year of 'great achievement' in
industrial and agricultural production, in the acceleration of the
modernisation drive and in further improvement of the people's living
standards. For several years the nation has achieved a new economic
situation marked by 'sustained, stable and coordinated economic
growth'. In 1984 the total value of both industrial and agricultural
growthexceeded 1000 billion yuan. This welcome growth foHowed an
average annual increase rate of 7.9 per cent. The 1984 growth
represented a 14.2 per cent increase over 1983. And national income
and state revenue both scored an increase of 12 per cent over 1983. In
agriculture, another bumper harvest was registered. Grain output was
more than 407 million tons in 1984 (a 5.1 per cent over 1983). Cotton
output registered 6.08 million tons (a 31.1 per cent increase over the
previous year). Rural China continued to diversify its productive
innovation toward a growing commodity economy. The average per
capita amount of grain and cotton in 1984 rose to 400 kilograms and 6
kilograms respectively, almost double that of the early 1970s in many
part ofthe country. With the exception of few far removed areas, the
people have gene rally 'attained sufficiency in food and clothing' . In the
industrial sector, energy production, for example, exceeded its target
production in 1984, with the coal output reaching 770 million tons and
crude oil over 114 million tons, an increase of 8 per cent for both over
1983. Good progress was registered in 1984 in other industrial areas as
weH, including chemical, building material, machine building, electro-
nics, textile, metaHurgical, and other light industries. By December
1983,43 out of65 major projects ofthe Sixth Five-Year Plan (1981-5)
had been completed one year ahead oftime. By the end of 1984, more
than 42 million urban jobs had been found for city residents between
1979 and 1984. According to a survey ofthe State Statistical Bureau, the
annual per capita income ofurban citizens has reached 608 yuan in 1984,
arid a net per capita income for a peasant was 335 yuan by the end of
1984. Farmers' per capitil increase was 14.7 per cent over their city
counterparts of 12.5 per cent in the 1984 average.
The main features of Chinese economic development in recent years
have included the foHowing: (1) a balanced rational growth between
agriculture and industry, and also between light and heavy industries
 Broad Implementation 0/ the New Economic Strategy 101

has been achieved; (2) a correct ratio between consumer consump-

tion production and capital investment accumulation has also been
obtained. These two main achievements represent a major accom-
plishment in the readjustment process. Agricultural expansion in
recent years has resulted in light industry growing at a faster pace, a
healthy 11.2 per cent between 1979 and 1983, with 13.9 per cent for
1984. Due to rapid expansion in light industries, especially in areas of
woollen fabries, washing machines, television sets and refrigerators,
heavy industries have also picked up rapidly. Rising consumer
demands have stimulated the growth production to meet the popular
demand for higher living standards of the people. Statistics indicated
that, between 1978 and 1983, average per capita consumption rose
from 175 yuan to 288 yuan, and in 1984 to 320 yuan. Thus the
average annual growth was 7.3 per cent after making allowance for
price changes. This growth rate far exceeded the 2.2 per cent
increase during the twenty-six years between 1953 and 1978. These
figures in economic achievements, which may suffer from technical
inaccuracy, have been the result of the success of the four-fold policy
of readjustment, restructure, consolidation and improvement. The
economy has broken the 'closed and rigid pattern that had taken shape
over a long period' .
Beginning in 1979, the economic policy success in the countryside
led the government to experiment in urban enterprise reform on the
tax system, enterprise decision making and other reforms concerning
the construction industry, the system of commerce, and banking.
Because of the reform effort to 'introduce diverse forms of urban
economy and method of business operation', the urban economy has
begun to experience a vigorous growth unknown for many years. Now,
the government is confidently entering a new stage of restructuring the
entire economy with an emphasis on urban aspects.
On the other hand, many new problems resulting from the recent
reform, in addition to those inherited from the past, will require
solution. Aside from the persistent difficulties over, for instance,
energy supply, transportation bottlenecks, supply of raw materials and
semi-finished materials, 'a conspicuous problem' is the issue of too
much currency as a result of 'lax control' over credit and consumption
funds in 1984. This was unavoidable because of the increase in
consumer goods production, in rapid business turnover, and in higher
income for people to spend. The lack of a rational wage and price
system has made control of bank credit and floating currency more
difficult to regulate and adjust. 1984 was the first year of the
102 China Under Deng Xiaoping

implementation of the economic reform decision of 1984. The nation's

political situation has been marked by 'increasing stability and unity' in
recent years. This has helped the economy to maintain vigour and
vitality. The principal guidelines have been: 'Be steadfast, be prudent
in fighting the first battle and be sure to win' .7 The government seems
fully aware of its lack of knowledge and experience in opening up a
complicated urban economy for reform. In the past few years, the
cities aided reforms in rural areas. And larger enterprises helped
smaller enterprises. The government will continue to 'invigorate sm all
enterprises' for still greater vitality. But future emphasis will be on
large enterprises. The reform focus will emphasise the need for low
production costs, less use of raw materials and the increase of the
factories' ability to initiate proper changes on their own. In terms of
new forms of administration, 'economic responsibility systems' will be
introduced to suit each particular enterprise for efficiency and
accountability.
The most urgent areas for structural reform in 1985 were the wage
and price systems. The old practices in both areas are now out of step
with new strategies and economic changes. They were not much in
need when the state authoritatively decided wages and prices, and the
supply of goods in the market and in rationing. The consumers, who
had no say, bought whatever was available or could not buy wh at they
wanted even at a higher price. There was no need for knowledge of
price theory and wage mechanisms to regulate the growth, production
and distribution in the economy. Today, all that has changed. The
economic 'command sector' , the 'collective sector' and the 'market
sector' of the economy must coordinate and compete in the name of
'socialist commodity economy'. All three sectors do mutually
influence each other. But they must also interact for purposes of
harmony to meet the overall growth efficiency and the structural
modernisation. Today the market conditions of Iess regulated and less
planned rural and individualised sectors of the economy can affect the
collective components and the commercial activities. This can very
seriously produce painful consequences for the average consumer and
wage earner. The negative effect of prices and wages must not be
allowed to destroy the basic purpose of raising the living standards of
the masses. The central government, however, is not at all experi-
enced in dealing with the price fluctuation of the free marketing
economy and with the wage system resulting from enterprise reform
between labour and management. Secondly, with the command and
collective sectors of the economy in the hands of the government, the
 Broad Implementation 0/ the New Economic Strategy 103

less regulated fluctuating 'market price' can easily be victimised if

wrong measures are adopted to prevent natural price fluctuation
which often affects the entire consuming population of the nation. On
the other hand, the new reform strategy itself depends on the healthy
growth and vitality of the free marketing mechanism from the
countryside to the urban daily commodity exchange. To maximise the
worker's production efficiency and rural industrial development, the
government must treat prices and wages as two major phases of the
same growing problem. Presently, the premier has reported that 'the
prices of many commodities reflect neither their value nor the supply
and demand relationship. They adversely affect the assessment of the
operation and management of an enterprise and its economic
performance as well as the development of commodity production and
exchange. Reforming the wage and price systems has become the key
to further encouraging initiative in all fields'. 8 In short, prices and
wages will not only affect every individual consumer but also the entire
economic growth. Wage restructuring has aimed at removing the
irrational and egalitarian practices in favour of a new distribution
differential system to pay each according to his work. Future
identification of the work value is to be done by specification of 'work
past', 'job specification', 'responsibility' and 'contributions'. In state
enterprises, payroll fluctuation will be assessed by the specific
economic performance record. Every worker, staff member, and
manager will be affected by the overall performance of their enterprise
as a whole. Wage and bonus reform is being carried out on a one by one
basis. Not all the 300,000 enterprises are equally prepared for uniform
reform in wages and prices at the same time. Until the wholly new form
is introduced, only partial adjustment on wages and bonuses may be
introduced. Aperiod of five years is made available for such reform on
wage and price. Presently, overall details on wage reform are being
studied and worked out. The first experimental phase of wage reform
was instituted in governmental offices in July 1985. All levels of all
organisations are currently studying their wage system. The payroll is
likely to continue to float on the basis of total production, tax, and
profit. More strict control over wage funds and bonuses will have to be
institutionalised soon against an irresponsible shift offunds.
Price reform in 1985 was equally difficult if not more so than wage
reform. The government adopted a short-range policy for 1985
combining 'relaxed control with readjustment' to raise the prices of
some commodities and to lower those of others in order to attain the
104 China Under Deng Xiaoping

basic stability of commodity prices across the entire economy. The

specific points whose achievement is sought are: 9
1. In the rural area, the government is adjusting the purchase and
marketing prices of grain and cotton and is introducing govern-
ment purchase of both on a contract basis. Other farm and sideline
products will be subject to market fluctuations through gradual
relaxation of price control. This will stimulate rural production
increases and the price competition of market commodities;
2. Increase of railway freight charges in order to promote the full
use and expansion of waterways and highways;
3. Widening of price differences for products of different quality and
large price differentials between regions. Expensive or unmarket-
able products will be eliminated in favour of the production of
brand-name and high quality goods in competitive commodity
circulation;
4. Prices of raw and semi-finished materials in 1985 remained
unchanged, while other finished products by enterprises were
subject to market forces. This policy willlikely continue.
Eventually a rational price system will emerge in a stabilised
economy. It is a laborious process which has been designed to involve
'Iess risk and greater chance of success'. The government is deter-
mined to control the currency circulation through (1) prevention of an
increase in consumption funds and the forbidding of aB units to use
public funds for any unjustifiable purpose (banks are used to control
the funds of enterprises as financial supervisor of the latter); (2)
introduction of a unified credit and monetary policy to strengthen the
regulatory function of the People's Bank of China over major
economic activities. The interest rate for bank deposits can be raised
to encourage savings over currency circulation (the bank will decide on
currency ceilings for its branches in various parts of the nation); (3)
over-investment, however, will be subject to a tax penalty in order to
protect business and economic expansion through adequate currency
circulation in the financial market; (4) a stringent budget cut was
imposed for 1985 against administrative expenses, a cut of either 10 or
20 per cent was imposed on administrative budgets of aB public
institutions on the purchasing of durable goods; (5) encouragement of
increase of consumer, marketable, high quality brand-name commod-
ities for expanding market supplies. These measures are presently
being implemented in various parts of the nation through cooperation
from local government units. The premier's report observed that with
 Broad lmplementation 01 the New Economic Strategy 105

one billion people in over 200 million households, the domestic

market has shown an enormous capacity. If people rush to buy the
same commodities at the same time, no state could cope with the
man-made strains on commodity supplies, thereby'providing opportu-
nities for lawbreakers and dangers to the state, the consumer and the
economy itself. Today, China is trying intelligently to stretch the use of
the price system or the wage device to stimulate economic growth and
to achieve certain social goals.
The premier's 1985 government report suggested several broad
policy making strategies and long term-goals in summary as folIows: 10

1. 'Adhere to the principle of see king truth from facts and making
steady progress and resolutely guard against blindly pursuing a
higher rate of development and vying with one another to this end.'
He expressed his faith in quadrupling the nation's economic growth
value by the end of the century. The nation should see, he said,
'better results rather than too high a growth rate';
2. 'Invigorate the economy and improve management.' The premier
asserted that 'we should continue to emancipate our minds and
stress opening China to the outside world'. We should, he said,
'have control over major issues and flexibility on minor ones'.
3. 'Take overall interest into consideration and overcome selfish
departmentalisation.' He warned all 'localities and departments'
not to interfere with the unified policy decisions and plans of the
central government and damage the overall interest of the country;
4. 'Continue to follow the principle of gradually improving the
people's living standards through increased production, and of
building the country through thrift and hard work.' He feels it
wrong to seek blindly a higher level of consumption regardless of
productive capacity and actual conditions;
5. 'Continue to check all unhealthy practices and remove all
obstacles to the current reform.' He listed several malpractices as
being extremely harmful to the reform: excessive bonuses and
allowances in cash or in kind, profiteering, price raising, power
abusing in reselling goods of short supply, giving lavish dinner
parties and gifts, and offering and taking bribes.
106 China Under Deng Xiaoping

4.2 ECONOMIC AND SOCIAL DEVELOPMENT TI-IROUGH

BUDGET PLANNING AND EXECUTION: PROBLEMS AND
SOLUTIONS

On 10 April 1985, the Sixth National People's Congress adopted two

major reports from the State Council Members as official policy
documents. One of these is called 'The Draft 1985 Plan for National
Economic and Social Development' delivered by Song Ping, Minister
in charge of the State Planning Commission and State Council. The
other document, 'Report on the Execution of the State Budget for
1984 and on the Draft State Budget for 1985' was delivered by Wang
Bingqian, Minister of Finance. These two documents provide a large
amount of important information on the state of the Chinese economy
and on the implementation of development plans. Information quoted
in the following pages is taken from these documents.
Song Ping's report deals with a review of 1984 and a draft plan for
1985 in economic and social development, the last two years of the
Sixth Five-Year Plan (1981-5). He listed, first of all , the major
achievements in 1984 in industry and agricuIture as folIows: total
agricultural output value was 330.3 billion yuan in terms of the 1980
constant prices, a 14.5 per cent increase over 1983. Grain output went
up by 19.84 million tons over the 1983 increase of 32.78 million tons,
for a total of 407.12 million tons. Cotton totalled to 6.077 million
tons, an increase of 1.44 million tons more than in 1983. Other major
areas in outputs all surpassed the planned targets. On the other hand,
the total value of industrial output came to 707 billion yuan, an
increase of 14 per cent over 1983. Coal output came to 772 million
tons, a 7 per cent increase over 1983. erude oil output was 114.53
million tons, representing an increase of 8 per cent. Several rare and
high cost commodities, such a refrigerators and washing machines,
increased in production by 45 to 200 per cent. Thus, better growth
results generally were attained in 1984. The railway, road and water
transport, civil aviation and post al and telecommunications depart-
ments 'all exceeded their plans by their best use of existing resources'.
Secondly, he reported on the work on key construction projects and
the technological transformation of enterprises. Work was speeded up
generally in these areas in 1984. Investment in capital construction for
state-owned enterprises came to 73.5 billion yuan, an increase of 14.1
billion or 23.8 per cent over 1983. Of this an investment increase in
energy growth reached 25.1 per cent and in transport and post al
 Broad Implementation ofthe New Economic Strategy 107

services, 34.2 per cent. Capital investment in cultural, educational

and public health areas and in scientific research rose by 30 to 50 per
cent or more. Investment in equipment replacement and technological
transformation was 42.5 billion in 1983, an 18 per cent increase over
the previous year. The Anshan Iron and Steel Complex, the country's
number one automobile works and other key enterprises are all
making 'fairly rapid progress' in technological transformation.
Thirdly, Minister Song said 'the urban and rural market was more
thriving than ever'. More consumer goods reached the market in 1984.
The total volume of retail sales of commodities was 335.7 billion yuan,
a rise of 50.8 billion yuan or 17.8 per cent increase over 1983. A new
record on foreign trade expansion and notable progress in the use of
foreign funds and technology were set in 1984. Total imports and
exports reached 120.1 billion yuan, a 39.7 per cent increase over 1983
or 19.6 per cent 'after allowing for currency exchange and price
fIuctuations ... Grain imports were reduced and cotton exports
exceeded imports'. Chinese imports in 1984 registered a considerable
increase in the areas of new technology, rolled steel, chemical
fertilisers, raw materials of the chemical industry, and timber. More
foreign funds were actually used in 1984 in the investment of joint
ventures than in the previous year. Progress was made in the areas of
science and technology, the training of qualified personnei, culture
and public health. Colleges and universities in 1984 enrolled a total of
475,000 students, an increase of 84,000 over the previous year. Adult
education at the college level is being developed rapidly. There were
1,292,000 students taking correspondence, television, and evening
classes at various universities in 1984. Technical and vocational
training was making rapid progress. In 1984, the total number of
'workers and other employees reached 118.24 million'. The document
further says: 11 'The situation in the national economic and social
development of our country is better than ever before ... There is
immense potential in production, construction, circulation and in
other fields.'
In surveying the difficult problems in social and economic develop-
ment ahead, the report listed the following: shortages in electric power
supply, in railway transport, shortage of raw and semi-finished
materials, failure of manufactured products to keep pace with changes
in consumption patterns, acuteness in market supply and demand,
high priced low quality consumer goods, a rapid increase in
consumption funds, unreasonable raises in wages, and bonus by
enterprises and other administrative offices. Many of these problems
108 China Under Deng Xiaoping

indirectly or directly contribute to price fluctuation and to excessive

currency supply in the market. The target for social and economic
development in 1985 consisted of three phases: price reform, wage
reform, key construction projects, and the technological transforma-
tion of enterprises. More specifically, the task consisted of greater
production growth, greater grain output, promotion of animal
husbandry and aquatic production. The development plan pledged
greater availability and priority in raw material supplies, capital
construction, bank loans and foreign exchange to such factories that
innovate and produce high quality goods for domestic consumption
and for export. Another development emphasis for 1985 was on
conservation in consumption of fuel, electricity, raw and semi-finished
materials and many other industrial material supplies. All of these
suggestions seek, in short, to achieve economic efficiency and social
cooperation. The total investment in capital construction in 1985 was
set at 80 billion yuan in the draft plan. The preference of spending was
given to technological transformation, renovation of plant facilities,
and expansion of existing enterprises (54 per cent of 80 billion is
assigned for improving the existing enterprises). Forty-four per cent of
the land was assigned to capital construction. Thirty-six billion yuan
was allocated for technological transformation. The plan seeks to
achieve a unified method of state distribution of materials to new
developments. Such priority for material distribution, as advocated in
the 1985 plan, should follow four criteria: 12 (1) 'Most of the newly
added materials earmarked for unified state distribution will be used
to meet the increased production projects. As for routine projects,
material supply will be kept at the 1984 base figure, or lower in some
cases'; (2) 'No additional outlets will be provided to supply materials
under unified state distribution at fixed prices. Rather , they will be
reduced'; (3) 'Fulfilment of the allocation quotas as fixed in the state
plan must be guaranteed. Where the quotas are not fulfilled owing to
subjective reasons, the proportion of raw and semi-finished materials
and the energy supply allocated by the state will be deducted from the
distribution quotas ofthe following year'; (4) 'Markets will be opened
up for public sales of key materials so that products and buyers will
come into direct contact through trade centres' .
The 1985 plan for social and economic development also empha-
sised the service role of urban and rural markets in catering to the
improved living standards of the people. For example, retail sales of
commodity goods for 1985 was expected to reach 378 billion yuan. The
supply of market goods in value and the total purchasing power of the
 Broad Implementation 01 the New Economic Strategy 109

people must be 'basically balanced'. Extra plan attention for 1985 was
given to the urgent production of high quality commodities to meet
market demand, especially in areas of textile products, household
appliances, brand name bicycles and foodstuffs to 'suit people's
changing consumption patterns'. Some commodity shortages will be
supplemented by imports to meet more urgent consumption demands
in accordance with the plan. The plan for 1985 called for vigorous
development of tertiary industry, especially in the areas of repair and
service trades. The quality of service industries must improve to meet
popular needs and safety standards.
Regarding relations with the outside world, the 1985 plan called for
a total volume of two way trade at 126.5 billion yuan. Some
restructuring in foreign trade must be made to harmonise with the
regulations of the State Council to achieve greater trade expansion.
Expansion in exports through vigorous campaigns was called for the
purpose of bringing in more foreign currencies to pay for China's
import needs. The plan emphasised the following areas for fast
development: (1) the Four Special Economic Zones; (2) the newly
announced opening of fourteen coastal cities; (3) Hainan Island, the
Yangtze River delta, the Pearl River delta and Southern Fujian
Province.
In the fields of education and intellectual resources, the 1985
development plan called for rapid expansion and utilisation of known
scientific and technological achievements in China. Better economic
results depend on their rapjd transformation into industrial and
modern agricultural production. Funds were budgeted for pilot
projects, industrial experiments, and, especially for the 'transfer of
advanced technologies from the defence industry and scientific
research to civilian use'. Emphasis was also made to apply new
technology to transform the traditional cottage industries. In 1985,
one of the major reforms took place in July in the field of educational
administration. Vice premier Li Peng was put in charge of education as
the head of the Educational Committee which absorbed the existing
Department of Education of the State Council. For example, the 1985
development plan projected an enrolment of 41,000 post-graduates
and 522,000 undergraduates in higher education. More students
were encouraged to take short-term training at the college level.
Faculty improvement and field specialisation were also emphasised.
The restructuring of secondary education had begun, vocational
schools were being rapidly promoted, and in the economically
backward areas, compulsory primary education was strictly enforced.
110 China Under Deng Xiaoping

New emphasis was made in adult education, especially through

television and radio courses, part-time colleges, correspondence
schools, and the make-up effort in secondary education for those
whose school time was wasted during the cultural revolution.
The development plan for 1985, was drawn up after the completion
of studies to map out a new planning system. The central new planning
system has incorporated the following guidelines to (1) reduce the
scope of central government's 'mandate'; (2) to incorporate all the
economic levers and the market forces; (3) and to expand the scope of
'guidance planning' with more flexibility and choices available for low
level planning agencies. The 1985 development plan emphasised the
'provisional regulations on the improvement of the planning system'
which was recently approved by the State Council. Mandatory
planning in China will be applied to products or areas which have a
'vital bearing on the national economy and the people's welfare' .
Local governments will be charged to balance the planning functions
between 'guidance planning' and 'market forces', while the central
government will strictly enforce the 'mandatory planning'. Local
governments in the future will have to 'decide how to coordinate such
plans with those of the enterprises'. The state, for its part, will guide
and help their implementation primarily by flexible use of such
economic levers as pricing, taxation and credit, and through the
allocation of economic funds, foreign exchange, and other major
materials and equipments at its disposal. Future 'manufactured
products under mandatory planning will be reduced from 135 to over
60; there will be a corresponding decrease in the number of
manufactured products covered by the man da tory planning of other
departments and the provinces, autonomous regions and municipali-
ties. And the number of varieties of materials earmarked for unified
distribution by the State Planning Commission will decrease from 256
t06'.13
The 1985 economic and social development plan took serious note
of the party's awareness that the 'more vigorous the economy, the
more attention we should pay to macro-economic regulation'.
Consequently, the 1985 development plan called for prudent manage-
ment of the macro-economy through the following measures: 14

1. Effective exercise of control over credit, loans and currency;

2. Tight grip on funds for consumption;
3. Keeping the scale of investment in fixed assets under control;
4. Strengthening control over foreign exchange; and
 Broad Implementation of the New Economic Strategy 111

5. Enforcing strict financial discipline and the elimination of unhealthy

practices.
The report on the 1984 state budget practice was given to the National
People's Congress by Finance Minister Wang Bingqian. He prefaced
this report with the comment that 'with the sustained, steady and
harmonious development of the national economy, and with a
considerable increase in state revenues, the 1984 state budget was over
fulfilled'Y The details of this third document are summarised as
folIows.
Statistics recorded that the 1984 total revenue was 146.5 billion yuan
and total spending at 151.5 billion yuan. There was a deficitof 5 billion.
On the revenue side, domestic receipts came to 143 billion yuan, which
was more than the budgeted expectation (111.1 per cent of the budgeted
figure). Foreign loans were 3.5 billion yuan (only 68.6 per cent of
budgeted figure). Other breakdowns are summarised as folIows:
1. Tax receipts totalled 93.78 billion yuan (115.8 per cent of budget
figure). This increase in revenue was due to faster expansion in
industrial and agricultural growth and improved tax administration.
2. Tax receipts from enterprises was 25.98 billion yuan (or 87.1 per
cent of the budgeted figure). The shortfall was essentially due to
surplus state purchase of grain and cotton and state price subsidies
for both in order to promote the income of growers.
3. Depreciation funds of enterprises turned over to the central financial
authorities was 2.66 billion yuan (or 115.7 per cent of the budgeted
amount).
4. State treasury bonds amounted to 4.15 billion yuan (as expected by
the budget authority).
5. Money collected for the construction of key energy and transport
projects for 1984 (149.4 per cent above expectation).
On the expenditures of 1984, the following breakdown represents a
fair picture of how the government performed in promoting the
economic growth through financial allocation:
1. Capital construction of 47.58 billion yuan (or 108.4 per cent of the
budgeted figure). Overspending occurred in energy and transport
development and in more key construction projects to meet the need
of extern al economic development.
2. Spending in financing technological transformation and in
subsidising the manufacture of new brand products totalled 9.82
billion yuan (or 132.6 per cent more than expected). Spending
112 China Under Deng Xiaoping

went much further because additional funds became available

during the year for this specific purpose.
3. Expenditure on aid to rural production and fighting natural
calamities amounted to 9.43 billion.
4. Culture, education, public health and science amounted to 26.343
billion (112.1 per cent of the budgeted figure). More local
contribution became available during the year.
5. National defence accounted for 18.075 billion yuan (or 101.1 per
cent).
6. Administrative spending reached 12.077 billion yuan (or 144.1 per
cent more than expected). Apart from the need to strengthen
public security, judicial work, additional spending was due to
failure to control personnel expansion.

On the whole, the execution of the 1984 state budget was

satisfactory. It was achieved largely due to the success of economic
readjustment and restructuring as weil as opening the country up to
the outside world. Several major points can be made about the success
of budget implementation in 1984. First of all, production expansion
and management efficiency helped increase revenue. Government
assisted enterprises to increase their profits and in turn, produced
more taxes for the state. As statistics indicate, the total 1984
production output increased by 14.2 per cent over 1983. This helped
raise a revenue of 143 billion yuan which registered a revenue increase
of 21.9 billion yuan (or an 18 per cent increase over 1983). Secondly,
in education and capital construction of key projects, government
spending increased by 22.3 billion yuan, a 25 per cent increase over
that of 1983. More was spent in 1984 in these two areas than was
originally budgeted. Thirdly, through budget execution, the govern-
ment helped the enterprises to reform for their invigoration of
production. The new taxation system had completely replaced the
profit system by October 1984. From now on, large and medium-size
enterprises must pay income tax to the state and sm all enterprises pay
a fixed amount of contracting charge. All profits after tax will remain
at the disposal of the enterprises. As a result of this reform, state
revenue, enterprise profit, production increase, and competition
among enterprises for efficient operation for higher income are all part
and parcel of an invigorated economy. Early statistics indicated that,
after tax, total profit of the enterprises reached 31.3 billion yuan in
1984, an increase of 3.4 billion over 1983. The new regulations from
the State Council in 1984 has further extended the autonomous
 Broad Implementation 0/ the New Economic Strategy 113

decision-making power of the industrial enterprises. These include

greater enterprise self-control over production, planning, purchase of
materials, sales of products, personnel and labour management, use of
funds, and handling of assets. The government also obligates itself to
financially assisting key enterprises with their depreciation costs of
fixed assets and on their special financial need for technological
transformation and new experiment on new product manufacturing.
Finally, in 1984 the state budget authority provided support to the
development of the special economic zones and the opening of coastal
cities. In 1984 the state subsidised the infrastructural construction of
these cities to create a favourable environment for foreign investment.
Special regulations on reduction and remission of income tax and on
industrial commercial consolidated tax in the special zones and coastal
cities are now in full operation. Preferential treatment is also given, in
addition, to Chinese-foreign joint ventures, cooperative enterprises
of joint partnership, and other enterprises run exclusively with foreign
capital. In 1984, the government succeeded in signing trade agree-
ments with Japan, the United States, Britain and France to prevent tax
evasion on the one hand, and to avoid dual taxation on the other.
Progress in negotiation with other countries on the same tax issues will
further smooth China's trade progress abroad.
Based on the progress made in the 1984 budget execution and with
1985 being the last year of the Sixth Five-Year Plan period, the 1985
state budget took into consideration the urban economic reform as
decided in October 1984. As a result, the 1985 budget consideration
included the following guidelines: 16
Work hard to explore new financial sources and increase revenue on
the basis of expanded production and improved economic effic-
iency; satisfy the need of key construction projects and the
economic structural reform, of the continued development of
cultural, educational and scientific undertakings of the continued
improvement in the people's living standards to the extent of
actual capability; and strictly control expenditures and ensure a
sustained basic balance between revenue and expenditure through
better overall balancing and financial management.
The 1985 total revenue of 153.5 billion yuan and total outgoings of
156.5 billion anticipated a deficit of 3 billion. This budget represents an
increase of 7 billion over that of 1984. The essential revenue
break-downs were as folIows: (1) tax receipts expected to be 162.18
billion yuan; (2) enterprises tax of 4.284 billion; (3) state treasury
114 China Under Deng Xiaoping

bonds 6 billion yuan; and (4) construction funds for key energy
and transport projects to be 12 billion yuan. Budget expenditure has
the following breakdown: (1) capital construction 48.363 billion yuan
(an increase of 1.1 per cent over 1984; (2) subsidies to enterprises
for technological transformation and the manufacturing of new
products, 5.26 billion (a decrease by 46.5 per cent from 1984); (3)
allocations for geological prospecting, 2.75 billion (a 5 per cent rise
over 1984); (4) aid to rural economy 9.4 (as in 1984); (5) allocation
for urban construction and maintenance project and for civil defence
5.45 billion (33.5 per cent increase); (6) expenses for culture,
education, science and public health 29.3 billion; (7) national
defence account 18.67 billion; (8) administrative account 11. 9 billion;
(9) repayment of foreign loans and interests 2.8 billion; (10) general
reserve fund 1.5 billion; and (11) meat price subsidy 2.2 billion.
The budget office is known to be determined to help maintain an
economic stability with minimum budget expansion and little deficit
if at all. Secondly, the budget office was conscious of its increased
spending relative to price and wage reforms in 1985. Wage reform in
government departments and institutions alone required 3 billion
yuan as increased expenditure.
When the budget office reported on the execution of the 1985
budget, the budget officer voiced in the new budget message of
April, 1985 several urgent guidelines which are summarised as
followsY

1. 'Improve enterprise operation and management efficiency and

increase economic efficiency.' Presently, China still has some 3000
industrial enterprises running at a loss. Price reduction for
overstocked products in state enterprises represent a loss of 4.5
billion yuan
2. 'Do a better job in tax administration and use taxation to
regulate economic activities and help ensure state revenue.'
Under recent tax law and practice, the success of tax administra-
tion depends on the cooperation of 'all state and collective
enterprises and urban and rural self-employed businessmen ... to
report to the tax authority on their production, business opera-
tions, and other incomes and pay taxes as required by law'. Tax
evasion, bribery and cheating must be prevented. The other
major task is to collect construction funds for key energy and
transport projects and to manage the issuing of state treasury
bonds to meet the target of state revenue for 1985.
 Broad Implementation of the New Economic Strategy 115

3. 'Continue to reform the financial and tax systems, and consolidate

and further its achievements.' There are still enterprises that have
not adopted the new methods of taxation. The tax system itself
needs improvement. The State Council decided to reform the
financial management in 1985 as the take-off year. For example,
Beijing expects eventually to have a three-category revenue system
with one 'fixed revenue' for the central government, another 'fixed
revenue for local government', and a 'shared revenue' for both.
Financial relations between central, provincial and local govern-
ments on revenue distribution and subsidies remain to be
institutionalised.
4. 'Control capital construction investment and consumption funds
and trim administrative outlays.' Unauthorised investment beyond
the plan for the year was an impermissible priority, for investment
should be shifted to projects for technological transformation and
their innovation and expansion.
5. 'Strengthen control over macro-economic activities and balance
the use of funds.'
6. 'Enforce financial discipline and check all unsound practices.'
There are still enterprises and units which have wilfully retained
funds owing to the state. Others have made unjustified additions to
regular costs. Many have indiscriminately raised wages and
bonuses in cash or in kind. Ostentatiousness and extravagance at
the expense of public funds in the form of lavish dinner parties and
gifts 'must be uncovered and prevented'. China's tax system is very
new and has not yet become institutionalised. The skills of taxation
experts, auditing personnel and administrators are to be gradually
improved. Tax evasion will probably be undiscovered in the years
to come. The country is moving toward an expanding free market
oriented consumption economy at the locallevel. Some 30,000 new
free enterprises are reported to have been set up recently. The
government announced on 16 November 1985, that these privately
owned markets would cost $1.3 billion in US dollars for their
construction during the next five years. 18 When these future private
owners and operators fail to report their taxes honestly, it will be
quite difficult to investigate without creating a huge tax administra-
tion and tax supervision system capable of operating at the
township and village level.
116 China Under Deng Xiaoping

4.3 PROSPECT AND CHALLENGE OF SEVENTH FIVE-

YEAR PLAN, 1986-90

On 18 September 1985, ex-Premier Zhao Ziyang reported to the

Communist party's national conference on the Seventh Five-Year
Plan. He explained only a few major points of the plan relevant to
economic and social development. Details and process of implementa-
tion were to be worked out later on a year-to-year basis. He revealed
that this draft plan was the product of a joint effort of both the State
Council and the Party Secretariat working for more than one year. The
final version was later submitted to the fourth session of the Sixth
National People's Congress in the spring of 1986 for its approval. The
draft dealt with three aspects: (1) The goals and guiding principles of
economic development during 1986-90; (2) strategy direction and
policy measures for economic and social development during 1986-90;
and (3) economic structure reform and procedure. He asserted that
since 1979 the economy has achieved exactly what was expected. The
four-fold policy of readjusting, restructuring, consolidating and im-
proving are to remain during the next plan period on the basis of
current accomplishment. The draft plan will continue to institutional-
ise the economic restructuring decision as passed by the Communist
party in October 1984.
Ex-Premier Zhao Ziyang reported that the economy hasachieved a
continuity in growth, stability and balance particularly among
agriculture, light and heavy industries, and between capital accumula-
tion and consumer consumption. Agriculture is growing in all its
segments, but light industry has progressed faster. Each year finds the
economy better than the previous year. There is an average of 10 per
cent growth in the national economy, which will continue into the
foreseeable future. This rate of growth, the premier has said, 'is rare
among nations'. Along with economic growth is the growth in state
revenue. The main tasks during the seventh plan, 1985-90, will
include: (1) to create a conducive economic and social environment to
continue the economic structural reform; (2) to accelerate key
construction, technological and human resource development so as to
prepare for the economic and social development in the 1990s; (3)
to improve the living standards of the people. The main long-term
concern is for, during the first half of the twenty-first century,
economic stability and growth. 'Without reform, there will be no
future economic lasting stability and growth ... for better conditions to
implement reform, we must not just aim at a high rate of economic
 Broad Implementation 01 the New Economic Strategy 117

growth, but maintain a proper rate of growth and continue the

improvement of people's living standards,19
The seventh plan period, 1986-90, can be divided into two stages.
The first two years will be devoted to control over total social needs:
preventing excessive economic growth rate, stabilising productive
investment from over-expansion and consumption spending from
sudden increase, using 1985 as the basis to make minor adjustments.
Gradually solving the existing economic problems in two years is far
better than trying to solve them all during the last half year of 1985.
The next three years, 1988-90, will follow the results of the first two
years to properly increase construction investment within safe control
over the entire development circumstances. This strategy is 'based on
our past economic development experience'.
On the overall economic structure reform, the seventh plan period is
the key stage reforming the economic infrastructure. 'We must insist
on reform as the first priority to lay the foundation for socialist
economy with Chinese characteristics', the premier said. Structural
reform of urban economy is a 'complicated social engineering'. To
structure a new economic system under public ownership the Chinese
must rely on three major aspects: (1) strengthen further the publicly
owned enterprises of large and medium-sized operations; such
enterprises must become relatively autonomous, self-managing,
responsible for their profits and losses as socialist commodity
producers and managers; (2) develop further , according to planning,
socialist commodity markets and gradually improve the market
structure system step by step; (3) slowly reduce the central govern-
ment's direct control of enterprises by perfecting a system of indirect
control. These steps can be accomplished only through economic
measures and legal procedures, in addition to necessary administrative
methods.
Based on the experience obtained in recent years of generating
economic vitality and flexibility, the future emphasis is on micro-eco-
nomic activities by strengthening the macro-management for indirect
control and guidance. This will include many economic levers for
adjustment and supervision. This task ahead seems far more difficult;
and the government has yet had no experience, as the premier
admitted in his speech. Yet, this is the only way ahead to accommodate
the current economic reform in progress. With all the economic levers
to be utilised, such as economic legislation, supervision, information
systems, banking, taxing, quality standardisation, and in dust rial and
commercial management, the central long-term purpose is to 'gen-
118 China Under Deng Xiaoping

erate new vitality into the publicly owned enterprises'. Two key
important goals of the seventh plan are namely: (1) to greatly improve
enterprises' economic efficiency; and (2) to vastly increase exports to
gain foreign exchange. His speech went on to cover other political and
social aspects relevant to the Seventh Five-Year Plan for 1986-90. The
premier went on to report the Draft Recommendation of the Seventh
Five-year Plan. 20 A few major points of the draft recommendation to
the party national conference of September 1985 are summarised as
folIows. The conference approved it as the basis for further
micro-planning by State Council for submission to the
fourth session of the National People's Congress.
The draft recommendation reviewed the economically POOf state of
1980 when Deng's new economic strategy began. The review cited
an increase of 80 per cent in the standard of living in rural China
during the 1980-5 period. It noted the continuing problems and
weaknesses of the economy, including weak agriculture, a food and
clothing crisis in remote regions of the country, lack of information
systems, raw materials supply and human resource development.
The draft recommendation listed the following guiding principles to
be followed:
1. Reform takes the first priority to accompany construction;
2. Insistenee on balance between society's total demand and total
supply
3. High production performance and improvement in commodity
quality be seriously emphasised;
4. Strengthen socialist cultural-spiritual construction; 1986-90, as the
period to fundamentally lay the foundation for 'a new model in
socialist eeonomie system with Chinese eharacteristics';
5. Maintain an annual GNP at about 7 per cent during the plan period
to avoid other economie problems;
6. Place emphasis on policy research and policy making as 'an organic
structural part of the planning process'.
On development strategy and guiding principles, the draft recom-
mendation provides a suggestion in three major areas: (1) to meet the
people's consumption demands and changes in spending; (2) to
eoncentrate on technological transformation, internal reform and
expansion of existing enterprises in order to expand production; (3)
correctly solve relations among geographie regions in their economic
development. Six major guiding principles are suggested in the draft
plan:
 Broad Implementation ofthe New Economic Strategy 119

1. Reliance on policy science to further improve production condi-

tions and to foster stability in agricultural development. Agriculture
occupies a strategic place in economic development. Adjustment in
rural production structure is critical toward rural specialising,
commercialising and modernising to better satisfy social needs.
Food production, for example, must not be overlooked.
2. Expansion in consumer goods and rapid development in the
national housing industry: consumers will be interested in
nutrition, c10thing and housing improvement. Housing construc-
tion must be commercialised to reduce the government's burden
in providing free housing as was practised in the past.
3. Concentration on all needed resources, including energy, transpor-
tation, communication and primary raw material supply as the
foundation for future development coordination.
4. Rapid expansion of tertiary industry and the correction of the
unbalanced relations or proportion between the service industry
and the first and second industries as now exist. Tertiary industry is
the inevitable outgrowth of the first and second industries in the
division of labour. China's third industry has been backward. It is
better to convert certain nationally owned commercial firms to
collectively owned or individually contracted operations. Small
shops should definitely be contracted out to individuals to ensure
better operation and profit. The state must invest in the develop-
ment of third industry. Manpower training for this sector industry is
critical for better and more adequate quality services.
5. Great emphasis during 1986-90 on rapid technological transforma-
tion of old enterprises, especially in the specific areas of engineer-
ing, electronics and defence. Parochialism and selfish protection-
ism in technological transfer and advance must be eliminated.
6. Proper attention and care to be given to the relations among
regions of East coast, middle section and far western section of the
country in their mutual relations and developmental cooperation as
both long and short term propositions. Each region must fully
explore its potential and its horizontal development. Gradually,
different regions should be linked around key economic urban
centres with different levels and sizes in their networking character-
istics. Development must move westward as an inevitable trend so
that people in all regions will enjoy the fruits of prosperity. The
middle section and western region will naturally gain in investment,
management skill, technology and their improvement from the east
coastal region. Ethnic national minority interests of the far west
120 China Under Deng Xiaoping

must be emphasised. Old revolutionary bases, border areas and

poverty-strieken regions must develop from their backward
appearances.
Tbe seventh plan period will single out education as one of the most
critieal areas for rapid expansion. Progress in any area depends on
knowledge, skill and foresight. Educational investment takes long-
term, persistent effort. The draft recommendation lists the following
major points for scientific and technological expansion:
1. Promote technology for better results and greater efficiency
2. Concentrate on key technologies and their conversion;
3. Make the distinction between 'applied research' and 'basic
research'.
Reorganisation of the Science and Social Science Academies is
required also. In social science research, emphasis must include
research on Marxist theory, other basic theories, and problem
research for China's socialist modernisation theory. China must face
the world and meet the future in her new educational task. For
example, du ring 1986-90, nine-year compulsory education of the
young to wipe out illiteracy must be carried out. Special education for
physically and mentally handicapped is also important. In short,
during the seventh plan period, some 2,600,000 university and college
graduates must be trained, an increase of 70 per cent over the sixth
plan period. Post-graduates must number 200,000- an increase offour
times over 1980-5.
Increase in foreign trade is a fundamental national policy. Tbe
target increase must aim at 40 to 50 per cent over the period of 1980-5.
China must maintain trade balances in her long-term modernisation
approach. Economic special zones must play a key role in foreign
trade. Tbe living standard is to be increased by 25 per cent over the
1980-5 period. Population control policy will be contimied to maintain
12.5 births annually per thousand individuals. In short, the seventh
plan period is aperiod of continuation of what has been started in
the 1980-5 period. The next five-year period is expected to complete
the new strategie policy of readjustment, restructuring, consolidation
and improvement. If successful, the Eighth Five-year plan, 1991-5,
will probably begin a new accelerated economic stage. Tbe last decade
of the twentieth century will probably see stable growth with a weil
institutionalised economic infrastructure. However, there can be
many negative politieal and social forces to make such hope less
 Broad Implementation of the New Economic Strategy 121

The review of the three documents above has, perhaps, given the
reader a broad picture of economic problems and developments in
China. It is, therefore, clear that China since 1980 has been transform-
ing its economy from one of a Maoist socialist model which broke
down to one of a Dengist new model which continues to change. The
transformation of reform does not have a new economic ideology
independent from Marxist and Maoist framework. However, the
substance of reform has taken on a very new and different approach to
adapt China's economic structure and growth toward capitalist
operations. But the Chinese economy will not be capitalistic because
of the public ownership and planning in the changing economy. In
theory, it can no longer be called socialism because it follows 'from
each according to his work or worth' that 'work more gets more, work
less gets less'. This competition is found in China now to be the only
way to stimulate and revitalize the economy for rapid growth which the
country must have in order to avoid the national starvation and
poverty of the past thirty years. By 1990, if reform and restructuring
has been completed, the Chinese economy will probably be growing
much faster and will be far better managed according to Western
capitalistic criteria. If successful, the new Chinese model will attract
global attention. This will me an one quarter of mankind under one
huge bureaucracy has profi ted from an indigenous innovation to
'combine public ownership and western management' - or 'socialism
within capitalism'. If, by 1990, the continuity of reform does not reach
the original goal, which is unlikely, more readjustment and new
experiment may be required, but there will be no return to the Soviet
model or Maoist utopia.
The reform measures have been under severe ideological and
political constraints from Deng's political opponents who are half-
heartedly in favour of his reform in both approach and result. This is so
because of their Marxist-Maoist ideology which has prevented them
from seeing progress in the capitalist world. The only offer to justify
what has taken place in the economic field is that the reform is
practical. And the common masses in China like it and benefit from it.
They have no faith in Maoism. Deng offers instead pragmatism. The
masses resent Mao and what he did during the cultural revolution, so
Deng and his colleagues are politically popular. This is the positive
aspect of the political environment. The negative aspects include party
factionalism and the doubtful followers who were purged by Mao,
rehabilitated by Deng and may not ideologically go all the way with
Deng on his economic reform and new orientation. In short, Deng's
122 China Under Deng Xiaoping

cat-and-mouse theory is not an elaborate foundation to replace

Marxism and Mao Zedong Thought. Some day, when Deng's
disagreeable colleagues and vicious opponents have died or been
neutralised, a brand new Dengist 'economic theory of Chinese
Socialism' may emerge to finally provide his reform with an adequate
theoretical or ideological foundation.
Given the political environment, Deng can be perceived in several
ways as the leader of a 'new economic revolution' in China. First of all,
he is an accommodationist ready to reconcile political differences with
his 'friendly opponents' through compromise in policy and the speed
of reform. Deng is hirnself content with a piecemeal reform approach.
Experiment must proceed before policy change so as not to antagonise
his opponents. He has gradually removed disagreeable friends from
positions of power in order to employ the young and committed cadres
of his own kind. Secondly, Deng is an experimentationist. As such he
gives his reform movement some time to experiment with new
approaches and methods. When the experiment is successful and
applicable nationwide, he applies it. This has been true with the
dismantling of the commune system. It is also true in urban enter-
prise reform. He allowed hundreds of enterprises to be put on
an experimental basis with new management and a shift in decision-
making authority, before the wholesale reform policies of October
1984. Whatever was experimentally a failure he rejected; and whatev-
er experimentally succeeded he adopted. He, indeed, fulfilled the
slogan: 'practice is the only test of truth'. Deng is, finally, areformist
or a 'peaceful revolutionary'. He seems a dassical socialist revolution-
ary who believes genuinely that socialism is superior to capitalism.
However, as a revolutionary, he wanted to explore economic deve\op-
ment peacefully. He does not want dass struggle and purge in his
reform. He is no longer, in this sense, adassical followerofMarxism in
its methods of post-revolutionary economic and political practice as
existed under Mao and even in Russia today. He now advocates
thought emancipation or other liberal approaches from unreasoned
dogmas.
Chinese economic development by 1988 has gone a long way in
attracting the attention of economists, World Bank experts and
Sinologists all over the world. 'Socialism with Chinese Characteristics'
was the theme of several important messages from the Chinese
representatives at the Chongqing Conference in September 1985
which was attended by many foreign experts on Chinese economic
development and other Sinologists who are eager to hear what the
 Broad Implementation ofthe New Economic Strategy 123

Chinese can say about the reform experiment.

Professor Xue Muqiao said in his welcome speech at the September
conference: 21

I recall now in 1982 many world renowned economists came to

China for a similar economic conference. Some of you here today
were at the 1982 conference. The result of that conference was
helpful to uso At that time some experts had very serious doubts
about our reform. The last three years have proved that our
economic reform has made a giant step forward and is progressing.
The reform has not yet completed. Greater reform will take place.
Our reform can only advance and never retreat. Difficulties will
accompany reform. Consequently control and care over untapped
areas must have our policy control. Our reform determination will
notwaver.

Professor Xue confidently declared that the rural reform success will
continue to move toward more improvement, while determined policy
attention now direct at 'more complicated and more difficult urban
reform'. If successful, he said, 'China will be a socialist state full of
economic vitality on earth. It will, then, produce long-term global
consequences' .22 China has al ready decentralised most of the sm all
size publicly owned enterprises which are now totally responsible for
their own profit or loss after income tax to the government. Only some
6000 largest and medium-sized enterprises are being slowly guided
toward self-accountability, seIf-management over profit or loss to
avoid 'Big rice bowl dependence of the state'. These largest and
medium-sized enterprises must pay income taxes amounting to 60 per
cent of their total financial incomes. In order to maximise efficiency
and profit at the micro-enterprise level, the government must
revitalise the macro-economic control.
One of China's current more serious problems is wage reform to
avoid decades of wage equalisation practice. The fear, however, is that
wage adjustment may go over the budgeted expectation to flood the
consumer market with large sums of cash. If so, it will affect price
stability. If housing construction, for example, progresses too rapidly,
it too will create new currency problems. Such examples illustrate a
lack of economic infrastructure to handle problems and a great lack of
management knowledge in China. Academic research in this area was
not possible in the past. Foreign experience on macro-management
did not come to China until recently. Presently, Chinese economists
124 China Under Deng Xiaoping

are most eager to acquire comparative knowledge on models of

macro-management in other Western countries. The State Council
continuously searches for new and acceptable measures to correct
economic behaviour, especially on policies concerning currency,
finance, budget systems, fiscal philosophy. Professor Ma Hung,
former president of the National Academy for Social Sciences, pointed
out at the 1985 Chongqing Conference the central difficulties in the
economic managment.
He said [author's translation]:23
Presently China is in the midst of an enormous historical reform.
First of all, China is economically in a rapid transition between a
backward agriculture and a modernised new economy. Secondly,
Chinese economy is moving from a closed, feudalistic model toward
a socialist planned commodity economy. During our Seventh
Five-year Plan, 1986-90, or later, a new model of economic system
will take shape, a key period in our reform.
Economist Ma listed several areas of reform contradictions:
1. 'In the midst of economic structural change, annually hundreds of
thousands of workers want to enter the non-agricultural sector of
the economy; this overheats the economy.' ,
2. 'Our economic reform and transition is from uneven development
to balance, from agriculture to industry, from collective owner-
ship to state enterprise, from consumption concern to production
expansion, from small to large enterprises, from coastal region to
hinterland. Slowly the reform becomes easy to be accepted. It is
difficult to meet expected and also unexpected new demands from
reform itself ... Investment hunger, consumption hunger, import
hunger are tied together to make greater supply demands.'
3. 'Movement from single measure, area-oriented reform to multiple
structural existence, thus creating macro control problems.'
One of the contradictions in the investment area, for example, is the
structural lack of control by the government over the execution of
budgeted investment. This is so because presently about two-thirds of
total investment derives from the contribution of publicly owned
units. The other one-third is from the contribution of the collective
ownership and from individual investment. Only one-third of the
two-thirds of the publicly owned units is reliable from budget commit-
ment. The rest of the expected annual investment accounting depends
 Broad Implementation o[ the New Economic Strategy 125

on administrative methods and control to cut other expenses and

through the issue of new currency.24 In short, such practices produce
negative impact against economic structural improvement and invest-
ment results. The banking and currency sectors require experience to
make investment more predictable and suecessful.
In short, economic structural changes in China since 1979 can be
divided into three stages. The first two stages have been governed by
the new strategy of readjusting, restructuring, consolidating and
improving. The first stage has focused on short-term adjusting and
long-term dismantling of inefficient practices of the past thirty years,
Obig rice pot' philosophy. The second stage has focused on restructur-
ing and improving during 1983-5. The third stage covers the Seventh
Five-year Plan, 1986-90. which will foeus on reshaping of a socialist
commodity economy that will require greater decentralisation of
decision-making powers to the produetion management level, leaving
the eentral government in charge of macro-management of the
economy as a whole. The Seventh plan period may reveal the maturing
of the process entailed by the Chinese socialist model with Chinese
characteristics. 25 In the final analysis, the government will continue to
do the same two things: first, to revitalise the economy at horne, and
seeond, to open the country wider to the international community in
trade, investment and technological transfer to China.
5 Rural Economic
Development
5.1 AGRICULTURALDEVELOPMENT

Chinese farmers have always loved the land. In an agrieuItural society

land is the only means of Iivelihood for most of the population.
Therefore land ownership, development poliey, and the distribution
of land by the past imperial government is of grave eoneern to those
who owned land and those who farmed it. From the aneient praetiee of
'well-field system,t of eultivation to other polieies of land distribution
and ownership, China has gone through many systems of land
disposition. Historieally, land was eoneentrated in the hands of the few
rieh, edueated ruling elite of the society. It was a perpetual system of
landlord exploitation whieh began with the Sung dynasty. Over the
centuries those who beeame rieh would invest their money in land
ownership, while the poor were redueed to the status of tenants. They
had to work hard in order to pay the landowner and still have enough
to live on. In bad years they relied on the merey of the benevolent
landowner for support to prevent them from starvation. Such a
praetiee had disastrous eonsequenees. Eventually, the system was
disrupted by Western imperial powers toward the end of the nineteenth
eentury. Sun Yat-sen's revolution of 1911 proposed a land distribution
poliey of peaeeful reform to give ownership of land to the tillers. He
suggested that inereased land value should belong to the publie
through higher tax or government repossession of the land if the owner
did not want to pay the high tax. Big landowners and land speeulation
would be abolished. The eommunists, on the other hand, adopted a
very eruel method of eonfiseating private land and punishing
landowners between 1949-52. The eommunists first distributed land
to the tillers. Shortly thereafter, they took land away from the farmer
and put it into the eooperatives or eommunes. Today, the government
owns the land and has the right to dispose of it in ways and methods it
ehooses.
The eommunist eonfiseation of land was aecompanied by violenee to
the owners in the late 1920s and again in the early 1950s. In the late
1950s the party leadership was split over the ownership of land and the
emergenee of rural eommunes. The moderate faction headed by Liu
Shaoqi was opposed to the radieals led by Mao Zedong himself. Rural

126
 Rural Economic Development 127

production development went through several stages which required

different policies of the government as folIows:
1. Mutual aid production teams in 1953-4 under private ownership;
2. Early stage of cooperatives in 1955-6 involving more families and
private land;
3. Advanced cooperatives in 1957, collective land ownership with
private family plots;
4. People's commune in 1958-9, state land ownership, no family plot,
public rationing;
5. Modified people's commune in 1963-78, with ownership at the
commune level, brigade level and production team level, with
private family plots;
6. Production responsibility system since 1979 and gradually eliminat-
ing the vestige of the commune system.
These changes reflect the failure of land policy against the wishes of
the rural population. More than that, it reflected a lack of knowledge
about successful agricultural economic development. Partly the failure
was due to blind adoption of the Soviet system of rural experimenta-
tion. In short, the Communist Party's failure in agriculture was largely
due to Mao's eagerness for a leap forward, his egalitarianism and his
radical utopianism or revolutionary romanticism.
China's rural areas remained largely the same before and after the
communist victory in 1949. Substantial improvements have occurred
only since the 1980s. This has been verified by Professor Fei Xiaotong
of Beijing University, who studied Kaixian Gong viIIage in 1936, 1957
and 1980, in addition to publications in 1955 by Professor W. R.
Geddes of the University of Sydney, Australia, from his own tour of
research to the same viIIage. The two sociologists have given us an
accurate insight into changes and progress of Kaixian Gong viIIage in
Jaingsu Province. 2 On the other hand, there is quite a contrast in
policy results between land reform in Taiwan and those on the
mainland. The former was done peacefully with no interruption in
rural life. Land reform and commune development, on the other
hand, produced enormous painful experiences for the rural popula-
tion. Both land reforms, however, have succeeded in getting rid of a
feudal land system of exploitation. But Taiwan's success in rural
economic development laid the solid foundation for its later industrial
modernisation and general economic prosperity; on the other hand,
on the mainland today, the new leaders hip under Deng Xiaoping has
to undo and correct Mao's mistakes in rural China in order to lay the
128 China Under Deng Xiaoping

same foundation for Beijing's success in the four modernisations by the

end of this century. Mutual aid teams, cooperatives, collective
communes, private plots, etc., have to be done away with entirely or
readjusted to bring about an efficient collective or individual
ownership of land for increased productivity. The story of rural failure
under Mao is illustrative of many theoretical and policy differences
between the radicalleftists and the pragmatic moderates who were at
first led by Liu Shaoqi. Liu, Zhou and Deng in the early 1960s
succeeded in correcting Mao's mistakes in the aftermath of the
commune fiasco of 1958. But Mao's jealous response was his cultural
revolution which entailed dismissing and humiliating all the moderate
leaders. There has been, of course, positive progress in rural China
since the 1950s. For example, some rural electrification, enormous
irrigation projects, road building, primary educational expansion and
the improvement in rurallaw and order were clear evidence of major
communist achievements. However, these achievements did not
directly benefit the people in their per capita income and in other
freedom to improve their own livelihood as is now possible under
Deng. In short, Mao's failure in rural economic development and rural
industrialisation has delayed the nation's schedule in building a
modern industrial and powerful state. Had Mao not deviated from the
party's policy li ne of the Eighth Congress in 1956, the communists
could have succeeded far more even than the progress made in Taiwan
by the Republic of China. In a real sense, the development experience
and the economic progress of Taiwan and mainland China must be
evaluated in competitive terms, because both governments were eager
to succeed under a revolutionary urgency.
Returning to the review of rural development in the People's
Republic of China. What did Fei Xiaotong say after his 1980 visit to
Kaixian Gong village? He wrote the foreword to his new book: 3

I could feel the changes brought about in the village by the new
economic policies immediately. These changes were shown not only
in the abstract figures of a threefold increase in average income,
from 100 yuan to over 300, but also to the smiling faces and
optimistic words of the local people ... Before the Communist
Party's Third Plenum in 1978, the village had very little sideline
production or industry. But soon after this crucial meeting, at which
new and flexible economic policies were adopted, the village's
si deli ne production developed rapidly. And this was followed by the
swift growth of its industrial enterprises. These changes altered the
 Rural Economic Development 129

previous economic structure of the village, in which 90 per cent of

the population engaged in farming. In 1980 the proportions had
changed to such an extent that over 50 per cent of the population
were working in sideline production or rural industries. Their
achievements encouraged me to think that they were paving the way
for the future development of rural China and providing a means of
rationalising China's economic structure through rural industrialisa-
tion.
Professor Fei's microscopic focus on a small village for more than
forty-five years, from 1936 to 1980, provides other scholars and
economists a valuable reference of what the Chinese people can do for
themselves if given a sustained period of peace, stability, freedom to
initiate, and a right policy which encourages them to experiment, even
after some thirty years of rural regimentation. 4 His village, Kaixian
Gong, is located eighty miles west of Shanghai on the south side of the
famous Tai Hu (Lake Tai). The soil here is rich and the growing season
lasts more than 300 days a year. The villagers grow rice, wheat, rape
seeds and vegetables. Moreover, the silk industry has been more than
a sideline occupation for the people. In his first research tour in 1936,
he found that the village represented a typical picture of a traditional
small village in the southeast part of China (only 1500 people in 1936).
Villagers here loved the land as people do elsewhere in China. 'Land is
there. You can see it every day. Robbers cannot take it away ... the
incentive to hold land is directly related to the sense of security ... the
best thing to give to one's son is land.,5 When the Communist Party in
the middle of the 1950s took land away from those who supported the
revolution and expected to hold on to their newly acquired land
ownership, it broke its promise of revolution since the 1920s and
1930s. To the farmers Mao made a mockery of the land reform of
1949-52. He pressured rural cadres to convince the pe asants to hand
over their lands to cooperatives and communes. Mao's personal
restlessness and ignorance reinforced by his subjectivism and
arrogance, indeed, caused most of the subsequent crises for the
nation. In his 1955 preface to the book of Socialist Upsurge in China's
Countryside, Mao wrote: 6
The problem facing the whole party and people is no longer that of
criticising conservative ideas about the speed of socialist transfor-
mation of agriculture. That problem has been solved. Nor is it the
problem of transforming the whole of capitalist industry and
commerce trade by trade into joint state-private enterprises. That
130 China Under Deng Xiaoping

problem too has been solved. The speed of transformation of

handicrafts should be discussed during the first half of 1956 .... [the
problem] lies in agricultural production; industrial production;
handicraft production; the scale and speed of capital construction in
industry, communication and transport.

Mao unwisely argued that 'right conservative thinking is still causing

trouble in many spheres and prevents our work from keeping pace
with the development of the objective situation'. He did not realise his
so called 'objective situation' was totally at variance with true reality
and the real wishes ofthe rural masses. In support of Mao's impatience
with the slow pace of rural growth, party cadres worked in rural areas
trying to convince the peasants of potential benefits of land recollectiv-
isation. The People's Daily blindly suggested in an artide, 'The
Direction for 500 Million Peasants', thae 'As a matter of fact, the
direction taken by these three poor peasant households is the direction
the five million peasants will take. All peasants now farming
individually will eventually take the road resolutely chosen by the
three poor peasant households.'
The press in China can cause enormous damage if used by the wrong
people. The same mistake, incidentally, happened during Jiang
Quing's struggle for power. No peasants in China wanted to give up
land, thus causing their own insecurity. Since the late 1920s and with
only a few exceptions, newspapers in China have often been used as a
tool of oppression by one man, one party, or one dass. Freedom of the
press has not really existed in China before and after the communist
victory in 1949. One of the reform measures in China should be the
policy effort to discover the real voice of the people through a free
press against the re-emergence of another Mao.
Professor Fei was quick to discover in 1936 the usefulness of
tradition al practices of mutual aid among peasants and the system of
mutual allowance. The interest rates on borrowed money in rural
China, on the other hand, made worse 'the hunger of the people
everywhere'. He strongely urged that 'a final solution of agrarian
problems in China lies not so much in reduction of expenditure of the
pe asants but in increasing their income. Therefore, industrial recovery
(sideline incomes) is essential'.!! The Nationalist government after
1945 and the Communist government after 1949 both failed to pump
income into rural China. On the contrary, so me of their policies were
to exploit the peasants for rapid urban industrial capital accumulation.
Only since Deng's New Policy after 1979 has the government through
 Rural Economic Development 131

careful planning purposefully raised rural income to help the peasants

in helping themselves. Writing in 1946, Professor Fei even had nice
words to say about rural gentry who were both exploiters and
benefactors of the peasants within the tradition al social structure and
institutional limits. 9 However, in his 1957 visit to Kaixian Gong, he
found 'the supplementary industries do not match those of twenty-one
years ago [1936]'. They had declined by 50per cent. Rural
collectivisation created new enthusiam and slogans for the higher
production of rice. But soon afterward, Fei noted, the peasants gave
way to 'three meals a day; we'll eat our way to socialism'. In 1981, after
less than two years of Deng's new rural economic recovery policy
Professor Fei found his villagers in Kaixian Gong had achieved aper
capita income of 300 yuan per year as opposed to the then national
average of less than 100 yuan. Thus, Kaixian Gong villagers belonged
in 1981 to the 300-yuan income brigades.
Professor Fei found that the 1958 establishment of the commune
system 'a premature move' and the 1962-6 rural readjustment a
'welcome improvement against the ultra-Ieftist tendencies'. Finally, it
was the post-1978 new policy that 'removed the various negative
effects of the leftist phase,' Fei said. On the other hand, agricultural
contribution to national gross income after 1949 much increased
proportionally. The government, in return, also made a few major
investments in rural China. The crisis, however, was the lack of policy
continuity and premature transformation of production and manage-
ment with no regards for peasant wishes.
To mention just a few of the positive improvements in rural China,
land reform itself in 1949-52 was a success. Between 1952 and 1976,
the government invested an amount of 130 billion yuan in agriculture,
68.4 billion of which was used for rural capital construction in such pro-
jects as water conservation to make possible 18.5 per cent of culti-
vated land to come under irrigation (about 360 million Chinese mu).
There were improvements in farming machinery, fertiliser produc-»
tion and rural electrification (for example, the tractor-ploughed
acreage increased from 2.04 million mu to 523.69 million mu in
1976). Networking in scientific research gained enormous progress
through the coordination of the Chinese Academy of Agricultural
Sciences. Nearly two dozen of the agricultural colleges were built and
some 270 secondary agricultural schools were established. All
together, about 250,000 students have graduated from agricultural
colleges and half a million more from secondary agricultural institu-
tions. 10 Rurallivelihood improved steadily during the early 1950s of
132 China Under Deng Xiaoping

Communist government. Improvement was resumed again after the

commune fiasco and natural calamity in the early 1960s. There had
been starvation nationwide in scope.
Because of Mao's erroneous population policy and the planned
imbalance between agriculture and industry, actual per capita
consumption in rural China, in fact, made little or no improvement in
thirty years or even declined in remote and less productive regions.
For example, the per capita grain consumption of 306 kilograms in
1957 declined to an embarrassing 300 kilograms in 1976. Cotton
consumption declined from 2.55 tp 2.2 kilograms, while oil-bearing
crops dropped from 6.6 kilograms to 4.35. These sorry records of
agriculture failure were acutely affected by 'high targets' for produc-
tion and by 'arbitrary guidelines'. Forests and grasslands were
destroyed in many parts of the country in order to grow foods in their
place. Lakes were reclaimed as farmland. Flood and soil erosion
resulted from these man-made disasters. During the cultural revolu-
tion years, the slogan in agriculture was 'learning from Dachai' . In his
report to the National People's Congress in 1964, Zhou Enlai
characterised Dachai as 'putting politics and ideological work in
command of the spirit of self-reliance and hard struggle'. In reality,
agriculture became a tool in the class struggle against 'the masses and
the cadres, and wantonly picking out the so-called capitalist roaders'.
The communist agricultural policy was simply unintelligent before
1978. Farmers could not see the need to work, although he was present
in the fields. lI Agriculture was but one segment of communist
economic failure. The real causes were ideological, wrong planning
and corrupt administration in the entire economy before 1978. A
general knowledge of the Chinese is necessary to understand and to
see how agriculture and the rural people became the victims of bad
socialism which did not care to learn about the nation's most needed
knowledge on manage rial skill, production incentive and the power of
'free marketing'. Most especially, the highly centralised administra-
tive system demonstrated several defects. One of them was to
subordinate productive enterprises to bureaucratic organs which
themselves were too ideological and inefficient to guide the produc-
tion units. The second cause of economic stagnation was China's
enormous expansion in socialist command planning and its rigidity.
And finally the system of 'unified income and expenditure' meant no
one needed to work hard in this egalitarian distribution of goods and
service. The government over the decades emphasised capital
accumulation at the expense of consumption by the people. The result
 Rural Economic Development 133

was less production and more poverty which was further accentuated
by natural disasters and still lower productivity. China's failure to
develop foreign trade was in itself a denial of wealth wh ich could have
easily accumulated capital gains through international trade competi-
tion in which Taiwan and Japan have done their best and become
wealthy. Wrong emphases of planning made 'better progress' in less
needed areas and 'less progress' in much needed areas. For example,
Table 5.1 shows less production in grain and clothing and more in steel
and oil. 12

Table 5.1 Output of selected commodities, 1980

1980 Rollover increase

Category (in million tons) over 1949
Grain 318 .8
Raw cotton 2.7 6
Steel 37 230
Coal 620 19
Crude oil 106 880
Chemical fertiliser 12.3 2,050
Eectricity capacity 300,000 million Kwh 70
Cotton cloth 13,000 million metres 7

It is c1ear that through authoritarian planning the government

decided where increases or deductions should be made in allocation of
resources. Steel, for example, was excessively produced and stock-
piled, while grain production only gained 2.8 times over the 1949
figure. Central command planning did not reflect the wishes of the
people, did not allow initiative for the enterprise, and did not
incorpor~te flexible methods and options to execute the plan.
Between 1958 and 1960, heavy industry grew by 230per cent while
agriculture declined by 23 per cent. There was in 1960 a shortfall of 6
million tons of grain supply for the urban grain market. The planned
capital accumulation rate still reached 39.9 per cent in 1960. It was
then adjusted to 10.4 per cent by 1962 because of natural calamities.
On the other hand, due to inefficiency and lack of control many
enterprises with huge production expenditures or capital losses were
forced to stop production or shift to make other products. When the
economy was not in accord with the planned objectives in 1960, for
example, the central government simply se nt back 20 million factory
134 China Under Deng Xiaoping

workers to rural areas from which they had been recruited only two
years previously. Through drastic readjustment in 1961--63, the
economy got back on track for normal growth. It would have been
utterly impossible to restore the economy 'without correcting bad
planning'. Centralised micro-economic planning can easily go wrong
as admitted in arecent publication: 13
We failed to observe the law of value and did not adjust the prices of
agricultural and industrial products in accordance with changes in
the cost of production. We did not strictly adhere to the principle of
'to each according to his work' and did not raise the living standards
of the workers and pe asants in proportion to improvements in
labour productivity. As a result, there was an excessive concentra-
tion of revenue in the hands of the state.
Having recovered from the nightmare of her economic failure
through overly centralised micro-economic planning, China is now
moving toward more macro-economic planning to allow flexibility and
incentive in the economic operation and production: 14
The state plan should therefore deal with such things as the overall
direction of economic development; the rate of growth; the balance
between the major economic spheres; the scale and regional
distribution of capital construction, investment allocation, major
projects and the rate of improvement in living standards. In
addition, it must take care of the balance between finance, credit,
materials and foreign exchange.
Imbalance in planning until 1978 was, in short, greatly responsible
for the suffering endured by the peasants. First of all , the central plan
emphasised heavy industry over light industrial development.
Secondly, the plan locked up pe asants in their own locale as prisoners
bondaged to their commune's stagnation. Thirdly, the government
took away food and grain through purchasing at fixed low prices and in
big quotas. Farmers subsisted on whatever was left. It was, therefore,
very difficult to raise living standards by the pe asants themselves
through production. The more they produced, the more the govern-
ment took away on a quota basis with fixed low prices. Urban workers
and 'white collar' staff members appeared to have gained in per capita
income as shown in Table 5.2. 15
 Rural Economic Development 135

Table 5.2 Growth of annual per capita consumption of

peasants and workers, 1952-79 (in CUTrent yuan of 1982)

1952 1957 1979

Peasants 62 79 152
Workers and staff members 148 205 406

5.2 RURAL DEVELOPMENT AND THE RESPONSIBILITY

SYSTEM IN FARMING

My first visit to rural China took pi ace in 1979 after exactly thirty years
of living abroad. I went through many communes, brigades, produc-
tion teams and many visitation briefs wh ich were made available
usually to Chinese descendents of foreign nationality. Wh at I had seen
in 1979 was quite different from what I later saw in my subsequent trips
to the same cities and provinces. Rural China was about to undergo
rapid changes in 1979. My family and I visited a dozen cities and
provinces in my first trip where we had relatives and friends. We
acquired a new Japanese expensive camera with long lens for my son to
take pictures of memorable sights and events. Everywhere we went we
were given briefs by local cadres and school principles. We went to see
many schools, health clinics, factories and recreation centres, and
hospitals. I was much affected by what I saw after thirty years, and was
able to compare wh at I saw and heard of the plight of rural China with
what lieft behind before 1949. Some of the things pleased me weIl,
while others saddened me for weeks and months afterwards. We had
relatives to visit in Kuangzhou, Shanghai, Beijing, Xian, and Yanan.
Therefore, this first trip gave me a general coverage of several regions
in China for my own comparison of the differences from region to
region. My other trips to Guangxi, Yunan, Hubei, Sichuan and
Manchurian provinces gave me still a deeper and wider scope for
comparison. I can categorically declare that while in theory egalitar-
ianism and equal share of Obig rice bowl' for all was supposed to be
true, the reality of shocking differences in living standards between
different regions in China was, and still is, incredibly sharp. A
commune member in the suburbs of Shanghai or Guangzhou enjoys a
much higher living standard than his counterpart in the suburbs of
Xian or Yanan. In China, villagers are destined to accept whatever the
locality is able to provide. Comparison on the basis of the so-called
egalitarianism is simply deceiving.
136 China Under Deng Xiaoping

Chinese villagers have in general, since 1949, lived a better life free
of robbery, theft, feudallandlord exploitation, and starvation from
natural calamities and disasters. They have not, however, been fully
free from rigid government control and from the stagnated commune
system until recently. The better living today consists of electric wells,
electric mills, bicycles, and sewing machines which rural people did
not universally have until recently. Peasants have always loved the
land, and this was their major reason for accepting the communist
revolution in the first place. I found in 1979 that villagers were
generally resigned to destiny and with a sense of powerlessness to do
anything for themselves. They had no incentive to do anything for the
country or the government. Villagers did not' appear to care for
anything, nor understand what they could have read from local
newspapers. And more likely they did not agree with whatever the
newspaper said. It was a shock for me to have discovered this common
negative attitude. They knew nothing could be done to improve their
own lives. However, when I listened to the short briefs by commune
cadres I heard only glowing pictures and lovely statistics. In 1979 I saw
only communes and brigades in operation. The responsibility system had
not been implemented yet in areas where I visited. Small cities and
towns were dead places as compared with the former commerciallife
before 1949. In rural China there were only early morning roadside
'free marketing' near population centres. I suspected in 1979 that some
of the trading was bartered between goods with little currency as the
medium. In 1982, 1984 and 1985, however, all that I had seen a few
years ago had changed. Free marketing in rural China has become a
nationwide phenomenon. Cash has become the only medium of
commercial transactions. It was incredibly exciting to see the new
varieties of goods brought to rural markets. Indeed, it has become the
centre of rural economic free activities. One can see rural China has
come back to life after some thirty years. Peasants love this new
freedom, which they lost unexpectedly after rural collectivisation
during the middle 1950s. They are eager to improve their living
conditions. That is to say that with less government they can make
more improvements through self-help.
Better rural land utilisation and economic improvement have
resulted from the dismantling of the commune system entirely or
through its reform. This change has been the heart of Deng's new rural
development. The process of this change differed from region to
region. Initiatives came from a variety of sourees, either from the
peasants themselves, or local cadres, or from guided policy
 Rural Economic Development 137

experiment from above. Politically the party and the central govern-
ment did not at first want to commit any risk which might touch off a
bigger political crisis within the party. Many party leaders at all levels
were ideologically frozen and stiff. They were incapable of evaluating,
through economic rationalism, what was wrong with rural economic
production and with the sad plight of rural living standards.
Ideological indoctrination had deprived most of the communist
leaders of innovative thinking. Political survival became the major
concern for most low level policy makers in China. No one can
completely undo the effects of Mao's ideological argument even
today. It was in such a fearful atmosphere that the dismantling of the
commune system took place in various parts of China. Some cadres
and peasants were bolder than their counterparts in other regions. On
the whole, even though most cadres knew the need for change, they did
not have the political courage to advocate it. Nor could they champion
the reform, on the other hand, which would inevitably reduce their
own authority as bureacratic leaders of the commune economy.
Provincialleaders of the party and the government might have wanted
central leadership to issue new policy directions. A few leaders,
however, were allowed to experiment quietly with the responsibility
system. The central government had to weigh the political conse-
quences of any contemplated commune reform. The moderate leaders
were waiting for more information about locally initiated experimen-
tal results. Only the farmers knew best that the commune land should
be privately contracted to them for more production if the government
would allow them to keep what is left after the delivery of a fixed quota
collection. This would encourage them to work hard in the field.
On the other hand, the commune reform over sideline production
was another way of encouraging peasants to produce more if they were
allowed to keep a large share of profit after fulfilment of the
contracted obligation to the commune. In short, reform at the levels of
the production team, the brigade and the commune itself was
necessary if production relations between the commune and the
production units could be arranged by contracts to profit both si des
through increased production. The following pages will describe so me
interesting accounts to illustrate the need for reform and the resulting
increase in production. 'The contracted responsibility system' has its
myriad varieties in both urban and rural production. During a
two-year period in rural China, 1979-81, agricultural productivity
increased by 18per cent. And farmers' per capita annual income
increased by 66 per cent. 16
138 China Under Deng Xiaoping

In three years (1979 to July 1982) some 70per cent of the rural
production teams had gone into the contract system. The main
reasons for this rapid transition was the desire of the peasants to work
for themselves, for more private profit, and the improvement of their
own living standards. The readjustment of production relationship
was essential for greater productivity. The leftists up to 1978 had failed
to understand the need for rural production incentives. For decades
under the leftists, the peasants had been resigned to depend on only
three things: 'Grain need depended on government's resale, liveli-
hood depended on government's welfare, and production depended
on government's credit lending.'17 The following incident led to
gradual but steady policy changes. During the planting season of the
Fall of 1978, Shan-nan district of Anhui Province suffered an
enormous drought, and the peasants themselves suddenly took
matters into their own hands. They divided up the commune land into
a 'family responsibility farming'. The higher authorities at the local,
district and provincial levels did not express either their approval or
disapproval. In March of the following year, 1979, the People's Daily
in Beijing was the first to criticise the event in an article. Local
authorities immediately decided to declare the farmers' action illegal
as so labeUed it in the People's Daily. However, the provincial party
secretary restrained the local authorities and instructed them to await
until after the spring harvest before deciding what to do, In 1979, the
spring and the fall harvests were enormously increased in volume. And
80 per cent of the farmers requested to continue the practice while, on
the other hand, the local party secretary had al ready ordered areturn
to the old commune practice. This party leader did so not because he
did not approve of what the farmers had done but he feared for his
own accountability to the higher party authority. Hemight be
condemned 'as a capitalist roader' if he remained silent. All his
subordinate cadres, however, supported the farmers against his
'perfunctory gesture of disapproval'. The farmers and the village level
cadres asked: 'Is increase in grain production a violation of law? Must
not test of truth be practiced in rural China? Why is this success in
grain production not allowed? Our nation still depends on grain
import. It embarrasses every Chinese. Why cannot we allow our own
production increase?' Farmers and low level cadres proudly advanced
their argument in this manner.
The middle level party leaders in Anhui had the same ideological
contradiction in their minds. They, too, asked: 'After twenty years of
rural work, we now produce less grain than before but still falsely claim
 Rural Economic Development 139

our general policy and direction is correct. This new contradiction was
similar to an earlier precedent. When grain production was increased
in 1961 and 1961 Mr Mao said the policy was wrong. What kind of
theory is this?18 They further asked: 'What is capitalism? What is
socialism? Now everything is confused.' They both loved and feared
the new success of family farming responsibility. They loved it because
grain production doubled and peasant incentives multiplied. They
feared it because of their involvement in it: they might be possibly
accused of supporting new capitalists. Therefore, these cadres did not
offer their support in the transition. Nor did they dare draw a positive
conclusion from it. They thus did not take a clear-cut stand before
the peasants; they were simply waiting for instructions from the
higher echelons.
What is family farming responsibility? It is not giving away the
collective ownership of land, an im als and large farming equipment.
These all still remain collectively owned. The production team at first
acquired greater autonomy in decisions about production, but the
team did not gain the ownership of anything. In many cases the
production team has become the most important unit. It may give
points to the members who in turn, receive goods or cash according to
these points. As a result, each family, has more income while still
under collective ownership. The state now gains in larger purchase
quotas because of production increase. Consequently, the collectivity
accumulates more capital profit. Thus, the individual, the family, the
collectivity and the state can all benefit. The rural individual farmer
can seil his goods on the free market. This practice is of value for
everyone. It is a form of socialism; it is not a typical practice of
capitalism. This is, then, the first argument in favour of individual and
family responsibility farming. However, ideologically leftist cadres
consider the new practice a step backward in the socialist movement
without realising that it is two steps forward for the modernisation of
the country.
In 1980, a number of areas of Kansu province adopted the family
responsibility system in response to local popular desires. According
to an official investigation report, Kansu province for the thirty years
after 1949 did not make much progress at all in agricultural
production, especially in the dry drought-prone central part. Top soil
was blown away by dry wind. In remote areas and hilly regions of the
province, no progress had been made at all. Cultivation still depended
on draft animals. For example, in education some 65 per cent of the
people between the ages of sixteen and forty-five were in 1980 still
140 China Under Deng Xiaoping

illiterate. Thus many local cadres did not have the necessary ability to
manage collective production. Bookkeeping in most ofthe communes
was confusing. Some cadres often misused and misappropriated the
commune's money, while commune members suffered from starva-
tion. Too many of the cadres themselves often refused to work in the
field and became themselves a burden for the pe asants to feed and to
clothe. Up to 1978, pe asants in Kansu province received aper capita
annual income of 60yuan (ab out $US30 in 1980 exchange rate).
Thirty-five per cent of production team members received only 40
yuan. 19 When family responsibility farming came to Kansu, commune
members could directly manage their own production to avoid waste
and exploitation by privileged cadres who used to live much better at
the farmer's expense. Now the pe asants love the land they farm and
their draft animals they keep for work in the field. Production has risen
rapidly as has per capita income. With the increase in production
enthusiasm, interpersonal relations have improved between the
cadres who now work in the field themselves, and the farmers who now
have little to complain about. Most important of aIl, the policy today
is in accord with popular desire and working experience in the field.
Responsible farming is in short, the first step in rural modernisation
because of (1) dramatic production increases; (2) competition
between farmers and rural division of labour; (3) emergence of
specialisation in production and new job availability; (4) transition
from farming to other specialised non-agricultural occupations; (5)
new and greater voluntary cooperation among farmers in the future
for their own self-interest; (6) rural expansion in husbandry, auxiliary
occupations and sideline industries. And rural commerce will be
developed by the initiative of pe asants themselves with just a little or
no government assistance. Land will not be the only means of rural
prosperity. Light industry and specialised commerce will absorb much
rural manpower. Land redistribution in the future on a voluntary basis
in order to mechanise farming for more efficient production is entirely
possible and rational without coercion.
The contractual family responsibility system is a new system of
readjustment in rural management of the economy and production. It
affects not only 80 per cent of the total Chinese population living in the
countryside, but also the other 20 per cent of urban citizens who
depend on abundant labour and material supply from the countryside
to improve their lives. A complicated sequence of changes will result
from the reform and revival of rural production initiatives. This
peasant enthusiasm to work for the benefits of all as weIl as for their
 Rural Economic Development 141

own self-interest is the antithesis of Mao Zedong Tbought or Marxism.

It is rather the retreat of ideology, the withdrawal of the party and the
government bureaucracy; it is a demonstration of peasants' self-help
with less socialist interference. However, China will remain a socialist
state, at least, in the foreseeable future. The planned 'command
economy' will continue to dominate. Tbe publicly owned enterprises
remain closely under the guidance of the central government. Even
growing rural prosperity can be reversed by future adverse political
policies designed to stamp out the present rural growth. Therefore, no
one should be misled into thinking that the role of government and
central policy will be less important. On the contrary, they will be far
more important in terms of price and wage systems, credit and
banking, government purchasing, central policy on educational
expansion to improve the technological level in rural mechanisation
and production management application, and especially in respect of
the total volume of production of goods and services for both domestic
consumption and for export in foreign trade. In short, as rural China
industrialises further, more government, but with a different kind of
planning and intervention, will be critically needed. A cooperative
relationship between the central government and rural industry and
agriculture must emerge to help and to guide, but not to control,
dominate or stifte. This, in fact, has been the policy of the Nationalist
government in Taiwan, which provides credit, fertilisers, export
information to farmers' own free associations which in turn make their
rational decisions on production, marketing and profit calculations. In
the people's Republic of China today, agricultural experts are warning
about future problems, such as farmers' short-sighted, conserva-
tiveness, and the need for more party leadership and consistent
policy to guide the healthy development ofthe agricultural economy.
The reform and readjustment experience in Kansu province is a
telling manifestation of thirty years of agricultural failure, a story of
tolerating inequality in living conditions of different parts of the
province, not a promotion of egalitarianism as Mao's theory promises.
Tbe central government did not have the resources to promote
egalitarianism which had remained, in Mao's time, an idealistic future
goal ohly. His government had only an organisation al mechanism and
a political power to oppress the pe asants into submission, the
organisational power and its efficiency to herd pe asants into political
discussion and indoctrination which the pe asants only listened to but
did not believe. The details and episodes are too numerous to be told
here. On the positive side, the dismantling of the commune system
142 China Under Deng Xiaoping

and the local government reform must eventually lead to such

future developments as to require a new outlook as follows: 20

1. The leadership must be able to anticipate the long-term impacts or

implications of responsibility farming and rural light industrial and
commercial development;
2. The distant future of rural economy includes new occupational
specialisation and differentiation along with production socialisa-
tion. Such trends will require a new uni ted effort and new
economic concepts and organisations for greater demand for more
efficient management;
3. Greater expansion of agricultural development cannot be sepa-
rated from rapid supportive development in industry, commerce,
transportation and the credit system. Family unit farming may soon
lead to expansion in family unit production in commercial goods,
service industry, and other greater sideline developments. Thus,
the market law of supply and demand, market organisation and
rational competition, guided production development, and raw
material supply for production, ete., must claim the utmost poliey
attention ofthe central government and provincial governments;
4. Too many party cadres and ill-fitting bureaueratic organisations in
rural China must be subject to eontinuous reorganisation. Presen-
tly, the communes and brigades, ete., are disappearing, and the
re-emergence of new local government units is in good progress.
However, achieving maximum administrative efficiency to yield
positive assistance to rural productive forces will require mueh
upgrading of the needed knowledge, leadership eapacity and
self-discipline on the part of future loeal eadres. Past cadres were
resented, feared and tolerated by deeent peasants who hated the
arroganee, privileges, misuse of power and unfairness of rationing
by the local cadres. 21 It is up to the Communist party and
government to honestly draw lessons and conclusions as to why (1)
the practices of the past thirty years killed peasants' enthusiasm for
production; (2) why today many rural problems have disappeared
as a result of family responsibility farming; and (3) why the new
policy in rural China must become the basic foundation for future
urbanisation and urban eeonomic prosperity. On the other hand,
the government must not tolerate the development of future gaps
between the rich and the poor. Future land reeolleetivisation must
be done purely for economic reasons as opposed to ideological
reasons. Many peasants must be allowed to leave farming for other
 Rural Economic Development 143

new occupations, and land must be mechanised to produce new

materials and more food to feed the entire population. A free
economy has often produced its own disadvantages in other
advanced economies against the interest of the rural population.
China is clearly heading toward a much freer economy through
sweeping reforms.
My own interview with Mr Hu Qili, one ofthe new rising stars in the
Political Bureau, demonstrated that he was very well-informed on the
dynamic rural economic development during the recent years since the
Third Plenum of the Eleventh Party Congress. He stated during the
interview several specific policy emphases. 22
1. Development in agricultural economy has created many new
unpreventable and also welcome conditions. For example, he cited
the following: the rise of thousands of new middle and small-sized
urban centres everywhere for rural commercial exchange and other
supply convenience; a policy need to guide and settle population
shift to prevent inflow of people into presently existing crowded
cities; pe asant initiatives to accumulate capital for transportation
and navigation purposes (for example, in the lower Yangtze
region); merchants making plans to build indoor retail market in
the suburb of Beijing; rural human resources will eventually
promote light industrial production for export; the need of avoiding
the crises in capitalist states such as crime and poverty; the
movement of scientists, technicians and educators into the country-
side and to less developed western China; and avoiding compulsory
immigration from the crowded coastal plain to western and
underdeveloped highland (it has failed once);
2. Before the year 2000 AD, the development of a new dynamic
national economy remains one of the three major goals of the
government (the other two being preservation of world peace and
the return ofTaiwan to the fatherland).23
In short, rural transformation has genuinely begun in the last six
years since 1979. However, the experience of constructive contribu-
tion under the old commune system is not totally forgotten by the
government. Peasants can still be called upon to do labour for the
benefit of the community or the village. The role of the Communist
party leadership in this economic transformation will remain a crucial
one for a long time to come. The quality of life in rural China will
improve by leaps and bounds in coming decades. And finally, the
144 China Under Deng Xiaoping

purpose of both the revolutions of 1911 and 1949 are showing

dividends in both Taiwan and the mainland for the weaker
peasantry.24

5.3 CASE INTERVIEW IN RURAL NANHAI COUNTY

P. Y. Chen and W. J. Gao of Guangzhou Foreign Affairs Liaison

Office arranged for and accompanied me to Nanhai county, which is
an hour's drive from Guangzhou. It is, incidentaBy, the birth place of
Kang Yu-wei whose teaching centre at Xiqiao I also visited. I was
brought to spend two days with Zhou and his two assistants. Zhou
came to Nanhai from Northern Jiangsu in 1949. He became an
instrumental leader of Nanhai county for thirty-five years with many
assignments in the economic and financial management areas over the
past three decades. He held such offices as deputy secretary, deputy
county magistrate and magistrate. His success in Nanhai earned many
opportunities for his promotion to higher positions. But poor health
forced him to remain in Nanhai whose prosperity has been intimately
tied to his life-Iong dedication. Presently he is much respected and
loved by the people of the county. They elected him to become the
president of Nanhai County People's Congress, a position requiring
fewer daily burdens, on account of his health.
Zhou is aleader of smooth personality with a wonderful memory for
statistical records in economic progress and dates of events. He used
no notes and asked for no assistance from the two assistants whom I
also interviewed separately for their responses to my questions result-
ing from the first interview. Zhou (hereafter referred to as Chairman
Zhou of the County People's Congress of the CPC) was purged during
the cultural revolution. His People's Congress Committee meets every
two months during which time he is in charge for about four days. The
People's Congress hears reports from the party secretary and the
county chief, Xianzhang. It also elects several officers, inc1uding the
police chief and judges of the court. There are several special reasons
for my selection of Nanhai county for the interview. First of aB, it is
weB known because it was repeatedly considered a model example of
success. One of its unique features is that it has its large number of
overseas residents in Hong Kong and the United States. AnnuaBy the
county has been visited by high government officials from Beijing.
When Hu Yaobang became the Communist Party Chairman, replac-
ing Hua Guofeng in November 1979, on the first day in office he
 Rural Economic Development 145

declared Nanhai as the model experience for others to imitate. When

party secretary Xi Chongshun was govemor of Guangdong he came to
Nanhai repeatedly to encourage new progress and spirit for reform.
Before my report on the interview with Chairman Zhou, it may be
helpful to summarise certain information about Nanhai county from
the 'Report on Govemment Work' delivered by the Magistrate
(equivalent of county board chairman of supervisors) to the County
People's Congress on 23 March 1985. In this report, the county chief
made the following points in a language and manner indicative of
standardised political practice:

1. Nanhai has closely followed Beijing's new policy direction 'to

continue our reform toward material progress and spiritual
construction'. 'We have made in 1984 good records in industry,
agriculture, finance, pubIic enterprise, collective entity, and
individual progress'. The combined production value of 1984 in
industry and agriculture was 1870 million yuan, an increase of
20.4 per cent over 1983. Of the total production, industry was 980
million yuan, an increase of 26.3 per cent over 1983. This was a
100 per cent increase in industrial total value in four years.
Agriculture made a 14.5 per cent value increase over 1983. Rural
development advances toward production specialisation, com-
mercialisation and modemisation. Commercial production has
increased unprecedentedly.
2. In 1984, the countryside of Nanhai county registered a total
income of 152 million yuan, a 23 per cent value increase over
1983. The thirty-six county-owned enterprises made a total
production value of 560,000,000 yuan, a value increase of
28.5 per cent over 1983.
3. Market prosperity and commercial transactions increased at both
county and national level in Nanhai.
4. 'We speedily advanced the development of small cities and towns
in Nanhai in 1984.' The living standard of the people made
another jump to aper capita annual income of 861 yuan, an
increase of 101 yuan over 1983 or 13.2 per cent. Workers and
factory staff members received a 8.5 per cent wage increase in
addition to an average bonus of 40 yuan for the year. Housing
conditions in the countryside also improved in 1984. Newly
constructed housing in 1984 provided an additional 760,000
square metres for the rural residents. People's savings have also
increased over the previous year by 48.6 per cent. The rural
146 China Under Deng Xiaoping

people have accumulated an average saving in their account of 681

yuan (each $US1 is approximately 2.5 yuan, subject to market
fluctuation) .
5. Nanhai county, by virtue of elose proximity to Hong Kong and
Guangzhou, achieved in 1984 an export volume of 320 million
yuan, a 27 per cent increase over 1983.
6. Nanhai is also speeding up 'its housing construction for our
overseas brethren to return and to live or retire in N anhai
homeland'. The county also returned many formerly confiscated
hornes owned by overseas citizens. In 1984 overseas Chinese from
Nanhai county made a total investment in their homeland of 30
million Hong Kong dollars, which has more than twice doubled
the total investment value of 1983.
7. Nanhai county is very conscious of technological improvement in
production. The county polytechnic office selected forty new
technical areas for skill improvement, twenty-nine of which have
achieved good resuIts. In education, the county made systematic
investigations of secondary and technical school curricula and
teacher training programmes. The county has proudly met the
following three educational criteria (1) every school is adequately
housed; (2) every elass of students has a room; and (3) every
student has a desk and achair. There were thirty-six night cIasses
in adult education in the rural areas of the county.
8. Birth control in the county has succeeded yielding a ratio of 17.41
births per 1000 people. Sixteen thousand citizens underwent
surgical operation for birth control in 1984.
9. In industrial structural reform, the county is following national
instructions to separate politics from enterprises. On industrial
personneI, it has moved from an appointment by a superior
hierarchy to an election system by the workers. Simplification of
the administrative procedures and control is being carried out.
And enterprise decision-making autonomy is being granted. In its
wage system, the county is becoming less egalitarian.
10. In agricuItural contract, the county's production land is mostly put
under a fifteen-year contract to assure stability in our farmers'
production long-term planning. The county has also adopted a
liberal policy toward credit lending with low interest to encourage
light industrial development occupational specialisation in rural
areas.
11. Rapid expansion in small towns and city construction in rural
areas was carried out to meet central government's expectation.
 Rural Economic Development 147

These small cities are needed to meet political, cultural and

economic future development in rural China and to avoid spilling
the rural population on to existing major urban centres.
12. In short, this county, like the rest of the nation, has suffered from
the following difficulties: (1) difficulties in liberating minds from
leftist past indoctrination; (2) inadequate energy, transporta-
tion and primary resource supplies for meeting rapid industrial
development; (3) the slower speed in rural industrial structure
reform, especially with regard to the development of t~rtiary
industry in remote areas; (4) lack of personnel in science and
technology in rural and far remote areas; and (5) lack of foreign
exchange to buy from abroad the necessary equipments and
goods.

The above list represents a continuing emphasis on economic

development for the six years since Deng Xiaoping's new reforms.
Nanhai is the model example in its implementation of such policy
guidelines of the central government. Most other counties in remote
or border regions of the country are not equipped to follow closely and
efficiently the new reform movement. Nanhai county benefits greatly
from its geographic proximity to Guangzhou and its rapid economic
development. Unlike other counties, it received a substantial amount
of investment from overseas Chinese. The level of education,
transportation and capital investment in Nanhai are far advanced
compared to most other poor counties in other parts of China,
including most of the coastal counties.
Let us return to my personal interview with Chairman Zhou of the
County People's Congress. I can only select a few instances to
highlight how he personally relates Nanhai's economic development
to central government's reform policy, to provincial leadership's
enthusiastic encouragement, and to the kind of unusual cooperation
among county leaders. It must also be true elsewhere that the rural
people simply did not believe at first the sincerity of the new leadership
in reforming the economic system as practised under Mao to one of
open experiment in new and non-socialist economic policy for material
prosperity. Chairman Zhou's interview revealed the following: (1) the
pe asants and city people for thirty years were very afraid of their
government. They did not believe the government was sincere
concerning a change in Mao's policy. They were accustomed to being
like siUing ducks waiting to be led. They were concerned to avoid
unexpected troubles which would hurt them; (2) given time, the
148 China Under Deng Xiaoping

political system and party leadership eventually were able to convince

all the citizens through open campaigns or restrained methods. The
party leadership was quick and eager at all times to initiate new ways to
change old practice, to reform and to convince everyone. The central
leadership was able to eventually convince the people that this time the
party is going to remain committed to changing the rural economy of
China; (3) the communist leadership, even after thirty-five years in
charge of everything, is still revolutionary and experimental in search
of thy best way to make China a powerful industrial state. Whether
under Mao or Deng, the party's willingness to experiment is
frightening and even admirable. It can change from past failure to
offer hope for future sucess. Therefore, communists do not fail in the
long run. But their price of experiment is too high; (4) communist
leaders, like their Kuomintang counterpart, are unable to succeed in
their original revolutionary goals. They have awakened to realise
China's own needs and her ability in self-rejuvenation and self-discov-
ery; (5) The revolutionary failures of 1911 and 1949 suggest that
external challenges can only help China transform in her own way. The
leaders know eventually what the people really want even though the
people do not have a dependable way of informing the government.
The leaders Iearn eventually to follow the people as the only way for
their own political survival. Mao did not follow the people and failed.
Now Deng takes account of what the people want, so he should
succeed in the end. The people always remain patient, and'silent under
bad leadership; (6) the Nanhai experience verifies that a thorough and
peaceful revolution is going on in all parts of China; (7) the Chinese
government bureauerats never seem to raise questions on what is right
or wrong. They only follow political dictatorship. So the whole system
moves in one direction from the top to the bottom until it fails totally,
when a new start is initiated.
Nanhai county has a population of 842,000. It lost some of its
people and land to the city of Guangzhou and other fast developing
urban neighbours. It is one of the first counties to become rich and
probably the richest among them as a result of Deng's reform. Six
hundred and seventy thousand people are considered farmers whose
1984 per capita income was 860 yuan. Total industrial and agricultural
growth value income in 1984 was 1870 million yuan. Thus, the average
1984 income for all citizens in the county was over 2200 yuan. The
average wage bonus per worker was 480 yuan. It exports through
Hong Kong a total value of 500 million yuan. Almost in every respect,
Nanhai has made enormous progress. Thus it was designated, at the
 Rural Economic Development 149

very start of Deng's reform, the 'model county' for emulation in 1979.
Why was this sueeess possible? Chairman Zhou spent days with me
explaining it. He was and still is totally involved in the eounty's
progress as he had been sinee 1949.
In 1949, Nanhai had an ineome of 100 million yuan. In 1979 the total
income was 810 million. As already eited, the 1984 total growth was 1870
million yuan. In the county's own statistical record, income inereased
by eight times in the thirty years between 1949 and 1979. Why was it
possible in the last five years for county ineome to inerease by 1070
million yuan? Chairman Zhou made the following summary. First,
enthusiastie exeeution of the eentral government's reform poliey of
'open the eountry up to foreign nations and revitalisation of domestie
eeonomie development'. Chairman Zhou unqualifiedly declared it the
only right poliey whieh is welcome to the people. This was a 'poliey to
make wealth'. As he said: 'Under the same sky, on the same land and
by the same people, the poliey has sueeeeded; but Mao's poliey failed.
To me the only valid answer is that this is a eorreet and welcome one,
Mao's poliey was ineorreet and without genuine support.' He said the
implementation strategy is also eorreet in terms of readjustment,
restrueturing, eonsolidating and improving. Such a strategy involves
no drastie departure or sudden change to benefit or hurt anyone. The
new poliey requires time to transform the eeonomy, to raise wages and
bonuses, to pump money into the eountryside and to allow the people
to adapt to new aims. The new poliey allows some people to prosper
sooner than others, but all will get there eventually. There is room for
all the people to improve their own personal lot if they live in rural
areas and wish to manage some sideline ineomes.
Seeondly, Chairman Zhou stated his seeond reason was that of sup-
port from the central and provineial governments. As early as Novem-
ber 1979 Beijing leadership declared 'In agrieulture, leam from Nan-
hai'. This declaration made his own leadership stronger and more
eonfident. It gave every eadre in 'the county more excited, more
dedieated push and made hirn eager to work extra hard to set the next
target of progress mueh higher and more ambitiously'. Well-known
leaders from Beijing eame to Nanhai to 'observe our progress, to
eneourage our people, to remove our fear of poliey reverse to make
themselves again the vietims of eondemnation. This pattern of
eneouragement was no different from Mao's declarations: 'In
agrieulture learn from Dachai' . The whole propaganda system and the
loealleadership then listened and followed. In the 1960s there was just
as mueh enthusiasm to learn from Daehai as in 1979 to learn from
150 China Under Deng Xiaoping

Nanhai. For Nanhai, however, the result was different. The people's
standard of living was improved instantly. On the other hand, the
provincial leaders did their utmost to support Nanhai's own progress.
Many came to Nanhai from Guangzhou. The governor, the first party
secretary and many others 'were behind us'.
Thirdly, 'the unity and cooperation among some twelve county
leadership units' were responsible locally for making the huge
economic progress possible. Chairman Zhou modestly omitted his
own leadership capacity in leading the county officers and cadres. The
people had to work day and night since 1979 at meetings, in the fields,
making plans, taking evaluations, plotting schemes and inventing new
methods in order to mobilise the peasants to believe and not to be
afraid. To become rich in the past was a violation of egalitarianism
wh ich would result in a person's being subjected to criticism of dass
struggle. No one wanted to commit that sin and to violate Mao's
ideology. After thirty years of communist rule people have learned to
share poverty in disgust, not healthy competition to become wealthy
even though they wish they could. It became the task of the county
leadership crew to convince the pe asants 'to work harder and to get
wealthy'. They must change now without fear.
How to campaign against peasant inertia of inaction or resistance?
The county leadership units worked hard to devise methods and
strategies to move the people for incentives to work. They held public
meetings and invited a few courageous people to report on how they
had been able to make more money and save more in their bank
account. The leaders went to production teams and brigades to tell the
people how to aquire greater income, how to think in terms of
becoming rich and 'why there is no limit to the growth of wealth'. They
created a variety of occasions in which to celebrate those who had
become wealthier. In 1979 the county leadership set the target of per
capita income from the average 100 yuan to 400 by the end of 1981.
This was a very difficult goal to attain. They worked daily to encourage
all teams and brigades to meet their separate group goal. A few devices
were employed to overcome the fear of becoming rich: (1) write 'a
letter to congratulate' those who have achieved more income; (2) 'use
astring offirecrackers to celebrate'; (3) give a free 'ticket to a movie';
(4) provide 'a head of pig for feast'; (5) deliver 'a case of wine'. This
was their method of encouraging production through their 'Five Ones'
policy. When such acelebration was in progress, pictures were taken.
The guests of honour often said: 'If the government accuses us of
becoming richer, these photos will be our evidence that you people in
 Rural Economic Development 151

county leadership are responsible for wh at we are accused of'. The

celebrations for production increases usually consisted of dancing,
local music, a brigade meeting and a lion's dance. After some time of
such encouragement, more and more pe asants took initiatives to take
on sideline jobs or worked more hours in the field. Such celebrations
were so often held and so numerous throughout the county that only
representatives of the county government were sent out to attend
these occasions. By 1981, the county leadership delegated the task of
organising victory celebrations to the district unit. Later on, certifi-
cates of achievements were used to replace big celebrations. Soon
more peasants were deeply convinced of the government's sincerity.
They might comment that 'we are not afraid any more. If we are in
trouble, you leaders will be in trouble, too'.
To change people's attitude toward wanting higher income was the
hardest thing to accomplish. They were simply 'afraid to be better off
than their neighbours for fear of class struggle and new tricks of the
government'. It took the country a great deal of campaigning to
convince the people. Thus in three years, 1979-82, per capita income
was raised from 100 yuan to 400 in Nanhai. Other neighbouring
counties did not follow Nanhai's example. They thought this was
impossible in their areas. The county leadership in Nanhai followed a
'four firsts' strategy to stay ahead of other counties in production and
in per capita income. Tbe 'four firsts' consisted of: (1) 'first to learn
everything'; (2) 'first to know everything'; (3) 'first to be concerned';
and (4) 'first to get the benefit'. This was the county's leadership
predisposition to stay ahead of others in the reform policies of the
central government. The separate units of the county government,
from the beginning to the present, have remained united, so rural
production and sideline industries have made 'Nanhai the first among
the richest counties in all of China'. Delegates of many other counties
gradually came to Nanhai for inspection to do likewise.
Why was the Nanhai county leadership so confident of its success
and not afraid of consequences of failure? Chairman Zhou said that
the provincial party leaders and governor assured the county not to be
afraid. Every cadre in the county was fully aware of the government's
commitment to make the country richer, and to raise the people's
standard of living. Secondly, Nanhai county leaders undertook a
thorough study of Nanhai's potential for development, and its past re-
cord in light industrial production and in commercial activities. After
a careful analysis of Nanhai's past, they drew four conclusions. First,
the geographic location of Nanhai is a positive factor. It is only hours
152 China Under Deng Xiaoping

away in transportation from Hong Kong, Macao and Guangzhou. All

year round Nanhai can produce vegetables, fruits, chickens and ducks
which can be shipped directly from Nanhai to these places during all
four seasons both by land and by water. Secondly, historical
experience was vividly available to convince that Nanhai could again
develop its light industries and revitalise its commercial activities as it
had done thirty years ago. Nanhai still had the human resources to
recover its lost commerical activities. Thirdly, the study made a correct
assessment of Nanhai's sons and daughters living abroad as overseas
loyal residents. They are scattered all over the world, the majority of
them residing in Hong Kong, Macao, Singapore, the United States
and even in African states. These overseas loyal citizens were eager to
re-establish relations with their loved ones in Nanhai. They could
make capital investment back in Nanhai and act as trade agents, too.
Finally, the county leadership has remained united to work together.
What should Nanhai produce? The answer is basic and simple. It
should first of all increase food production for people to eat well.
Their feelings of security will increase if they are no longer worried
about starvation. Secondly, Nanhai should produce supplementary
food supplies and other daily consumer articles for both self-consump-
tion and for export. Thirdly, Nanhai should expand light industrial
development; 'Without industry there cannot be wealth'. And finally,
the county leadership emphasised their effort and determination
to redevelop Nanhai's commercial activities. They believed that
'without commerce life has no vitality and dynamism' . In 1980 all these
condusions of the study were put into practice. The people became
quickly convinced that their destiny was in their own hands, and that
the new policy of reform was not likely to change.
For example, Nanhai reached out to re-establish links with those
overseas Chinese. Many of them left Nanhai more than thirty or forty
years ago and still had their dose relatives there, but they did not want
to return yet. Communication with relatives was cut off totally during
the cultural revolution. Deng's open door policy to the outside world
was, therefore, particularly beneficial to Nanhai which could now help
local citizens re-establish relations with relatives abroad. Over the last
several years, many Nanhai officials have visited Hong Kong, Macao,
Singapore, the United States, Canada and even parts of the African
continent to seek doser contacts with them. Seventy thousand of
them were scattered elsewhere be si des the 200,000 of them stillliving
in Hong Kong. Others are in Taiwan, Macao and various parts of
Southeast Asia and Europe. In total, Nanhai has more than 300,000
 Rural Economic Development 153

former citizens and their descendants living abroad. They have been
invited to return to their homeland to retire, to visit relatives, to seek
trade opportunities and to invest in local industries.
The result of such visits by Nanhai county officials abroad has paid
off handsomely. Many former inhabitants have returned to visit or to
invest. Former residents or descendants in Hong Kong have reversed
their political allegiance in National Day celebrations after 1980. They
have stopped hoisting the Nationalist Government flag on 10 October
every year. Nanhai's Chamber of Commerce in Hong Kong has been
in active existence since 1910. Members of it have been eager to
contact their relatives in Nanhai. When Chairman Zhou hirnself
visited Hong Kong in 1980, they all wanted to see hirn personally. He
was kept busy for weeks meeting with them. Nanhai's total foreign
trade with Hong Kong annually accounts for more than 100 million
Hong Kong dollars. These overseas Nanhai descendants remit a large
portion of their foreign exchange to their relatives. They also donate
cash for welfare and education. Some 500,000 local citizens have
directly or indirectly been benefited by these new contacts with
relatives abroad. Nanhai now has its own foreign tourist industry.
My interview with Chairman Zhou covered other areas which have
broad similarities with other parts of China. For example, the
dismantling of commune economy, local government reorganisation,
education and technological developments, and other local problems
of nationwide significance occupied most of the remaining interview
time. I asked for his opinion on the development of democracy and
the rule of law in China. Chairman Zhou considers this as one of
the central parts of the reform under Deng in terms of long-term
implications. In conversation he demonstrated his total ignorance of
democratic freedoms and rights. He was unaware of local autonomy
and practice in democratic decision making, or of the importance of
political election with multiple candidates to choose from or of the
expression in public affairs or the freedom of the press. However, what
he avoided mentioning or did not know about non-communist practice
of political democracy was itself most important to me. I suddenly
realised with greater depth that no nation can practice any form of
democracy which is alien to itself and is not in demand by its citizens,
especially its rank and file political and administrative leaders.
Chairman Zhou is not just anybody else. He is a gentle, thoughtful,
experienced, and dedicated communist who is open-minded and
genuinely loved by most of Nanhai's citizens. I believe, that by
comparison, most of his counterparts elsewhere in the nation as
154 China Under Deng Xiaoping

chairman of county people's congresses would know much less about

the varieties of democratic governments in practice. Chairman Zhou
has made official visits during the last several years to the Uni ted States,
West Europe, Africa, Singapore and Hong Kong. In short, this example
illustrates that Western scholars or Sinologists have to be careful when
they inadvertently attempt to impose on China Western standards of
democracy, such as respect for human rights, freedom of religion, civil
liberties as guaranteed by the national constitution, or multiple party
practice in the election system. Chairman Zhou was proud that China
has come out of the chaos of the cultural revolution and that the
'Revolutionary Committees' at the county and provinciallevels have
finally been replaced by reform-minded officials in recent years. To
him, China is now already quite democratic. There was no response
from him to my question on the practice of democratic centralism in
China and absence of election for central government officials by direct
popular methods.
Zhou happily told me that since before 1980 Nanhai county has had an
elected people's committee which meets under the direction of the
county chief, who was himself theoretically elected by the committee.
The minimum voting age in China is eighteen. Members are elected to
the county people's congress which, in turn, selects members of its own
standing committee to exercise the 'legislative or consent' power when
the Congress is not in session. The congress meets generally for aperiod
of five days or seven days annually to hear a variety of reports and to
approve the needed actions. Real democracy appears to exist in the
method of practice, not as guaranteed by legal or constitutional devices.
For example, the county people's congress elected the county adminis-
trative chief (county board of supervisors' chairman), police and fire
chiefs. Members of the county people's congress are directly selected
by districts, towns, the units of local military and security forces, com-
mun ist youth league, .women's organisations, worker's unions, and
fire departments. Every three years an election is held for members
of the county congress. Re-election is possible for another three-year
term. The standing committee of the people's congress must meet every
two months and also meet anytime on an emergency situation.
The members of the standing committee annually make two visits in
small groups to every community in the county to hold discussions
and other meetings with county voters on matters of their interests.
I asked Chairman Zhou what the voters perceive as democracy in
practice. He happily replied that voters want their representatives to
'have power, a sense of duty, an interest in local, county and provincial
 Rural Economic Development 155

matters and participation in their solutions ... Representatives must be

just and unselfish, resentful of political factionalism, communicative
both upward and downward, willing to hold street or village open
meetings to tell voters the positions of their government on various
issues. If this kind of democracy conveys genuine popular
judgements on issues, it is then, a true democracy and a form of 'New
England town meeting'. Another major routine practice in Nanhai
county is that the chairman of the County People's Congress must
invariably request all delegates to survey voters' ideas and opinions in
advance of the next session. The voters may directly initiate 'legislative
proposals' with their own signatures. People's delegates also enjoy 'a
Chinese postal courtesy' to mailletters and information to the voters,
in addition to their frequent tours to visit voters.
Nanhai county has 820,000 people. The people's congress has 400
delegates. Only one-third of the delegates are communist cadres. An
elected county chief may not even be a communist party member.
Approximately 15 per cent of the 400 represent the intellectual dass
(those with high school education or above). Some 60 per cent of the
400 members, in fact, are not party members in Nanhai. Their
youngest delegate was twenty-three years old when elected. The
average age of the Standing Committee of the People's Congress is
fifty years of age. Roughly 25 per cent of the delegates are women.
However, none represent the sm all democratic political parties wh ich
are better organised and proportionally represented at the provincial
and national levels of congresses.
I did ask for Chairman Zhou's opinion on the future fate of the eight
sm all political parties in China. First,- he considers that from the point
of view of historical development, China must have a multi-party
system. He likes the communist party strategy of forming a united
front among minor parties for cooperation. The sm all parties made
their contributions to the communist victory of 1949. They also pro-
vided the 'sovereign basis' in the formation of national government in
1949. It was the Chinese People's Political Consultative Conference
(CPPCC) which acted as the sovereign central legislature before the
adoption of the 1954 constitution. Besides, the CPPCC has existed
side by side with the National People's Congress (NPC) underthe 1954
constitution. At the national level, the CPPCC can perform a very
significant check on the communist exercise of power. Thus, chairman
Zhou welcomes a multi-party system because of his views about the
role of the minor parties. Secondly, he thinks that the country must
have a core leadership at the national level to lead the people toward
156 China Under Deng Xiaoping

the achievement of modernisation. Therefore, the Communist party

must exercise greater power as the politicalleading core. Thirdly, he
cited the Party Secretary-General's pledge of 'Heart to heart peaceful
co-existence forever' with the minor parties. And finally, Chairman
Zhou sharply suggested that the existence of such minor parties in
mainland China has an important meaning for the government in
Taiwan. The nation must some day be unified as one. The minor
parties presently worked hard on that issue: they have friends in
Taiwan from the days before 1949.
Our interview shifted to the rule of law and Chinese legal or judicial
independence. I respect his experience of leadership in thirty-five
years at Nanhai. As a top leader at the county level, he was able to stay
dosest to the basic rural social hierarchy where 90 or 95 per cent of the
people live and die. The other 5 or 10 per cent of the Chinese citizens
and leaders remain in 'the ivory tower of big cities'. They have less
practical experience or knowledge about the majority of the people
who have suffered more and were condemned to poor rural areas and
small cities. As a result, his definition of democracy in practice and
understanding of rural people and their immediate government is of
great importance to me. His definitive responses to my questions on
the 'rule of law' and 'judicial independence' are very original and of
practical use for my further contemplation. His reasoned answers are
summarised as follows:

1. 'The rule of law must be under strong leadership of the communist

party'. ludicial independence requires party direction or institu-
tion. A judge's work can be independent: but he must be 'under the
communist party, not superior to the party'.
2. 'Rights, democracy and ideology are mutually related.' There is
'no need to emphasise democracy', 'no need to stress ideology'.
'Emphasis either way is wrong.' He dedared 'talking about
democracy without food in the stornach and talking about
ideology without food in the stornach are both meaningless'.
Economics must have the first priority. After only a few years of
the current reform, we have already eliminated the rationing
coupons for food and cIothing. People who talk like young Wei
Jingseng and Wang Xiche, are ahead of their time. It seemed to
me that his stand is relative only to economic changes. Chairman
Zhou is an economic determinist.
3. Chairman Zhou very sharply emphasised that the good and
common people in China 'cherish, first of all, peace and stability'.
 Rural Economic Development 157

They have suffered too much from revolution to revolution, from

dass struggle to dass struggle in the 1950s and again in the 196Os.
Finally, they were 'rescued by Deng's peaceful reform to im-
prove their economic conditions'.

Toward the end of our interview, I simply wanted to hear from hirn
'what will the majority of people want in the next ten or fifteen
years?' Chairman Zhou's answer emphasised familiar issues. How-
ever, he daimed to speak from the common people's point of view.
'Energy supply, transportation and education are important to the
average person in China, today and in the next fifteen years.' 'People
do not have energy to cook food in the kitchen.' Coal, wood and
electricity are in very short supply for daily use by the people. He cited
popular complaints: 'Under the Kuomintang government before 1949
we had fuel but no rice to cook; under the communist government
since 1949 we had rice but no fuel to cook.' He explained that, during
the cultural revolution, the 'rebel slogan was to open up the mountains
to make rice field because rice production was the key policy'. Since
Deng, the key policy emphasis is to dose the mountains to make forest
because reafforestation is indispensable for energy and raw material
supply.' On education, he said 92per cent of Nanhai's primary
school-age children are in school today. The county is rushing to build
more schools for students of junior high school which is now
compulsory. Senior high school education, polytechnic occupational
education and university opportunities are extremely limited every-
where, especially in remote and border regions of the country. Nanhai
is one of the best places for educational opportunities. A grave crisis,
however, has been 'teacher shortage everywhere'. During the cultural
revolution, Mao simply dosed schools at all levels for many years,
Nanhai county is rich. It has been able to build thirty-three new junior
high schools. The entrance examinations for senior high school and
university are too difficult to pass. No more than a dozen or so lucky
candidates out of one hundred are admitted into good universities and
colleges. The other top 20 per cent find other post-high school
training opportunities for jobs. The rest are wasted annually.
Qualified professors are also in short supply everywhere. The people
today are fond of comparing educational opportunities before and
after 1949. He said, that before 1949 'there were books and schools,
but parents did not have the money; now parents have the money but
there are no books and no schools'. Nanhai county has only four senior
high schools for 33 per cent of the senior school age. One of the crisis
158 China Under Deng Xiaoping

solutions has been to request universities at the provincial city,

Guangdong, to accept some Nanhai students for whom Nanhai will
pay the university the entire expenses of each student. Nanhai has also
created its own television university and has hired professors to come
to Nanhai county at specific times to meet with students on their
questions and other difficulties at the county television centre
dassrooms, student dormitory and other university facilities. Because
of Nanhai's advanced economic prosperity, the county must train its
own varied human resource supplies. For example, Nanhai has even
one specialised training school for foreign languages. The adult
education campaign is a nationwide movement. Nanhai, too, takes
care of its adult victims of the cultural revolution period when all levels
of schools were dosed. Chairman Zhou hirnself is spending three days
per month attending dasses offered by professors of Chongshan
University in Guangdong.
In condusion, I must remind the reader that Nanhai's experience is
unique, because it is one of the best developed counties in the entire
nation. It is wealthy, conveniently located for foreign trade and
transportation, and is dose to the big city of Guangzhou. Nanhai
possesses a good background in education, light industry develop-
ment, and has better dimate for a longer growing season per year.
Above all, Nanhai has its own brethren living abroad who are making
investments in their horne county and are engaged in its foreign trade.
The rosy picture in Nanhai must not be applied to other counties in
other regions, and even in other counties of Guangdong Province.
The most significant discovery in my interview was how the Nanhai
county leadership fought to promote reform for a higher standard of
living for the people who were themselves still afraid of becoming rich.
They feared future dass struggle. My second discovery was that aIl the
documents I read, in addition to this interview, demonstrated a high
degree of knowledge on the part of the county political leadership
concerning current government policies in aIl major fields of national
affairs. My third surprise was that Chairman Zhou hirnself could so
easily adapt to aIl new policy and political circumstances at the
national level. He was very weIl adjusted, softly spoken, mild
mannered, and with a strong sense of pride in his and the county's
achievements in the last six years under Deng's leadership. He
rejected many offers of merited promotion for health reasons and, I
suspect, of his love for N anhai. Coming from North Jiangsu in 1949, he
has become completely identified with Nanhai's recent past and its
foreseeable future. And finally, besides the differences in levels of
 Rural Economic Development 159

wealth between Nanhai and China's other 2800 counties, Nanhai

reflects common national problems and the critical need for capable
leadership dedicated to making satisfactory economic progress, if not
the miracles that this particular county has achieved in the last six years
since Deng's reform beg an in 1979.

5.4 CONCLUSION

China's economic future and urban prosperity very much depends on

how solid rural diversities and development will be, but the prospect is
good. The present economy has come a long way through
difficulties. 25 In general, the village level economy in various places
still retains some collectively centred features. Such weak collectivity
in ownership consists of specialised production, individual or house-
hold contracts, with or without equal income for participating
households as mutually determined by the contractual terms. Often,
formal policy adaptation in rural China has lagged way behind changes
that have occurred. This phenomenon was confusing in rural China
du ring 1983, when change was still experimental in rural policy.26
Local government since reorganisation has recently (1983-4)
replaced the commune structure. This government reorganisation
finally has eradicated all the vestiges of the commune in economic
experiment. Production team and brigade as economic accounting
units have now been replaced by village committees.z7 New rural
production incentive and income diversities are both encouraged and
easily adaptable as new experiments. Xian level government (county
government in the USA) will slowly become the transmission belt
between rural and urban economic relations. If the central govern-
me nt can develop a much improved nationwide transportation system
of rail, highway and waterway to link rural regions together, China may
be able to avoid the adverse impact of economic urbanisation which
has occurred in many non-Western countries. If so, the si um cities
of the developing countries may not come into existence in China. 28
Rural enterprise at the town level may become the most promising
new experiment in China's free marketing economy. A large portion of
government revenue may depend on its development. Rural products
do not rely heavily on government's policy for marketing success. The
people will gain or lose on their own accountability. Such town-Ievel
enterprises depend essentially on local surplus cheap labour, village-
level capital accumulation, and the indigenous raw material supply. In
160 China Under Deng Xiaoping

some distant future, China may have to introduce economic special

zones in the interior hinterland of the far west where underground
resources are more available and technological transfer is most needed
to catch up in development with the coastal regions. Recent economic
policy seems to suggest 'all get rich at the same time rather some now
and others later' .29 It is clear that amiddie course socialism in Chinese
economic management and its profit distribution is adeparture from
the Soviet economic model but not an unqualified acceptance of the
capitalist profit model. The retention of land ownership for example,
means little when the land contract itself now allows fifteen or
fifty years in duration. We may be able to witness another policy
change in rural land ownership. Land recollectivisation may precede
mechanisation in farming as the next rationale for policy change. As
rural economic policy continues to be experimental in nature, other
problems of economic considerations will add new pressures to the
govemment's rural decision making. One China expert on the rural
economy has put it this way:30 'There are other major areas of concem
which tend to enhance the govemment's policy dilemma. Water
conservation works represent a crucial one ... The lifeline of agricul-
ture is by no means firmly secured.'
The Chinese people in rural areas and the hinterland seem to be the
best resources for the nation's economic development. If for no other
reason their motivation to work for a profit, their self-discipline and
industriousness can be easily counted on tomove the nation forward.
The real concem may simply be whether or not bad central planning
and bureaucratic bungling can be avoided. For example, lately the
nation finds itself short of vegetable and meat supply. In early 1988
meat rationing is being instituted in several urban areas. Shortages are
caused by lack of govemment support in meat price. Larger profits are
possible by abandoning farming and devoting them to non-farming
trade and sideline productions.
6 UrbanEconomicReform
and the Case of Shenzhen
Chinese revolutionary leaders from 1911 to 1949 of both the
Nationalist and the Communist persuasions have indeed wanted to
build a modern and powerful industrial state in East Asia. The
Japanese modernisation success provided the inspiration and the
Uni ted States provided the ideal of democracy for Sun Yat-Sen on
the one hand; on the other, the Bolshevik victory in Russia in 1917
offered a new revolutionary alternative to Mao Zedong and his
idealistic predecessors. Both Sun and Mao not only once cooperated
but also agreed to make China strong enough to be treated with
equality in the international community. Sun did not know the
Western nations were not prepared to aid hirn and circumstances
forced hirn to accept assistance from Lenin in 1923. Mao Zedong,
likewise, failed to realise until 1960 that Stalin was not prepared to
help China become a strong partner. A new Sino-Soviet conflict
eventually compelled hirn to be reconciled with the United States in
the 1970s. All of these twists of history help illustrate clearly one of
the many genuine Chinese expectations, to build China into a strong
industrial state capable of self-defence and a higher living standard.
The May 4th movement in 1919 further demonstrated how young
intellectuals were devoted to the same purpose through democracy
and science.
Sun proposed an 'industrialisation plan' wh ich suggested the use
of Western capital and technology to convert China into an industrial
state. Deng Xiaoping today is doing almost exactly what Sun wrote
about some seventy years ago. Only Deng calls it four modernisa-
tions - in defence, science and technology, industry, and agriculture.
Urban industrial development was also the central emphasis of Mao's
revolution in order to speed up progress so as to catch up with Britain
and Japan. However, Mao again failed miserably. It has been Deng's
task to revise Mao's timetable to achieve the success of modernisa-
tion by the end of this century to give the nation a 'Socialist Economy
with Chinese Characteristics'. Deng has seen in his lifetime the
failures of Sun and Mao who both idealistically insisted in following
either the US or the Soviet model. Deng, on the other hand, wants to
experiment in China his own way. His strategy of success follows two
basic paths: enliven the economy at horne and keep the nation open
to the outside world.

161
162 China Under Deng Xiaoping

6.1 INTRODUCTION: MAO'S ECONOMIC FAlLURE AND

DENG'S INNOVATION

When Taiwan and Hong Kong eeonomieally prospered, and while

Mao's China in 1970s was suffering from eeonomie decline, reform
beeame really a matter of survival of Marxism and the Communist
Party in China. Intelleetuals and youth were faeed with a erisis of
eonfidenee in Marxism and the party. Deng in the 1970s had to restore
and reform from the basis of a new erisis for the party's survival as he
had done in 1961-3. In three years, reform in rural China had
sueeeeded and the experiment for urban eeonomie reform was
underway in 1984. Confidenee slowly returned. Living eonditions
were so improved that Deng was ready to launeh a greater urban
eeonomie reform plan.
The Soviet eeonomie model had to give way. It did not provide work
ineentives in China: Chinese people work hard only when working for
themselves. Mao's poliey after the First Five-Year Plan (1952-6)
further disrupted the normal ineffieieney of the Soviet model. He
made his worst mistake in eommunising land in the late 1950s against
the advice of the party and his Defence Minister, Peng Dehuai, who
begged hirn to discontinue the eommunes. A short-term poliey
revision soon followed to restore the economy between 1961 and 1963.
When Mao became restless again three years later, he launehed a new
revolution to replaee his loyal followers, and to further radicalise the
economic and political system during the next deeade, 196~76. He did
not trust anyone except Lin Biao, his wife Jiang Qing and a few others.
He put up Dachai as the rural production model and Daehing as the
urban produetion model. Both models survived only two years under
his hand-picked Premier Hua, who had his own 'little leap forward'
during 197~8 whieh also failed. The nation was eager for a new
economic model, and pe asants themselves began to dismantle the
eommune system. Hua soon lost the majority support in the Political
Bureau of the Party and by 1978 was on his way out as Mao's sueeessor.
Deng's urban eeonomic reform followed his sueeess in rural reform.
He had allowed a larger plot of land to eaeh farmer, eneouraged more
sideline private produetion, permitted rural free marketing, improved
individual ineome, and enlivened light industrial growth throughout
rural China. Deng made rural economie revitalisation the eornerstone
of urban industrial development. I After several years of new poliey in
eeonomie readjustment, restrueturing, eonsolidation and improve-
ment, China seems to have blazed a new trail in socialist development.
 Urban Economic Reform and the Case of Shenzhen 163

Although full of theoretical contradictions within Marxist ideology,

what Deng has done is wh at the Chinese people want as an
alternative to Mao's failure in improving the people's living stan-
dards.
Deng launched his new urban economic reform because it was the
main public sector of the economy. Forty thousand major enterprises
under public ownership did not function effectively. The Party's
strong interfering hand in factory production, rigid administrative
domination, and lack of purpose in enterprise initiative for produc-
tion in the past thirty years had destroyed the real economic
opportunities for growth at a satisfactory pace. Deng's four moderni-
sations would be in serious jeopardy unless the urban economy was
enlivened. Maximum efficiency of enterprise production, individual
enthusiasm for his work, correct leadership in management, enter-
prise responsibility for planning in production, in the marketing of
goods, and the desire for better income for all were all in need of
drastic reform for new economie growth. Under Mao 'politics took
command'; under Deng 'economics takes command'. Under Mao the
'red expert' planned the micro-details for economic progress. Under
Deng the 'economic expert' is allowed to exercise greater leadership.
After several years of unpublicised enterprise reform experiments,
the government declared in October 1984, its grand scheme of urban
economic reform to be carried out in three years. 2
Growth and expansion in industrialisation is the key to the
transformation of the economy. Western technology and science,
capital investment, and management skill are part of China's
strategie need. This is why one of Deng's long-term policies is to keep
China open to the outside world. Chinese import and export will play
a major part in the economy in the decades to come. The Special
Economic Zones in the coastal areas will be the middle ground to
bind China to the rest of the world. Among the Four Special
Economic Zones, Shenzhen is of greatest importance for a variety of
factors. First of all, Shenzhen is near Hong Kong which is apart of
the free world economy and will be apart of China in 1997.
Secondly, together with Zhuhai, Macao, and Hong Kong, Shenzhen
will playa major role in the economic and technologieal develop-
ment of the great Pearl River Delta scheduled for rapid industrial-
isation when the oil of the South China Sea is further explored and
refined. Schenzhen development represents a Chinese multi-pur-
pose innovative regional experiment whieh will enjoy the easiest
access to the outside world by air and by sea, while at the same time
164 China Under Deng Xiaoping

acting as a transmission belt for technology in the development of

China's hinterland.

6.2 THIRTY YEARS OF UNSTABLE POLITICAL

ECONOMY IN CHINA

In the socialist state, politics and economics are much more combined
into an integrated whole. Polities and policy from the political arena
dominate the economic development not through the science of
economics but through the dogma of Karl Marx, Engels and Lenin.
Records show that all communist states are doing poorly in terms of
economie growth as compared with non-communist states. Political
economy in the communist world has an entirely different emphasis,
such as the theory of class exploitation. Thus the operational,
organisational and structural aspects of the economy are sacrifieed to
the ideological pre-eminence. As a result, political rulers remain
powerful as decision makers and the citizens are powerless victims
without opportunities to take initiatives to maximise their own private
income potential. Thus, the Soviet economic model has failed in
Russia, East Europe, North Korea and in a few other socialist states as
weil. In the capitalist countries, greater productivity does bring about
a greater enjoyment of material life by all citizens who bave a far
higher standard of living than citizens in most of the socialist states.
Politicians, and policy makers in capitalist states are much less able to
dominate production and competition among the common citizens,
who are also able to reduce economic inequalities. China has learned
about economic wastefulness and the disadvantages of the Soviet model
of socialism. It has learned also from its Russian big brother the painful
experience of Soviet economic aid cut off in 1960 and the withdrawal of
the 1000 technicians, aid materials and project blueprints. In short, as
a loyal socialist member in the Soviet orbit, China paid dearly since
1949, especially in its sacrifices during the Korean War years. Chinese
leaders found, to their surprise, the Soviet leadership never intended
to treat China either as an equal partner or with trust and confidence.
This fact led to mutual distrust between the two nations in the late
1950s and was a critical factor in Mao's radieal economic policy. Mao
was a restless leader, eager for quick results. Moderate and more
rational colleagues failed to restrain him from his radiealleftist polieies
because they, too, were shocked by their treatment at the Soviet
hands, whether under Stalin or Khrushchev. These reasons were part
 Urban Economic Reform and the Case of Shenzhen 165

of the basic background in China's thirty years of instability in both

politics and economics. The painful experience resulted in her
backwardness, following Taiwan, South Korea, Hong Kong, Malay-
sia and Singapore in economic development.
Oeng had to reform the economic system, but this could not be
done without some fundamental reorientation, first of all in the
political system and its new relation with economic development. For
a better perspective, it is worthwhile summarising the past thirty
years of political and economic instability. This sequence of instabil-
ity and changes can be divided into stages as follows: aperiod of
rehabilitation, 1949--52; efficient growth with popular support,
1953-{); Mao's economic disaster, 1958-61, corrective adjustment,
1961--6; political chaos and economic decline, 1966--76; failure of
Hua's 'little leap forward', 1976-8; and Oeng's readjustment and
reform, 1979-present. Ouring all these years, the emphasis was on
urban economic development or reform in order to build rapidly a
modern industrial state. The facts in the following pages will best
illustrate the past instability and failure as weil as significant
achievements made in some areas under the communist regime.
In 1949 the communists inherited a bankrupt economy which did
not have a large segment of modern industry. According to Beijing's
statistics, production of grain (-25 per cent), cotton (-48 per cent),
and peanuts (-60 per cent), for example, were all way below the
production level of 1937 by substantial percentages. China's produc-
tion of steel, electricity and coal were below one or two percentage
points of the world's total in 1949. 3 Upon achieving power, the
communist government confiscated all segments of modern indus-
tries owned by former government officials and foreigners. All
enterprises handed in their revenues to the government for unified
control of expenditure. The state became responsible for allocating
grain, cotton and all industrial equipment. Such complete control
reduced the need for currency and market exchange. By 1952,
restoration following war damage was largely completed, and
production of steel and pig iron had greatly increased. Economic
transformation accelerated during the four years from 1952. The
'state economy' became the leading economic force. It consisted of
enterprises taken over from the Nationalist government and new
enterprises created after 1949. The 'cooperative economy' was
owned by the working people, and the 'individual economy' owned
by the people privately still constituted a freer segment of the
economy. These three segments co-existed in the early 1950s. By
166 China Under Deng Xiaoping

1955-6, agriculture was transformed into rural co operatives and

farmers' production mutual aid teams. 4
The worst crisis occurred in late 1950s when Mao's leftist mistakes
damaged the economy gravely. He was not satisfied with the speed of
transformation into a socialist economy, because it still induded the
handicraft industry which counted for nearly 8 million full-time
craftsmen and women in 1955, and small businesses of traders and
street peddlers who supported nearly three million households in 1956.
Between 1952-67, strong emphasis on economic growth was placed
in heavy industry at the expense of the standard of living of the people.
The rural population suffered most while industrial workers were
relatively better off. Grave imbalance was imposed on the people
because of concentration on capital accumulation and negligence of
daily consumption. Therefore, growth achievements were made in
spite of management and leftist mistakes (see Table 6.1).5
Table 6.1 Rise in the output of major industrial products, 1952-80

1980 output lncrease over 1952

Cotton yarn 2,930,000 tons 4.5 times
Co al 620,000,000 tons 9.5 times
Electricity 300,600,000,000 kwh 41.0 times
Crude oil 105,950,000 tons 241.0 times
Steel 37,120,000 tons 27.0 times
Machinery 127,000,000,000 yuan in value 54.0 times
Metal-cutting tools 134,000 units 9.8 times

A defence industry was built up from nothing. Many new in dust ries
were built in China's hinterland which accounted for 36 per cent of the
annual industrial output. In agriculture, large-scale irrigation projects
were undertaken to make possible 20 million more hectares of land
under irrigation. Flood control measures were undertaken to improve
waterflow in the Yangtze River, Yellow River, Huaihe, and the Pearl
River regions. Grain output by 1980 reached approximately 318
million tons which almost doubled the production figure in 1952. In
rural China, the means of production were drastically improved as
shown in Table 6.2. 6
Although the nation's population nearly doubled between 1949 and
1982, China is today able to feed and dothe its people. The progress
in education and road construction in rural China must be counted as a
major achievement to overcome so me physical isolation in the
 Urban Economic Reform and the Case of Shenzhen 167

Table 6.2 Means of production improvement in rural China,

1952-80

1980 Increase aver 1952

Tractors of all sizes 745,000 570 times
Pumping equipment 74,645,000 hp 583 times
Farm trucks 135,000 474 times

countryside and illiteracy among rural people. However, progress

would have been far more impressive if China had not gone through
the phases of economic disasters and political upheavals. The
disproportionate allocation of resources between heavy industry on
the one hand, and agriculture and light consumer goods on the other,
the blindness in following the Soviet economic organisation al model
and the ignorance in see king faster industrial growth were all serious
policy mistakes. Several times economic readjustments were made to
correct the government's own mistakes, especially during 1961-3,
1976--8, and 1979-81 before the current long-term new policy of
readjustment, restructuring, consolidation and improvement during
the Sixth Five-Year Plan (1981-5). This economic instability was
caused by political instability which itself was caused by the blind
following of an alien, inapplicable ideology - Marxism and the Soviet
model of economic structure. A great deal of time in the last thirty
years was wasted in political campaigns and mass mobilisations. A
period of ten years was given to futile ideological battle among
Communist Party members and factions during the cultural revolu-
tion. Everything suffered setbacks and there was much human
sacrifice, educational neglect and economic dedine.
Hua Guofeng did not have anything new to offer the nation,
although he was eager to correct so me of the political and economic
mi stakes of the previous decade. He did not make any changes at all on
the ideological front. On the contrary, he depended on Mao's old
prestige and politicallegacy to govern post-Mao China. He deliber-
ately tried to imitate Mao's personal style of appearance to create his
own legitimacy for succession. Hua failed to join hands with the
Dengist reformers who held very different views regarding Mao's
personality cult, lettist ideology and the dass struggle. A new round of
political instability occurred, therefore, during the policy struggle after
Deng's return to power in 1977 until Hua's departure in 1981. Even
168 China Under Deng Xiaoping

after Hua's departure, anti-reform conservative senior leaders still

remained within the party hierarchy. A retirement system had to be
implemented after the party's Twelfth Congress to formally, or
legally, separate them from the policy-making function. However,
even now they still interfere indirectly in political and economic
policies. In short, political compromise and the potential for
instability, has always been present since the communist takeover in
1949. Some party leaders, whom Deng has rehabilitated from purge,
refuse to relinquish their executive power in the economic sphere.
They have been quite reluctant to accept fundamental but peaceful
reform in recent years.
The urban economy has been at the core ofDeng's reform to enliven
the economy at horne and to open the country to foreign technology
and trade. The early measures of readjustment between 1979 and 1981
can be summarised as folIows.
First, a readjustment of the relation between capital accumulation
and consumer spending changes has occurred in a number of ways. His
policy included the raising of government purchasing prices for grains
and other sideline rural products, and the lowering of, or exemption
from, taxes for all poor communes. The government paid prices to
farmers higher even than the free market prices for grain, cotton and
other products to enliven the rural economy. The government buying
prices, for example, rose 22.1 per cent in 1979 as compared with the
previous year and another 7.1 per cent in 1980. In two years, the
government spent 48 billion yuan in higher-price purchasing. Further-
more, farmers are allowed to grow anything they see profitable in
order to increase production. On average, a peasant gained 89 yuan in
1979-81. Farmers were encouraged to exercise greater production
initiatives. They could do anything they wished after the government's
quota purchase has been fulfilled.
With extra income, pe asants have begun to build additional housing
units, to buy sewing machines, radios, watches, etc. In urban areas,
26 million people found new jobs during 1979-81. Wages and
bonuses for industrial workers in 1981 increased by some 25 per cent
on the average, from 614 yuan in 1978 to 772 yuan in 1981. Like that
of rural areas, more housing construction took place in 1979-81, from
30 million square metres per year previously to 220 million square
metres of housing for the three-year period. National income
distribution between capital accumulation and consumption is shown
for a four year comparison as follows in Table 6.37
In socialist countries, the living standard is controlled by govern-
 Urban Economic Reform and the Case of Shenzhen 169

Table 6.3 Accumulation vs consumption

in national income distribution, 1978-81
(percentages in 1981 prices)

Year Accumulation Consumption

1978 36.5 63.5
1979 34.6 65.4
1980 32.4 67.6
1981 30 70

ment allocation. China after 1949 never placed people above heavy
industry and capital construction.
Secondly, a new policy of faster growth of agriculture and light
industry has increased and enriched the supply of consumption in rural
life. This was areversal ofthe practice ofthe previous thirty years. The
implementation measures were: (1) ensuring the policy independence
of rural communes, production brigades and teams in their production
decisions through a system of contractual obligations and for long-term
contract duration; (2) diversification of production specialization and
sideline production through encouragement for rural free market
commercial exchange; (3) subsidies for rural sideline production
through price supports. These policies induced more peasant enthusiasm
to produce for their own assured greater income, for example, grain
production reached an all time high of over 332 million tons in 1979.
Even terrible floods and droughts in both north and south China did not
prevent grain production from reaching approximately 318 million
tons, in 1980, the second highest since 1949. Gross agricultural output
value was augmented by an average of5.5 per cent in 1979-81. The same
high rate of growth was true for cotton, oil-bearing crops, forestry,
animal husbandry and fishery. Light industry received in the 1979-81
period larger sums of government loans for expansion. For the first time
since 1949, light industry grew faster than heavy industry. Thus, market
commodity supplies s\,lddenly increased. Annual retail sales rose by
several times in 1979, greater than for any single previous years and
more than the entire decade of 196Os. The growth rate of heavy industry
was purposely reduced through control of resource allocations. A
comparison between light and heavy industry is shown in Table 6.4. 8
Ouring 1979-80, because policy emphasis was on improving the living
condition, tax exemptions and financial subsidies reduced government
revenues. Oue to practical difficulties involved in reducing capital
170 China Under Deng Xiaoping

Table 6.4 Proportion of light and heavy indus-

try in gross national output value, 1978-81 (in
percentages)

Year Light industry Heavy industry

1978 42.7 57.3
1979 43.1 56.9
1980 46.9 53.1
1981 51.4 48.6

construction and other government administrative costs, a huge deficit

occurred for both 1979 and 1980 for a combined total of nearly 30 billion
yuan. This deficit in turn caused inflation and price rises, which were
controlled effectively in the following year through budget revision.
Thirdly, greater effort was still needed to readjust the economy
beyond 1981 which was not originally expected. A new policy was
adopted to continue the readjustment in five more years during the
Sixth Five-year Plan (1981-5), and beyond. Drastic economic changes,
though policy guidelines and specific steps finally did come in October
1984 when massive urban economic reform measures were announ-
ced. The reform thrust called for changes in the following specific
areas: 9
1. Creation of adynamie socialist economy in China;
2. Invigoration policy as the key to restructure the national economy;
3. Creation of a planning system to foster development of a socialist
commodityeconomy;
4. Reform in price system and utilisation of all economic levers for
competition in production and management efficiency;
5. Separation of government from enterprise in the latter's internal
decision making and operation through 'enterprise autonomy and
internal collective decision making';
6. Institutionalisation of responsibility accountability through wage
differentials and salary reward;
7. Development of diverse economic forms in both domestic and
foreign economic exchanges;
8. Training of 'a new generation of cadres' and a managerial personnel
for the new socialist economy; and
9. Strengthening the party leadership 'to ensure the success of reform' .
The Sixth Five-Year Plan has now been completed (1981-5). The
Seventh Five-Year Plan was presented to the party conference in
 Urban Economic Reform and the Case of Shenzhen 171

September, 1985. For future rapid growth, emphasis is given to

coordinating the three segments of the economy: public command
economy, collective economy owned by the groups, and the individual
economy. Creation of a price system and a wage system in relation to
enterprise reform, capital accumulation, and consumption is being
pushed forward. A faster economic growth is cautiously expected
during the Seventh plan, 1986-90. But rapid economic production
take-off is confidently expected during 1990s, but even then, living
standards in China are not expected to rise beyond aper capita annual
average income of $US 1000 by the year 2000. It seems that there is
no doubt that China's gross industrial and agricultural output value
will be quadrupled over its 1980 level. There seems to be an enormous
self-confidence on the part of the Chinese leaders in the 'inherent
superiority' of the socialist system and the control of its productive
potential. The command sector of the economy, fully subject to
national planning, is looked upon as the socialist weapon to prevent
the rise of 'economic anarchism' wh ich disrupts the 'un-regulated free
enterprises' of the West. This is the Chinese rational and theoretical
claim. Of course, the truth is that there is today no such 'anarchist
economy' in any of the capitalist states of the West, including Japan.
The most difficult part of the reform seems to be the government's
ability to create a workable and efficient economic management
institution consisting of good banking, credit system, inflation control,
wage and price relations, ete. Will China eventually have a market
economy under socialist planning? Or will it remain a socialist
economy with a less regulated but insignificant rural eonsumer-orien-
ted 'free market'? Much depends on the political leadership after
Deng and his immediate followers. The Chinese leadership is
attempting to combine the virtues of both the socialist and the
capitalist eeonomic systems. Can they be combined without contradic-
tions in ideological consistency? Such a combination was predicted
by Chen Yun at the Eighth Party Congress in 1956. He said: lO

As regards planning, the bulk of the industrial and agricultural

output of the country will be produced according to plan; but, at the
same time, a certain amount of production will be carried on freely,
with the changing conditions of the market ~s its guide and within
the scope prescribed by the state plan ... This kind of market under
a socialist economy is in no way a capitalist free market, but a unified
socialist market. In the unified socialist market, the state market is
the mainstay and attached to it is a free market of certain
172 China Under Deng Xiaoping

proportions under the guidance of the state and supplementing

the state market.

It remains to be tested in China's future economy whether Chen

Yun's theoretical prescription is possible or not in actual practice. In
fact, China tried in 1958 to decentralise a number of centrally operated
enterprises and place them under local government management. The
practice did not seem to have produced positive results. In short, the
Chinese economy before 1979 had revealed similar defects of common
socialist practices. These defects relate to whether the central
government directly manages certain enterprises or puts them under
local control while itself remains in command of unified planning. In
the case of Chinese past economic failures more specifically, the
defects were: over-centralisation, extreme egalitarianism and
bureaucratic inefficiency.
In the current economic reform of the managerial system, the
government has been very cautious. It began with limited 'enterprise
decision-making autonomy' in 1978 in six enterprises in Sichuan
province. The number was increased to 106 in 1979. Eighty-four of
them were state-owned enterprises, while the other twenty-two were
under direct management of the central government. The general
stipulations in those experiments were indicative of the existing
strength of control by central directives or planning. An enterprise
could not market its products in free market, for example, until it had
fulfilled the planned quota first. 11 Profit for the enterprise was possible
only after other costs, such as depreciation, was first taken care of. The
enterprise was allowed to hire only 'the middle-Ievelleaders without
permission from their leading bodies' .
In 1979, some 4000 enterprises took part in some phase of
autonomous management experiment. In the following year, ovet
6600 enterprises were in these experiments. They made up only 16 per
cent of some 42,000 large enterprises which were under law required
to hand in their annual profit to the government. However, these 6600
enterprises accounted for more than 60 per cent of the industrial
output value and 70 per cent of expected profits for the government.
So the experiment was a quiet but significant undertaking. The result
was obviously a success. For example, the eighty-four Sichuan local
enterprises increased their annual output value of 14.9 per cent over
the previous year, their profits by 33 per cent of which 24.2 per cent
was turned over to the government. However, small enterprises,
which did not take part in the experiments, made even larger output
 Urban Economic Reform and the Case of Shenzhen 173

value of 25 per cent and 120 per cent profits and turned over to the
state 100 per cent more profits. Upon further analysis, in 5422
enterprises which participated in the experiments, decision-making
decentralisation did not have a significant impact on production. 12
Another experiment in enterprise production and profit making was
tried in 1980 in Shanghai, Sichuan and Guangxi. This time the
experiment was on the introduction of income tax to replace profit to
be delivered to the government. The enterprise was made solely
responsible for either profits or losses. The State Economic Commis-
sion asked every province to select an enterprise to experiment in 1980
with the new tax appproach in place ofprofits. In total, 191 enterprises
throughout the country participated in this experiment. Toward the
end ofthe year, the State Council issued 'ten provisional' regulations
to promote and protect socialist competition throughout the nation
against local barriers. In short, urban economic reform had five years
of quiet experiment throughout the country before its official
inauguration in October 1984.
Among recent reform experiments has been the government's effort
to recreate an individual economy of craftsmanship, for example. As it
may be recalled, the government in 1955 compelled all peddlers, small
shop owners and craftsmen to join cooperatives. More that 96 per cent
of them did, that is except those in far remote areas of the country. In
1962 there were still 2 million individual handicraft people and
traders within the cooperatives. By 1978, only 150,000 were left.
However, between 1978 and 1980, under a new policy of rehabilitation
and expansion, the number grew to 810,000 in 1980. More jobs and
competition will probably develop as the individual economy is
encouraged by the state. In short, competition and growth are related
closely to the expansion of the free market. The reform policy is using
the market mechanism as an auxiliary regulator of the economy which
is basically controlled by state planners. Today in China consumer
goods through market channels, as opposed to those handled by the
government, account for 20 per cent of industrial production and 25
per cent of total retail sales. One-third of total rural produce is being
purchased by the government. The prospect appears that more a
market-oriented economy in China is most likely. Rural population
will revolve around this free sector of the economy.
Proper handling of the relations between government planning and
market mechanisms will always be crucial to managerial reform. The
free market as a supplementary regulator of the socialist economy has
alerted experts to call for 'four different forms of management'. They
174 China Under Deng Xiaoping

are :13

1. 'Production carried out under mandatory state plans'. This applies

to key enterprises and major products which are most vital to the
people and the economy. Their output value 'accounts for the
greater part of the gross national product, although the types of
goods are limited in number'.
2. 'Production based on changes in market demands, but limited to
the specified categories in the state plan'. This type of production
includes a great variety of small commodities which are made by
large number of small enterprises and individual producers, but
their total output value constitutes only a small part of the national
gross product.
3. ' ... goods produced largely according to state plan but a small part
of them are made by enterprises or individuals on their own'.
These are goods close to those of the first category.
4. ' ... goods made according to changes in the market demand, and
only a small part of them made under the state plan'. These goods
are close to those in the second category.
Such a managerial and production structure is to integrate state
guidance with enterprise initiative. This may be what Deng calls
'Socialism with Chinese Characteristics'. It will clearly be different
from the rigid Soviet economic model on the one hand, and unlike the
market economy of free capitalism on the other. It will be a planned
economy with a market stimulator. Whatever the reform result,
planning and reforming in China is a difficult task. With a large
population, and uneven economic development in a huge country
handicapped by lack of transportation and technology, it is, indeed, a
difficult, if not impossible, task to attempt to secure the desired
outcome of any intelligent planning exercise. However, the wishes of
the people, and their desire to improve their own living standards must
be considered the best guides to planners; they can no longer be
ignored.
In conclusion, political upheavals of the first thirty years under
Mao's policy caused economic setbacks. In addition, the lack of
market knowledge on economic competition and its proper growth
aggravated political and policy debate between Mao - who wanted
faster growth, especially in heavy industry, at the expense of raising
living standards - and the moderates, who failed to resist Mao's
economic policy. The people paid a heavy price for the mistakes of the
communist party leadership in the economic area, especially in the
 Urban Economic Reform and the Case of Shenzhen 175

Table 6.5 Composition of national income in 1966

and 1976 (%)

1966 1976
Total national income: 100 100
Industry 38.2 43.3
Agriculture 43.6 41.0
Building 3.7 4.9
Transport 4.2 3.8
Commerce 10.3 7.0
Proportion in net industrial output values:
Light industry 47.2 40.4
Heavy industry 52.8 59.6

imbalance of economic growth and national income comparison

during the cultural revolution (see Table 6.5).14
Such an officially imposed imbalance in national income composi-
tion naturally created general distress over per capita real income for
each citizen. The management of the economy simply violated the
natural forces of supply and demand and the experience of growth
success of the non-communist countries, and thus created unnecessary
economic problems. People can suffer for a while in the interest of
their nation; they can not forever make sacrifice after sacrifice for
unnecessary revolutionary radicalism and egalitarian utopianism.
Deng tried to correct the situation in 1974 - 6. He was soon dismissed
by Mao for political reasons in 1976. After Mao's death Premier Hua
tried to correct some of Mao's mistakes. But he made other grave
mistakes of his own, because he, in fact, did not have a new economic
and political orientation different from Mao's erroneous economic
approach and political dictatorship. The need for economic adjust-
ment and reform during 1977 and 1978 was inevitably delayed for the
outcome of the leadership conflict between Hua and Deng in early
1980s. Thus, it is only fair to conclude that political instability and
economic disasters from the 1950s to the 1970s were aggravated by
repetitious conflicts between politics and economics caused by contra-
dictions in Mao's own thinking.
From December 1978 to the present, Deng's economic reform
emphasised the following: increase in people's living standards,
greater rural freedom of production and profit making, increase in
light industry over heavy industry, reforms in the price and wage
176 China Under Deng Xiaoping

system, and the importation of foreign technology and capital

investment. In short, Deng's reform has been to continue to enliven
domestic economic development and to bring China into closer
contact with the rest of the world. Shenzhen and other economic
special zones are the transmission belts in China's economic develop-
ment through foreign investment, technology, and world trade. China
has become an integrative experimenting model of both socialism and
capitalism, with practical emphasis on Chinese indigenous characteris-
tics.

6.3 THE CASE OF SHENZHEN AS A CAPITAL-

TECHNOLOGY TRANSMISSION BELT IN CHINESE
ECONOMIC ENLIVENMENT

In J anuary, 1984, Deng Xiaoping and his entourage came to Shenzhen

Special Economic Zone for an inspection, or study tour, in order to
assess policy decisions for its future. Some members on this tour have
been known to be very critical of this non-socialist experiment.
Rumours had it that many anti-Shenzhen senior leaders and generals
had come to Shenzhen before and wept on sight. They feit Mao's cause
for socialist revolution had been eliminated totally in Shenzhen.
Special Economic Zones are 'dangerous signals' against socialist
revolution for the rest of the country. If such a sentiment was and still is
that strong for some leaders, it is easy to realise how significant was
Deng's tour in his later economic policy decision. At the end of his
inspection on 26 January Deng wrote a one sentence souvenir
statement: 'Shenzhen's development and experience has proved our
policy is correct in the creation of such economic special zones.' How
relevant his tour was to the 20 October 1984 party decision on urban
economic reform will be for researchers to discover. In the short-run,
his tour convinced hirn and other 'doubtful colleagues' to end their
dialogue over Shenzhen itself.
Whether Shenzhen signals a conversion from socialism to capitalism
will be speculated about later. My interview-study tour of Shenzhen in
July 1985, made many things clear to me as far as this particular
experiment is concerned. I shall first of all introduce certain relevant
information about the experiment. Discussion will take place on laws
and regulations concerning foreign capital and technology to be
attracted to Shenzhen and their profit-making. There are a number of
serious questions I raised in my interviews with many individuals
 Urban Economic Reform and the Case of Shenzhen 177

especially those with the vice president of Shenzhen University, Fang

Sheng, who is an economist and has travelIed abroad, and has
answered many similar questions I raised during the interview.

6.4 INTRODUCTION TO THE SHENZHEN EXPERIMENT

In their interest for international economic cooperation and technolo-

gical exchange to advance socialist modernisation in China, the
Standing committee of the National People's Congress, in 1981,
formally declared Shenzhen, Chuhai, Shantou and Xi amen as four
Special Economic Development Zones. Shenzhen is the largest of the
four. It emphasises industrial development, commerce, agriculture
and tourism. The Shenzhen Special Economic Zone (SSEZ) is part of
Shenzhen Municipality along the sea coast and is closest to Hong
Kong. It is 327.5 square kilometres in size and is already one of
China's largest import-export centres. Whatever Hong Kong repre-
sents as a present and future economic advantage for China, Shenzhen
is the direct transit port of such advantage. After 1997, Shenzhen and
Hong Kong will easily produce joint prosperity because Shenzhen can
bring all the available Chinese resources to assure its future expansion
and act as a hinterland for Hong Kong. In the long distant future Hong
Kong and Shenzhen may simply become one single commercial-in-
dustrial centre for southeastern China. According to its current
development blueprint, it will have a population of 400,000 (250,000
as of 1985) by 1990, and 800,000 in the year 2000. Since 1981
Shenzhen has developed faster than expected. It is now the best known
foreign investment centre in China. As one rides through Shenzhen,
one is easily overwhelmed by the number of high-rise buildings under
construction compared with other buldings al ready in use by
commerce, industry and as tourist hotels. There seem to be more
buildings under construction than those already in use. Construction
workers have come from all parts of China besides those from
Guangdong province. They have come through competition to claim
their share of the profit in Shenzhen's rapid development. So are the
many commercial firms here representing all other twenty-eight
provinces and municipalities in China. It looks like an emerging
twin-city of Hong Kong or its suburb, only more sparsely occupied in
population density. Of its 327.5 square kilo met res only 17.4 are
under use. So me 350 square kilometres are still in the suburbs as future
reserved land for development. Land development in Shenzhen began
178 China Under Deng Xiaoping

in 1979 and had cost an amount of $US 824 million by 1983. In the
Shekou industrial area of Shenzhen, transportation, electricity supply,
water system, postal and telecommunications have been more fully
completed (the industrial sector of Shekou is only 1.3 square
kilometres). A larger area of 20 square kilometres, in addition to the
presently used 17.4 square kilometres, is being rapidly developed as
the site of a future industrial-commercial complex. Chinese industrial
and construction workers in Shenzhen's development today are the
best prepared or trained human resources. The city of Shenzhen
(which is adjacent to the Shenzhen economictone) itselfhas a working
force of 100,000. The other 100,000 selected workers came from other
parts of the country. These 200,000 construction people have
generally completed their high school education. In addition, they
now receive on-the-job training for occupational specialisation
provided by various factories themselves. For technologically advan-
ced future development in human resources, the central government
in Beijing approved in 1982 the establishment of Shenzhen Univer-
sity which is totally financed by Shenzhen itself, and is providing
students with a Western curriculum in content and in depth (of which
more will be said later). The university promotes basic research in
Shenzhen's future technological development. Another major under-
taking is the construction of a nuclear power station to supply a fully
expected future industrial-commercial use.
Both the land and the water transportation systems between
Shenzhen and the rest of the country, and the world at large, are being
improved. The special zone will be fully linked with the national
network of railroads and highways. Future harbour development for
world trade and for Nanhai oil exploration is also under way. Presently
3000-tonnage ships are navigating between Hong Kong and Shekou.
Future harbours are planned to handle 10,000 and 100,000 tonnage of
ships for an annual total weight of 20 million tonnage of business.
This will be especially useful to oil refining for crude oil from the South
China sea. The Shenzhen Navigation Company is presently in charge
of water transport with most major cities reachable by water in heavy
tonnage.
It has been just four years since the experiments began in 1981.
Shenzhen has become an attractive centre to people of many interests:
tourists, merchants, industrialists, academic experts, China specialists
and economists in particular. They have come to Shenzhen from all
over the world to learn about recent Chinese economic development
through the example of Shenzhen. For example, for economic
 Urban Economic Reform and the Case of Shenzhen 179

investment reasons, many foreign banks from Japan, North America,

Europe, Hong Kong and Southeast Asia have recently opened branch
offices there.
Presently, there are eleven different legal codes and regulations that
govern the economic activities in Shenzhen. Other laws are being
proposed to deal with growing complexities. On the wh oie foreign
investors or Chinese from abroad can make greater profits he re and
enjoy more extra privileges than elsewhere. In enterprise manage-
ment, foreign investors can operate independently, or enter joint
ventures with Chinese enterprises. They can invite in foreign workers,
overseas Chinese, or Chinese experts from Hong Kong as technology
or management advisers. If Chinese workers are preferred, the
Shenzhen Worker's Bureau may take charge ofthe recruitment. Every
enterprise can recruit independently and so select the best workers
through specific tests administered to job-seekers. After that both
sides can negotiate a wage contract. Violations by Chinese workers of
the contract may result in either a warning, mild penalty, wage
reduction or dismissal. According to the nature of the enterprise,
wages may be determined by day, hour or work-piece accomplished.
Free of import duties, an enterprise may import equipment for
production, repair or replacement parts, raw material, transport
equipment and other production material. Other daily useful articles
mayaiso be duty-free, or as determined by contract except whisky and
cigarettes, at half of the lowest such duty charge. Products or
semi-products made in Shenzhen are duty free for export purposes.
Income tax on enterprise is 15 per cent. However, on investment
amounts larger than $US5 million, or involved in the advanced stage
of new technology, or investment of long-term duration, there is a tax
reduction of between 25 to 50 per cent, or even total tax exemption
for from one to three years. Foreign investors' profit may be exempted
from profit tax entirely, or else reduced, if such profits are reinvested
in Shenzhen for a new period of more that five years.
On investors' land use, the Special Zone Authority can satisfy
diverse land uses on a variety of stipulations as folIows: industrial use
for thirty years, commercial and residential for fifty years, school-me-
dical for fifty years, tourist for thirty years, and agricultural-dairy for
twenty years. After the completion of a contracted period, new
contractural extensions are possib\e. Rates of charge on land use vary
according to types of usage, area of location and duration of contract
per square metre per year. These rates are currently as follows (in
Chinese yuan, ($USI =2.7): industrial, ten to thirty years; commer-
180 China Under Deng Xiaoping

cial and residential, thirty to sixty years; tourist, sixty to one hundred
years, and agricultural-dairy subject to contract negotiation. Those
enterprises having ente red contracts on land use prior to 1985 have
built into their contracts a reduction of fee in land use by a percentage
rate of 30 to 50 because of previous inadequate development in land
quality or incompleteness in land development itself. Those enter-
prises having undeveloped land, or slope, hills, or swamp areas, may
receive a fee reduction between one to five years at the initial stage.
However, the land usage fee is subject to readjustment every three
years to future users. Such fee readjustment each time will not be more
than 30 per cent of the existing amount. For investment in the fields
of education, cultural affairs, science-technology, medicine-health
and other social welfare , fees for land use will be substantially reduced.
Any investment in the most advanced technology and in non-profit-
making fields will pay no fees for land use.
On the control of foreign exchange, all foreign enterprises must
open their accounts with the Bank of China in the special zone or with
such other foreign banks as are approved and certified to do business
by the Chinese authorities. Foreign investors and businessmen,
workers or Chinese from Hong Kong and Macao may remit their
properly earned profits after having paid their income taxes. Such
remittances must be handled by the Bank of China or such other
designated foreign banks in the special zone. Foreign enterprises
seeking terminations of their business before normal expiration of the
contracted period may transfer their capital to other companies, or
remit it abroad after having applied for termination as regulated after
they have paid all financial debts.
On sales of products manufactured in the special zone, Chinese law
requires that such products be exported unless otherwise entered into
the contract in advance. If such manufactured articles are those which
China imports, they are permitted to enter the Chinese domestic market
on a fixed ratio as determined by domestic demands. On the whole, in
any dispute or misunderstanding arising from the contract in a joint
venture between the guest investor and the Chinese investor, both
si des may negotiate for solution on the basis of equality and mutual
benefit. After failing to do so, such disputes may then be submitted to
the Chinese arbitration authority for mediation and arbitration. And
finally, for the convenience of entry to and exit from Shenzhen Special
zone by all foreign investors and those having residence in Shenzhen as
merchants or alien residents, the Shenzhen authority provides them
with special permits issued by Shenzhen Special Economic Zone
 Urban Economic Reform and the Case of Shenzhen 181

Oevelopment Company, or other permits with multiple-entry and

multiple-exit privileges upon application by the foreign users.
In short, because of these privileges and protections as granted by
the Chinese authority, foreign investment is increasing rapidly. Those
making approaches for information or contract negotiation are from
various parts ofthe world, including the United States, Britain, Japan,
France, West Germany, Norway, Sweden, Ireland, Australia, the
Philippines, Singapore, Hong Kong and Macao. The early contacts
came from small companies. Many of them today represent large
corporations, from big financial combines, and multinational corpora-
tions. Early enterprises were gene rally interested in assembly work of
imported parts by Chinese labourers. Today, joint ventures in
investment or independent foreign investment have undertaken
diversified production of heavy articles. The amount involved in
investment companies producing a single article has'varied from a few
thousands in Hong Kong dollars to thousands of millions. Ouring the
first two and half years ending in June 1983, contracts with guest
investors reached 2300 in number and the total amount reached
1200 million in Hong Kong dollars. Many of them have already
gained big profits from some 120 kinds of products. US Coca Cola
exports from Shenzhen to Hong Kong and Southeast Asia are today
responsible for a considerable profit. Joint ventures between China
and foreign investors in agriculture (e.g. chicken and pig breeding) is
so successful that supply cannot meet demand at the present. In short,
investment in Shenzhen seems to have few or no problems attached.
Profit-making is inevitable because the Chinese want this experiment
to be a success. They will be able to regulate the development for
mutual benefits as the Chinese government may see fit from time to
time as provided by law.
One of the Chinese companies in Shezhan provides varied services
to foreign investors. It is a multi-purpose enterprise itself and the
largest in the zone. This firm is the Shenzhen Economic Zone
Development Company. It undertakes the task of attracting foreign
investments and Chinese enterprises to the zone. Its specific functions
include: negotiations for foreign investment, cooperation among
domestic enterprises, foreign-Chinese joint ventures in investment or
foreign independent enterprise in developing land use, expansion of
industry and commerce, building, transportation and tourism, manage-
ment of real estate, collection of land use fees, and promotion of
exports. Even before the end of 1983 this company had helped negotiate
and sign some sixty-six major foreign contracts for a total investment
182 China Under Deng Xiaoping

of 9200 million Hong Kong dollars. The company itself has been
divided into thirty-three specialised branches to pursue their separate
division of labour. It will likely sub-divide into more functional speci-
alisations according to future demands, as Mr Chen told me du ring
my interview with hirn on 14 July 1985. For example, some of its branch
companies are doing the following: (1) to manage real-estate services
together with guest investors to build 100 or more offices or residential
buildings of no less than eighteen stories high and several hundreds
of luxurious villas; (2) to develop and manage Wen Jin Du Industrial
district and Houhai Bay New District's cultural and residential area
and to prepare to create an Asian university in this new district; (3) to
improve and develop into a new commercial and tourist city, the old
city of Huacheng with Chinese cultural-national characteristics; (4) to
develop and manage Futian New Town of thirty square kilometres in
size; (5) to develop a cement enterprise through a joint venture with
Japanese investors to reach 200,000 tons of annual production in
cement; (6) to develop and manage Honey Lake Holiday Resort; (7)
to develop a science and technology exchange centre, and (8) such
other developments for a total of some thirty-three projects under
thirty-three subsidiary companies of Shenzhen Special Economic
Zone Development Company.15 In short, this special zone develop-
me nt company is the official vehicle for both the Guangdong
Provincial Government and the Beijing Government for devising,
developing and coordinating many services in competition with other
non-official companies. The creation of so me thirty-three subsidiary
companies is clearly for the purpose of avoiding a mushrooming
growth of the head company bureaucracy. As subunits, each branch
company is competitively responsible for its own separate finance and
accountability. Many of the Beijing Government policy guidelines are
transmitted directly or indirectly through the head office of this giant
semi-independent company. The company itself is producing many
advance technology-intensive articles, such as orbital satellite ground
television reception equipment and micro-computers. Together with
the expansion of South China Sea oil exploration, Shenzhen is
becoming one of the future oil refining and distributing centres.
Petrochernical industrial development will be another potential area for
development. At present, to invest in Shenzhen requires following
certain steps in contract negotiation as folIows: (1) all prospective
foreign investors must contact and discuss with the foreign investment
negotiation department or its branch offices in Hong Kong or the
Hong Kong office of Shekou Industrial Zone. Prospective foreign
 Urban Economic Reform and the Case of Shenzhen 183

investors must submit the application forms and an investment

proposal indicating its purpose, list of products, amount of capital,
land to be used, methods of investment (independent, joint or
cooperative in nature), justification for investment success and a list of
needs to be provided by the Chinese side; (2) prospective guest
investors will receive a reply on whether the pro pos al is acceptable. If
acceptable, there is an accompanying invitation for further discussion;
(3) when agreement on the investment is achieved, the contract will
soon be formally signed and delivered to the Shenzhen People's City
Government for formal approval before it takes legal effect; (4) when
approval is given, both sides then work out a list of articles of
equipment to be imported from abroad for submission to the
Shenzhen City Government for approval. After that, the investor
begins to arrange with the Chinese customs authority for the
importation of certain materials (5) before the investment enterprise
formally starts, registration with and certificate from the Shenzhen
Industrial-Commercial Administrative Commission are required. All
the documents of approval, enterprise charter, names of the board of
directors and registration certificate copy must be submitted; and
finally, (6) such later-stage activities can be performed by the Special
Zone Development Company's trade service division on behalf of the
foreign investors. The company's trade service division also may act on
behalf of the Shenzhen city government on matters of real estate
transfer, land development fees, etc.

6.5 CHINA MERCHANTS AND ITS SHEKOU INDUSTRIAL

ZONE

At the western end of the Shenzhen special economic zone is a

uniquely developed subunit. My visit to the area and interview with its
deputy director, Mr Jin-Xing Chen, can be summarised succinctly
concerning its specific differences from that of Shenzhen. 16
The primary initiative for the Shekou Industrial Zone came
originally from the China Merchants Steam Navigation Co. Ltd
(hereafter CMSN) , wh ich was established in 1872. In 1978, more than
a hundred years later, it received approval from the Beijing
Government to expand and diversify its business development from
shipping abroad. As a government-owned corporation headquartered
in Hong Kong, it applied for and received in 1979 from the State
Council an authority to build the Shekou Industrial Zone (hereafter
184 China Under Deng Xiaoping

known as SKIZ). This bold action ofboth CMSN and the State Council
opened up a new chapter in CMSN's history . During the last six busy
years, CMSN has brought to SKIZ advanced technology, foreign
capital, and management experience from Hong Kong, Macao and
foreign states. Shekou is a small industrial port. It has completed its first
stage of development. Its total area is 10 square kilometres, of which
half is now usable land. SKIZ is administered by CMSN, which has
converted a 'desolate beach and barren hills' into a small city-port. As
a matter of fact, SKIZ is only one of many subsidiary operations and
sub-companies buHt up in recent years by CMSN which has a total
capital amounting to 8 billion Hong Kong dollars. Although it is a
government agency under the Ministry of Communication with its
board of directors sitting in Beijing, CMSN is operating out of its
Hong Kong head office relatively free of any interference from the
central government. Its business expertise is far advanced and beyond
the government's ability to participate effectively or constructively. In
the development of SKIZ, CMSN has been able to bring to Shekou
many foreign investors in a variety of fields through its Planning and
Development Division. Thus SKIZ's success under CMSN is a source
of Chinese pride. This success has brought Deng Xiaoping (1984),
Hu Yaobang (1983), Zhao Ziyang (1981) and Yi Jianying (1980) to
SKIZ to observe its progress.
In July 1984, the People's Guangdong Provincial Government
ratified a plan to establish the Administrative Bureau of Shekou
District. Although legally under the Shenzhen People's Government,
the Bureau exercises its functions quite autonomously as a local
administrative body in charge of SKIZ, Chiwan Bay and Shekou town
for a total land area of 14 square kilometres. The Shenzhen People's
Government has relinquished a large number of its rights to the
Shekou bureau, including those relating to the ratification of
investment agreements and contracts, import of materials, application
for household registration by aliens and by overseas Chinese, and the
right to set up its own public security, tax units and postal services.
Under the Administration Committee, SKIZ is governed directly by
many subunits as functional service branches. SKIZ also has a Nanhai
Oil Service office to act as a liaison organ to provide logistic services
for oil exploration in the South China Sea and to 'render consulting
service to oil companies and contractors'. Like Shenzhen Special
Zone, SKIZ has a large volume of joint ventures and sole foreign
investment ventures, or other cooperative enterprises. Forty-five per
cent of the joint ventures involve investment of 21 per cent from the
 Urban Economic Reform and the Case of Shenzhen 185

United States, 17 per cent from Thailand, 6 per cent from Japan, 5.4
per cent from West Europe and 4 per cent from Singapore. The
categories of investment are as folIows: 17 industry 77.5 per cent, real
estate and construction 10 per cent, commerce and service 8.2 per
cent, tourism 2.2 per cent and communication and transport 1.6 per
cent.
SKIZ had a population of 12,000 in 1985 and is projected to re ach
100,000 in the year 1990. Its future seems closely related to the
development of transport of the Pearl River Delta and South China
Sea oil resources. Since 1983, China National Off-shore Oil Corpora-
tion has concluded eighteen contracts with foreign oil companies, of
which twelve are related to the Shekou basin. The second feature of
Shekou is its emphasis on industrial production as opposed to the
multiplicity of investments in Shezhen or Chuhai. 18 The third feature
about Shekou is the fact that it is developed by a Chinese company
without any sharing of authority with other domestic or foreign
agencies, unlike the situation in Shezhen. It is quite possible that
Shekou will always be more efficient in management and easily
adaptable to domestic and international market realities or changes.
The economic and managerial resources and experience of CMSN is
totally behind the development in Shekou, in competition with other
economic zones, which are larger but less efficient.

6.6 SPECIAL ECONOMIC ZONES, EDUCATIONAL

REFORM AND THE PROSPECT FOR CAPITALISM

One of the most outstanding features in Shenzhen's development is

the newly founded Shenzhen University. It opened on 27 September
1983, when Beijing gave its approval to create experimentally a 'new
and comprehensive university'. It is new also in its educational
methods, its unique curriculum, and its mission to help develop
Shenzhen's future development. Under president Zhang Wei, there
are four vice-presidents. I had the privilege to interview Vice-presi-
dent Fang Sheng who is an economist and has travelled abroad to
observe the economic development in several non-socialist states.
Incidentally, Vice-president Fang attended National Taiwan Univer-
sity before 1949. When I indicated my former university education in
Taiwan, he assumed that I was from his Alma Mater and showed a
special intimacy toward me. When I identified myself as not one of his
fellow alumni, he quickly stopped tal king about how weil he was
186 China Under Deng Xiaoping

received abroad by graduates of National Taiwan University. He

seemed disappointed not to be able to continue asentimental
conversation to express his host friendship to an alumnus from
Taiwan. He is a very thoughtful scholar and a profound thinker on the
most basic economic issues between socialism and capitalism.
Shenzhen University is situated at Yue Hai Men (Gate ofthe South
China Sea) near the coast of Houhai Bay. It has a 250-acre campus.
By the autumn of 1984 the first phase of construction had been
completed which consists of a modern classroom building, an
experimental factory, several student dormitories and living quarters
for the faculty staff. After the completion of the second phase
construction, which started at the beginning of 1985, there will be a
total of 138,000 square metres of buildings of all kinds in use. To meet
the needs of Shenzhen's long-term development, the university offers
various practical specialities. Ten academic departments were in
operation at the time of my interview: Departments of Chinese
Language, Foreign Languages, Economics, Economic Management,
Law, Architecture, Electronic Engineering, Applied Mathematics
and Physics, Structural and Municipal Engineering and Precision
Machinery and Instruments. Other departments are being organised,
including Chemistry and Chemical Engineering, Industrial Arts and
Crafts, Statistics, Tourism, etc. The university presently is divided into
four colleges which are: Arts, Law, Natural Sciences, Engineering and
Economic Management. Students are trained with practical know-
ledge and ability to solve problems under varied conditions. Computer
and foreign languages are especially emphasised. All students must
spend five years for a bachelor of arts degree. There are only about
1000 full-time students at the present and so me 300 cadres attending
various special courses. Some 400 adults are studying on apart-time
basis. In the last two years, the university offered to 5000 people a
variety of short-course training classes. Graduates are likely to work in
the coastal provinces of Guangdong, Fujian, Chejiang, Jiangsu, and
three metropolitan regions of Beijing, Shanghai and Tianjin because
they have been recruited from these areas. Only Shenzhen students
are admitted as part-time students for short courses.
Unlike other universities in China, Shenzhen University follows a
Western credit system to allow students the latitude to select their
courses in non-required areas. They can graduate early or late. Less
capable students can thus stay on and study longer for their degrees.
They can also change their major or minor fields. Some 40 per cent of
students receive scholarships. Student loans are also available for
 Urban Economic Reform and the Case of Shenzhen 187

those from poor family backgrounds. All graduates will work in

Shenzhen immediately after graduation. The government does not
find jobs for them: upon graduation, they must work in Shenzhen
and find positions for themselves before transferring to other
locations. This is a new experience in China which is designed to
avoid the assignment of graduates to places with no regard for
individual preferences as the country has done for the last thirty-five
years. Another feature of Shenzhen University is its support for
students to take part-time jobs while still in school: 'running shops,
restaurants, guest houses or sm all factories, selling books, magazines
and newspapers, operating postal agency, cleaning grounds around
the campus, working as assistant in the university's administrative
departments and research centers. ,19 The emphasis is on the
student's self-management, self-discipline, self-dependence and self-
support to face the real world. Eventually the university will grow
into a research institution to meet Shenzhen's development needs.
There are several research institutes already in existence. They
include Institutes of Special Zone Economic Study, classical Chinese
Literature, Comparative Literature, Structural Engineering, New
Energy Sources, Hong Kong and Taiwan Literature, and Bio-chemi-
cal Experiments. The university is al ready moving toward graduate
studies, such as Industrial Management and Special Zone Economy.
In short, the university is staffed with an imaginative and creative
administrative leadership which is training a new generation of young
people capable of meeting new economic growth demands in
Shenzhen and other special economic zones and major coastal cities.
Fourteen such cities were recently declared open to the outside world
for investment, trade and other activities.
As an economist, Vice-president Fang Sheng expressed his various
concerns regarding Shenzhen's economic future. In the lead article of
the inaugural issue of the Journal of Shenzhen University, he said
essentially that China's Special Zone economic development is to
expand state capital under socialist guidance. It is a 'multi-faceted'
economy in nature wh ich allows several sectors to co-exist with the
'state sector playing the leading role and state capitalism enjoying
priority'.1o He also predicted in the same article that 'it is beyond
doubt that there will be an ever broadening range of economic
relation and collaboration between Shenzhen and Hong Kong.
Cooperation will ensure the two areas in continuous economic
prosperity, mutual promotion and mutual complementing, and work
division,.21
188 China Under Deng Xiaoping

In my interview with hirn, he provided a historical interpretation of

China's failure to meet foreign economic challenges since the
nineteenth century: 'from self-reliance and self-sufficiency, economic
isolation, foreign economic imperialism, and finally, to certain
historicallimiting conditions since 1949, Chinese handling of foreign
relations, in general, has been too narrow-minded until 1979'. For a
long time under socialism, China 'had little or no knowledge in
handling her economic relation with foreign countries' , no experience
to appreciate advanced foreign technology and foreign economic
management skill. Poverty in China was aggravated further by 'leftist
ideology' and thus created a new isolationist policy after 1949. The
cultural revolution made the situation worse. Vice-president Fang
happily asserted that international economic-technological exchange
and mutual dependence in recent decades has been a correct historie
trend, according to the Marxist point of view. China should join it and
promote the trend further. China's recent economic policy since 1979,
has been, in fact, areal awakening to this trend. This new lesson is the
fundamental reason for China's long-term opening of the nation to the
outside world. The special zone is the focus of this intensified opening
towards the outside world, with such incentives as tax exemptions,
high profit percentage and other favourable concessions in order to
bring in foreign technology and management science. Chinese special
economic zones are more than an effort to build up a processing
industry for exporting goods. The most important point, the Vice-
chairman asserted, is to 'open up a window to the outside world - a
window of technology, a window of knowledge and a window of
management'. The Chinese economic structural experiment in the
Special Zone is an experiment to train new people, to extend, if
successful, to the rest of the nation this advanced new success. Many
new experiments are 'carried out without any prior knowledge'. The
main message, from Marxist theoretical point of view, is to override
the frozen concept that 'individual economy' is inferior to 'collective
economy' and 'collective economy' is inferior to 'an economy owned
by the whole nation'. In the special zone all sectors co-exist among
enterprises owned by the nation (banks, postal services, etc.),
cooperative enterprises, domestic joint ventures, joint Chinese-fo-
reign ventures, enterprises owned wholly by foreigners, and others
owned by private individuals. This 'structurally unique' economy is
obviously succeeding. All sectors are mutually dependent, mutually
influencing and competing, and each is full of vitality. The socialist
sector, which includes energy supply, transportation, public utility,
 Urban Economic Reform and the Case of Shenzhen 189

and currency management, is controlled by the government. The

sector of the joint venture consists of both socialist shares and foreign
capitalist shares. So Shenzhen is a 'mixed enterprise' or 'mixed
economy'. Many of 'our socialist laws and regulations are applied to
capitalist joint ventures. Thus, such Chinese-foreign joint ventures
become partially 'a state capitalism'. The wholly foreign-owned
enterprises enjoy even more management autonomy in a socialist
state. Except taxes and expenses, all the profits belong to the
entrepreneurs. However, such wholly foreign-owned autonomous
enterprises are being guided, supervised and licensed by a socialist
state. In the final analysis, 'without socialistic national capitalism,
there cannot be a Special Economic Zone'.
Furthermore, the Vice-president added, the special zonal economic
'management structure' is basically 'a combination of planning
adjustment and market adjustment'. The zonal economic structure
itself and its management structure are part and parcel of overall
national planning. For example, zonal commodity production and
marketing and transportation are basically under Chinese national
planning. How to properly manage the planning and market
adjustment is itself a plan and is a theoretical problem which enlivens
the Chinese economy at horne. In the past, Chinese Marxist theorists
perceived 'socialist planned economy' and 'market adjustment' as
mutually exclusive or 'unmixable'. Certain Marxist theorists denied
that market adjustment was functionally useful. They thus planted
the seeds of China's economic failure in the thirty years before 1978.
From 1978, however, the government began to realise the utility of
consumer commodity production and the adoption of capitalist
management. It learned how to prevent blind economic development
while not neglecting the usefulness of market adjustments.
China's special zone economy is an 'advanced commodity eco-
nomy'. Its growth is closely related to future prosperity in inter-
national commodity market. This will soon bring greater understand-
ing so that Chinese policy makers will see the inevitable commodity
competition in international markets and China's need to respond to
the international market challenge.
Vice-president Fang emphasised especially the need to dispose of
one critical question, which is: is the Special Economic Zone a
capitalist development? He said that he had been repeatedly asked to
respond to this question during his travel in the United States. He
kindly gave me a copy of his recently composed essay on this question .
We discussed some of the main points during the interview. He
190 China Under Deng Xiaoping

emphaticaBy admitted that the special zone development is for the

interest of socialist China. It is a method of demonstrating the
'superiority of socialism by learning the best of capitalism'. In the
special zone, China invites foreign investors to make a profit, which is
a form of exploitation. However, this 'exploitation' is in China's own
best interest because it is the means of acquiring foreign technology
and a way of providing incentives for foreign investors in order to
advance China's four modernisations. In any case it takes place within
certain limits, such as income tax and re-investment. In practice,
China makes the special zone economy serve the socialist economy in
general, not the other way around. 22

6.7 SPECIALZONESBENEFITBOTHCHINAAND
FOREIGN INVESTORS

Many questions can be raised about this new venture which began in
1981. In fact, this scheme to stabilise long-term economic relations
between a socialist nation and aB or any capitalist investors has never
been attempted before by a socialist state. Why does China have to
choose this path? Is this a stop-gap approach or a serious experiment
on China's part? What will be the political effects if it faiIs? How weIl
have the experiments been accepted by the leftist elements in the
Communist Party? How can one reIate this experiment to democrat-
isation in China and the government's goal to quadrupie the national
income by the year 2oo0? Special zone experiments conform to
Deng's two revolutionary goals: (1) to keep China open to the outside
worId, and (2) to revitalise the economy. The commitment to these
twin goals since 1979 has been so strong and so weIl accepted that it
seems impossible for any future leadership to abandon it without
unpredictable consequences. Even if set backs and corruptions should
occur in the special zones, they would not be likely to reverse China's
policy to remain open to the outside worid. On the other hand, foreign
investors have made their long-term investment decisions when they
came to invest here. They will not be able to withdraw easily under any
adverse changes in Chinese politics. After a eIoser observation of this
economic experiment the special zones can be related to four
long-term benefits: (1) foreign investment security and guaranteed
profits; (2) assurance in foreign capital retrieval; (3) gateway to
technology and capital inflow; and (4) internal need for continuity.
These four 'preliminary observations' are based on a long-term
 Urban Economic Reform and the Case of Shenzhen 191

assumption that China needs constant inflow of foreign technology

and capital. It must allow greater investment competition for both
profits and security to foreign investors. If one examines Chinese laws
and regulations on the Special zone experiment, it will be found that
the above four observations are well-supported. A simple explanation
for each is as folIows.

Foreign Investment Security and Guaranteed Profit

There are now some twenty-two separate pieces of regulation and

legislation from both the National People's Congress and the
provincial governments in Guangdong or Fujian. The more important
ones are: The Law of the People's Republic of China on Chinese-fo-
reign Joint Venture, Procedures ofthe People's Republic of China for
the Regulation and Administration of Chinese-foreign Joint-venture,
Interim Procedures for the Handling of Loans by the Bank of China to
Chinese-foreign Joint Venture, the Income Tax Law of the People's
Republic of China concerning Chinese-foreign Joint Venture, and
Rule for the Implementation of the Individual Income Tax Law of the
People's Republic of China. Other regulations may concern foreign
exchange control over enterprise or individual income and profit,
resident foreigners and foreign company representatives, export-im-
port licensing or foreign enterprise registration. These laws and
regulations or procedures are fair, well-intended and so far well-admi-
nistered. The percentage of tax on profit is low and outflow of profit is
quite easy. Joint ventures between Chinese and foreigners 'to organise
company enterprises or other economic organisations' are to take
place 'in accordance with the principle of equality and mutual benefit
and subject to approval by the Chinese Government,.23 Artide 2 of
the National People's Congress (hereafter, NPC) in its first piece of
legislation in July 1979 on foreign investment dedares: 'The Chinese
Government protects the investment of joint ventures, the profits due
them and their other lawful rights and interests in a joint venture.'
There is an agency and investment commission to handle applications
for such joint ventures. Foreign investors do not have to contribute
more than 25 per cent of total capital to a joint venture, and this
investment need not be in cash and can be in the form of 'advanced
technology and equipment that actually suits our country's needs,.24
All enterprises, joint venture or not, must be governed by a board of
directors agreed upon among the investors. The chairman of the board
must be a Chinese and the rest can all be foreigners. The board
192 China Under Deng Xiaoping

'decides on all major problems' of the venture. The 'net profit' is

defined as that portion left after the enterprise has paid its income tax,
set aside a reserve fund, a bonus and welfare fund for staff and workers
and enterprise expansion fund. This net profit shall be distributed
among investors according to their share of the contribution to the
capital of the enterprise. The law encourages the importation of
'advance technology' by any joint venture through 'reduction or
exemption of income tax for the first two or three profit-making years' .
As a second attraction, the law stipulates that 'a foreign joint venturer
that reinvests in China his share of the net profit may apply for refund
of apart of the income tax already paid'. The Bank of China or its
approved foreign banks in the special zone shall have rights as
protected by law regarding the financial transactions of all joint
ventures. But enterprise insurance shall be provided by Chinese
insurance companies, a protected right to earn premiums but also to
compensate for any major loss. This itself is evidence of a sincere
undertaking and also an expression of self-confidence in providing
security to all joint ventures. 'A joint venture is encouraged to market
its products outside China' , and 'mayaiso be distributed in the Chinese
market'. Finally, the same NPC law states the methods of settling
disputes between partners of joint ventures by (1) its board of
directors, or (2) through mediation or arbitration by a Chinese
agency or any other arbitration agency mutually agreed upon among
partners to the joint venture. 25
According to the 'Interim Procedures' of the State Council of 13
March 1981, the Bank of China will handle a variety of loans of joint
ventures, including (1) working capitalloans on revolving funds for
deficits~ (2) loans for settlement of accounts when their production
fund is tied up in goods; and (3) fixed asset loans when the joint
venture needs to expand its business or needs to make more fixed-asset
investment. Details on loans convince an observer that the Chinese
government is very seriously involved in the success or failure of the
special economic zones in which China cannot unilaterally change
conditions to exploit foreign investors or joint venturers.
On income tax, the NPC promulgated a law on 10 September 1980.
This law is quite similar to the equivalent in the United States. Taxable
income is defined as the amount after all 'deductible costs, expenses
and losses' . The rate of tax on joint ventures is 30 per cent. There is an
additionallocal income tax of 10 per cent, making the total 40 per cent.
When profit itself obtained from investment is remitted abroad, a tax
of further 10 per cent is levied on the profit. The law exempts income
 Urban Economic Reform and the Case of Shenzhen 193

tax or reduces it by 50 per cent if a joint venture starts with a pledge 'to
operate for aperiod of ten years or more'. In such a case, the
enterprise must apply for its tax exemption or its 50 per cent deduction
for the first three years. If investment is made in a low profit region, it
may gain an additional tax deduction by 15 to 30 per cent for aperiod
of ten years after the first three years of tax exemption. 26 These are
enough examples to illustrate how China is eager to have joint
ventures with foreign investment partners even if their share is only
25 per cent, with their taxes being reduced or exempted. In short, due
to its interest in acquiring advanced technology and in exporting
manufactured goods, China has established this unique special
economic zone to benefit both sides fairly. Investment security and
guaranteed profits are assured both in the existing law and also by
contracts.

Assurance in Capital Retrieval

Investment laws clearly speIl out the retrieval procedure from China of
the original capital, profits made from such investment, and the wages
of foreign staff members and workers. All of these incomes can be
remitted from China as described by the laws. The best details in each
case come technically from the contract itself of each joint venture,
wh ich can include any conditions for details du ring the negotiation.
The Chinese tax system is cIearly designed to induce foreign investors
to reinvest their net profits in more profitable new ventures. For
Ion ger periods of investment commitment, more tax benefit is still
available. In short, China is prepared to tie down capital forces as long
as it can. If such a successful trend continues, foreign capital,
equipment, and national gross income will increase with accelerating
speed. Domestic employment, internal market development, foreign
trade expansion and new technological gains will be such that China
will eventually be deeply dependent on international economic
networks and trade transactions. On the other hand, without such
unique special economic zones and investment tax benefits under
law, foreigners will not be so easily attracted to China, and her
four modernisations will not be able confidently to count on such
foreign participation. Given all these factors and their critical conse-
quences, it is easy to appreciate why China is institutionalising in the
direction of a long-term opening up of the country to the outside
world. To provide strong confidence to foreign investors, China must
allow easy retrieval of capital from the country by any investor.
194 China Under Deng Xiaoping

Gateway to Technology and Capital Inflow

Any developing country has to be fairly successful in economic

growth, political stability, positive social trends, good internal
transportation and communications, an ample power supply, good
human resource supply, and better domestic consumption market,
before any foreign investor is attracted to invest fixed capital in the
country. For example, Singapore and Malaysia are often considered a
safe place for foreign investment, but the Philippines, communist
Vietnam and communist North Korea are not. How could China
attract many foreign investors soon after the death of Mao and when
the country was still in political turmoil until Deng's resumption of
leadership? Yet China must have foreign investment to finance her
four modernisations. Foreign investment and modernisation are
inseparable for China to catch up with the rest of the world. Foreign
capital and technology are critically needed to build up adequate
transportation, energy supply and educational standards. There has
been, until recently, !ittle domestic market consumption to convince
foreigners to invest in China. Deng Xiaoping's leadership skilfully
thought out such a special economic zone scheme to provide potential
foreign investors with a very attractive offer in exchange for advanced
technology and cash in foreign exchange, or foreign exchange cash
earned by China at the special economic zones. And thirdly, the joint
venture itself may manufacture such articles and heavy machines in the
special zone for China's expanding domestic market for industrial
equipment and consumer goods.

Internal Demand in Favour of Continuity of the Special Economic

Zones

Any visitor travelling in China knows it is a nation on the move. The

Chinese people in both rural and urban regions demand a higher
standard of living. Many communists themselves are embarrassed that
China's living standard remains too far behind Hong Kong, Taiwan,
South Korea, Malaysia and Singapore. Thirty years of communist
misrule has been long enough to learn the lesson that ideologicalleftist
crisis of the communist party, especially under Mao's last ten years,
has been responsible for the embarrassing economic consequences.
Vice-premier Deng Xiaoping in 1974-5 had proposed his four
modernisations even before Mao's death. Since 1977, he has remained
eager to again pursue his four modernisations. The people are also
 Urban Economic Reform and the Case of Shenzhen 195

eager to support rapid economic development and the raising of living

standards. Deng's leadership seems universally praised in China for:
(1) his dismantling of the commune system and his policy to allow the
peasants to help themselves economically; (2) his emphasis on
economic enlivenment to quadruple the national income by the year
2000; (3) his decision to reform the urban economic structure; and (4)
the opening of the country to the outside world. The Chinese
population expects more material improvement. Emphasis is on the
success of light industry to meet popular demands, something wh ich
will probably prevent any future successor to Deng from turning the
dock backwards. The special economic zones, therefore, as a vehide
to accelerate modernisation, can only be abandoned with adverse
consequences for any future regime. There is today a 'new revolution
of rising expectation' in China.
This study has avoided a survey of economic difficulties and crises
resulting from rapid growth, which would be the subject of another
book. Suffice it to say that China today is still unable to manage rapid
growth and inflation, wage system and price stability, economic crime
and bureaucratic inefficiency. Above all, many experts at horne and
abroad are seriously concerned about future political stability after
Deng's death, and the possible re-emergence of a factionalleadership
struggle within the Communist Party itself. Economic planning is
currently under trial in terms of scope and depth. Competition
between the relatively free market sector of the economy and the
planned command sector is an on-going threat to the established
guidelines of socialist development. Even if all proceeds as expected, it
may require a decade or so for the socialist planners to build a coherent
and integrated infrastructure of a new and experimenting economic
system. This new system is, indeed, a new model of its own, which
Deng has called 'Socialism with Chinese Characteristics'. To this
author, it looks like a 'half-way mixed economy' between socialism
and capitalism.
7 'One Country, Two
Systems'
This chapter will not go into detail concerning the development of both
Hong Kong and Taiwan since their separation from Imperial China
und er the Ching Dynasty during the nineteenth century. However,
certain aspects of changes and the evolution of their significance will be
touched upon to highlight the contemporary problems and conflicts
surrounding both. For Hong Kong, for example, much emphasis will
be placed on its evolution, the impending crisis of its return to China,
the process of Sino-British negotiation since the early 1980s, the joint
declaration of 1984, Hong Kong as achallenge to the People's
Republic of China (the PRC), and the Hong Kong settlement and its
impact on the solution of Taiwan.
The unification of Taiwan with the PRC, on the other hand, is a far
more complicated matter, politically and diplomatically. Even the
recent history of Taiwan reflects many conflicts of the Cold War in
Asia since 1949. The early Japanese and US positions on Taiwan,
shortly before their formal diplomatic relations with the PRC in 1972,
were not quite free of duplicity or mixed intentions. The growing
ability of the Republic of China (hereafter, the ROC), independent
and free of the PRC, deprives the Beijing regime of certain effective
methods of putting pressure on the island. The United States
continues to playa critical role in stabilising the current status quo. To
obtain a true picture, one must fully understand the nature of Cold
War and superpower diplomacy on both si des of the Taiwan Strait.
Thus, this chapter will touch on the major features of Cold War
strategy, the PRC's overture for unification and its determination to
recover the island, Taiwan's internal transformation into a genuine
democracy, and the continuing threat of separation in internal political
development.

7.1 THE HONG KONG EXPERIMENT

From a barren village island in 1842 to the 1980s Hong Kong has never
been fully separated from China. It is almost entirely populated by the
Chinese. Of its 5.5 million population 98 per cent are Chinese,

196
 'One Country, Two Systems' 197

induding since 1898 that of the leased New Territories. It has a total of
5075 square kilometres. It is the most urbanised city adjacent to China
proper. The majority ofpeople speak both Cantonese and English.lts
economy is modern, with some 75 per cent in industrial production and
24 per cent in tertiary service. Without a rural countryside for
agriculture and natural resource supplies, Hong Kong depends totally
on China as its hinterland for raw materials and as its market. Most of
the citizens in Hong Kong have dose relatives in Guangdong Province.
In 1949 when the Chinese Communist Party took over the mainland,
Hong Kong had a sm all population of less than half a million. Over the
last thirty years, refugees from China have aided in its rapid population
growth. Security border control has remained tight against the inflow of
refugees by both water and by land. Cheap labour supply from refugees
has been the major cause of rapid light industrial growth and
commercial expansion. It is, however, necessary to prevent illegal entry
of new refugees to protect the high standard of living. The economy is
heavily dependent on foreign markets, investment, and tourism.
Oue to its geographie propinquity and lack of resouces, Hong Kong is
inseparable from the PRC. Water, meat, vegetables and food grains are
all imported from China. The major reason for Hong Kong's prosperity
is primarily attributable to its colonial status under the British. The
British authority in Hong Kong, like Burma on China's southwestern
border , has maintained a friendly neutrality toward a politically chaotic
country over the last several decades. The PRC, for its part, has been
too weak to take over Hong Kong militarily. It could not abrogate the
treaties of 1842, which formally ceded the Island of Hong Kong to the
British. In 1860 the Kowloon peninsula was also ceded to the British
after the Anglo-French War of 1860. The New Territories, wh ich is the
largest segment of the three, was rented to the British in 1898 for a
period of ninety-nine years. Together, these three treaties constituted
the basis for the British to make Hong Kong into adependent colony
free of Chinese intervention. However, the PRC government since
1949 has maintained a position of not legally recognising the validity of
these treaties which were unilaterally imposed on China by the use of
force. The Beijing regime has always made dear that in due course it
would take proper measures to recover all Chinese territories taken by
force by foreign imperialism du ring the nineteenth century, including
those lost to Tsarist Russia.
What has made Hong Kong prosperity tenable was the anti-Com-
munist sentiment among the millions of refugees from China and other
local Chinese who do not wish to lose their free commercial society with
198 China Under Deng Xiaoping

its higher standard of living for communist regimentation. The British

have seen to it that no cause should be provided for the PRC to interfere
in Hong Kong's internal affairs. Residents in Hong Kong, however,
have always maintained their Chinese Nationalistic outIook, but have
welcomed the British as an artificial necessity to de-politicise the island.
On the other hand, the PRC government has been tolerant of Hong
Kong for a variety of reasons: the window to earn foreign currency
exchanges through exports, accumulation of Cold War intelligence, its
in ability to earn political support from the Chinese residents, and lack
of physical capacity to take over and administer the area without serious
adverse consequences. As a result, Hong Kong has been able to exist for
the interests of all concerned: it is a threat to no one and as such it has
prospered. But the hidden influence of the PRC in Hong Kong has
remained viable. Like Macao, Hong Kong's internal peace and stability
has been possible only due to the wise policies of all si des for mutual
accommodation. The British, however, have no long-term sustaining
and bargaining power against the PRC. Beijing can exercise greater
initiative over the fate of Hong Kong which will similarly affect Macao.
Thus, mutual benefit, protected by the British in maintaining internal
peaceful order, has made Hong Kong a unique place. This uniqueness
has served the interests of London, Taipei, Beijing and, above all, the
resident Chinese people in Hong Kong.
Yet, Hong Kong's existence under the British since the turn of the
century has had a revolutionary message for China. It is a signpost of
democratic institutions, free press, free association among civilians and
free enterprise for higher standards of living. This fact has inspired
many Chinese from China to come as refugees. In spite of its own
colonial status, Hong Kong even helped Sun Yat-sen to organise his
democratic revolution against the Manchus. Western ideas of
democracy, human rights and civil liberties have also entered China
through Hong Kong. Often in the present century, Chinese political and
intellectual leaders have sought asylum in Hong Kong. During the
Sino-Japanese War, many Chinese came here to seek their safe haven
against the Japanese before the Pearl Harbor incident. Through Hong
Kong, the world can learn a great deal about China, whether under the
Nationalist or Communist regime. It is, in short, the southern gate to
China. For better or for worse, Hong Kong is achallenge to China
because ofwhat it iso Hong Kong, in this respect, represents a potential
for progressive and democratic influence on events in China.
 'One Country, Two Systems' 199

7.1.1 The Crisis ofits Return to China

As hinted already, Hong Kong is a British colony consisting of Hong

Kong island itself, Kowloon city, other unoccupied islands, and the
leased New Territories for aperiod of ninety-nine years. Without the
New Territories, Hong Kong under the British cannot survive. Nor
can Hong Kong enjoy internal peace and prosperity without coopera-
tion from the government of China. For example, the Chinese
government can cut off the water supply or trade relations. Secondly,
alI Chinese governments, the Nationalist before 1949 and the
Communist since then have vowed to recover all their lost territories at
a proper future time. Chiang Kaishek seriously discussed Hong Kong's
return to China at the Cairo Conference in 1943 with Winston
Churchill and Franklin D. Roosevelt. Politically speaking, the PRC
government could have stirred up difficulties for Hong Kong at any
time since 1949. The reason she did not do so was because she has
always feit that the time for such return was premature. Given all the
other advantages that Hong Kong provides and the domestic unrest
that China itself has had, the PRC government did not want to
interfere with the lease until 1982. It was the Hong Kong Governor
who first brought up the issue with Deng Xiaoping in March 1979
during his visit to Beijing. 1 Six months later Premier Hua Guofeng
hin ted at Chinese concern for Hong Kong's prosperity and external
investment and trade. This was the first indication from China about
the future of Hong Kong. During Premier Hua's official visit to
London, he again assured the British not to worry about foreign
investment in Hong Kong. Deng Xiaoping hirnself assured British
Foreign Minister Carrington that 'if any change in Hong Kong's future
status should occur, the interests of foreign investors will not be
adversely affected', when the latter visited in April 1981. Half a year
later, additional indirect references were made public when Beijing
declared its ni ne generous conditions for peaceful unification with
Taiwan. Observers concluded that alI these conditions were applicable
to Hong Kong and Macao with the exception of Chinese troop pres-
ence to be negotiated. As declared by the Chairman of the National
People's Congress, Yi Jianying, the nine conditions for the Taiwan
'Special Administrative Region' consisted of non-interference in local
affairs, no changes in the social and economic system as it now exists,
no change in lifestyle, no interference in local economic and cultural
relations with foreign countries, private property, hornes, land,
business enterprise and the right to inheritance. By January 1982,
200 China Under Deng Xiaoping

Beijing was eager to discuss the future of Hong Kong. For example,
Premier Zhao Ziyang announced on 6 January 1982, that China
would respect Hong Kong's status as a free port and a weIl recognised
centre for international commerce in spite of China's future sovereign-
ty over the colony. He urged others not to draw any damaging
conclusions that might affect Hong Kong's economic prosperity while
Sino-British negotiation were still underway. Three months later,
Deng reaffirmed the applicability to Hong Kong of the conditions for
Taiwan's unification in his meeting with British former Prime Minister
Edward Heath on 6 April 1982. Heath later revealed the possibility of
a 'government by Hong Kong residents themselves' as a special
administrative region (hereafter, SAR). This approach was to be
arranged through the PRC constitution. Everything in Hong Kong
should remain unchanged, including local passports for travel abroad.
Up to April 1982, the 5.5 million residents had not had any formal or
informal contacts with the Beijing government regarding their own
views about the future transfer of sovereignty. The Chinese stand
appeared firm and consistent.
Repeatedly, reaffirmation of future conditions was made to Hong
Kong officials and citizens as they came to Beijing. For example, Deng
in April received President L. S. Huang of Hong Kong University and
twelve other notable local residents from Hong Kong and Macao on
their views of the future. Article 31 of PRC's 1982 draft constitu-
tion provided the way to introduce the establishment of SAR for both
Taiwan and Hong Kong. On the British side, officially guarded opt-
imism was detectable by the middle of 1982 when the late Sir Edward
Youde, Governor of Hong Kong, described at London Airport the fu-
ture transfer of sovereignty as a 'routine matter'. 2 Members of the
British Parliament began to recognise the government's responsibil-
ity to negotiate an acceptable agreement for the people of Hong Kong.
Everything remained secret regarding other obstacles to be resolved
through negotiation. On 22 September 1982, British Prime
Minister Margaret Thatcher arrived in Beijing. At the welcome
banquet, Premier Zhao Ziyang voiced the need to discuss long-term
future mutual interests between Britain and China after the transfer of
Hong Kong. He eagerly cited China's much quoted five principles of
peaceful coexistence as a basis for friendship among states. The next
day Zhao expressed to Hong Kong correspondents China's determina-
tion to regain sovereignty and to guarantee prosperity in Hong Kong.
In the critical meeting between Prime Minister Thatcher and Deng
Xiaoping, they each stated their separate stands and principles
 'One Country, Two Systems' 201

eoncerning the eoming diplomatie negotiation. Prineipally, Thateher

insisted on the validity of the three existing treaties. Namely, the treaty
of 1842 whieh legally eeded Hong Kong Island itself to Britain. The
treaty of 1860 further eeded the tip of Kowloon peninsula away.
Britain has full sovereignty over both aeeording to treaty stipulations.
The third treaty governs the lease of the New Territories sinee 1898. If
the validity of the three treaties had been aeeeptable to Beijing, the
subsequent diplomatie negotiation would have ealled for different
stands by both. The Chinese would not, as expeeted, aeeept Thateher's
argument on the grounds that those three treaties were unilaterally
imposed on China during the days of Western 'gunboat diplomaey'
and military invasion. China never had any reason to exereise free
volition to eede or lease her territories away. It is, therefore neeessary
and legal for a 'stronger China' to regain lost sovereignty over its
former lands and to eorreet the wrongful legaey of past foreign
imperialism in China. This has been, in fact, a eonsistent stand of the
PRC over all border disputes, whether eoneerning Burma, India,
Pakistan, or the Soviet Union. However, this time the politieal and
diplomatie implieations required delieaey and sensitivity on the part of
the regime, to aehieve, at least, three major results in the outeome of
Hong Kong transfer; (1) no adverse effeet on the eeonomie prosperity
of Hong Kong despite a rejeetion of the agreements; (2) the
settlement model to be applieable to Maeao and the Republie of China
(hereafter ROC); and (3) the eultivation of British good will and
eooperation during the transitionary stage before 1997 and its
assistanee afterwards in mutual eommereial and other 'long-term
interests'. Therefore, the Chinese government had to exercise
prudenee in bargaining and pattern-setting during the negotiation. It
would not want to embarrass the British about their 'moral responsi-
bility' to the Hong Kong people who themselves were not allowed by
the Beijing government to partieipate direetly in the negotiation. Had
they been allowed to participate, greater bargaining power would have
been available to the British side. On the other hand, patriotic Chinese
and university students of Hong Kong openly objeeted to Margaret
Thateher's insistenee on the legal validity of the three treaties. The
students eonsidered these treaties 'as evidenees of insults to China' if
aeeepted. China has always marked such agreements as 'unequal
treaties' .
A sense of erisis seemed to emerge over the validity of the three
treaties. A feeling of impotenee emerged on the part of many loeal
Chinese residents over their own future. This beeame another souree
202 China Under Deng Xiaoping

of crisis, a crisis of uncertainty in future trade and commerce, or future

potential sodal and political instability. Watchful anxiety affected the
Hong Kong stock market for a while and caused the decline in real
estate transactions. For the people of Hong Kong, little could be
known about the extent and conte nt of self-government after 1997.
This concern reached the level of crisis when industrialists and
businessmen contemplated the outflow of their wealth and capital to
other parts of the world. Local leaders wanted to become the third
party in the Sino-British negotiation or part of the British delegation.
It took a while for the PRC government to convince and calm the
population in Hong Kong through many local delegations that came to
Beijing to ascertain what the government had in store for their future.
To quell the anxiety, Governor Youde appealed to the people on 28
April 1983 to understand the difficulties in the negotiation process and
the time required for it. But the people seemed to have little faith in
empty promises about their future prosperity and self-government.
The second stage of Si no-British negotiations did not begin, until after
Margaret Thatcher's visit in 13 July 1983. This time, Governor Youde
declared that he would represent the people of Hong Kong within the
British delegation. His claim to represent the people was not
acceptable to Beijing either.

7.1.2 Analysis ofPopular Anxiety and the Joint Declaration

Residents of Hong Kong remained powerless to influence the

Sino-British negotiation which was already deadlocked by July 1983.
They depended totallyon the British to fulfil their 'moral responsibil-
ity to the people'. However, the British had little bargaining power
once they gave in on the treaty validity. For the Beijing government,
the entire matter was to wait for 1997 for the regaining of sovereignty
over Northern Kowloon and the New Territories. The British would
have legally no case against this: Hong Kong Island and the tip of
Kowloon cannot exist without the New Territories. But the Chinese
cannot govern Hong Kong by themselves. They expect the British to
stay on in a new advisory capacity after 1997. The entire future stability
and prosperity after 1997 depends on mutual good will and coopera-
tion, and Beijing knew this weil. The PRC thus remained diplomati-
cally confident and consistent on its negotiation stand. Furthermore,
China also thought beyond the reversion after 1997 in offering 'new
favoured' opportunity to Britain, including better conditions for
investment and trade opportunity in China, besides helping the
 'One Country, Two Systems' 203

residents in self-government as a special administrative region of

China. Following so me debate in Parliament and public airing of the
whole matter, it was not after all difficult for Britain to return for the
second round at the diplomatic table. Both Britain and China have
shown their art at diplomacy in both tactics and strategy, since the
treaty validity issue was abandoned.
What was at stake still was the interests of Hong Kong residents. To
this, China had verbally pledged repeatedly 'to take care of the
people's interests'. The real frustration was the division among the
residents whose interests cannot be well ascertained without a detailed
analysis of the population structure. Due to this frustration and fear,
their efforts to be heard by London and Beijing were pronounced
during the interval after Prime Minister Thatcher's first visit to China
in 1982. Wh at did the local residents do and say that was important?
Generally , most residents believed the Chinese sovereignty over
Hong Kong could not be challenged. Anxiety was focused on how the
residents should be allowed to administer their own affairs, with or
without British assistance after reversion. They were concerned about
what specific changes would possibly be made to protect Hong Kong as
a free port and the third largest financial centre in the world. They
could not visualise yet how to insulate Hong Kong from the communist
system of government, its economy and way of life, to protect their
higher living standard of 4000 American dollars per capita vis-a-vis
a poor one of fifteen times less. The residents perceived their future in
a variety of possible arrangements: 'As trust under British Administra-
tion', 'under arental arrangement with Britain', 'joint Sino-British
Administration', and 'full self-government under the PRC Constitu-
tion', or 'limited local autonomy'. The daily press itself was, of course,
divided among leftist, rightest, and neutral or liberal stands. Each
orientation advanced its own perceptions and interpretations of the
events. The residents were divided, as rich, poor or in the middle who
reacted differently to changing of events. Their lack of faith in the PRC
promises beyond 1997 was the one fundamental cause for anxiety,
even though the Beijing government remained cautious, firm and
consistent on Hong Kong after 1997. To summarise the major
concerns of the residents, the pro-Beijing Mirrow Monthly in its
October issue 1982 published a ten-point list of recommendations for
the PRC government:

1. There is a need for clear and firm stipulation through the PRC
constitution on a set of special administrative laws which should
204 China Under Deng Xiaoping

prohibit any change within several decades after 1997. This would
remove the fear for the local residents of future administrative
discretion which may cause uncertainties;
2. To protect Hong Kong's capitalist economy and its free port
status, the Communist Party should declare publicly that party
organs will not participate in the SAR administration and no
municipal communist secretariat will be established in Hong
Kong;
3. The Communist Party should declare that its 'four cardinal
principles' (Marxism-Maoism, the socialist path, Communist
Party leadership, and democratic dictatorship ) are not applicable
to Hong Kong;
4. Hong Kong's own modernised educational system, professional
people and their social status and high personal income must not
be downgraded in order to keep such modernity replenished for
good performance;
5. Local customs and practices must be respected;
6. Residents of Hong Kong should continue to enjoy rights to travel
abroad, to emigrate and study abroad. The PRC government
should negotiate with other governments to maintain free port
privileges for Hong Kong;
7. The Beijing government should declare a general policy toward
residents from Taiwan about their rights, press and publication
freedoms, and other enterprises so long as they do not carry out
'two China' activities, or violate Hong Kong's laws and public
security, or use Hong Kong to carry out underground counter-
revolutionary activities. They should come and go freely and carry
out their activities openly;
8. TheBritish system oflaws should remain in practice after 1997 and
recognition and protection of all legal contracts and obligations
and interests made legally before 1997 should be maintained;
9. Hong Kong's foreign exchange should remain uncontrolled;
favourable balance of payments should be kept in Hong Kong and
not be reported to Beijing. Hong Kong should have no obligation
to purchase PRC bonds and treasury certificates. This policy
concerns the protection of local prosperity. (Britain only requires
Hong Kong to reimburse it for the expenditure incurred from
defence protection); and
10. Unless in a war emergency, Chinese military forces should not be
dispatched to Hong Kong. With prior consent of the PRC
government, Hong Kong should be able to welcome friendly visits
 'One Country, Two Systems' 205

by foreign warships.
Mirrow Monthly emphatically declared that if the PRC can practice
these ten policies, the 'crisis of confidence' would be likely to
disappear for the people.
If this ten-point recommendation can, in fact, be put into practice
after 1997, Deng Xiaoping's doctrine of 'one country, two systems' will
truly be revolutionary. It seems that the Joint Declaration of 1984 can
accommodate all these points except the dispatch of Chinese troops.
When the British government gave up the sovereignty argument,
the second round of negotiation quickly convened in Beijing in July
1983. Negotiation moved forward smoothly. The Joint Declaration
was consummated on 26 September 1984. It is a good document and
weil received everywhere, including Western Europe, Japan and
the United States. The government of the Republic of China on
Taiwan denounced the Declaration as invalid and not binding. The
Declaration consists of PRC requirements; it feit the 'so-called
appropriate future time had come' for China not to reject its own
territory. The deadline for transfer from the British to the PRC is 1
July 1997. All of British Hong Kong, with a total area of 404 square
miles, will be returned. China could not just take back the New
Territories without also taking over the Hong Kong Island and lower
Kowloon, nor could domestic politics in China allow this logical
inconsistency. On the other hand, the British government could not
administer Hong Kong under Chinese sovereignty without full control
of the New Territories. Thus, the PRC government accepted
favourable opportunities for future British trade and investment in
China and a special guest role to assist Hong Kong after 1997. China
has secured long-term cooperation for, perhaps, the entire fifty years
which the Joint Declaration has granted to Hong Kong as a special
administrative region of China.
The major stipulations of the Declaration appear to be satisfactory
to the residents of Hong Kong, many of whom had established in
1983-4 a high degree of mutual understanding with the Beijing
government. Many Hong Kong delegations, personal visits to the PRC
and official statements by the Chinese government were made in 1983
and 1984 be fore the real negotiation began in July 1983. The Chinese
government meanwhile bought properties and opened business firms
in Hong Kong. It acted to stimulate and restore activities of the local
stock market. The Shenzhen Special Economic Zone, across the
border from Hong Kong, received large investments from Hong Kong
businessmen. Gradually but steadily, the Hong Kong residents
206 China Under Deng Xiaoping

understood better the Chinese intent to succeed in the practice of 'one

country, two systems'. It also intends eagerly to apply the Hong Kong
model to Taiwan for the unification of the country.
The major stipulations of the Declaration include many well-de-
vised means and procedures to ass ure prosperity in the post-1997
period wh ich will last for fifty years. The Hong Kong Special
Administrative Region is being enacted into law through Article 31 of
the PRC constitution of 1982 which empowers the National People's
Congress to create such regions and to exercise shared supervision
with the State Council. The major points are as follows: 3
1. Hong Kong will implement a new system of government to be
based on the people's choice as allowed under Article 31 of the
PRC Constitution. Foreign affairs and defence powers are,
however, to be exercised by the central government in Beijing;
2. Internal auto no my shall include executive, legislature and judicial
power. Final adjudication power is vested in an independent
judicial body without interference from the central government;
3. The present economic and social system, which includes free
speech, free movement, free association, freedom of religion, and
right to strike, will remain unchanged and to be protected by law.
Private property rights will be protected;
4. The economic structure and trade system shall remain unchanged
for fifty years;
5. The chief executive after 1997 will be appointed by the central
government after elections or constitution locally. The future
government will be run by the local people;
6. In addition to displaying the PRC national flag and national
emblem, Hong Kong mayaiso displayaregional flag and emblem;
7. The government of Hong Kong may join 'relevant international
organisations' and enter into international treaties. It can also
establish trade missions and economic agencies in foreign coun-
tries. In each case, the name 'Hong Kong, China' must be used
when it enters into agreement with other states, regions and
relevant international organisations; and
8. Chinese defence forces stationed in Hong Kong 'shall not
interfere in the internal affairs in Hong Kong' and the expenses
of such forces shall be borne by the central government of
China.
Clearly, residents of Hong Kong should feel adequately assured of
self-government with a minimum of routine central government
 'One Country, Two Systems' 207

participation, namely, the appointment of a chief executive through

consultation or as a result of local election. Foreign affairs and defence
are the two major areas in which the PRC central government will
exercise independent decision making. A local flag and emblem are
concessions to enable Hong Kong to retain and create international
economic relations as an independent identity. All things considered,
the real test is only, indeed, the PRC's good faith to enact a genuine
basic law to create the Hong Kong Special Administrative Region
based on the stipulations set down in the Joint DecIaration. Direct
representation of Hong Kong in the NPC through some forty delegates
will help achieve communications between the centrallegislature and
Hong Kong. The legislature of Hong Kong itself shall make locallaws
in accordance with the basic law for Hong Kong as enacted by the
National People's Congress or its Standing Committee which mayaiso
interpret local enactments in accordance with the basic law itself.
Thus, during the fifty years after 1997, the special administrative
region of Hong Kong shall be self-governing under the central
legislature only. 4
According to ArticIe 89 of the PRC Constitution, however, the
State Council (central executive) has the power to alter inappropriate
decisions and orders issued by local organs of state administratio~ at
different levels. Whether this cIause is applicable to Hong Kong after
1997 is debatable because Hong Kong is not 'a state administration' at
a locallevel in the usual sense. It is governed by the special basic law
for Hong Kong. Professor Hungdah Chiu thinks that the State Council
can alter enactments in Hong Kong. s On the other hand, it is easy to
agree with Professor Chiu's analysis if the PRC central government
does not act in good faith. It is difficult to believe that the PRC can
afford to act in bad faith if it wants to earn the confidence of the people
in Hong Kong. The real difficulties are those not foreseeable at the
present time. These might incIude, for example, factional conflicts and
struggles within the Chinese Communist Party, political instability
inside China, or an economic crisis and failure in China's four
modernisations. Any one of these could easily interrupt the PRC's
ability to implement the Joint DecIaration of 1984. In short, the real
guarantee for the 'high degree of autonomy' for Hong Kong must
co me from an examination of long-term in te rests of China vis-a-vis
the interests of an autonomous Hong Kong which will be part of China
and cannot be totally insulated from the common interests of both.
Any unforeseen future circumstances will affect the success or failure
of relations between Hong Kong and China after 1997. The sincerity
208 China Under Deng Xiaoping

of China's professed aim to make Hong Kong 'A Show Model' cannot
be doubted. From the PRC point of view, any failure to win the
confidence of resident citizens in Hong Kong will have a disastrous
result for her attempt to unite with Taiwan.

7.1.3 Hong Kong as aChallenge to the PRC

It has been four and a half years since the consummation of the Joint
Declaration. Hong Kong proves to be achallenge to the British to
implement and interpret the Declaration up to 1997 to prepare for the
reversion. To discharge Britain's self-imposed moral obligation to the
residents of five and a half million is not easy. They are divided among
themselves in interests and in expectations. The next ni ne years of
British effort is to be made under watchful scrutiny of the PRC
agencies and personnel already in Hong Kong. So far all things seem to
remain rosy for all concerned. Hong Kong has an open and free press
and freedom of speech to guide the development and to facilitate the
exchange of ideas. The local residents are likely to support the British
authority to accomplish as much as it can before 1997, while all will
look beyond 1997 with reservations.
The PRC has begun to work on the drafting of the basic law and on
the organisation of the advisory group to voice their opinions and
recommendations from the local residents. For the next four years this
task itself will not be easy. Theresidents, as groups of divergent or
conflicting interests, may have difficulties cooperating easily. Each
group or dass wants to have a basic law that can best guarantee its
future interests. All will look for assurance and safe devices to protect
future autonomy. The PRC government, on the other hand, is not
willing to see too many changes occur before and after 1997. However,
Beijing wants to expand its influence among the population now in
order to be able to steer future development to its own liking. Thus,
the challenge of the implementation of the Dedaration will increase in
its momentum as 1997 approaches.
A different challenge of implementation will come after the
reversion in 1997. This is when self-government begins. The Beijing
government will exercise supervision over the execution of the
Declaration and the basic law. There will be no 'buffer authority' when
the British administration disappears to prevent direct conflicts,
should any arise between the local autonomous regime and the PRC
authority. Hong Kong has been a very different society in itself. Its
social, cultural, economic and political realities manifest essentially
 'One Country, Two Systems' 209

the characteristics of a free and open democratic system. It has a very

highly educated population who all are business oriented and have
incentives for self-achievement. Their organisational knowledge and
management skills have enabled the people to build up Hong Kong
as the third largest financial centre of the world. Hong Kong must
remain sensitive to international commercial reality, otherwise it
cannot succeed in world trade. It does big business with the rest of
the world without interference from big government bureaucracy.
Can Hong Kong after 1997 remain free from heavy-handed supervis-
ion or intervention from the PRC agencies locally or from the
National People's Congress or the State Council in Beijing? Given
the planned nature of the socialist economy and the powerful
bureaucracy of the PRC, it is difficult to imagine how the central
government can remain aloof or self-restrained in the exercise of its
supervision. Whether the central government will fully authorise its
local authority in Hong Kong to wisely and flexibly exercise
self-restraints on behalf of the central government remains to be
seen. Hong Kong must not be subject to new constraints and
heavy-handedness from the North if it is to compete successfully
internationally. Hong Kong will be the first experiment of 'one
country, two systems', in a socialist state. It expects, under the Joint
Declaration, to remain unchanged.
The positive challenge of Hong Kong to the PRC, on the other
hand, is whether or not the central government will be willing and
able to take every advantage that Hong Kong provides. For example,
Hong Kong's story of economic miracle under the British should be
accepted as a positive reference in China's four modernisations. This
reference may help the PRC in re-orienting its political and economic
structure reform. Can China make all the necessary resources
available to Hong Kong after 1997 to make the latter an even greater
miracle? China can encourage Hong Kong to expand its commercial
and economic relations with the rest of the world. On the other hand,
the Hong Kong experiment of economic success can be introduced
into. the non-socialist sector of the economic, the rural and tertiary
sector, for example. There are several special economic zones in
China in wh ich Hong Kong after 1997 can be achallenge for success.
If the PRC fails to meet Hong Kong's needs and expectations, it will
be viewed directly as a failure of Deng Xiaoping's 'One Country,
Two Systems'. It is difficult to imagine that this can be allowed to
happen if peaceful unification with Taiwan remains high on the PF.C
agenda.
210 China Under Deng Xiaoping

What has taken place in implementing the Joint Declaration so far?

The British side has done weil, and the people like what has been
done. They expect more to be accomplished before 1997. A few
examples can be cited either as accomplishments or as forecasts of
future accomplishments:

1. The British government has taken its part quite seriously in its new
annual undertaking. The government agrees 'to produce an annual
report on Hong Kong for presentation to Parliament between now
and 1997'.6 Community leaders in Hong Kong 'reacted favourably
to the move of keeping the UK up to date on Hong Kong';
2. The British government has worked to provide new passport
privileges to residents of Hong Kong as British Nationals
(overseas) without requiring the carrier to produce an identity
card. Discussions on the matter with the Chinese authorities have
been under way since 1985;
3. To continue trade expansion since the Joint Declaration, financial
cooperation between the Bank of China in Hong Kong and local
banking committee has become close. Hong Kong's membership in
the General Agreement on Tariffs and Trade (GATI) after 1997 is
getting support for its continuation from many trade partners;
4. Since January 1985, the new British political adviser has been
building contacts to implement the Sino-British Agreement on the
future of Hong Kong. His role involves contacts and cooperation
with the Shenzhen Special Economic Zone, the Guangzhou
provincial authority and the Chinese Xinhua News Agency in Hong
Kong. The late Governor Sir Edward Youde said: 'not much hard
work will have to be done in implementing the Sino-British
Agreement on the future of Hong Kong; preparatory work has
al ready begun,7 For example, in the field of legal reform, some 300
multilateral treaties and agreements and 160 bilateral agreements
that apply to Hong Kong have been gathered together for review by
the Hong Kong Attorney General's office in order to clarify Hong
Kong's rights or obligations under such existing agreements. The
study result will be turned over to the future Joint Liaison Group
which has the task of reviewing and deciding which and how each
agreement can best serve Hong Kong's interests after 1997;
5. A significant step was taken to hold elections for the Legislative
Council on 26 September 1985 in furthering the development of
representative government. The elected twenty-four seats for the
first time has joined the twenty-two nominated members and ten
 'One Country, Two Systems' 211

officials in the Legislative Council. Twelve ofthe elected seats were

allotted to district board members and the other twelve to
professional groups, including lawyers, teachers, bankers, and
social workers. There was an almost 100 per cent voter turn-out
among district board members and more than 57 per cent of the
registered voters cast their votes in the functionary constituency.
Local leaders considered the election a satisfactory start toward
future political development;
6. London is aware of the risk involved in deviating from the terms
laid down under the Joint Oeclaration. Peter Williams, Hong Kong
Secretary, said in London on 30 September 1985 that 'the first thing
that must be ensured is Britain's effectively administering Hong
Kong up to 1997. Any deviation from the term will frighten away
investment as weIl as the professional and skilled groups on whom
Hong Kong's success depends.'8 He predicted that 'the early
ni ne ti es will almost certainly see a new period of uncertainty and we
shall have to have weIl thought out and firm plans for the changes
which will then need to be introduced'. The fear in Hong Kong
that China might interfere in local affairs during the early transition
period has proved to be unsubstantiated. The British introduction
of constitutional government, although unjustifiably long ignored,
willlikeJy pick up its pace in the coming years;
7. One of the major developments in 1986 was the benefit for the
3.25 million residents of Hong Kong who will continue to hold
British Nationality (overseas) passports (BN(O». These 3.25
million people are Hong Kong British Oependent Territory
Citizens (BOTC). The White Paper on the Oraft Hong Kong
(British Nationality) Order 1986 was released in both London and
Hong Kong on 18 October 1985. The new designation of BN(O)
pass ports for Hong Kong residents was for life only. Children born
in the first half of 1997 may apply for BN(O) up to 31 Oecember
1997. No one born in Hong Kong after 30 June 1997 is to be
eligible to apply for such a passport status. The British government
will seek recognition by other governments of this change. This
BN(O) status is a significant step with long-term implications. The
views of Hong Kong residents were to be voiced on it. The US
Consulate in HK has already announced the US's recognition ofthe
proposed BN(O) passport when it comes into use in 1987. Even
Her Majesty the Queen in her speech to the new opening
Parliament reaffirmed her government's commitment to 'continue
to discharge their obligations to the people of Hong Kong; and will
212 China Under Deng Xiaoping

propose provision to implement the nationality arrangements

arising from the Sino-British Joint Declaration'. 9

In implementation on the Chinese side, Beijing has seemed most

concerned about residents' po pul ar reaction to the drafting of the
Basic Law, which will be Hong Kong's Constitution after 1997.
Selection of membership of the Basic Law Drafting Committee was a
major effort in 1985. Various social, economic and intellectual groups
must be directly represented on the Drafting Committee in proportion
to their respective influences among the population. Secondly, the
formation of membership on the Joint Liaison Group (JLG) is another
major task. It must be, like the Drafting Committee, fairly representa-
tive ofthe British, local and Chinese views. In April 1986, the Drafting
Committee had its second plenary session in Beijing. All the members
from Hong Kong were in attendance. As reported, the agenda of the
session included: (1) discussion and adoption of the outline of the
Basic Law; (2) discussion and adoption of the working regulations for
the Basic Law Drafting Committee; and (3) classification of special
issues and organisation of special working groups of the Basic Law
Drafting Committee. It is hoped that an early draft of the Basic Law
will be completed in 1988. By 1990 the final version should be ready.
The five working groups were expected to present their reports to the
next plenary session of the committee. Greater emphasis ~as given to
the future relations between the PRC Central authorities and the
Special Administrative Region, the rights and obligations of Hong
Kong residents, and the SAR's 'political system, economy, education,
science, technology, culture and other matters'. 10
Ji Pengfei still seems to remain fully in charge on Beijing's behalf
over the work and the pace of progress of the Basic Law Drafting
Committee. He has been, of course, the director of the Office for
Hong Kong and Macao Affairs of the State Council and is concurrently
chairman of the Basic Law Drafting Committee. Ji made a trip to
Hong Kong in December 1985 and voiced his views and positions
during his stay at a news conference concerning the Basic Law. Ji's
views were all welcome to the people of Hong Kong. For example,
he said at the news conference that he 'has been much better
informed after discussions with Governor Youde and many Chinese
leaders of many ranks and groups; that Hong Kong is a modern city,
free port, international financial-commercial centre ... and that to
keep Hong Kong prosperous, stabilising is in accord with the interest
of all parties involved. This has been the view and policy of the PRC
 'One Country, Two Systems' 213

government consistently since the start.'l1 He acknowledged that,

since the Sino-British Agreement, working relations between London
and Beijing have been much closer. He expressed gratitude for the
views and opinions of the Hong Kong members on the Basic Law and
Joint Liaison Committees during his trip to Hong Kong. Over the role
to be played by the National People's Congress and its Standing
Committee on the future interpretation of the Basic Law, which is of
grave concern to the people of Hong Kong, Ji promised that this
matter should not be confused with the local implementation process
by the autonomous administration authority which can be dealt with
carefully when the Basic Law is written. He fully recognised the need
for certain flexibility and for changes wh ich may be inevitable under
new circumstances in the years to come. Hong Kong always reflects
changes in the outside world. China must go along with such future
changes beyond its control if Hong Kong is to remain prosperous and
protected. 12 In short, it seems that Hong Kong's distant future will
ultimately be affected by those who will succeed Deng Xiaoping and Ji
Pengfei. Prosperity in China and in Hong Kong will depend on the
Communist leadership after 1997 and beyond. On the other hand, the
death of Sir Edward Youde in December 1986, for example, was an
important loss of one whose devotion and understanding is no longer
available during the final decade of transition work. 13 His contribution
as Governor of Hong Kong and as delegate of the negotiation team
was properly acknowledged at his memorial services.
The following list provides a summary of the problems, progress,
and future concerns as expressed by local leaders in Hong Kong and
the responses from Beijing and provides also a good agenda for the
Basic Law Drafting Committee: 14

1. Members from Hong Kong on the Basic Law Drafting Committee

are most concerned about Hong Kong's future 'degree of
autonomy'. They have different views regarding the outline of the
Basic Law; for example, that suitable stipulations of the PRC
constitution be listed in the Basic Law so to distinguish the PRC
constitution from the spirit of 'One Country, Two Systems'. They
would prefer a more specific listing of Hong Kong's powers in
addition to the 'administrative, legislative and judicial powers' as
already mentioned in the Joint Declaration, and are displeased with
the wording of the outline of the Basic Law wh ich said 'under
the leadership of the Central Government.' They preferred the
wording 'authorised by the National People's Congress' only. They
214 China Under Deng Xiaoping

object to the use of Marxist-Leninist jargon in the Basic Law, and

refuse to be held responsible to any unit of government except to
the National People's Congress;
2. Dissatisfaction of Hong Kong's members of the Basic Law
Drafting Committee with what Xu Jiatun had said publicIy about
his knowledge of the outline of the Basic Law before the Hong
Kong members had read the document. As director of New China
News Agency in Hong Kong Xu seems to have over-played his
hand;
3. Their fear about China's four cardinal principles (communist party
leadership, Marxism-Leninism-Maoism, a socialist path and
democratic dictatorship ) which made it necessary for Deng
Xiaoping to assure them that China would not force on Hong Kong
these principles;
4. Their 'ardent hope' to retain Hong Kong's legal and political
system in order to be 'an independent political entity' to make
Deng's 'One County, Two Systems' a trustworthy and credible
proposal;
5. The PRC is itself critically concerned about the British intent and
implementation of democratic political reform which Britain had
failed to provide in the past. The elections of 1982 and 1984 for the
partial membership of the Legislative Council and the eighteen
district boards have truly worried the PRC. It is cIear that Britain
and the residents of Hong Kong want political democratisation as
quickly and as throughly as possible during the transition period. It
is equally cIear that the Chinese want to preserve the political status
quo with no changes at all. The PRC side has, however, achieved a
strong influence and support among the powerful industrial-com-
mercial elite cIass through local membership in the Basic Law
Drafting Committee (consisting of fifty-nine members, of which
twenty-three are from Hong Kong and thirty-six from the Chinese
side) and the Basic Law Consultative Committee of 180 members
(all of them from Hong Kong) who will represent all ranks of the
society and will have strong advisory voices in the Basic Law
drafting. Thus conflicts or differences over wh at kind of political
system will emerge in both form and substance may come up
unavoidably, although both the British and the PRC want nothing
less than prosperity and stability. However, the people of Hong
Kong, according to arecent survey, seem to still 'have a very low
degree of trust for the PRC government'. 15 In the survey, 66.3 per
cent did not believe the PRC would let the 'Hong Kong people rule
 'One Country, Two Systems' 215

Hong Kong'. In another survey, 74 per cent of the respondents

believed that the current British system, albeit imperfect, is the best
under the existing circumstances. Thus, China's constructive
responses to the concerns of the local population in the coming
years will remain critically important to longterm prosperity and
stability in conjunction with necessary reforms under the British
before 1997.
On the other hand, since the start of the reversion negotiations in
1982, the PRC has been flexible and consistent. It can be expected to
respond more constructively to the continually changing circumst-
ances. The promised 'high degree of autonomy' can not be taken
inflexibly or unilaterally. Beyond 1997, the PRC may exercise general
supervision in both political and economic development. 16 This can
take place for a variety of well-known and unknown future reasons,
Meanwhile, steady progress has been made towards the transition,
especially during the third session of the Basic Law Drafting
Committee in November 1986. The five working groups have given
their reports on relations between the central government and the
Hong Kong Special Administrative Region and other matters. The
basic rights of the Hong Kong residents include the following: 17
Hong Kong residents will enjoy freedom of movement in and out of
the country and freedom to emigrate to other countries and regions,
as weIl as freedom of speech, information, the press, association,
forming and participating in trade unions, together with freedom to
strike and hold meetings and demonstrations within the framework
oflaw. They will also be free to decide how many children they have,
and their freedom of marriage will be protected by law.
In short, Hong Kong is achallenge to the PRC, politically,
economically and in the field of democratic civil liberties. This is
China's first experiment in giving meaning and purpose to Deng's
'One Country, Two Systems'. Dynamic developments are likely to
occur before and shortly after the reversion in 1997. Can Hong Kong
succeed? Some do not believe so. 18

7.2 THETAIWANTANGLE

Ever since the outbreak of the Korean War in 1950, Taiwan's legal
status and political position have emerged to complicate the Cold War
216 China Under Deng Xiaoping

eonfliet in Asia and in the United Nations. Mueh of the eonfliet has
resulted from ehanges in the United States toward the two govern-
ments of China. The position of the United States toward Taiwan has
affeeted the policies and diplomatie dynamies of many Asian states,
including Japan. Other than eommereial and eultural relations with
the Republie of China (hereafter ROq, most nations in reeent years
have terminated their formal diplomatie reeognition of the ROC.
There are eurrently twenty-two states with embassies in Taiwan.
However, the United States alone is more deeply involved in Taiwan's
seeurity and defenee even without formal diplomatie relations. Given
its regional defenee leadership in the superpower eontest and in her
direet relations with the PRC, poliey options for the United States are
very limited at the present time. It may be helpful to highlight the
reeent developments over the status evolution of Taiwan before the
diseussions of the PRC overtures of peaeeful unifieation, Taiwan's
internal politieo-eeonomie transformation and the ehallenge of its
independenee movement.

7.2.1 The Evolution ofTaiwan's Status

The population of Taiwan is of Chinese deseent, exeept for a small

number of original 'mountain people'. Taiwan was eeded to Japan in
1895. At the Cairo Conferenee in 1943, it was solemnly deeided among
Chiang Kai-shek, Franklin D. Roosevelt and Winston Churehill that
Taiwan must be returned to China upon the Japanese defeat. In 1945,
the Chinese government took over Taiwan after the Japanese
surrender. The loeal Chinese population in 1945 overwhelmingly
welcomed the return to the motherland. Two years later, the
unfortunate ineident of 28 February touehed off an uprising between
Chinese of Taiwan birth and those arriving from the Chinese mainland
after 1945. This ineident seriously damaged the relations between the
two groups. In 1949 Chiang's eentral government retreated to Taiwan
while the vietorious eommunist regime was preparing to invade the
island in 1950. Suddenly, the Korean War broke out while the US
diplomatie delegation was still in the Nationalist Government Capital
of Nanking on the mainland.
Surprisingly and suddenly, President ,Harry S. Truman deeided to
send the US Seventh Fleet to the Taiwan Strait to proteet Taiwan.
Within one month, General Douglas MaeArthur flew to Taiwan to
meet with President Chiang to talk about Taiwan's defenee against
Communist invasion. Within weeks the US Military Advisory Group
 'One Country, Two Systems' 217

under General Chase came to re-arm and train the Nationalist troops.
In 1954, a mutual defence treaty was signed between Washington and
Taiwan. The United States began thus to insist diplomatically in the
Uni ted Nations that the ROC was the only legal government of all
China. The PRC, for the next 20 years could not receive a two-thirds
majority of votes in the United Nations to be admitted to that body.
The frozen attitude of the UN towards the PRC had worsened the
relations for all Asian states. Suddenly again the Uni ted States under
President Richard M. Nixon decided on secret talks with Beijing to
change the US policy. Still the Taiwan tangle remained one of the most
difficult issues in the US policy and in international politics. Much of
this has remained from the superpower conflicts.
What is at the heart of the Taiwan tangle? How complicated has the
crisis been in both domestic and international dimensions? Because of
lack of space, only a few aspects will be discussed below.
When President Truman decided to defend Taiwan in 1950, he also
unjustifiably raised a question over Taiwan's sovereignty or legal
status. One of his arguments was that Taiwan's position had not been
c1early defined at the Cairo Conference. It was decided only that Japan
would relinquish Taiwan without specifically suggesting which Chi-
nese government should take over from Japan. Taiwan's position
remained to be decided internationally. This line of argument was
repudiated immediately by both Taipei and Beijing. Suggestions were
then aired in the United Nations as to whether a UN supervised pIebi-
seite should be held in Taiwan to determine whether the majority of the
people would wish to become part of China. This foolish sugges-
tion was again immediately dismissed by Taiwan and Communist
China. War in Korea between the US forces and those of the PRC was
fought and areal possibility of another war emerged in 1958 when the
communists launched their heaviest attack on the island of Quemoy
which was China's own territory but under the control of the
Nationalist troops. To avoid such danger of war with the Chinese
communist regime, a 'two China theory' came into existence. If
acceptable to both Taipei and Beijing, US relations with both of them
would have been quickly transformed. This proposal was unacceptable
to either one. The Nationalist government insisted on its legality, as
elected in 1948 by the people on the mainlartd, to govern the entire
country once it could achieve a victory on the mainland. The
communist government, on the other hand, vowed to complete its war
of liberation against Taiwan. Neither government can be blamed by
the Chinese citizens for their common claim that 'Taiwan is apart of
218 China Under Deng Xiaoping

China'. In any case, the United States could not untie the Taiwan
tangle, Iegally, politically or militarily. The majority of nations
continued in the 1960s to retain diplomatie relations with the
Nationalist Government and supported the US position for nearly
twenty years. The Cold War certainly was a major cause for nations
taking sides. The United States, as the leader of the free world,
commanded this position of prestige to retain the support from other
nations. However, the 'two China approach' in the early 1960s
remained condemned by both the ROC and the PRC.
The PRC's conflict with the Soviet Union and its military inability to
confront the Uni ted States was one of the major reasons for Beijing's
giving up the search for a military solution in Taiwan's liberation
problem. China's mad plunge into cultural revolution and power
struggle deprived the PRC of the ability to reclaim Taiwan. On the
other hand, the ROC be ca me gradually far more powerful after having
the armed forces well-equipped and trained by the United States.
However, the US would not allow the launehing of offensive action
along the China co ast. Thus, Washington effectively froze the Taiwan
Strait against any military action by either side in the 1960s. The
Nationalists' hope of returning to the mainland militarily or of
negotiating a settlement was thus totally frustrated. The government
under President Chiang Kai-shek was not intended to be retained in
Taiwan forever. However, he had no choice, given his defence alliance
with the United States. Beijing, on the other hand, was kept out of the
United Nations and the diplomatie community. I ts concentration on its
own domestic cultural revolution further isolated it from the outside
world, which was watehing US defeat and retreat from Vietnam. In
essen ce , both Chinas were powerless to make their own decision about
the unification. The superpower contest in Asia did not leave room for
any nation to manoeuvre. Thus, two Chinas have existed in practice,
but not in mutual recognition and have been at war since 1947.
However, the matter of highest order is to find Taipei and Beijing in
perfeet agreement in their undivided claim and devotion to the
unification of Taiwan to form 'One Single China'. No international
conspiracy can shake that determination to unite Chinese territories
and citizens some day under one single government.
When President Nixon wisely and correctly reviewed US policies
toward the PRC, Vietnam, and the Soviet Union, the Taiwan tangle
again became a painful reality. For example, the United States could
not simply cast away a loyal ally of two decades. Japan and South
Korea and the defence of Western Pacific Ocean required Taiwan to
 'One Country, Two Systems' 219

remain on the anti-communist frontline in early 1970s. Nixon had to

devise a method of defreezing the Cold War in the Taiwan Strait if he
was to achieve any improvement at all with the PRC in their mutual
relations. First came the Secret Mission of Henry A. Kissinger in 1971.
Then came Nixon's own 'Journey to Peace' in February 1972. In his
joint communique with Premier Zhou Enlai, President Nixon shifted
the US position toward Taiwan by declaring that 'there is but one
China' and 'Taiwan is apart of China'. Washington, however,
preferred a future unification by peaceful means. It clearly indicated
that such unification is 'for the Chinese to decide'. Even today there
has been no evidence ofWashington's intention to be 'a pe ace broker'
between Beijing and Taiwan.
All China experts have long realised the impact on Taiwan by the
first Nixon trip to China in 1972. Taiwan became the embarrassed
victim and deserted ally for the US to bargain away in order to achieve
formal diplomatic relations with the PRC. But China's conditions for
normalisation of mutual relations were quite harsh. They included:
termination of formal diplomatic relations with Taiwan, abrogation of
the mutual defence treaty of 1954, withdrawal of the Seventh Fleet and
US forces from Taiwan and the Taiwan Strait, and expulsion of the
ROC from the United Nations. The United States could not
accomplish all these in a very short time without serious consequences
for its leadership in the Pacific alliances. Thus, formal diplomatic
recognition was not established until1 January 1979 during the Carter
Administration. All four conditions were eventually met. Taiwan
suddenly became isolated in formal diplomacy and left out of the
United Nations, the harsh position the PRC used to be under between
1950 and 1972.
However, US interests in the ROC were so overwhelming and
genuine that Washington was compelled by the Congress and public
opinion to legislate a Taiwan Relations Act in 1979 to protect Taiwan
against extemal military threat and to maintain a uniquely 'unofficial'
official diplomacy with the island. The PRC govemment considers this
Taiwan Relations Act by the Congress an interference in China's
domestic affairs. In essence, the Taiwan Relations Act is similar to the
1954 defence treaty except it does not require the presence of US
forces in the area. Further, the PRC considers American arms sales and
support of the ROC an effective obstacle against the prospect of
peaceful negotiation for national unification. More will be said about
this later. It is, however, sufficient to conclude that the evolution of
legal, political and military status of Taiwan has been closely
220 China Under Deng Xiaoping

associated with the poliey ehanges of the United States toward the
PRC. And the ROC has been either a benefieiary or a vietim of the
ehanges. Stability and peaee in the Taiwan region, and eeonomic
prosperity in Taiwan are, however, the two most positive and direet
benefits of US poliey. This very sueeess has further eomplieations for
Taiwan, the PRC, and the prospeet of Deng Xiaoping's 'One Country,
Two Systems' as a formula for peaeeful unifieation. The 'ball game' of
the future, however, will see the PRC and the ROC to rise above
selfish partisanship or not in their negotiation.

7.2.2 The PRC Overtures for Unitication

Despite severing formal diplomatie relations, the Uni ted States

remains the staunehest supporter of the ROC. The PRC eannot do
anything about it despite strong objeetions. Given the need to
eoneentrate all its resourees on the sueeess of the four modernisations
and the need of growing diplomatie and defenee relations with the
Uni ted States, Beijing will eontinue to develop greater eontaet with
Washington for mutual benefit. Having met with many diplomatie
setbacks and political challenges on the horne front, the ROC, on the
other hand, has remained strong in eeonomie growth and in politieal
stability. All three eapitals, Beijing, Taipei and Washington, seem to
understand eaeh other weIl. In this general state of improved relations,
the PRC sinee 1981 has launehed a persistent eampaign to unify the
eountry. Admittedly, there are several major reasons for the PRC's
eagerness for unifieation. For example, the aging of President Chiang
Ching-Kuo and his general weakening in health, the separatist
movement against the Kuomintang in favour of Taiwan's independ-
enee, and prevention of the island from see king eontaet with the Soviet
Union are a few ofthe serious eoneerns to the PRC. Therefore, in late
1981, the PRC announeed a nine-point unifieation plan whieh
proposed to start bi-lateral negotiation immediately between Beijing
and Taipei.
The nine points are summarised as folIows: 19
1. In order to quiekly terminate the national split, the Communist
Party and the Nationalist Party should begin negotiation in equal
partnership through their representatives;
2. Chinese on both sides of the Taiwan Strait are desirous of mail
service, mutual visits among relatives, and trade. Beijing reeom-
mends that such aetivities should eommenee, including aeademie,
 'One Country, Two Systems' 221

cultural and sports exchanges;

3. After unification, Taiwan can enjoy 'a high degree of autonomy' as
a special administrative region. It can also retain its armed forces.
Beijing will not interfere in local affairs;
4. Taiwan's current social, economic and cultural system will remain
unchanged. Its way of life, foreign relations, ownership of private
and personal property and their inheritance and foreign investment
will not be changed;
5. People in authority and representative personages of various circles
in Taiwan can take up posts of leadership in national political
bodies and participate in running the state;
6. If Taiwan's finance is in difficulty, the national government may
subsidise it;
7. For those in Taiwan who wish to come to the mainland to reside
permanently, the government can help and assure freedom to come
and go without discrimination;
8. The PRC welcomes those in industry and commerce to come for
investment and business. Their legal rights including entitlement to
profits are guaranteed; and
9. All citizens are responsible for promoting national unification. The
PRC welcomes all ranks of people to use all channels and methods
to make suggestions on national affairs.
This announcement has been preceded by many other simple public
overtures to the people of Taiwan for their efforts to help achieve
national unity through peaceful means. 20 The PRC's terms for peace
and unification are reasonable and responsively perceived to meet
Taiwan's situation. However, Taiwan's responses to these proposals
have been completely negative. Taiwan for its part, has different
criteria for peaceful unification. For one thing, the Nationalist
government's responses to the PRC's overtures are based on its past
experience of negotiations with the Communist Party. The ROC has
little faith in Communist promises which they violated each time at
their own convenience. Taipei fears such deception again. In short, the
ROC government often cites the following reasons against the
Communists.z'
1. The communist government's promise to the Tibetans in 1950 was
violated in 1959. It finally became necessary for the Dalai Lama to
escape to India. The social and religious system was destroyed and
the PRC troops moved in to occupy and reform;
2. Past experience with the Communists convinced the ROC leaders
222 China Under Deng Xiaoping

that agreements with them were never kept. Both during the war
against Japan and in the 1949 examples of negotiation they found
the Communists did not keep their promises - the promise to fight
Japan turned out to be a devotion to expanding the Red Army
rather than meeting the enemy on the battlefield, and the reason-
able peace offer in 1949 turned out to be a demand for uncondition-
al surrender and insistence on punishing the ROC 'war criminals';
3. The PRC's pressure to isolate and destroy ROC internationally has
been increased in recent years while tal king deceptively about
agreement for unification. For example, it tried to prevent the
ROC from purchasing arms abroad and establishing commercial
relations in friendly countries;
4. The ROC is in a process of political integration in party leadership
to include local Taiwan representatives in central government.
Democracy in Taiwan must be met with the introduction of genuine
democracy on the Communist side. The 'four cardinal principles:
(especially proletarian democratic dictatorship under communist
leadership ) cannot be accepted as a suitable political and economic
system for China. Sun Yat-sen's doctrine is the only basis for the
unification of China in the future;
5. The lack of political stability in the PRC makes any negotiation and
agreement undependable as a solution. Intra-party faction al
conflicts form a serious cause of political instability. The PRC has
not yet succeeded in an institutionalised transfer of leadership
through elections;
6. The nine-point peaceful unification proposal would be, in practice,
adegradation of the ROC to a provincial level position, not a
guarantee of equal footing during the period of the 'Special
Administrative Region'. This is really a surrender call. At the same
time, the ROC leadership can not fail to note that Beijing has not
relinquished the use of force on Taiwan. Once the ROC has
accepted the pe ace proposal, she could not remain independent in
foreign trade and in purchase of arms abroad because the laws of
the National People's Congress will be applied in Taiwan according
to Article 31 of the 1982 Constitution. Even without any direct
contact on future unification, the PRC has already strongly
opposed the ROC's purchase of arms from the United States. In
essence, the ROC does not trust the communist offer for unifica-
tion. Much can be at stake on ce the offer is entertained as a basis for
negotiation.
 'One Country, Two Systems' 223

On the other hand, the ROC in Taiwan has aseries of counter-

suggestions. They see the ripe time for the start in negotiation will be
determined by the PRC's effort to meet their own suggestions or
preconditions. They can all come under the -heading of unification
through Sun Yat-sen's 'Three Principles of the People', namely,
principles of nationalism, democracy and the livelihood of the people.
This very doctrine of the revolution of 1911 was once the basis for
acceptance of the Communists into the Nationalist Party in the 1920s
and again the basis of the second agreement between the N ationalists
and the Communists during the 1930s in the war against Japan. Mao
Zedong himself personally advocated support and implementation of
the 'Three Principles of the People' by all political parties in China at
the CCP's Expanded Sixth Central Committee Meeting in October
1938.12 The ROC leaders, in short, expect more changes to occur in
mainland China to narrow the major differences between the ROC
and PRC. Former Premier Sun Yun-Suan once declared in Taiwan in a
speech: 23 'If the political, economic, social and cultural gaps between
the Chinese mainland and free China continue to narrow, the conditions
for peaceful reunification can gradually mature. The obstacles to
reunification will be reduced naturally with the passage of time.'
There was no direct response from the PRC to Premier Sun's
speech. Nor has there been any official modification ofthe Communist
Party stand on the 'four cardinal principles' in sub se quent years. The
recent nationwide student demonstrations in the PRC prove the need
for more political and institutional reform under Deng Xiaoping. Even
Deputy Premier Wan Li of the PRC said publicly in 30 August 1986
that the success of economic reform depends on greater political
democracy. Until internal adverse pressure continues to mount, the
ROC is likely to continue to adhere to its well-established policy
toward reunification, namely, 'no contact, no compromise, and no
negotiation'. Unless a new basis for contact or negotiation is found by
the PRC, or the nine-point proposal is revised, reunification talks in
the immediate future are not likely. For Taiwan, the ROC leadership
is determined to preserve the right to maintain their independent
international relations, autonomy, and the right to acquire defensive
arms anywhere in the world. The ROC has reached a high level of
industrial and economic development. It is now undergoing a
democratic peaceful transformation into a two-party democracy. A
new mass-based political party has emerged in late 1986 and has tested
its high popular support in a general election in December 1986 in
Taiwan. This new party's demand for greater democracy is both a
224 China Under Deng Xiaoping

challenge to the Nationalist Party on the island and to the Communist

Party on the mainland. The younger generation in the PRC, given
better education and greater opportunities in the outside world, will
continue to demand an open society with genuine elective democracy
and popular participation. The same remains true on the other side of
the Taiwan Strait. Thus, the real gap between the ROC and PRC is the
gap in political, social and economic development. Once this gap is
narrowed, similarities between the two societies will appear and
reunification will come sooner, provided no foreign intervention and
no indigenous independence movement in Taiwan intervenes.
What are the main reasons for the PRC's promoting unification?
What arguments has the PRC advanced to defend the ni ne-point
peaceful proposal? How does the PRC view the Taiwan Relations Act
of the United States? The following is an attempt to answer briefly these
questions. A major 'documentary paper' presented by Li Shenzhi to an
Atlantic Organisation Seminar has a complete review of the PRC stand on
the Taiwan Tangle.24 It properly asserted that 'Taiwan is China's
problem ... which has emerged because of the American involvement'. It
went on to emphasise the PRC's preference for peaceful unification for
several reasons: (1) to avoid human sacrifice in a civil war; (2) the PRC
needs a peaceful environment to develop its four modernisations; (3)
peace and stability in East Asia is important to China since its opening up
to the rest of the world, especially in the commercial field; (4) China
expects to continue to transfer science and technology from the United
States, Japan and West Europe. Any war in the Taiwan Strait will
interrupt China's dose relations with those states; (5) China is determined
to improve her once-douded relations with countries in Southeast Asia.
War in the Taiwan Strait may adversely affect the improvement of these
relations; and (6) military action will interrupt Taiwan's economic
development.
Li's speech stresses the PRC's formula of 'One Country, Two
Systems' and its unique reasons for application in Taiwan. True or not,
the article asserts: (1) the greatest majority of Chinese in Taiwan
identify themselves with China, despite a few elements who hope for
an 'independent Taiwan' as influenced by the once popular discussion
in the USA of a 'One China, One Taiwan'; and (2) presently, a
large majority of people in Taiwan have many doubts concerning reuni-
fication; but this is understandable because of some ninety years
of physical separation since its cession to Japan in 1895. 'Certain
Americans fail to understand the inseparable feelings among the
Chinese people. Foreigners thus conclude that the people in Taiwan
 'One Country, Two Systems' 225

do not want unification when the problem is merely eoneerning the

eonditions under whieh unification should be eonsummated.' Move-
ment between fear and eonfidenee among Chinese in Hong Kong ean
similarly occur in Taiwan. The main differenee is that Taiwan is
governed by our Chinese people, not the British. Li believed that the
PRC has been very generous to Taiwan whieh will be permitted to
keep its armed forces. The article stresses, however, that the PRC has
never declared 'not to use non-peaeeful means to unify Taiwan',
hinting at a veiled threat.
Li's article blames the ROC government's attempt 'to have two
Chinas under the slogan of one China' and its claim to represent all
of China. The author eritieises the ROC government for the expansion
in semi-offieial relations with many nations to bring into praetiee
two Chinas in substanee in the national eommunity. The United
States is singled out for its double-edged approach toward China's
internal problem eoneerning Taiwan. Li labelIed the US poliey as
'keep her feet in two boats' or 'two track poliey'. On the one hand.
Washington offieially reeognises the PRC as the 'only legal China and
Taiwan is part of it' aeeording to the Shanghai eommunique. On the
other hand, the US government repeatedly declares 'the proteetion of
Taiwan's seeurity' as its own obligation. The United States has
legislated a domestie Taiwan Relations Act to justify its sale of arms to
Taiwan. This poliey ereates and perpetuates several dangerous
eonsequenees: 25 (1) it may induee the PRC's eventual unfortunate
use of non-peaeeful me ans to aehieve unification; (2) it fosters
negative conditions to delay the ROC's readiness to begin negotiation
for unifieation; (3) it indireetly aids those separatists in favour of
Taiwan's independenee movement against the desire of one billion
Chinese people for national unity; and finally (4) the Taiwan Relations
Aet is a direet interferenee in China's internal affairs. The Nationalist
government itself may, in the end, be the vietim of US poliey whieh
also tends to encourage the long-term emergence of anti-government
forees under the disguise of demoeratisation. Li's paper espeeially
attaeks 'the US leaders and government spokesmen for their
statements that the solution to Taiwan 's future must respeet the wishes
of the residents in Taiwan'.26 Li's paper further attaeks the
development during a US Senate hearing in 1984 when a eertain
senator asked an offieial of the State Department what the govern-
me nt might do in ease of a PRC military attaek against Taiwan's
declaration of independence. The direct answer was 'the US would
take the neeessary action under the Taiwan Relations Act'. Li recog-
226 China Under Deng Xiaoping

nises that the majority of the leaders of the Taiwanese independenee

movement are eoneentrated in the United States. Indeed, a substantial
number of them have US eitizenship. Conservative and liberal faetions
in the US Congress and among eertain interest groups either advoeate
support to the Nationalist government to adopt a two-China approaeh
or give 'sympathy or eneouragement to Taiwan's self-determination'.
Both faetions are interfering with or obstrueting China's effort of
reunifieation. Politieally, the US is defending its interests in the
Taiwan region. Aeeording to internationallaw, however, the author
asserts, the USA is in violation in China's domestie affairs by 'keeping
the Taiwan issue frozen'.
What is the future prospeet of unifieation in the next ten years?
Rightly or wrongly, Li's article attempts to speil out three possible
developments: (1) maintain the status quo; (2) peaeeful solution; and
(3) non-peaeeful solution. He goes on to deseribe eaeh of the three
possibilities. He emphasises determinedly that the PRC would never
tolerate a 'foreign-supported independenee movement to take over
Taiwan or foreign powers to take advantage in Taiwan's internal
erises'. A high government offieial in my interview in 1985 declared
that China would take non-peaeeful means against Taiwan if (1) it
declares independenee; and (2) if the Soviet Union is involved. 27 Li's
article asserts eonfidenee that the PRC-ROC negotiation is not
hopeless: 'Under the frozen iee sUrfaee there is often a warm eurrent'.
Taiwan's present position is 'Totally dependent on the United States'.
The United States must, aeeording to Li, ehoose among four
alternatives: (1) eontinue the present poliey; (2) retreat and let the
Chinese people deeide their own destiny; (3) adopt a positive stand in
favour of negotiation; or (4) allow the erisis to emerge to trap it again
in China's internal dispute. In the final analysis, the above alternatives
will either be in favour of reunifieation or of separatism. He concludes
the article by saying 'the United States has plaeed a time-bomb in
Sino-Ameriean relations ... If you partieipants in this seminar ean
eolleetively assist the government to turn off the time-bomb, the
interests of the United States and that of the world will be positively
served,.28
Tbe Taiwan Relations Aet eame under many attaeks in the PRC. Tbe
maj~r reasons are the same as presented in Li's paper eited above.
However, more detailed debates have foeused on US poliey eontradie-
tions toward the PRC. For example, Washington is equally eommitted
to honour the Communique on the Establishment of Diplomatie
Relations of 1978 and to implement the Taiwan Relations Aet. A US
 'One Country, Two Systems' 227

government spokesman when commenting at Congressional hearings

orfor the public record often hastily added that 'we don't see the two are
contradictory' .29 A communique is 'A solemn agreement' between
governments. The Taiwan Relations Act is a piece of Congressional
legislation having no international standing. The US government must
learn to see the differences and choose since it cannot implement both.
The United States has 'de-recognised the Nationalist government and
recognised the PRC government as the sole legal government of
China ... the US has made acknowledgement of one China and Taiwan
as part of China' .30 How can Washington pretend to be blind to confuse
others? The Taiwan Relations Act also contradicts, according to
arguments from the PRC, the obligations undertaken by the United
States in its joint communiques with China in the following ways: (1)
'the security clauses of the Taiwan Relations Act flagrantly interfere with
China's internal affairs and encroach upon China's sovereignty'; (2) many
provisions in 'Section 4 of the Taiwan Relations Act regard Taiwan as a
country' and also openly declares 'the continuation in force of all treaties
and other international agreements concluded by the United States and
Taiwan and being in force on 31 December 1978'. This is absurd because
Taiwan is merely a province of China. The PRC was disturbed by this kind
of agreement during the Senate Hearings on Taiwan in the Spring of 1979
when questions and answers took place between Senators Hayakawa and
Glenn and H. J. Hansell of the Department of State. 31 In short, this PRC
position on Taiwan is a legal one. A superpower , on the other hand, can
always act more politically in its national interest than legally to meet the
international rule of law.
So far our discussion has provided a simple summary of the PRC
overture for peaceful unification, the ROC response in a counter-argu-
ment of its own, and, finally, a PRC attack on the United States over the
latter's interference in 'China's internal affairs' in the Taiwan region.
What about a more objective analysis among some well-known social
scientists of Chinese descent who are observing the development from
North America? Although these academic scholars may not be totally
'unbiased, they each possess a much greater understanding and
judgement than other Chinese people on both sides of the Taiwan
Strait. It adds constructive insight to bring in their general outlook on
the problem of re-unification. My summary below will be, of course, an
over-simplification because of the limits of space.
On the whole, Chinese social scientists in the United States do not at
all dispute 'the inevitable and eventual re-unification' of the PRC and
the ROC. They, too, subscribe to the 'single China approach' which is
228 China Under Deng Xiaoping

politically and legally not disputed among Taipei, Beijing and

Washington. With the exception of political refugees and refugee
intellectuals from Taiwan, no Chinese scholars in North America
have advocated or subscribed to the positions of 'Two Chinas', 'One
China, One Taiwan', or 'the Republic of Taiwan' through a
declaration of independence. Nearly all of them seem in favour of the
proposition of of 'One China, but not now'. Re-unification will come
when conditions of political, social, economic and cultural develop-
ments in both the PRC and the ROC are relatively similar. Thus,
re-unification is seen as only a matter of time. This position, on the
one hand, directly condemns those who advocate the independence
ofTaiwan. On the other hand, it requires both the PRC and the ROC
to honestly and consistently seek what ought to be the proper
conditions to be developed in social, political, cultural and economic
fields in order to move the two systems closer together. Apremature
attempt at unification will not succeed peacefully. The nine-point
overture for negotiation will downgrade the ROC and diminish its
needed identity as it now exists in the international community for
trade, cultural and political purposes. If accepted, the nine-point
overture would subject the ROC in domestic affairs to the supervis-
ion and legislation of the PRC's National People's Congress, the
highest organ of state, according to Article 31 of the 1982
Constitution. Thus, the ROC's rejection is predictable. It ~imply will
not sign its death certificate to give up what it must preserve. Taiwan
is economically strong and can purchase defensive arms abroad,
especially from the United States under the Taiwan Relations Act.
Taiwan can also manufacture a great many of its defensive weapons.
Therefore, militarily it is capable of defending itself far more easily
against an expensive attack which will require a much larger assembly
of arms and men to cross the Taiwan Strait. In addition, there is a
predictable popular unity of all 18 million citizens of the island in
fiercely defending their homeland and property. Given the above
factors, Chinese scholars in the US are able to formulate a general
position on the unification issue as follows: 32

1. Based on its previous experiences in negotiation with the Chinese

Communist Party (CCP) that resulted in the CCP becoming
stronger, the Kuomintang Party (KMT) is psychologically resis-
tant to another negotiation. If the CCP expects to unify the
country via negotiation, it must demonstrate sincerity and avoid
the past duplicity of see king to absorb Taiwan and destroy the
 'One Country, Two Systems' 229

KMT. Unless the CCP is able to remove the KMT's fear of

insincerity, the KMT will not negotiate to sign what it sees as its
death certificate;
2. Thirty years of economic growth has enabled the people in
Taiwan to enjoy an annual per capita income of $US2500 (as of
1982) Vis-a-vis those in the PRC of $US300. Popular elections
have been in practice for decades as compared to none held on
mainland China. Moreover, the political system in the PRC has
not been institutionalised. Cultural development has also been
different. Under such circumstances, pre-conditions to peaceful
unification do not at all exist yet. Both sides must strive to attain
them first;
3. Despite the highest common goal of both the PRC and the ROC
in favour of unification at the end, lack of the above
pre-conditions will make superficial unification less sustainable. If
that should happen, large-scale bloodshed may be too costly for
the nation to bear and foreign powers may thus interfere.
Therefore, both the PRC and the ROC should be devoted to
preparing for the pre-conditions or common grounds before the
start of negotiation;
4. The present peace overture from the PRC appears reasonable and
high-sounding, but behind the reasonableness is the pre-condition
which requires the ROC to abandon its independent sovereignty.
Once Taiwan lost its sovereign independence, and if the CCP
should change the terms of agreement, it would not have the
power to rectify the mistakes. Thus, the current peace overture
should remain unacceptable to the ROC; and finally
5. Because of the past unpleasant negotiation experience, and
because of the divergent developments in the PRC and in the
ROC, successful unification requires a 'confidence building
period' . During this period both should live in peaceful
co-existence and peaceful competition on equal footing across the
strait. They should not interfere in each other's international
relations, especially not to meddle in each other's right of
self-defence (such as purchase of arms abroad). On the PRC side,
greater effort should be devoted to political and economic
modernisation to shorten the gap between them. The ROC, on
the other hand, must pledge not to engage in Taiwan's
independence movement. And within the limits of self-defence
and security capabilities, Taiwan should establish commercial,
cultural, academic and sports exchange with the PRC to increase
230 China Under Deng Xiaoping

mutual understanding. After such aperiod of transition, both may

feel confident and comfortable in peaceful negotiations for
re-unification. 33

7.2.3 Democratisation and the Independence Movement in Taiwan

Taiwan has been under one-party domination since 1945, especially

after the ROC government's removal from Nanking to Taipei in 1949.
The existence of martiallaw in Taiwan since 1950 has denied most of
the basic civil rights and genuine political participation to the citizens
who would otherwise have enjoyed such liberties under the 1947
Constitution. The military garrison command in Taiwan has been fully
empowered by the martiallaw to arrest and punish. It made itselfmost
hated by those who cherish political and civil rights. No mass-based
political party, except the KMT, could be organised. Elections at the
local and county level were controlled and heavily regulated, although
honestly executed and performed in an orderly manner. Municipal
and provincial legislative elections were also instituted two decades
ago. Political stability and regimentation were considered necessary
for general social stability and for rapid economic development. Given
the economic growth miracle through land distribution and the
introduction of agricultural science, and the enormous educational
expansion, Taiwan's lag in political democracy, as a price to pay, has
been weIl worth it as compared with much poorer performance
elsewhere in Asia.
What remains difficult to deal with is the growth of demand for
political participation and for the rights to form political parties among
native born Taiwanese. They have grown up under the Nationalist
Party and are well-educated too. They are in the majority of the
population who are sons and daughters of the native land. Without
removal of martial law, however, they cannot do much short of
committing civil disobedience. Thus, in the last half decade, political
forces in organised groups outside of the Nationalist Party (Kuomin-
tang or KMT) have grown in strength. They found ways to participate
in election politics without a political party of their own. The
government was careful to accommodate their needs at election
time. 34 In recent years, more elections have been held to select a larger
number of representatives to strengthen and expand the Taiwanese
voice in the central government - members of the Legislative Yuan,
the National Assembly and the Control Yuan. Demand for political
participation has also been intensified as a result of other political
 'One Country, Two Systems' 231

developments and incidents. For example, native Taiwanese citizens

are afraid of tbe possibiIity of reunification witbout tbeir participation
in tbe negotiation or witb no regard for popular dissent. Secondly,
many elements tbat bave long been indined toward Taiwan's
independence mayaiso camouflage tbeir true colour tbrougb demands
for political participation. Former citizens of Taiwan now Iiving
abroad and political refugees are equally eager to join tbe native
opposition against tbe Nationalist rule. Tbus, tbe political movement
in favour of democratisation of tbe system bas not been as simple as it
appears. For example, tbe political opposition insists on 'Taiwan's
future to be determined only by tbe 18 million people tbemselves'.
Tbere is strong suggestion bere for separation from tbe future prospect
of re-unification witb tbe mainland.
Political democratisation tbrougb a popular e1ection system bas
been institutionalised since tbe 1950s. Campaigns and elections in
Taiwan bave become, in recent years, major events in tbe Iife of
citizens tbrougbout tbe island. Tbe Nationalist Party bas devoted a
great deal of energy to guide and compete at election time. On tbe
wbole tbe government can count on rougbly 70 per cent of tbe popular
vote. Indvidual non-government candidates collect about 30 per cent.
Campaign irregularities and money involvement seem to be gradually
devaluing tbe purpose of democracy. Witb tbe emergence of a strong
middle dass as a result of economic growtb, demand for participation
bas gone band in band witb tbe demand for social stability in recent
years. Tbe policy strategy of tbe government bas been 'seeking
progress tbrougb stabiIity'. Tbe late President Cbiang Cbing-Kuo in
1986 overruled, bowever, all tbe opposition from witbin tbe ruling
Nationalist Party to allow tbe formation of tbe new Democratic
Progressive Party (DPP). Tbis was a new milestone toward democracy
of two-party politics, sometbing wbicb bas never been possible since
tbe revolution of 1911.
Since Marcb 1986, following a party conference, tbe government
began aseries of reforms encouraging political pluralism. Discussion
took place over tbe rem oval of tbe martiallaw. It become legal for tbe
political opposition to organise local cbapters of 'political policy
forum' and otber election-related groups. Suddenly in late August
1986, representatives of groups of political opposition dedared in
Taipei tbe formation of tbe DPP despite its iIIegality wbile martiallaw
was still in force. Tbe government tolerated it. DPP tbus formally
became tbe opposition party to contest in tbe 6 December 1986,
election. Even more encouraging for tbe DPP, it won twelve seats in
232 China Under Deng Xiaoping

the legislature and eleven in the National Assembly. This was a

surprise victory for the D PP, but not a defeat for the KMT government
which will continue to enjoy an absolute majority in the legislature.
The important progress is that a new dialogue will be advanced at all
times in the legislature by the opposition which is likely to grow and to
integrate into a better and well-organised institution al party, although
it presently suffers temporarily from factional conflicts and from lack
of institutional stability.
In retrospect, one must give credit to the government party for its
readiness to accommodate political demands through reform. How-
ever, the government has set three limits for the opposition party: (1)
it must uphold the 1947 national constitution; (2) it must oppose
communism; and (3) it must oppose the Taiwan independence
movement. Presently, a new National Security Law has replaced
martial law. Another proposal is being debated in the legislature for
passage to allow citizens the constitutional rights to organise
associations among themselves. Since the removal of the martiallaw,
the regular judicial system have come into full play. The garrison
command on the island can not freely make arrests and imprisonments
any more. There is, already a fresh existence of a much greater press
freedom. All these were carried out in 1987. Taiwan in 1988 enters a
newage of democracy as a show case for constitutionalliberty. 35
Whether or not the D pp will live up to popular expectations remains
to be seen. Its internalleadership itself is yet to be dear. Whether or
not the DPP supporters among the voters are willingly and loyally to
support the existing constitutional system is a serious matter of
political test. Ideally, it is hoped that the DPP will rise as a genuine
national party in platform and in activities. Unfortunately, it has to
fight itself from within to streamline the party philosophy in a choice
between being national in scope to share leadership and support with
the Nationalist Party, or remain parochial and working only for the
interest of Taiwan's eighteen million people.
All things considered, democratisation is a continuing process in
Taiwan. Social, economic and cultural developments in the last thirty
years require modernisation in politicalleadership and in institutional
reform. Taiwan is now doing so and is ahead of many countries in East
Asia in this respect except Japan. One author has conduded as
follows: 36

Given the stable, step-by-step manner in which nation building in

Taiwan has been achieved by the ruling party, there is every reason
to believe that the legal and political reforms of 1986 were motivated
 'One Country, Two Systems' 233

by a rational and sincere belief by the leadership that the Chinese

people in Taiwan are ready for more democracy. While the reforms
being made may fall short of the goal set by the ROC's hardest critics
both at horne and abroad, they still are a monumental step forward
in political modernisation.
The sudden death of President Chiang Ching-Kuo in January 1988
may already offset the pace of democratisation. On the other hand, the
Taiwan Independence Movement is a very vexing problem that may
destroy some of the genuine effort toward democratisation in Taiwan.
There is, of course, a long history to the independence movement.
Many of the early leaders went to Hong Kong and Japan to fight the
KMT government from abroad. Before the 1970s many of them died
abroad. The new and younger leaders since 1970 have concentrated in
the USA. They are articulate and energetic. Some have even
conducted urban guerrilla warfare. 37
More seriously, since 1964, there was a declaration for independ-
ence which read: 38
A powerful movement is rapidly developing inside Formosa. It is a
self-preservation movement of the island's twelve million people
who are willing neither to be ruled by the communists nor to be
destroyed by the Chinese Nationalist regime. Riding high on the
universal currents of awakening peoples, we dedicate ourselves to
the overthrow of the Government of Chiang Kai-shek and to the
establishment of a free, democratic, and prosperous society ... that
there are one China and one Formosa is an iron fact. In Europe or in
America, in Africa or in Asia, whether or not one has already
accorded diplomatie recognition to the Chinese Communist Gov-
ernment, the entire world accepts the fact of one China and one
Formosa.
If the declaration were written today, the author would be laughed
at, because the real world that most countries have accepted is that
there is but one China and Taiwan is part of China. In the early
decades many native students who went abroad for study did not
return. Some of them eventually became anti-government and joined
such groups. As one student said: 'Aslong as the KMT rules the island,
I prefer to live in a democratic country'. 39 A large number of them
lived in Japan which was eager to see Taiwan become independent so
as to avoid the communist takeover. Japan was worried about its own
defence if the Communists were to move closer to Okinawa. There
was a large community of Taiwanese in Japan (some 25,000 of them)
234 China Under Deng Xiaoping

by the 1960s, although many had come to Japan before 1945. They
were, however, split by factionalism. Wen Y. Liao, a well-known
leader of them, once said; 'Factionalism? Everyone has a different
explanation and they are all partly right'. 40 Those in the United States
organised themselves as Uni ted Formosans in America for Independ-
ence (UFAI) who had their own publications. Others were scattered in
Canada and Western Europe. While in Europe, they, too, created
their own organisation, Union for Formosa's independence in Europe
(UFIE). Their headquarters was in Paris in the middle 1960s.
Eventually, after most countries recognised communist China in the
1970s, these anti-government Taiwanese gradually moved to the
Uni ted States. Factionalism among them seems to be growing worse.
Another type of younger and better educated Taiwanese emerged in
the forefront in the late 1970s calling themselves members of
'revolutionarynational liberation movement'. They attempted to
adopt the Marxist-Maoist strategy in their Taiwan Independence
Movement (TIM) to terrorise and destroy so as to interrupt normal
urban life. Both in Taiwan and abroad, they spread false propaganda
to embarrass the Chiang regime which, they asserted, 'had pillaged the
land and the people' and was unable to m::tke economic progress. By
the late 1970s these 'radical revolutionary' groups increasingly relied
on terrorist actions to accomplish Taiwan Independence through an
'urban guerrilla' strategy. Altogether some twenty-six incidents of
violence were committed between 1970 and 1983 as documented by A.
James Gregor. 41 The most widely reported violence was the attempted
assassination ofVice-premier Chiang Ching-Kuo in New York City on
24 April 1970 by two members of TIM (Chiang Tsu-tsai and Huang
Wen-hsuing). They tried to bomb power installations (January 1976),
to assassinate Governor Hsieh Tung-ming (October 1976), and to
destroy dams, bus, and newspaper buildings between 1980 and 1983 in
Taiwan. In foreign countries, they killed ROC government diplomats
(Paris, 1983), burned the KMT news department (New York 1979),
damaged China Airline Office (Chicago 1980) or planned arson.
However, such violence did not stir the people and did not achieve
their political purpose. The violent movement itself collapsed. As the
KMT govemment under late President Chiang Ching-Kuo has stead-
ily moved forward to achieve economic miracles, he became more and
more popular among the native people throughout the island. Per
capita income and GNP rose and political violence declined. The
independence movement lost its appeal for the Taiwanese people both
on the island and abroad. Rather it was the struggle to open up the
political system for pluralism in participatory democracy that has
 'One Country, Two Systems' 235

become more attractive in the 1980s. The Chung-li and Kao-hsuing

incidents demonstrated dearly that polarisation and politicisation
within the political system was transforming the system itself. Only
occasionally a sporadic voice is heard about Taiwan's right to become
independent. Any serious separatist movement would invite the PRC
intervention instantly.
In summary, the Taiwan Independence Movement can be divided
into several stages: (1) stage one (1947-64) was aperiod of strong
factionalism and peaceful struggle from abroad; (2) stage two
(1964-83) was the period of regrouping, federating in the midst of
violence, frustration and defeat; and finally (3) stage three (1983-) has
become an open struggle from within the system through election
contests, open street demonstrations and the formation of political
parties. Perhaps the younger generation has become more sophisti-
cated, articulate, knowledgeable and mature. Social changes, econo-
mic growth and the emergence of a strong middle dass seem to be the
major factors in discouraging any form of violent attempt to destroy
the existing political system. Rather , these very factors directly compel
the Nationalist Government to initiate new reforms to meet popular
demands. Such reform has already been underway since 1986. The
prospect for those people living largely abroad and constituting the
backbone of the independence movement looks bleak indeed. The
DPP seems to have taken over the underground movement from
within the island. But a new form of tension of political deve\opment
will remain strong over many difficult issues ahead, as a result of
President Chiang Ching-Kuo's death in 1988. President T.H. Li is both
a Taiwanese and the acting Chairman of the KMT.

7.2.4 Conclusion

Hong Kong and Taiwan are too different to be treated in the same
manner. It is much easier to obtain a joint dedaration from the British.
Hong Kong is much within the PRC's re ach politically and commer-
cially. There is an inevitable continuity of mutual dependence between
Hong Kong and the PRC. None as such exists between the PRC and
the ROC as yet. There is a third superpower, the United States, acting
on both sides of the Taiwan Strait to exercise a balancing influence as it
sees fit. This tri angular relation will not change until the PRC is ready
or is powerful enough to risk a diplomatie showdown with Washing-
ton. Secondly, Taiwan's independent-minded population exerts only
strong but negative influence on the ROC government in the latter's
attitude toward reunification. Thirdly, the open agreement of 'one
236 China Under Deng Xiaoping

China' , which includes Beijing, Taipei, Washington, Tokyo, and most

of the other less involved capitals of the world is itself a stabilising force
for the immediate future. The evaluation of a dialogue on precondi-
tions before negotiation between Taipei and Beijing will continue.
Should there be any sudden or unexpected change of attitude, it will
probably come from Taipei. And finally, the process of political
reform and the challenge of the new Democratic Progressive Party
may yield new understanding and causes for changes on development
in theROC.
All things considered, for Taipei it is worth noting again the
proposition made by Professors Hungdah Chiu, James C. Hsiung and
Kau Ying-mau that exchange of mail, sports, academicians and other
cultural contacts should be seriously attempted between the PRC and
the ROC. In my own judgement, given enough time to allow
confidence to be built up, both will be able to reflect from their present
positions on negotiation. A realisation for 'one China' might come
much sooner if political reforms on the mainland move forward faster
than expected as a result of the recent nationwide student demonstra-
tions for democracy and civil rights. It is my firm view that the success
of Deng Xiaoping's grand politico-economic reform will inevitably
move the PRC closer to the Taiwan experience in both poIitical and
economic progress. Public insistence on the 'four cardinal principles'
will eventually be less and less necessary and meaningful. The interest
in the PRC in studying Sun Yat-sen 's doctrine of the revolution of 1911
may even influence Deng Xiaoping's definition of 'socialism with
Chinese characteristics'. If the ROC succeeds in its experiment with an
open and pluralistic democracy in the next decade in Taiwan, she can
truly be a catalyst for both democratic and economic success on the
mainland. 42 Increase of indirect trade, Taiwan businessmen's desire to
seek investment inside the PRC, and the millions of homesick citizens
visiting the mainland since late 1987 will jointly have an impact on
relations on both sides of the Taiwan Strait.
8 Conclusion: Revolution,
Continuity and Synthesis
8.1 NEW CHINA OF THREE TRADITIONS

The preceding chapters have introduced the rise of Deng Xiaoping to

supreme leadership through many stages and struggles. Readers are
now better able to appreciate the various kinds of problems Deng has
had to confront since 1977. China under Deng began to fight all the
odds in an uphill battle. Some of the policy goals and methods needed
to accomplish his reform he could freely and openly speil out. Other
sensitive issues he did not feel free to announce. By 1977, he was a
mature and well-seasoned politician after having been humiliated and
removed from office several times. He had then few or none of his
former dose colleagues on hand in 1977 to team up and fight. The
leadership authority was still in the hands of Premier Hua Guofeng
and his Maoist supporters. Deng remained in the leadership minority
for two years among colleagues in the party's political bureau which is
the highest real decision making body in China. He has to be very
tactful despite his devotion to reform China in a more comprehensive
way as he expected at long last.
I have outlined in preceding chapters some of the critical aspects
relative to his grand reform. For example, the dynamic nature and
demand of the reform, the crisis of his own ideological void, and the
need to rehabilitate many of his former comrades with Premier Hua's
approval. His search for a new method to begin rural agricultural
reform and to experiment with urban production and enterprise
management reform were at the heart of his thinking. He wanted to
find ways to take steps to convince a dosed nation to open its doors to
foreign countries for broad contacts in a hope to acquire science,
technology, industrial management skill and capital investment. What
sacrifices must be made to convince sceptical foreign leaders in the
West who for more than thirty years had been locked out of China as
enemies? How could a new definition and content be given to his
society of Socialist Legality, Socialist Democracy, Socialism with
Chinese Characteristics and his promise of Collective Leadership? A
host of such problems did not have solutions. He had a strong sense
of new direction to move toward. As a practical realist, he seemed
confident in what he could achieve and what priority had to be foUowed

237
238 China Under Deng Xiaoping

to provoke the least resistance and to maxi mise support from with-
in the policy-making machinery and the population at large. His life-
time experience now became his best inner guiding voice for action
or silence. He needed the 'Four Cardinal Principles' to assure his
opponents - the socialist path, the Communist Party leadership,
Marxism-Leninism-Maoism, and democratic dictatorship. On the
other hand, he insisted on 'practice as the sole test for truth' as a
justification to free his hand for experiment with his 'black-and-white
cat' theory.
As the confident grand reformer sitting on top of a gigantic
bureaucracy, Deng had by tale 1978, finally found a new team of
leaders to set his reform in motion. They did the work, and he guided
their pace for reform and the critical thinking for the next right move:
from the countryside to urban centre, from the party to the
government, and from the undoing of the Maoist cultural revolution to
his four modernisations. Detailed policy planning, policy implementa-
tion and programme supervision and evaluation were the tasks
assigned to others. Deng shared his leadership and decision-making
power with chief supporters. As a former bureaucratic chief adminis-
trator, Deng knew the importance of respecting the organisational
division of responsibility and role assignment. Thus, he could keep
hirnself free from less important decision-making. He had to see far
ahead to discover solutions for new problems. For example, on the
reversion ofHong Kong and the re-unification with Taiwan, he offered
a long-term solution: 'One Country, Two Systems'. To attract foreign
technology and investment, he adopted the practice of the special
economic zone as a non-socialist sector of economic experiment.
These issues required careful judgement in an effort to keep all
conflicting political factions and ideological forces in balance.
To depict Deng's role in the PRC we are forced to view hirn and his
responsibility in historical perspective in order to judge whether or not
he can meet history's approval. The same applied to Chiang
Ching-Kuo in the ROC. There are three major political cultures or
ideologies which have interacted with each other since the turn of the
century. These three political traditions have never ceased to compete
with one another as China struggled to modernise itself to meet the
standard in global revolutionary development. They are the indige-
nous cultural tradition, the new democratic tradition of the revolution
of 1911, and the Marxist Sovietised revolution of 1949. The indigenous
Confucian political tradition is the most prominent and well-inte-
grated institutional system with which China has been totally and
 Conclusion: Revolution, Continuity and Synthesis 239

proudly identified for more than 2000 years. The entire treasury of
Chinese civilisation is the substance of this tradition. But without
change in some parts of this indigenous tradition, China could not
bring itself into the modern world. It was inappropriate to resist the
challenge of foreign science, industry, liberty, equality, and political
democracy. If there was no way to peacefully change the old or
traditional China, a revolution to overthrow the old political system
was the only approach to revitalise China in order to resist foreign
imperialist encroachment which began in the 1890s. So there must be
revolution for a new China.
But how to bring about a new China? What new ideology has been
introduced into China in the last ninety years has resulted in an
excruciating, bitter experience in modern Chinese history . What
kind of a future did the revolution of 1911 accomplish for the people?
Why did that revolution abort? Certainly many Chinese in gen-
eral can emphatically agree that the meaning of liberty, equality,
popular democracy, and constitutional system of government that
they have learned before 1949 are attributable to the revolution
of 1911.
Why was there a need for a Marxist revolution in China shortly after
the October victory in 1917 in Russia? Unfortunately, lack of space
does not permit a lengthy discussion here. However, a simple
overview on each of all three traditions is necessary in order to
appreciate that aH revolutions create changes. Continuity of parts of
the indigenous tradition always remains visible. What is changed and
what remains visible must be synthesised for the new order to integrate
after a major revolution. This is now the task of Deng Xiaoping, to
understand correctly historical continuity. Every major revolution,
including the American and the French revolutions of 1776 and 1789,
has its own ideological tenets to justify the revolt and to bring about a
new way of life. What should be Deng's new ideological tenets after
having seen the failure of Sovietised Marxism in China and the
bankruptcy of radicalleftist Maoism in the aftermath of the cultural
revolution? The new measuring formula that 'practice is the sole test of
truth' is itself not an ideological truth but a working tool in
policy-making choice. It is not an ideological system in itself that can
be used to debate and defeat Marxism, or to repudiate the doctrine of
the revolution of 1911. To meet this ideological vacuum or void, one
must carefully identify, first of all, the three major ideological, or
political traditions. All three have had their supporters and antagon-
ists in twentieth-century China. As a value system in political culture,
240 China Under Deng Xiaoping

what do the one billion Chinese like or dislike after having lived under
all three - the indigenous Confucian tradition up to 1911, the tradition
of the Revolution of 1911, and the Marxist tradition since 1949? I shall
focus below on an over-simplified summary of the political culture of
each of the three.

8.2 The Indigenous Cultural Tradition

As a belief system, Chinese indigenous political culture has two

diametrically antagonistic aspects. Both were equally applied to justify
(1) the exercise of absolute authority by an emperor who received the
'mandate from Heaven,l to rule, or (2) the right of tyrannicide to
justify the next revolution. The first was applied at the moment when
an emperor was crowned to begin a new dynasty hereditarily from
emperor to emperor in the same imperial household. The second was
to support the popular right to revolt and kill a bad emperor, if the
people found physical evidence of his immoral or unethical behaviour.
Revolt was justified at the moment when Heaven had withdrawn the
mandate from an unacceptable ruler of the people. The real test of a
divine statesmanship was easily measured by such clear evidences of
good harvest, tranquil climate, perfect peace and prosperity through-
out the imperial realm. An emperor deserted by heaven was always
surrounded by the opposite evidences, such as earthquakes, other
natural disasters, imperial household corruption and sex scandals or
poor harvests. In short, the emperor must behave mo rally and fairly to
deserve loyalty from all officials under hirn and from the people at
large. The government became corrupt when the imperial household
and the emperor were corrupt. For example, Mao Zedong would have
been considered a tyrant, a bad ruler who created chaos and caused
poor harvests during the time of his rural commune and the 'Great
Leap Forward' in 1958--60. Thus, he should have been killed or chased
off the throne of power according to the practice of imperial political
culture. On the other hand, Deng Xiaoping would be viewed as having
the 'mandate from Heaven' to govern because his government has
brought good harvest, prosperity and domestic tranquility. And thus
the people should offer hirn loyalty and support. There was and still is
such a popular belief to justify whether or not a regime can enjoy peace
which says 'those who win the hearts of the people will succeed in good
government; and those who lose the hearts of the people will be
thrown out'. This quotation has been one of the most popularly cited
 Conclusion: Revolution, Continuity and Synthesis 241

'common watchwords' among the Chinese masses. Its very signific-

ance can be equated with the Western belief in 'the sovereignty of the
people'. More than 2000 years aga Mencius made the following
famous proverb: 'Heaven sees what the people see; and Heaven hears
what the people hear'. This was his theory in support of popular
sovereignty against bad rulers. He wrote again that 'the people are
most valuable (or come first); the bureaucrats come second; while the
ruler is least valuable'. Rulers come and go; they can be replaced. So
can the officials of govemment. But the people's interests are the basis
for government. In short, in tradition al China, there was a well-known
fixed standard of good conduct for rulers and officials to follow. The
people were the judges and were free to draw their own conclusions
about their rulers. According to Mencius, the people can decide on the
application of tyrannicide or not. Unfortunately, this politieal-cultural
artieulation of theory was not institutionalised as a systematie
machinery for 'checks and balances' as in the Ameriean Constitution
or through a well-built election system to turn out of office bad rulers
and the emperor himself.
The other aspect of traditional Chinese politieal culture automati-
cally compelled the people to accept any new emperor on his positive
assertion of having received a 'Heavenly Mandate'. This theory
worked every time for more than 2000 years when a new emperor had
defeated all other contenders or pretenders to the throne. His military,
or political power was so overwhelming or unmatchable by any one
else that his claim to a 'new mandate from Heaven' became
undeniable. Thus, the bureaucrats and the people of the realm had no
choice but to pledge their loyalty and allegiance to him. It resembles
Adolf Hitler's ascension to dictatorship when every resistance had
been eliminated. This practice, as a tradition or a 'constitutional
principle' in tradition al China, was completely institutionalised to
allow the ambitious victor to legitimately establish his new dynasty.
This practice can be compared with the modern British 'unwritten
constitution' whieh is 'written in the hearts' of the British people. This
'unwritten Chinese Constitution' was written in custom and practice
for 2000 years. Thus the 'dynastie cycle' repeated itself dozens oftimes
in Chinese political history .
If this practice seemed perfect, why was there the cause for the
revolution of 1911? Of course, it was not acceptable any more when
China was forced to open up to the Western Nations and Japan. The
old imperial system failed to protect its system's functional integrity.
Besides, foreign politieal ideologies of liberalism, theory of rights of
242 China Under Deng Xiaoping

man and civilliberties, individualism and equality, and, above all, the
doctrines of three-way separation of power and constitutional
government slowly but steadily found their way to imperial China. So
the Chinese societal integrity and political system became bankrupt
before the turn of the century. When constitutional reform under Kang
Yu-wei and Liang Chi' -chiao failed in 1898,2 the only way out to rescue
the nation was through Sun Yat-sen's revolution to establish a
democratic system of government.
What were other aspects of the political culture in the Confucian
system of society? Are any of the tradition al values still strongly
adhered to by the average Chinese people? How much of the traditional
heritage was adopted in the behavioural pattern of many leaders of the
Nationalist party and the Communist Party? Any responses to these
questions cannot be adequate without knowing the nature of the
Confucian society - its structure in human relations, dass stratification
or mobility and the philosophy of life. To begin with, the Confucian
philosophy rests on the belief that every person must play his or her role
in a structured relationship of authority to maintain a balance and
harmony. Any good government must enforce the well-prescribed code
of ethics that is required of each person. For example, filial piety and the
extended family of complex human relationships were expected to
demonstrate the cardinal virtues in human nature. Agentieman of the
society earns his title through learning and his demonstration of dassical
virtues. He occupies a socially elevated position of prestige. He is
entitled thus to enter government service through passing various
imperial examinations. Such a scholar-gentry came into existence in the
Han Dynasty. The learned men, as bureaucratsor aristocrats, governed
continuously while emperors and dynasties came and went. Confucian
precepts of etiquette and rituals were sources of law that was
enforceable by the state authority. The traditional political system in
China was derived from the Confucian concepts of a hierarchical
authority structure. Since the Han dynasty, Confucian teaching became
the official ideology of the imperial state at the expense of others,
induding legalism, Taoism and Yin-yang theory. Or rather, other
ancient schools of learning were gradually incorporated into 'official
Confucian religion of state' under the 'Son of Heaven' as emperor. His
authority was unlimited. The people had little to say against the
emperor, contrary to modern constitutional heads of state.
The Confucian social-hierarchical code of ethical conduct was
fully implemented through education and social organisations to such
an extent that individuals, families, villages, towns, counties, as self-
 Conclusion: Revolution, Continuity and Synthesis 243

sustaining units, governed themselves with alm ost no support or

interference from higher levels of government. In practice, govern-
me nt was an un-necessary evil of corruption and abuse of authority.
There was a 'natural way of democracy in self-government' at the
lower levels ofthe society.3 In the legal and juridical sense, the entire
state power was employed to enforce the Confucian way of life. This
was inevitable because the scholar-officials were themselves 'little
Confucians' by education and conviction. Such a way of culturallife
has survived in many parts of China, especially among villagers in rural
China and among tradition al scholars such as Mao Zedong whose
concept of 'democratic centralism' arrogated all the 'last words' of
authority to hirnself. He and many twentieth-century Chinese leaders
have demonstrated in their behaviour, consciously and unconsciously,
the same legacy of tradition al political culture.
Given the emphasis on humanism, the moralisation of politics, the
training or indoctrination of people in following various codes of
conduct and the monopoly of political power by scholar bureaucrats,
traditional political culture remained antagonistic toward democratic
values and political rights and equality under any modern constitution.
This was the main difficulty for China in modernising through peaceful
reform in 1898. It was more difficult to accept a republican form of
government with officials e1ected after the revolution of 1911 which
overthrew the 3000 year old system of imperial government. Since then
many Chinese leaders have asked whether or not the country should
go for 'total Westernisation'. Or whether or not the traditional
political foundation should largely be retained and China should adopt
only Western science and technology. After the May 4th movement in
1919, some young Chinese intellectuals became convinced that China
should avoid Western bourgeois revolution under Sun Yat-sen and go
directly to ally with the Soviet Union for Marxist revolution in China.
Thus three political traditions soon met in the 1920s to generate
confusion, contradiction, and frustration for the feeble 'and young
republic which was still under the domination of regional warlords.
Even today we see conflicts being generated by mutual exclusiveness
of the three traditions: indigenous culture, Western democracy, and
communist proletarian dictatorship.4 The country naturally cannot
totally shake off its past political thought and behaviour in such a short
time. Many of the past political ideas are an integral part of the
Chinese civilisation in general. Mao Zedong tried to uproot the
tradition al culture through his 'Great Political-Cultural Revolution' of
1966-76, but he failed completely in his attempt. To many contempor-
244 China Under Deng Xiaoping

ary Chinese people, Mao stands a condemned tyrant who was worse
than the First Emperor or the Chin Dynasty, in his radical uprooting of
indigenous tradition in favour of an outlandish, inapplicable and
bankrupt application of Marxist political ideology.
It is now up to Deng Xiaoping to reverse Mao's ignorance and his
leftist radicalism. The revival of Confucian learning in China in recent
years is a good sign of constructive attitude toward the nation's cultural
past. Restoration of Confucian temples and documentation of his life
through movie pictures represent a proper shift in cultural develop-
ment. Deng's 'Socialism with Chinese Characteristics' will in time
demonstrate what characteristics will be discovered and preserved.
Compared with the 'bourgeois revolution' of 1911 and the policy on
cultural development, Taiwan's attitude toward indigenous cultural
tradition is much more in harmony with the goals of life in the past.
Individualism and personal rights of the bourgeois revolution of 1911
are in deep conflict with the proletarian revolution of 1949. They both
must in time find proper reconciliation if the two parts of China are to
be unified peacefully. In short, Deng should be seriously concerned
about China's Confucian cultural tradition and its way of life. Every
nation values its heritage. Chinese civilisation and cultural values are
deeply respected everywhere in the world outside ofthe PRC. Foreign
scholars, for example, admire the Chinese family system and concept
of friendship. Chinese arts, poetry, and ancient cIassics. seem more
valued elswhere than in China. Recent tourism in China should
encourage many Chinese to realise that their cultural heritage and
traditional philosophy of life have attracted millions of foreigners.
Any revolutionary excess and the blind condemnation of the past tend
to misjudge the past cultural achievement. Creativity in arts and
literature should be insulated from any revolutionary condemnation
for its immediate political purposes, such as the wholesale condem-
nation of the past during Mao's cultural revolution of 1966--76.
Future Chinese leaders must realise the need for cultural pluralism.
There must be some cultural independence from political persecution
for the sake of preserving the culture itself. The Chinese people will
continue to love their past culture and will protect the cultural values
as part oftheir reallife. Politics must not be in command of everything.
Modernisation itself will inevitably lead to cultural pluralism. Deng's
reform policies in politics and economics will still come into conflict
with indigenous tradition, unless the leadership realises the need for
cultural independence.
 Conclusion: Revolution, Continuity and Synthesis 245

8.3 THE LEGACY OF THE REVOLUTION OF 1911

Sun Yat-sen was the first Westernised Chinese leader who devoted his
entire life to change imperial China through political revolution, or the
overthrow of the Manchu dynasty. In its place, a republic of China was
to be established to achieve modernity for the nation. This task
included, among other things, the following:
1. Development of anational self-consciousness to resist foreign
aggression and to abolish the 'une qual treaties'. This policy would
bring China to a level to be treated with equality among nations
under internationallaw;
2. To create a democratic political system to allow the citizens, for
the first time in history , to elect their leaders in government at all
levels. This would have made government responsible to the
average citizens. Failing in their Constitutional duties, the elected
officials could be recalled from offices;
3. To introduce a peaceful system of land reform to divide land
equally among the tillers. This would have stopped rural exploita-
tion by landlords. His revolution proposed a mechanism to regulate
industrial capital to prevent the evils of Western unregulated
capitalism which had occurred in the nineteenth century;
4. To attract international investment and technology to help develop
Chinese industries. This would have kept China open to the outside
world and also would have enable China to contribute to
international peace and security.
In short Sun Yat-sen's doctrines of nationalism, democracy and the
livelihood of the people were three tools to achieve modernisation for
China. But, for a variety of reasons beyond his control, his revolution
failed. Sun himself listed so me reasons as folIows: (1) Foreign
imperialists intervened on behalf of their existing special privileges
and interest in China as guaranteed by the 'unequal treaties' which
they had imposed on China unilaterally; (2) many foreign states
supported Yuan Shih-Kai, the traitor of the revolution, and other
regional warlords who succeeded Yuan upon his death in 1916; and
most important of all, (3) his followers as revolutionary leaders failed
to understand the task of the revolution and to reconstruct a new nation
of democracy, industrial development and national unity through new
nationalism. Thus, his followers were divided aimlessly, factionalised
over minor disagreements, and disappointed with the consequences of
246 China Under Deng Xiaoping

the removal of the imperial dynasty. The country plunged into

lawlessness, and this allowed Yuan Shih-Kai's followers to continue to
exploit the people and to feed foreign powers' ambition for their own
protection. Thus Sun was disappointed himself and started the second
revolution against Yuan and later his remnants.
Sun himself did not become, like General George Washington,
actual ruler of the country. The warlords and their governments, after
1911, were formally recognised by foreign countries. But the purposes
of his revolution to make China strong, independent and prosperous in
the community of nations were eventually accepted by the entire
nation, including the Chinese Communists who joined the Nationalist
party in 1923 in order to defeat the warlords and to unify the country.
In essence, Sun's hope for Western democracy, liberty and equality,
was indisputable. The Chinese intellectuals agreed, especially during
and after the May 4th Movement of 1919, that China needed
democracy and science. However, some young students after 1917
became interested in the study of Marxism. They eventually secretly
organised the Chinese Communist Party in July 1921, in Shanghai.
Although Sun died in 1925, his revolutionary followers soon unified
the country militarily in 1928, with some effort of the Communists.
Soon Sun's 'Three Principles of the People' became 'the bible' for
national reconstruction. China under the Nationalists went through a
decade of rapid development in many fields, especially in education,
transportation, rural assistance, and abolition of most of the 'humiliat-
ing unequal treaties'. However, after Chiang's purge of the Commun-
ists in the Nationalist Party in 1927, the country remained in a new
state of civil war. The J apanese agression in China broke out in 1931 in
the Manchuria Incident which provoked China into military armament
in anticipation of a large-scale Japanese aggression, which occurred in
July 1937. China was at war again with Japan until1945. Civil war was
renewed in 1947.
From 1927 to 1949, the Nationalist Party was in control of China.
Indeed, they were confronted with many insurmountable problems,
such as the Japanese aggression before and after 1937 and the civil war
with the Communists whose aims for the nation were never weIl
understood except their struggle to oust the Nationalists from power.
Propaganda from both the Nationalists and the Communists appeared
confusing to the masses. Victory for the Communists after 1947 was
inevitable in view of the post-war run-away currency inflation, popular
antagonism toward the renewal of civil war, greed and corruption of
the Nationalist officials, and their loss of popular support. Therefore,
 Conclusion: Revolution, Continuity and Synthesis 247

by 1949, its armed forces collapsed in indiscipline and surrendered one

after another. Sun's doctrine never had a chance for implementaion.
How does one evaluate the democratic revolution of 1911 in view of
the total chaos in twentieth-century China? The Nationalists came and
went in only twenty-two years on mainland China, but its renewal and
rejuvenation in Taiwan has lasted thirty-nine years. This success must
be taken seriously; it cannot be irrelevant to the development in the
PRC. On the other hand, Mao Zedong's Marxist revolution of 1949
also came and went in twenty-seven years. Deng Xiaoping initiated a
new era of peaceful reform. This, too, must be taken seriously in an
analysis·of future development. Both the Nationalists and the
Communists have each created a tradition of its own.
Sun's doctrine of revolution, unlike Marxism, has never been
seriously criticised by any Chinese intellectual. Even some eighty
years ago, he was able to propose precisely wh at China then needed
and still needs today. His doctrine emerged from three sources: (1)
China's tradition al culture and institution; (2) modern Western
democratic theory; and (3) his own innovation and integration of
relevant theories and concepts applicable to China. For example, he
praised highly the traditional Chinese civil service system to place
government in the hands of educated scholars. He also preserved
the Chinese traditional institutional system of censorship. Thus he
was able to propose a 'Five-Power Theory' of government. 5 Western
concepts of judicial independence and separation of power between
the executive and the legislative were adopted to introduce a genuine
form of democracy in China. He did not blindly condemn Chinese
culture but opposed, for example, such practices as superstitions and
the intolerable inequality between man and woman. He advocated the
need for strong nationalism as a me ans of national survival only, but
not as a tool of aggression against others. Sun was opposed to the global
cosmopolitanism of the strong nations which would lead to national
self-destruction of the weak nations. He advocated aglobai practice of
national self-determination against foreign colonialism. To Sun, the
recovery of 'national spirit' was the only way to achieve internal unity
against external aggression. Chinese 'national spirit and heritage'
consists of 'loyalty to state, filial devotion to parents, kindness and
love to fellow citizens, justice and harmony in human relations and
peace to the world'. 6 Traditional morality and ancient Chinese
learning must be fully and eagerly revived. He advocated the revival of
Chinese political philosophy as incorporated in the ancient 'Great
Learning'. Contrary to Marxism, Sun's concept of nationalism for
248 China Under Deng Xiaoping

unity and salvation was easy to understand and to appreciate by all

Chinese. Even Mao Zedong supported hirn on this.
On the theory of democracy, Sun read J. Rousseau, J. S. Mill and
John Locke. He was opposed to autocracy, despotism or the
justification for the existence of any form of privileged dasses. His
greatest contribution, however, was in his dear analysis of the
differences between his Principle of the People's Livelihood (Min
Sheng) and Marxism. On 3 August 1924, when Sun delivered his first
lecture on this subject, he said that Karl Marx had been wrong in
advocating materialistic determination of human history and human
behaviour. Sun considered Marx merely an economic 'pathologist of
social disease', not a 'physiologist for its cure'. His own theory of
livelihood of the people is the real cure of rampant capitalism. While
Marx had foolishly advocated dass warfare, Sun, on the other hand,
insisted on the need for peaceful dass reconciliation as the source of
social progress. To prevent capitalist monopoly, Sun proposed a
mechanism of progressive taxation on the one hand and public
ownership of public utility services on the other. His policy on land
control and 'land to the tillers' represents a peaceful alternative to
Marxist violent confiscation of private property. Sun's approach was
more successful and practical, therefore, than that ofMarx, Lenin and
Mao Zedong: Mao's rural commune failed while Taiwan succeeded in
its land reform. His doctrine has been implemented with flexibility by
the Nationalist government to bring about an economic morale of
prosperity and high per capita income as compared to the deplorable
suffering of the Chinese people under Mao's rule. In his lectures in
1924, Sun specifically warned that Marxism was inapplicable to
China. At that time, there was little or no industrial development or
capitalist threat in China. He was sure that China could easily prevent
all the evils of the free enterprise economy. In condusion, it is fair to
say that much of what he advocated has proved to be accurate and
useful. He was a moderate revolutionary, a reconciliationist of
cultural differences and a progressive thinker who, unfortunately, did
not live to see the revival in the study of this revolution of 1911 in the
PRC sixty years after hisdeath.
Furthermore , Sun was a man of peace. He negotiated for peace with
Yuan Shih-Kai in 1912 to avoid more blood. To satisfy Yuan's
amibition in exchange for peace and for Yuan's acceptance of the
new republic, Sun resigned his post as provision al president of the
young republic in March 1912. Thirteen years later, he journeyed
from Canton to Beijing via Japan while ill, in order to unify the country
 Conclusion: Revolution, Continuity and Synthesis 249

by peaceful agreement with the warlords to avoid a military expedition

which was being prepared by Chiang Kai-shek in 1925. Unfortun-
ately, he died at the warlord's capital on 12 March 1925. Since then,
Sun has been venerated by the entire nation. No other modern
Chinese leader of any political persuasion has been able to match his
knowledge, personality, tolerance, vision, sincerity, and gracefulness.
Rad China had his helmsmanship for two more decades, many
tribulations, civil wars and national sacrifices might have been
avoided. In the early 1920s, people of all classes in China, youth and
intellectuals, especially the communists, believed in him, supported
his leadership for the realisation of his Three Principles of the People.
Rad it been implemented while he was still alive, it could have brought
to China the long-expected democracy, rapid industrial development,
and the general modernisation of the country much earlier than what is
now happening under Deng Xiaoping. Sun believed in popular
democracy and basic fundamental human rights. Re was not as
doctrinaire as Mao Zedong was, who wanted to 'brainwash' and
punish his opponents. Nor was he aleader who allowed a violent
temper to get in his way. What he stood for, such as a pluralistic open
society with constitutional rights and freedoms guaranteed for all,
seems to be exactly what the Chinese students and intellectuals are
demonstrating for in 1980s in the streets of Shanghai and Beijingo They
do not want science and technology without democracy and freedom.
Likewise, Chinese people in Taiwan today are demanding political
reform - the removal of martiallaw, grant of freedom of association,
press freedom and a genuine two-party system of democracy. Whether
under bourgeois democracy or proletarian dictatorship in China or
anywhere else, people of all races are crying out for the opportunity to
speak their minds. Minds cannot be 'brainwashed' forever. This, in
short, is the message of Sun Yat-sen and his revolution of 1911.
Taiwan's experiment under the late Chiang Ching-Kuo may provide
the required result. A few events in Taiwan deserve discussion.

8.3.1 The Emergence ofthe DPP in 1986

The emergence of the Democratic Progressive Party can be counted as

one of the most eventful surprises in the ROC since 1949. Given the
existence of martiallaw and the potential for war in the Taiwan Strait,
development of political opposition against the Nationalist Party can
be divided into five stages: 1) 1945-51, the period of confusion,
instability and ambiguity in ROC's external relations when the
250 China Under Deng Xiaoping

government adopted a severe attitude against the emergence of any

political opposition: 2) 1951--61, still no opposition forces emerged
after an aborted effort by Chen Lei to organise a second party, and the
government eagerly reached out to influence every existing group on
the island; 3) 1961-71, when Wen-Shing magazine alone was able to
voice some intellectual liberalism on the one hand, while the
government was scoring in economic and social progress simultan-
eously; 4) 1971-81, a critical stage when new anti-government
magazines and greater participation in election politics opened up new
channels to reach the masses whose favourable curiosity brought
warning and alertness to the government. Both street demonstrations
and arrests were occurring; and 5) 1981-present, there is now a greater
number of political participants. a large number of anti-government
publications, faction al developments among the opposition forces and
press freedom, etc. And the government party has become more
used to criticism and willing to share elective offices with opposition
groups. Opposition forces seem to represent exclusively the interests
and sentiment of the 13 million local population vis-a-vis the 5
million people who followed the KMT to Taiwan in 1949. Potential for
physical street violence has been apparent. The line of political
division is unfortu,nate. With the OPP leadership at their disposal,
many Taiwanese young voters can compete openly for popular
support. The following factors may help to promote non-violence: 1)
President Chiang was determined to share power and leadership
peacefully within the constitutional framework; 2) the new party
appears determined to follow peaceful elections to acquire political
power, and 3) Taiwan's friends and foes abroad do not want the island
to become embroiled in violent chaos. Friendly count ries and the
tourist industry hope to continue their profitable economic and trade
relations with Taiwan. Besides, Taiwan is not another Philippines.
There is rapid economic growth and the standard of living is high.
Almost everyone has a strong stake in 'progress through sta-
bility', and an emerging middle-class majority is likely to protect its
vested interest through peaceful transition in politics. It would,
however, be suicidal if the new OPP failed to integrate in the coming
years to become a rational and effective party. It will also suffer from
incalculable difficulties if it fails to meet late President Chiang's wishes
and, especially, his three conditions: 1) be supportive of the Consti-
tution; 2) be anti-communist in policy, and 3) reject the inde-
pendence movement. Oespite an internal factional struggle, all the
leaders of the OPP must not follow the separatist movement. The
future of a likely healthy two-party democracy depends on the
 Conclusion: Revolution, Continuity and Synthesis 251

DPP's capacity to grow to provide alternative government peacefully

and without inviting external interference. For example, its party pol-
icy platform and constitution, as it now stands, can lead to many future
difficulties. The DPP insists on 'Taiwan's future to be determined by
the residents only' and on its 'opposition to any agreement between
the CCP and the KMT on Taiwan's future'. It has so far failed to cut
clean from those advocating Taiwan's independence from China.
Nor has the DPP platform declared, beyond doubt, its support for the
ROC constitution. These are fundamental issues that concern all
Chinese everywhere, especially those high officials in the PRC and the
ROC. The future of a healthy party system now depends on how the
DPP guides itself. It may alienate itself from the support of the
middle-class majority who are also native-born Taiwanese in origin-
1987 may prove to be more critical to the expectation of a two-party
democracy than any previous year. 7 The development within the DPP
leadership will be less critical if its moderate faction can rise to the
majority in intra-party decision making. N. S. Kang, the well-known
leader of the moderate faction, is far more dedicated to building a
democratic infrastructure in the electoral and legislative process than
on other issues. But its radical wing is eager to confront the KMT and
more willing to rely on street demonstrations to achieve its goals. 8
The other danger to democracy in Taiwan may emerge from the
conservative wing within the Nationalist Party. Since September 1986,
when the DPP was first organised in violation of martiallaw, it has
tried to convince the government to take severe measures against the
'illegal party'. These conservative elements can make it very difficult
for the ruling party to tolerate and cooperate with the DPP. As
die-hard anti-communists, the leaders are incapable of tolerating those
who advocate Taiwan's independence. Now President Chiang Ching-
Kuo is no longer at the helm, they may not be able to interrupt the
KMT decision making. In future years, however, they must be dealt
with by President Li. If the DPP deviates from its present policy course
in favour of separatism. President Li will have a new crisis on hand
against his fellow Taiwanese of the D PP.

8.3.2 The KMT Stand on Reunification

Despite the peace overtures from the PRC, and so me US$700 million
of indirect trade through Hong Kong, President Chiang Ching-Kuo's
policy toward the PRC was still the 'three nos approach: 'No
compromise. No contact and No negotiation'. He was prepared to wait
252 China Under Deng Xiaoping

'until the Communist Party is overthrown,.9 On the other hand, the

PRC intensifies rapidly its campaign for early unification. The Beijing
authority has designated unification as one of its major agenda issues
for the 1980s. Even lowering the ROC flag and hoisting the PRC flag
would seem to satisfy the PRC government. Many people in Taiwan,
under the existence of martial law and the restriction on freedom of
press, were deeply concerned about the deadlock but unable to speak
out. Such anxiety for the citizens of Taiwan today resembles that of
Hong Kong a few years ago. In many ways, the people of Taiwan have
both doubt and fear concerning the PRC's eventual decision to attack
Taiwan with military forces. They simply have many questions. The
ROC today maintains a force of 500,000 men who are weIl equipped
and trained in battlefield experience. It could be suicidal for the PRC
to launch a military attack without interrupting its own four
modernisations. Thus, there is no solution is sight. Professor C. T.
Chang of National Taiwan University estimated that at least 90 per
cent of the people in Taiwan are anti-communist. However, a large
majority among them are in favour oi trade, mail and shipping services
directly between Taiwan and mainland China. They are also in favour
of mutual exchange visits of among newsmen, academieians and
families. According to the current policy, however, anyone who trades
direetly with the PRC ean be tried for treason and subjeeted to the
death sentence. But how long can the ROC restrain the pressure for
contaet from within and without? What will happen now when
Chiang is no longer in office? How to respond to the DPP
stand against any negotiation by the KMT government? Who ean
say when the PRC decides to use military means to aehieve uni-
fication? Can the PRC succeed through diplomatie ehannels to deny
Taiwan's arrns purchases from abroad?lO If the democratisation pro-
cess in Taiwan creates uncertainties and anxiety for the PRC, it may
very weil adopt the military option to prevent a future erisis in Taiwan.
For example, many Taiwan citizens are eager to replace the eurrent
members in the Legislative Yuan, Control Yuan, and the National
Assembly who were elected in 1947 on the mainland and have long
lost any claim to represent any one. If the KMT should allow them
to be replaeed suddenly and totally through loeal elections in
Taiwan, the KMT will most likely lose its eontrol of these organs.
A political crisis for its legitimacy to govern would become imminent.
But there is, indeed, no valid justification for this 'longest parlia-
ment' to last any longer . They are very old people now and phys-
ically too weak to attend to their duties vigorously. Even their
 Conclusion: Revolution, Continuity and Synthesis 253

gradual death is rapidly contributing to an emerging crisis. Secondly, now

the press controls are lifted, public discussions of many sensitive issues will
be aired. This new freedom of inquiry may also create problems and crises
that cannot be resolved. In short, many issues in Taiwan tend to generate
crises, tensions, and frustrations as a result of democratisation and party
politics in a pluralistic society that may hasten the PRC's choice of a
military option to prevent deterioration on the island.
Political opposition forces, including the DPP, may not be quite as
expected as interested in democracy itself. They are undoubtedly
more interested in the transfer of political power through the election
process. The KMT leadership, they believe, can be replaced or ousted
in a future election defeat. Its only way to retain power may lie in
military control through declaration of an emergency which is legally
possible under the new National Security Law, which was passed in
1987 to replace the martial law. However, all the enlisted men and
their officers below the rank of generals are native-born Tai-
wanese who will be forced to choose in their loyalty between the KMT
and their own indigenous brethren. Such a future state of affairs for the
KMT is very unpalatable. In short, it will lose political power and
leadership because of its own success in democratisation which the
KMT cannot afford not to promote. In either case, the KMT, being on
the minority side, may in time lose power unless it is able to integrate
itself into the local majority to compete on equal footing with the D PP.
Some overseas Chinese writers assert that the KMT itself, in fact, is
promoting Taiwan's independence. 11 They concluded that the only
way out for the KMT is to negotiate with the PRC for a long-term
peaceful co-existence. On the other hand, the PRC's Chairman of the
National People's Congress (NPC), Peng Zhen, has declared that
'Beijing rests its hope on the KMT and also on the 19 million Chinese
people in Taiwan for contacts and discussions for reunification'. 12
Peng emphasised in his speech the PRC's readiness to receive
representatives of any party, organisation and individuals who are in
favoUT of reunification. This represents a major shift from the PRC's
previous position to negotiate only with representatives of the KMT.

8.3.3 Succession issue in Taiwan

This issue legally found its constitutional answer in the 1984 presi-
dential election. President Chiang chose Li Teng-hui as vice-president
of the ROC. Li had a strong academic background before becoming
the mayor of Taipei and the governor of Taiwan. He is a native-
254 China Under Deng Xiaoping

born Taiwanese. Beyond this limited experience, he has no other

credentials to compete with other notables who are far better prepared
in their experience, ability and leadership in the Nationalist Party. On
the other hand, the power and leadership of the future presidential
office depends on who occupies the seato When the late President
Chiang Kai-shek held the title, the office was the most powerful seat in
the leadership. His successor, C. K. Yan, did not have the same
command of power. When Premier Chiang Ching-kuo moved up to
the presidency eight years ago, the office again became more
powerful. In Chinese politics on both sides of the Taiwan Straits, the
informal arrangement is often more important in the exercise of
leadership role than the constitutional designation. In fact, whoever,
exercises the supreme power in the ruling party commands the highest
authority to act despite what office in the government he may hold. We
must consider Vice-president Li's authority to rule in the future
through his relations with the KMT Party. Because of his lack of elose
relations with the party, his authority as president of the republic
under the constitution may not carry him too far. Since 1988, he has
become the president. Therefore, there is no succession problem. The
KMT elected him the Party Chairman also.
Many question can be asked about President Li. For example, how
has he been groomed to tap various sources of power in prep-
aration for his future leadership? How is he ranked inside the
KMT internalleadership role against him? Is he by nature or training a
great fighter for power? How would the new DPP opposition think
of his as president? There are no answers yet to these questions. The
general informal discussion in Taiwan gives a sense of crisis of
transition in leadership beyond late President Chiang Ching-Kuo. In
fact, many other individuals may be competing for the position and a
better opportunity to become the real future decision-maker in the
party and the government. This very uncertainty produces anxiety and
crisis in future leadership. President Li appears in charge as both the
ROC government leader and the KMT party Chairman.

8.3.4 Conclusion

The legacy of the revolution of 1911 may be summarised as follows. It

was a short period of experiment in democratic government. Yet
through Sun's doctrine and his influence, modem China leamed about
the Western democratic system of govemment, individual dignity and
human rights in an open and pluralistic society. The Republic of
China, under President Chiang Kai-shek, fought to unify the country
 Conclusion: Revolution, Continuity and Synthesis 255

after 1925, and to resist and defeat Japan in the end to regain Chinese
sovereignty over Taiwan. During the 1930s, China regained sovereign
control over her lost rights through renegotiation to abolish the
'un-equal treaties'. These included customs rights and foreign conces-
sions in many coastal cities. He expanded education, built transporta-
tion, and made preparation against foreign aggression.
Due to its own corruption and other factors, the ROC government
was defeated in 1949 on mainland China. But Sun's legacy has
continued in Taiwan. The ROC government succeeded in peaceful
land reform and in economic development. Now the experience of
success should be taken as positive reference in China's modernisation
under the communist leadership. Taiwan's success has already become
a model example for many developing countries in the world. It must
not be sacrificed after reunification in some future time. Taiwan is part
of China; so is the legacy apart of Chinese experience in modernisa-
tion. Sun's doctrine of revolution has brought prosperity to the people
in Taiwan. It should be of aid and reference to Deng's 'Socialism with
Chinese Characteristics'.

8.4 SOCIALlSM WITH CHINESE CHARACTERISTICS

Before some concluding remarks on the communist legacy or tradition

in China, it is important to remind oneself that the world knows China
by her Confucian civilisation and traditional institutional stability in
social structure and in political transfer of dynastic changes through
the 'Mandate of Heaven'. The glory of China was partly from its
cultural achievement and partly from its well-structured system of
human relations which centred on the extended family with rigid
discipline. This traditional way of life was not feudalistic or antiquated
in the usual sense. The values and style of the Chinese traditional way
of life are on the contrary, rich and humane. The cultural system of
China for 2000 years remained unaffected, pure, original and
continuous until the 1840s when the country was forced to open up to
the outside world. Sun Yat-sen's doctrine of revolution aimed at
preserving China's own cultural identity, while learning from the
democratic West those things China lacked - popular sovereignty,
liberties and equality, science and industry. Chinese culture, to Sun, is
the foundation of her 'national spirit'. His theory of Chinese
nationalism is based on it. The leaders of the revolution of 1911, from
all factions and including the late President Chiang Kai-shek and his
256 China Under Deng Xiaoping

son, campaigned to preserve Chinese culture through Chiang's New

Life Movement in the 1930s and in the 1960s again in Taiwan through a
Cultural Renaissance Movement. Contrary to this, Mao Zedong
launched a cultural revolution in 1960s to condemn Confucius and
Chinese culture.
Secondly, despite the different policies toward the indigenous
culturallegacy, the leaders themselves of the revolutions both of 1911 and
1949 acted in their behavioural mode very much like those in traditional
China. They think in the same pattern as the ancients did in their.concerns
and motivations. Many leaders of both revolutions could not even
modernise and modify their own habits against personal misuse of
authority. Revolutionaries at all levels before and after 1949 have tended
to demonstrate, for example, the following indigenous traits: (1)
Nepotism toward relatives and friends; (2) imperial and authoritarian
attitudes toward the rule of law; (3) personalisation in major policy
decision-making in disregard of institutional settings and administra-
tive procedure; (4) balancing offactional conflicts among subordinates
relative to maximisation of their own personal exercise of power and
leadership and (5) lack of control of their own violent temper- to name
just a few. These tradition al traits are demonstrations of personal
trust, selfishness,' skills, and strategies and tactics in leadership and in
politics. And revolutions cannot change much in cultural depth and
substance.' Revolutions in an ancient but well-developed cultural
environment can only change the superficial and the obvious things to
satisfy the grievances of the revolutionaries. Whatever their success or
failure, Sun Yat-sen and Chiang Kai-shek are, in many ways, highly
respected statesmen for their respect of Chinese culture. But Mao
Zedong and the Gang of Four of the cultural revolution are generally
condemned by many Chinese for their 'excessively untraditional or
anti-historical behaviour'. China under Deng Xiaoping has clearly
reversed Mao's mistakes in many areas - in education, in rural and
urban reform, in intellectual policy and governmental reform. It is
likely that future historians will judge Deng as one of the most
outstanding revolutionary statesmen in modern China. He has saved
the Communist Party. He is correcting the mistakes committed by the
party before 1978. Consciously or not, he is following the message of
the traditional legacy - the virtues of moderation and a sense of
historical relevance.
Thirdly, Deng owes it to the one billion Chinese people to develop
and describe his own ideology of reform. 'China under Deng' cannot
be sufficiently understood or even correctly observed without the
 Conclusion: Revolution, Continuity and Synthesis 257

guidance of an ideology explaining his reform. This he has not yet

provided. Since 1978, China scholars throughout the world have heard
from Beijing that Marxism is not applicable to some of the
contemporary problems of China. They have heard also that 'practice
is the sole test of truth' and Deng's promises to build 'socialist legality
or rule of law and socialist democracy, different from Western
democracy'. There are great difficulties in ascertaining what these
terms me an . On the other hand, the four cardinal principles seem to be
'unpredictably applied' from time to time either in severity or in
leniency. Without clarification, the people cannot follow his leader-
ship with assurance. For example, the nationwide student demonstra-
tion in January 1987 for 'democratic reform' was either good or bad,
tolerable as appeared at first or intolerable as later proved true. 13
Official confusion leads to actual frustration. Perhaps, the time is not
right yet in intra-party factional politics for Deng to announce an
'ideology of reform'. If the four cardinal principles are followed
literally (Democratic Centralism, Party leadership, socialist path, and
Marxism-Leninism-Maoism), there would be little hope for any
genuine degree of democracy in the foreseeable future. If so future
student street marches are likely to be unavoidable while the political
system remains closed. Finally, without mutual adjustment in their
political ideologies, the ROC and the PRC can not easily achieve talks
on their unification which both are pledged to carry out eventually.
Having made these three aspects of observation, the next conclud-
ing remark is on the success and the problem of Deng's economic
reform. Generally speaking, the success of the last ni ne years of
reform in both rural and urban areas have greatly improved the living
conditions of the people. There is strong incentive to work and manage
for still greater achievement in the economic fields. Economists and
policy officials have acquired greater experience in the past eight
years. They are, with much confidence, able to accurately forecast the
performance of the economy. However, much more remains to be
dealt with in continuing the reform between macro-economic planning
and micro-economic execution throughout the economy. New prob-
lems have been discovered in the relation between economic decision-
making on the other hand and political interference on the other.
Separation of the communist party from the operation of the
government remains critical to reform success. Planning on 'socialist
command economy' may still inadvertently or intentionally affect the
individual and the collective sectors of the economy. Balance in the
economy between the consumption needs of the one billion people
258 China Under Deng Xiaoping

and capital accumulation requires constant adjustment and correc-

tion. Great debate goes on concerning the ownership of means of
production. Continuing improvement over enterprise autonomy and
its relation to macro-economic planning requires more experience,
better understanding and dear division of authority and responsibility.
Economic performance can be divided as follows: (1) the recent
economic success; (2) continuing economic problems; and (3) a short
macro-analysis of the economic reform.

8.4.1 Recent Economic Success

Today in China, the people have more purchasing power. Stores are
full of consumer goods. Demands for consumption remain higher
than the market can supply. Prices of rare articles rise faster because
there are more consumers who want them. The trend is toward market-
isation and privatisation on daily goods and services. There is much less
regulation in this daily service economy. Food grain growth and cotton
production both are so greatly increased that a rationing system is no
Ion ger used. Statistics show great success in many production fields.
1986, for example, registered an overall steady growth. There was
good harvest in the rural economy. Total grain output was reported at
390 million tons, an increase of 10 million tons over the previous year.
Livestock breeding, aquaculture and fishery and many other con-
sumer goods all registered satisfactory growth. 14 The total agricultural
output was expected to reach 303.8 billion yuan, a 4.4 per cent growth
over 1985. Rural industry grew in 1986 by 21 per cent more than in
1985, reaching a total of330 billion yuan. In industry, 'overheating', as
in the previous two years, was arrested. The total industrial output was
expected to reach 980 billion yuan with an 8.7 per cent gain over 1985.
Production of major raw materials, steel, copper , cement and iron, for
example, all recorded a 10 per cent increase. There was a dear
satisfaction over the balance between heavy and light industry.
Gradually, but not satisfactorily, the PRC has achieved better control
over capital investment. Some 194 billion yuan went into investment of
'fixed assets in state-owned' areas in 1986. It represented 15 per cent
more than in 1985 which had reached a 41.8 per cent of 1984 growth.
So me 200 export-oriented light industrial and textile projects were
completed in 1985. They could earn an annual income of $US400
million in foreign currencies. In 1986, some ninety production centres
were organised to produce electrical machines for export. Exports
rose 14.7 per cent over previous year, while imports were kept at the
 Conclusion: Revolution, Continuity and Synthesis 259

level as planned. Trade deficit, thus, was $US4 billion less in 1986
than in the previous year. A drop in oil prices on the international
market adversely affected the trade deficit. Sources of credit in bank
deposits in the year rose to 56 billion yuan more for a total of 218
billion yuan which were available for industrial and agricultural
production and construction. In short, some years are better than
others because of luck; other years may suffer from greater inter-
national trade or other financial difficulties, in addition to natural
disasters or droughts and floods in the agricultural sector . The
economy is now much better managed since Deng's reforms of 1978.
Improved methods in statistical collection and interpretation has
represented a giant step forward in the management field.

8.4.2 Continuing Economic Problems

In my interview on 13 July 1986, Mr Luo, a senior economist of the

Economic Planning Commission for thirty-five years, summarised
several major problems: 15
1. In recent years, industrial expansion has remained steady; but the
rate of efficiency has not kept pace. It even declined in some
sectors;
2. Rapid enterprise expansion may cause and has caused abnormal
behaviour in efficiency performance and market instability. There
must be better control over the rate of investment, consumption
credit, volume of lending, foreign exchange regulation, and
increase in exports and elimination of unnecessary imports;
3. In order to succeed in enterprise auto no my , its profit or loss must
be made as the centrallink of economic reform. Each enterprise
must Iearn budget responsibility;
4. There is the need of the market supply being in excess of consumer
demand to create conditions for cornpetition among enterprises
aginst each other and to avoid the present excessive demand that
minimises the sluggish lack of competition among suppliers;
5. Adjustment of control systems to help build a scientific macro-
structure in the economy;
6. Need for further research and knowledge in enterprise behaviour,
quality products, and standardisation; and finally
7. Improvement in the inspection system on false reports, commercial
misinformation, revenue deception, warehouse management,
product quality test, etc.
260 China Under Deng Xiaoping

EIswhere, reports indicate that there is still a tendency toward

excessive investment in fixed assets. In some areas, excessive taxes
unduly sap the vitality of state-owned enterprises. People's consump-
tion patterns change too fast. It creates problems for production
structure and product mix. In 1987, the second year of the Seventh
Five-year Plan, so me 5800 new products entered the market. On the
other hand, additional problems of 1986 have been released by the
State Statistical Bureau in January 1987. They are listed as follows: J6
1. 'Revenue from industrial and commercial enterprises declined'.
Production costs rose 6 per cent in 1986 while profit and taxes
delivered to the states declined by 0.3 per cent. There was no
marked improvement in product quality. Circulation costs of state-
owned commercial enterprises rose by 4.6 per cent. Enterprises
were not making full use of their capacity;
2. Budget deficit. 'More and more enterprises fell behind in
delivering their tax payment and profit to the state while
increasing their expenditures';
3. Balance between import and export. 'China's import payments
exceeded export revenues in both 1984 and 1985 ... This unfavour-
able situation grew worse in 1986'. In all, trade deficit was $U8.6
billion for 1986;
4. 'Over-building and shortage of capital'. 300 billion yuan went into
fixed assets investments in 1986. The next two years in capital
construction will cost, as estimated, 840 billion to complete projects
already under way at the end of 1986 without starting any new ones:
and
5. 'Imbalance of supply and demand.' China's failure to change
production processes and the mix of items has meant that many
products in domestic demand turned out to be in short supply.
The Statistical Bureau's report concludes that 'industrial production
growth in 1987 is likely to stay at 1986 levels. Multi-level reforms will
help strengthen management of industrial enterprises, adapt their
production to market demand and mobilise their workers' enthusiasm
for production.'
Many Chinese economists recognise the positive results of urban
economic structural reform. But they see aseries of difficulties has
forced the government to slow down the pace of reform and to return
to both adjustment and stabilisation measures. These economists have
come to agree, as a theoretical breakthrough on the urgent need to
deal with the issue of 'socialist public ownership of the means of
 Conclusion: Revolution, Continuity and Synthesis 261

production'. They have urged a new policy to allow all kinds of

'non-socialist' ownerships to compete. One professor at Beijing
University concluded: 'The success or failure of economic structural
reform rests on reform of socialist ownership, not price reform'Y
They agreed generally that structural reform must begin with the
fundamental issue, not the minor aspects. These PRC economists
formulated their own conclusion as folIows: (1) breakthroughs on
economic structural reform lie in the system of ownership; (2) other
forms of ownership can co-exist with the 'ownership of the whole
people and collective ownership of groups'; (3) forms of ownership are
part of the process of development in socialist ownership concept -
socialist ownership concept should not be 'an inflexible dead one'; (4)
other structures of specific ownerships must be considered besides the
official simple categorisation of ownership of me ans of production;
and finally (5) they reject the theory that collective ownership is
suitable only for manual workers and reject further the concept that
collective ownership is a transition stage between individual owner-
ship and ownership by the whole people. This is a dangerous threat to
the long-term existence of both collective and individual ownerships.
Collective ownership has by nature an enormous capacity for
economic adaptation. It should not be considered as a transition stage
to be absorbed eventually into ownership by the whole people. 18 In
short, these economists seem to argue in reverse of the present
half-way reform policy, as declared in October 1984, which thought
that ownership and management could be separated to allow
management autonomy without ownership. Real structural reform
includes ownership reform as weIl. Ownership contributes to greater
freedom for planning by the enterprise itself. Thus unity of ownership
and management will contribute to more management efficiency and
greater profit making. This is, of course, a very serious debate. For
example, if the state or the whole people should give up ownership in
the socialist economy, how could the government impose its macro-
economic planning on the whole economy? The debate must turn to
the main thrust of the 1984 policy on urban economic structural
reform.

8.4.3 A Short Macro-analysis of the Economic Reform

The PRC's economy before 1979 was influenced by two basic factors:
the Soviet pattern of structure and Mao Zedong's radical mistakes.
The setbacks resulted from Mao's mistakes in the great leap, rural
262 China Under Deng Xiaoping

communes, the cultural revolution and the Soviet cut-off of economic

aid. There was also undue emphasis on rate of growth, concentration
on heavy industry, imbalance in rapid development against consump-
tion and tertiary services. Deng's emphasis since the early 1980s has
been in the improvement of living conditions of the people. This shift
was aimed at the following : (1) better economic results; (2) balanced
development with emphasis on new technology, energy production,
rural improvement, and expansion in transport and communication;
and (3) enterprise renovation and management improvement of
existing enterprises for better quality products and efficiency rating.
The Soviet model of economic structure unduly concentrated on
bureaucratic and administrative control and planning. In addition, the
Chinese economy before 1980 was also adversely affected by the
defence need in military supplies. 19 Thus, the economic structure was
overly centralised and also unduly committed to Mao's extreme notion
of egalitarianism.
As a result, during the first thirty years after 1949, economic
decision-making was totally dominated by the central government.
The operating units throughout the country took orders from high
officials. The day-to-day production targets and distribution orders
were issued through administrative channels in the state bureaucracy.
The government was interested in high statistics only, with little regard
for quality of products, incentives to work, need for wage or salary
differentials, and the new science for management efficiency. Party
ideology gave orders to technical experts who had no right to disagree
on orders given. The ultimate result was an economic para lysis and the
philosophy of 'big rice bowl' mentality. No one wanted to work
without rewards. The government itself became enterprises and
distributoTS. There was little need for marketing. No one had anything
to seil. There was no money to buy. Starvation in desolate and remote
frontiers was not uncommon. Economic power was totally in the
control of the government. This was Mao's China.
Deng's China must change to make progress, to redeem the
government from popular disaffection, to undo the damage of the
cultural revolution, and most important of all, to catch up with the rest
ofthe world in living standards and in science and technology. Urban
economic reform was one of the central thrusts for change and
progress. After the satisfactory result in doing away with Mao's
communes in rural China and some examples of reform experiment in
urban economy, the 1984 broad reform plan was finally announced to
convert the economy into a 'socialist commodity economy'. It was a
 Conclusion: Revolution, Continuity and Synthesis 263

small step in retreat from over-centralisation. By definition the new

'socialist commodity economy' was to be biased toward 'public
ownership of the means of production'. 20 This would allow some free
market under a central macro-economic plan. However, the market
mechanism has been a dynamic force to slowly, but steadily, affect the
central planning and the demands of the consumers who, with
increased work incentives and higher income, have generated new
activities in the economy. Socialist relations of production under
public ownership is now itself subject to continuous debate for the
purpose of common prosperity and efficient performance. Thus, the
process of reform is dynamic. Private economists contribute also to the
continuing dialogue of the reform. The success of the reform has
persuaded government planners to adapt to new reform measures. For
example, the emergence of individual, collective and other forms of
ownership and management have been so succssful that the socialist
command sector of the economy is forced to learn from the private
market. In short, the main features of the 1984 urban reform are as
folIows: (1) previously unified state control has given way to a
'multi-layered decision structure' which expects the government to
limit itself to macro-economic planning only; (2) the old egalitarianism
has given way to a new system of distribution which merges 'incentives
with social justice'; (3) there is today aseparation offunction between
government and the enterprises, less vertical command between
higher and lower government agencies and closer relations horizontal-
ly between enterprises; and finally (4) direct regulation through
administrative orders has given way to indirect regulation by economic
methods of market forces under centrally planned guidance. The new
economic system focuses on vitalisation of enterprises through greater
opportunity for competition. 21
'Socialism with Chinese Characteristics' is still in a process of
evaluation. Each new five-year plan has incorporated a number of new
goals and fresh changes annually. Marxist ideology is competing or
giving way to economic rationalism. Lenin once groped to implement
Marxism without being able to 'describe what socialism iS,.22 The
Chinese Communist Party blindly adopted the Soviet model without
questioning its applicability. Unlike Yugoslavia and other socialist
states in East Europe, the PRC allowed Mao Zedong to try and to fail.
During Deng's first return to government in 1973, still under Mao's
leadership, he had helped Zhou Enlai to propose the programme for
the four modernisations. 23 Two years before the 1984 urban reform
was launched, Secretary-General Hu Yaobang in his speech to the
264 China Under Deng Xiaoping

party's Twelfth National Congress categorised the Chinese character-

istics of socialism on seven major points: (1) abolishing the system of
exploitation; (2) public ownership of the means of production; (3)
remuneration according to work; (4) planned commodity economy;
(5) political power in the hands of the working dass and other
labouring people; (6) highly developed productive forces and labour
productivity which will eventually be higher than in capitalist
countries; and (7) socialist ethics cultivated under the guidance of
Marxism. 24
Many Western economists have observed the Chinese economy.
Some are quite optimistic ab out the outcome of reform, while others
are much less so. Some are even pessimistic. A few already see the de
facto breakdown of public ownership in favour of 'privatisation of
property rights'. The users of public property are private persons,
pe asant families, collective firms, and provinces. There must be a
continuous search for a balance between plan and market, public and
private property or commodity. In other words, the PRC is experi-
menting with innovation in rational choice. The final product many be
rightly called 'Socialism with Chinese Characteristics'. The reformers
can speed up or slow down according to the new 'unleashing' of market
forces or depending on the control of opposition faction within the
ruling party itself. For example, 1986 was designated as a year of
relaxation. Premier Zhao Ziyang wanted a year to 'consolidate,
digest, supplement and improve what had been achieved earlier in the
way of economic changes,?5 The government for a while, however,
seemed to have lost control of investment, consumption funds,
currency and credit, import and export, and even cadre discipline in
the nineteen months following the announcement of the 1985 reform
plan. Thus, there was the 'overheating' of the economy in 1985.
Meanwhile, reform changes were introduced, such as new wage and
price policy, labour contract system, experimentation in the financial
capital market, extension of macro-economic control measures and
levers, industrial-commercial tax system, and the improvement of
domestic conditions for foreign investment. Given this large volume of
change, there was a need for aperiod of 'digestion and adjustment'. In
condusion it can be said that, especially among Western economists,
economic reform will continue to face challenges from a variety of
sources. The reform itself, however, has been a success. But the
intractable difficulties are summarised by one US economist as
follows: 26
 Conclusion: Revolution, Continuity and Synthesis 265

Most of the more intractable difficulties experienced by the

Chinese system are due to the half way nature of the changes so
far. Not unlike Hungary, China has almost arrived at the state of
neither plan nor market, with the market striving to dominate
agriculture and the plan still dominant in industry. This represents
an unstable condition in which the many remaining old and new
systemic elements work at odds. In other words, China's policy
makers are facing a fundamental choice that can not be avoided by
systemic half measures ('adjustments'). The choice is to either
move all the way to the market, or revert to administrative
command.

Unfortunately, there are other political and ideological considera-

tions, in addition to the need for prudence in the reform movement.
The success in the rural economy has already paved the way for
successful industrial changes. But greater preparation is needed to
move more successfully and more rapidly toward marketisation and
privatisation in the urban sector. One of the critical preconditions in
determining the pace in economic reform is political support among
factions of the Communist Party. There cannot be any economic
reform if that political support is lacking for Deng Xiaoping or his
successors in future decades. Deng does not want to split the party into
factions. He also refuses to purge the opponents of the reform. Both
political and economic reforms must be 'peaceful'. His reform is a
long-term movement which he has equated with 'peaceful revolution'.
For example, he called off the recent student demonstrations in
thirteen major cities for 'faster political reform and more democracy'
after the demonstrations had provoked a serious resistance from the
conservative element within the party Y The resistance within the
party was plotted to challenge Deng and his faction, not to make any
concessions to the students. Instead of protecting his reformist
colleagues, Deng removed his potential successor, Party Secretary-
General Hu Yaobang in J anuary 1987. The reform programme will, no
doubt, slow down. Premier Zhao Ziyang has already announced a
limit on importation of unnecessary merchandise, and a reduction in
project spending. This reduction can only be interpreted as retreat by
Deng in the face of strong intra-party resistance. A nationwide ban
against demonstrations has been imposed. The press has suddenly
turned against student demonstrations. In short, there cannot be an
economic reform without a political reform. The two must march
forward hand in hand. Fear ofWestern 'bourgeois liberalism' can lead
266 China Under Deng Xiaoping

to political instability which can instantly disrupt economic reform.

Jaime A. Florcruz has reported the following on the government's
change of attitude from approval of the demonstration to its ban two
weeks later: 28
Astonishingly, some local officials at first spoke approvingly of the
anti-government actions ... By the time the Peking protests ended, a
government controlIed media blitz was underway. Television, radio
and newspapers hammered away at variations on a theme: while the
students might have a well-meaning desire for more democracy,
they should desist from actions that threatened the country's
stability and unity. More than once the spectre of the Cultural
Revolution was raised.
In other words China is following 'its own way of modernisation' -
that is 'Socialism with Chinese Characteristics'.
There are, indeed, many Chinese characteristics: such as size of
population, landscape and resources, lack of arable land, way of life
and a low living standard, pockets of poverty and backwardness, a long
indigenous Confucian legacy, the challenge of the revolution of 1911,
the failure of the Soviet economic model in China, and so on. For
China to accept any foreign model of modernisation, there are major
difficulties, whether a Western, East European, or even Japanese
model. China is China, and she will experiment with things in her own
way. Foreign experts, friends or foes, should be able to appreciate this
uniqueness of the Chinese tradition, which was never historically
influenced by the outside world except by Buddhism from India. One
Chinese economist from the ROC has commented on the PRC's
economic reform to emerge as a 'mixed model' by following a number
of principles: 29
1. 'Insist on socialist principles';
2. 'Throw out the Soviet economic structure';
3. 'Imitate from the Hungarian economic model';
4. 'Absorb the American enterprise management model';
5. 'Learn from the Japanese developmental experience';
6. 'Learn from Taiwanese economic success';
7. 'Integrate indigenous practical characteristics'.
Economic reform on such a scale will take decades to accomplish. It
cannot reach its predicted goals unless there is first a success in
political-institutional reform, or at least, both political and economic
reforms should advance together to achieve 'progress through,
 Conclusion: Revolution, Continuity and Synthesis 267

stability', which has been the strategy of Taiwan in its economic

miracle.

8.5 IS POLITICAL REFORM POSSIBLE AFTER HU

YAOBANG?

As Sun Yat-sen's revolution of 1911 and the May 4th Movement of

1919 had insisted, Chinese modernisation and reform must include
political democracy. Sun promised a Western model of 'Bourgeois
democracy'. Mao Zedong in his writing promised a new doctrine of
'People's Democratic Dictatorship' , but in Mao's definition it means
'democracy for the people, and dictatorship for the enemies of the
people' simultaneously. He developed a classification of who are the
people and who are the enemies of the people. For example, the
people consist of the workers, the peasants, the progressive intellec-
tuals and others who are in favour of Mao's revolution. The enemies of
the people are those who are opposed to his revolution, such 'National
bourgeois', landlords, warlords, the opportunists and others who are,
by definition, counter-revolutionaries. Wh at did Mao do in carrying
out his promise of 'democracy for the people'? And how do those
people, as workers and peasants and progressive intellectuals, feel
about democracy after thirty years under Mao since 1949? At least,
many do remember today that violence was employed and millions
were executed both during rural land reform and as spies, saboteurs,
Kuomintang agents and counter-revolutionaries. Mao ignored the
provisions of his 1954 constitution on civil and political rights of the
citizens. He purged hundreds of thousands of the 'rightists' in 1957,
and again du ring the ten years of cultural revolution. There was no
grass-root election or any genuine effort to justify his government by
popular sovereign consent.
Since 1978, government under Deng Xiaoping has promised the
Chinese people 'socialist democracy' and 'socialist legality'. Does this
mean government by popular consent and a rule of law with judicial
independence? In practice this has meant several different things. For
example, popular elections under Deng have been held at village,
township and up to county level. Deng has welcomed back the other
sm all democratic parties which had existed before and after 1949 but
were ousted during the cultural revolution. 30 Today, they co-exist with
the Communist Party in the Chinese People's Political Consultative
Conference (CPPCC). The CPPCC now meets regularly each year as a
268 China Under Deng Xiaoping

deliberative body in the same building, the people's hall, where the
National People's Congress (NPC) meets. However, the CPPCC does
not have constitutional power. It has, on the contrary, only an advisory
capacity. Deng's socialist democracy has meant tolerance toward
direct and constructive popular criticism. Anyone who visits China
and mingles among inteUectuals, students, and in rural areas will detect
a relaxed atmosphere and open exchange of policy evaluatiot:t. There
has been repeated assurance of the new liberal policy toward writers,
artists, religious leaders, church organisations, teachers, and there is
now a greater degree of academic freedom for discussion. In many
respects, Deng's 'socialist legality' implies also a new reform policy
toward judicial exercise of power, support for a new legal profession,
restoration of law schools and legislation of new criminal and civil
procedural codes, and so on. The trend appears to be in the direction
of institutionalisation of political and legal stability. In time, the rule of
law may replace the rule of man. However, there is a long way toward
a system of democracy and a system of legal, and objective justice
guaranteed by the state. For example, a democratic constitution must
be approved by a majority of the people directly. Political decision
should not replace legal judgement. No individual or party should be
above the laws of the state. The court system and judicial decisions
must not serve as instruments of any political party. These are some
obvious aspects of 'the rule of law' in any democractic country.
Furthermore, the rule of law, or socialist legality, is inseparable from a
genuine political democracy which itself must recognise and protect
basic civil liberties and universal human rights as enshrined in the
Declaration of Human Rights Charter of 1948. There are, of course,
special obstacles in China to the realisation of both political democracy
and judicial independence. For example, the ancient Confucian state
disregarded positive law in favour of morality. Today Marxist ideology
places the morality represented by the Communist Party above
positive law as the 'guardian of the revolution'. In the ancient Chinese
tradition, collectivism of family, clan, and village identity was far more
important for protection than the recognition of the individual person
and his 'inalienable rights'. But the revolution of 1911 and the
contemporary universal demands for liberties and equality seem to
have forged in China an irreconcilable and irreversible requirement for
such constitutional rights. As people's living standards rise, demands
for rights and equality will be likely to grow stronger, although the
realisation of such rights may take a very long time to achieve. When
that day comes, China will have acquired a new tradition. It is in this
 Conclusion: Revolution, Continuity and Synthesis 269

long perspective that the future generations will eventually see an

emergence of such a true democracy that all believers in Sun's doctrine
and his revolution will live happily in a unified and peaceful China.
However, China under Deng Xiaoping does have a short-term
problem with the concept of 'socialist democracy' and 'socialist
legality'. There have been many moments of tension and oppression
since 1978 when Deng achieved leadership in his party. For example,
the movement for 'democracy by wall posters' in 1978, suppression of
novelist writer Bai Hua, the arrest of Wei Jinsheng and his friends for
their dialogue on democracy, to cite just a few, have stirred up
enormous frustration and debate in recent years. There has been,
since Deng's ascension, a general assumption and hope for gradual
and steady progress toward opening up of the political system without
major set-backs. This hope rested on Party Secretary General Hu
Yaobang who has been viewed as an open-minded interpreter of
'Marxism, Leninism and Mao Zedong Thought' to which the party
insists on adhering. Nearly all observers expect the Secretary-General
to succeed Deng when he someday chooses to retire. But recent
political unrest, from December 1986 to January 1987, has resulted in
Hu Yaobang's partial downfall. The development ofhis downfall is an
excellent illustration of the reality of politics and factions inside the
Chinese Communist Party (CCP). A summary discussion of its
highlights will help understanding the internal pressures and counter-
pressures wh ich have affected Deng's decision to remove Hu from his
post. There can be many aspects about Hu's removal that the outside
world can not accurately interpret or speculate. This newest leadership
crisis surrounding Hu over the student demonstrations has been
analytically reviewed in many newspapers around the world. The
following summary will follow the chronological development from
early December, 1986 to 27 January 1987. In fifty days, the entire crisis
came to an end but with implications that may last.

8.5.1 The Crisis ofHu Yaobang's Downfall

In China, university students are always concerned about national

affairs and the destiny of their country in a hostile world of competing
nations. Campus organisations often support street demonstrations
which register their protests· against various matters. During the
summers in recent years, the government has helped college students
and post-graduates to visit factories and farms, etc., to acquire
accurate information so as to avoid misunderstandings. There are
270 China Under Deng Xiaoping

times when rumours spread about students being arrested and

detained. For example, it was reported that more than 100 students
were arrested on 18 September 1986, the day Japanese aggression
commenced in Manchuria fifty-six years ago. 31 But in fact no such
arrests ever happened in 1986. In December 1986, university students
in Hefei, Anhui Province, demonstrated for the right to nominate and
vote for their own candidates against a single-candidate ballot as
approved by the government. As a result, one of their most respected
advocates for greater democracy and free press, the Vice-president
of the University and Professor of Physics, Fang Lizhi, was elec-
ted. Immediately, tens of thousands of college students in Shanghai
took up the cause and demonstrated. They even debated with the
mayor of the city on his right to hold public office without popular
election and their general rights to openly voice their opinions on
public issues. The mayor was most accommodating and supported the
right to demonstrate.
Fang Lizhi is known nationwide as one of several spokesmen for
intellectual freedom. As reported in Beijing Review,32 he insisted on
the right of scientists to discuss 'unreasonable aspects of the West or
the East'. Fang believes in free inquiry as a tradition among physicists
and the practice can be traced back to Galileo and Copernicus. Fang's
insistence on free inquiry influenced student demonstrations to spread
unexpectedly and suddenly to many other major cities in ten pro-
vinces. The final result of this unrest was Hu Yaobang's downfall as the
designated successor of Deng Xiaoping. Hu was accused by the leftists
in the Communist Party for his failure to suppress student demonstra-
tions. The chronology of the crisis emergence and a few comments are
recorded as folIows:

The first stage

The government was first found to be very accommodating rather
than repressive as in the past decades, and the students restrained their
own demands on improvement of campus conditions. After more than
30,000 demonstrators in Shanghai had demanded more democracy
and after some violen ce had occurred in the middle of December 1986,
the student movement for more democracy beg an to spread rapidly to
other cities. Some of their minor demands were being quickly met. But
the demonstration was expanding to incIude greater demands. Some
police arrests and beatings were reported. Student placards read 'Long
Live Democracy' or 'Give Us Freedom'. However, the students'
motives seemed peaceful; and they did not make any formal demands
 Conclusion: Revolution, Continuity and Synthesis 271

beyond the communist system. The reform group under Deng

Xiaoping could choose to use such student demands to advance
political reform against the opposition faction within the party. 33 The
students indicated clearly that 'they support government reforms, and
that their only demands were for meaningful participation in campus
life and local election'. The People's Daily in Beijing even encouraged
the students 'to promote popular election and some of the Western
ideas of democracy.' By late December, the government's attitude
toward the demonstration still remained 'lenient and unclarified'.
U nofficial reports considered the demonstrations the best response to
the anti-reform leftist faction. Nearly all newspapers throughout the
country supported the broad democratic causes of the student marches
before the end of December. As late as 26-27 December, students
in Beijing University began to march on the streets. They chanted
the Communist Internationale, the National Anthem, and complain-
ed that the Communist Youth League 'cannot represent their needs'.
Large-Ietter wall posters appeared on many campuses in Beijing. The
mayor of Beijing had earlier publicly declared 'there would be no
arrests if students should demonstrate, and that the Constitution
provides the freedom to march. ,34 But as participation in demonstra-
tions spread, the city suddenly issued new regulations to demonstra-
tors to register their marches five days beforehand and not to march in
certain areas of the city. The Press in Hong Kong beg an to comment
that such demonstrations 'would be limited against challenges to com-
munist party authority'. The foreign press also at first considered that
the demonstration was government-induced and supported to 'help
Mr. Deng carry out reform in the political structure.' But the New
York Times report commented: 'The pro-democracy demonstrations
over the last several weeks have revealed a depth of discontent among
the elite of China's youth unsuspected untiI now ... But many intellect-
uals have insisted that responsibiIity in the work place must be accomp-
anied by politieal rights. Yet the absence of liberalization in daily life
has become increasingly apparent to students. They have no decision in
who their representatives to student councils are , no role in picking
student candidates for loeal people's congresses. No freedom to
choose where they will work after graduation. ,35 As students raised
the level of demands for greater democracy, newspapers in Beijing
began to advise students not to 'deviate from the leadership of the
Communist Party'. Demonstrations in Nanking were even more open.
The students and a few city workers openly 'attacked the party
dictatorship and held debates and seminars in the streets'. Chinese
272 China Under Deng Xiaoping

newspapers abroad echoed the student demands and voiced the

'incompatibility of economic freedom with political dictatorship' .
'Freedom of press' was emphasised by Nanking student demonstra-
tors.

The Second Stage

By 30 December 1986, the government became gravely concerned
about the scope of student demands. Newspapers suddenly changed
their stands. The Workers Daily accused students of thinking of
'the capitalist world as paradise, and downgrading socialist society as
hopeless and without a future'. The Xinhua News Agency quoted five
conservative faction leaders who had accused 'Western thoughts in
China have become a flood of disaster' . General Wang Zhen accused
his opponents for advocating 'total Westernisation'. The People's
Daily stated that 'capitalist democracy is a form of bourgeois control in
service ofprivate capital'. On the other hand, a Time magazine weekly
correspondent in Shanghai warned that student demonstrations could
'add difficulties to Deng's economic reform ... unless Deng can
manage student demands skilfully, severe suppression is quite likely'.
United Press reported that Chinese newspapers began to accuse the
'Voice of America' broadcast for 'Skilful encouragement of students to
demonstrate and the Nationalist Government underground agents to
conspire in the student movement.,36 The People's Daily on New
Year's day made a special declaration in support of the party's 'Four
Cardinal Principles' and warned the students not to make impractical
demands. Still, thousands of students marched in Beijing's Tienanmen
Square in a demand for human rights. Clearly, the government had
adopted a suppression policy. Deng Xiaoping was reported to have
blamed Hu Yaobang for mishandling the demonstrations and for not
giving orders to prevent any further unrest.
Deng was being confronted by the conservative faction in apower
struggle. A purge seemed necessary. Deng had to choose between 'his
success in economic reform with acquiescence from the leftists' or
immediate political concessions to the students' cause. Hu Yaobang
became Deng's 'scapegoat to protect his own leadership' . By 6 January
most campuses had become quiet. Students returned to their classes
with disappointment. It had been a demonstration movement in
support of Deng's reform, but it ended in defeat at the hands of Deng
himself. 37 The Far East Economist properly commented that three
weeks of student demonstration had led to a head-on conflict between
party factions. The conservative group seized the opportunity to move
 Conclusion: Revolution, Continuity and Synthesis 273

to the offensive against Deng's reform group. Students, on the other

hand, burned and condemned newsp;;tpers for misjudging the purpose
of their demonstration. Advisers from Premier Zhao Ziyang's office
warned students that any further demonstration would affect the
progress of economic reform. 38 By 9 January all major newspapers
escalated attacks against 'Bourgeois liberalisation' . The Beijing
People's Daily advocated future emphasis in the school curriculum on
the 'Four Cardinal Principles'. The next day news revealed the military
leaders had taken a strong position to prevent 'Bourgeois liberalisa-
tion' and pledged loyalty in support of the 'Four Cardinal Principles. ,39
Newspaper editorials in Hong Kong quoted unidentified sources from
Beijing that Deng had issued a directive to deal with student
demonstrations. They were: (1) firm attitude toward students; (2) fair
and just handling of any issue; and (3) an in te rest in understanding
problems of the students. There was general agreement that the
conservative group had won, but the reformers suddenly realised that
additional major political reform was essential to greater future
success in economic achievement. This was only a temporary strategie
retreat. Rumours were spreading that Hu Yaobang might be the victim
to end the crisis since Deng spoke publicly on the mishandling of the
demonstrations.

The Fall of Hu Yaobang and Other Purges

Since 29 December Hu chose not to appear in public or to receive
guests. Physical fatigue was cited for his official absence for more than
two weeks. The news media emphasised Deng's own decision not to
retire. Many other well-known names associated with support for
democratisation were cited as potential victims for a purge of limited
scope. 40 On 15 January action was taken to replace the President and
Vice-president of the University of Science and Technology at Hefei,
Guan Weiyuan and Fang Lizhi, for their failure in administrative duty
and their own participation in the student demonstration in early
December. Other victims included the Party Minister of the Prop-
aganda Department and the Director of Information Division. Wang
Ruowang, the well-known novelist of Shanghai, and Liu Binyan, a long-
time critic and correspondent of the People's Daily, were removed
to be soon expelled from Party membership. The next day news
quoted Deng saying 'at least du ring the next twenty years, we must
oppose bourgeois liberalism'. Control over literature and arts will be,
no doubt, intensified. Economic and political reform will slow down.
Party members will be severely disciplined in the future for violation of
274 China Under Deng Xiaoping

party constitution. 41 Finallyon 16 January 1987, Hu Yaobang

personally admitted his mistakes in managing the student unrest and
tendered his resignation as Secretary-General of the Party at the full
meeting of the Party's Political Bureau. His resignation was reportedly
accepted unanimously. However, he retains his membership in the
Political Bureau and on its Standing Committee, as weIl as his
membership in the Party's Secretariat. Premier Zhao Ziyang took over
as Acting Secretary-GeneralY Meanwhile, Deng himself publicly
reaffirmed the government's policy to keep China open to the outside
world and to continue on economic reform. In addition, the final
action was taken in late December to strip the three so-called
anti-party intellectuals, Fang Lizhi, Wang Ruowang, and Liu Binyan,
of their party membership. The fall of these three served as a warning
to others. Deng's devotion to reform remains unabated. Hu Yaobang
has been re-elected in October 1987 a member of the new Political
Bureau. Hu is reported to be assigned a new high post in early 1988.
Political reform seems accelerating its pace since the Thirteenth Party
Congress in October 1987. Deng wins again.

The Short-Run Consequences 0/ Hu's Fall

Students and intellectuals in China are dismayed and disappointed.
Moreover, Deng's own economic reform did slow down in 1987.
Deng's image was temporarily damaged in the minds of the intel-
lectuals who will probably choose to remain silent for a long while. The
Chinese media has proved itself once again to be a totally obedient
instrument on behalf of the party. The burning of the People's Daily on
Beijing University campus spoke weIl for the 'demerit of news media'
in China. Hong Kong indirectly has been much affected by Hu's
downfall. Prices on the stock market reacted sharply, moving
down ward upon the news on Hu's fall. He had been the most
important right-hand man to guard the party on Deng's behalf. Hu's
own natural disposition toward liberal ideals and democratic political
reform has convinced many intellectuals and students of his sincere
promotion of 'meaningful Socialist democracy' and his implementa-
tion of the constitutional rights of the people as enshrined in the 1982
constitution. Hu has shown himself to be Deng's architect in
developing ideological debates, such as that surrounding 'practice as
the sole test of truth', and to be the one to adjust Marxism-Leninism to
meet 'Chinese characteristics'. Besides, Deng is al ready 83 years old.
His own leadership, without Hu, is now far more critically needed than
before. Deng has to fight more battles in the frontline against the leftist
faction inside the party. In this Deng has succeeded up to the 13th
 Conclusion: Revolution, Continuity and Synthesis 275

Party Congress in October 1987. Chao Ziyang seems a new articulate

ideologist for Ru's place unless the latter is restored to share Chao's
power. New Secretary-General Zhao Ziyang is more experienced in the
administrative side of the government than in party ideology .
It was widely believed in early 1987 that Deng would map out a new
strategy in personnel reshuffle before the next major confrontation
with the leftist faction at the 13th Party Congress. For example, Ru has
been treated with high ho no ur and visibility at the 13th Party
Congress, and he may yet return to other powerful role to work dosely
with Zhao Ziyang as the new Secretary-General if they both can agree
privately to join forces beyond Deng's departure. It is simply inconceiv-
able that Ru's dose relation with Deng has suffered beyond repair and
that Ru's talent and influence should be lost to the reform group and to
Deng personally. Since 1977, Ru has placed many friends in party high
posts.
In the long-term, the reform group has found, through the recent
student demonstration, how eager and impatient China's future
leaders and present intellectuals are in favour of gradual democratisa-
tion. They did not ask for Western institution al restructure, nor
multi-party politics. They even did not directly challenge the 'Four
Cardinal Principles'. They quite modestly asked for meaningfullocal
election with multiple candidates to choose from. They want some
freedom to speak out and to receive fair and honest press coverage.
Deng and his group should realise the country is far more ready for his
promised political reform than he is prepared to accept. If he does take
a giant step in the area of political-structural reform, he will have more
support than he needs, provided he can successfully handle the
Marxian leftists within the party. The post-Ru halt in political
relaxation can only be considered a temporary one. Deng's economic
reform cannot succeed without political reform regarding decentral-
isation. On the contrary, and with disappointment, Deng and Zhao
both have recently reasserted that 'China needs more opening to the
outside world ... and the country's mistakes were due to demanding
too much and moving too fast' .43
It has been obvious after the 13th Party Congress that the reform
group has taken the major leadership posts within the party. If Ru
Qili, a protege of Hu Yaobang, can protect in the next ten years his
position in the party, he may in time emerge to succeed Zhao Ziyang,
who was 68 years old in 1987, to become Secretary-General (Zhao is ten
years older than Hu Qili). In strategy, Deng took a tough stand against
the students in January 1987 in order to take an equally tough stand
against his opponents within the party to defend his economic reform
276 China Under Deng Xiaoping

and his own leadership position in the party. 44 In any case, even after
Deng, demands for democratic reforms will not end but may suffer
from many small sacrifices. In my judgment, theoretically, economic
and political reform must proceed together. Ideally, political reform
should lead the way.
On 31 July 1986, four months before the recent student demonstra-
tion, Vice-premier Wan Li and Deng's friend and also a member of the
powerful Political Bureau of the Party, made a speech entitled
'Making Policies Democratically and Scientifically - An Important
Problem of Political Restructuring'. He made many major points in
that much-quoted speech, including the following: 45

making policy by democratic and scientific means has not received

enough attention in this country. One of the obstacles to this comes
from traditional ideas about authority. It also reflects the main
defect of the existing political structure, namely, the over-central-
isation of power in the leadership and the resulting imperfect
policy-making procedures. It is therefore most important in the
political restructuring to bring socialist democracy into full play and
to adhere faithfully to democratic and scientific approaches in policy
making ... to develop a scientific approach, it is necessary first to
create a political environment in which democracy, equality and the
free exchange of views and information are the norms of life.
Leaders must respect other people's democratic rights to air their
opinions without fear, including, of course, those that contradict
their own ... Only in an atmosphere of complete academic and
political freedom can one hope to form true judgements and feel
free to speak out and argue with others ... Political research must be
conducted on the basis of facts and truth, not subject to the blind
worship of any authority or to the will of any individual leader .

Socialist legality, or rule of law essentially, can not be possible, if the

partyexists in sovereign command dominating all other organisations
and people. Robert E. Bedeski wrote also that, 'A basic contradiction
between socialist legality and party sovereignty remains. The former
should mean equality before the law. ,46 Eventually the party must
modify the 'Four Cardinal Principles' to avoid this contradiction when
politics within it becomes ready to accommodate such long-awaited
modification. Progress in economic pluralism will create country-wide
demand, rural and urban, for genuine political participation. On the
other hand, even without the 'Four Cardinal Principles', the Commun-
ist Party will remain, for a long time, the single dominant party in the
 Conclusion: Revolution, Contlnuity and Synthesis 277

PRC. In East Asia, there can be modified democracy under a single

party domination. Japan under the Liberal Democratic Party (LDP)
since 1955, Taiwan under the Kuomintang Party since 1949, and
Singapore under the People's Action Party since 1959, have all
practised Western democracy with various degrees of modification.
Why can this not be possible in the PRC, given the increasing demand
for it from the people?
It seems also necessary to redefine and rejuvenate Chinese
traditional values with a modem sense of virtue and utility. 'Socialism
with Chinese Characteristics' must be an open concept to accommod-
ate worthy tradition al values. It should be able to integrate change and
continuity with aglobaI perspective. Deng's political and economic
reforms must be properly synthesised to permit internal institutional
harmony. Secondly, the three basic political and cultural traditions,
one indigenous and two revolutionary, must, in time, be synthesised
into a new eclectic and pluralistic system with emphasis on the
preservation of its indigenous foundation. Thirdly, the PRC's
modernisation must not yield to current political convenience and
political in-fighting among ruling factions. Humanistic values must not
be sacrificed to the ideological inflexibilities of Marxism. Modernisa-
tion, furthermore, cannot avoid the need to conform to global trends
toward a world culture which, in time, will affect the parochial values
of all national cultures and ideologies. 'Socialism with Chinese
Characteristics' is an excellent and practical approach. It must, first of
all, succeed in a synthetic effort to integrate modem revolutionary
values with Chinese cultural tradition. And finally, whatever the
ideological labels, western democracy or Marxist socialism, modem
foreign revolutionary philosophies must reconcile on the basis of
Chinese cultural tradition. This implies a long way for the Communist
regime to adjust to the genuine aspirations of the people in both
spiritual and material terms. However, the grand reform since 1978
has been, indeed a 'Peaceful revolution' in itself, although the road
ahead remains rough and zig-zagged. In comparison, what is currently
transforming in Taiwan as an advanced industrial-political community
is itself a model-setting. And what is happening in the PRC is quite
another model-setting. The two models, originally inspired to succeed
in making China into a modem industrial and democratic state
through either the Western democratic revolution or the Communist
proletarian dictatorship, have both come a long way and there is still
far to go yet. The leadership of both regimes must reflect in terms of
what the Chinese people have sacrificed, and what they want in their
future. Both regimes have had their share of failures. Both are capable
278 China Under Deng Xiaoping

of self reform. They both must, in the interest of the nation, put aside
their mutual antagonism. It seems hopeful lately that both appear
moving toward each other. For example, exchange of visits and
indirect trade are welcome beginnings in 1987, and can generate new
opportunities for mutual accommodations in the interests of eventual
reunification. The ROC under President T. H. Li must not move
toward separatism to avoid the PRC's decision to unite both by
military means. The PRC must consolidate its leadership under Chao
Ziyang to reduce dependency on Mr Deng as crisis arbiter and to
subdue the conservative-Ieftists in the interest of accelerating political
reform, wh ich is a necessary precondition in ultimate economic reform
success. On the other hand, short-run economic success does breed
new needs in political reform. Preference is for politics to lead
economics to maximise efficiency in reform progress.
N otes and References
1 Introduction

1. Beijing Review, 8 April 1985, p. 6 (also ibid., 15 July 1985, pp. 6-11).
2. Ibid., p. 7.
3. These trips brought me and my visiting party to Guangzhou, Guilin,
Kunning, Zhengdu, Chongqing, Xian, Taiyuan, Beijing, Tiangin,
DaQing Oilfield, Harbin, Changchun, Zhenyang, Anshan, Dalian
Shanghai, Hangzhou, Suzhou Wuxi, Changsha, Wuhan and Yanan. At
each place I had both escorted and unescorted interviews of my own
choosing.
4. See Toward the Year 1997: (Hong Kong's Future, Hong Kong: Qiong
Pao Cultural Enterprise, 1983).
5. Hungda Chiu and others (eds.) China's Unification and the Question of
Negotiation, (Rushing, NY.; World Journal Books, 1982).
6. Beijing Review, 24 September 1984, p. 6, and pp. 20-21.
7 Ibid., 17 June 1985, p. 8.
8. See the government document announced on 20 October 1984 on
'Enterprise Management Decision-making'. People's Daily, Beijing,
25 October 1984.
9. Robert A. Scalapino, paper read at the Symposium on the East
Asia-Pacific Base Area Economic Development, 9 and 10 September
(Berkeley: University of California, 1985).
10. For greater understanding, see Dorothy J. Salinger Three Visions of
Chinese Socialism (Boulder, Col.: Westview) and also Frederick C.
Teiwes (1984) Leadership, Legitimacy and Conflict in China: From a
Characteristic Mao to the Politics of Succession (London: Macmillan,
1984).
11. See James L. Watson (ed.) Class and Social Stratification in Post-Mao
China (London: Cambridge University Press, 1984).
12. 18 September 1985, People's Daily, Beijing.

2 Deng's Return and Reform

1. David W. Chang, Zhou Enlai and Deng Xiaoping in Chinese Leadership

Succession Crisis (Lanham, Md.: University Press of America, 1984), p.
126.
2. Ibid., pp. 153-4.
3. The 'Gang of Four' was used for the most radical group under Mao's
wife, Jiang Qing. They sought to succeed Mao and Zhou at the expense
of the moderate group within the party. The radical leaders included
also ZhangChun Qiao, Yao Wenyuan, WangHungwen. Allofthemare
still in gaol after their trial in 1980-1.
4. Deng Xiaoping, Collected Wor/es of Deng Xiaoping: 1975-fJ2 (Deng
Xiaoping Wen Xuan, People's Press, Hsinhua Co. 1983), pp. 1-3, also
pp. 15-24.
5. Ibid., pp. 13-14.
6. Deng Maomao, 'My Father's Days in Jiangxi' Beijing Review, 3

279
280 Notes and References
September 1984, pp. 17-18. See also People's Daily, 22 August 1984.
The English version is a shorter summary of the Chinese language
version in The People's Daily.
7. David W. Chang, Chinese Leadership Succession Crisis ch. 4, pp.
197-206.
8. Ibid., pp. 209-27.
9. The Resolution of the Central Committee of the Chinese Communist
Party on some Historical Problems Since 1949 (Beijing: Hsinhau
Bookstore, The People's Press, 1981, in Chinese).
10. Ibid., pp. 21-2.
11. Ibid., p. 25.
12. David W. Chang, Chinese Leadership Succession Crisis, pp. 218-
20.
13. Fang Shei-chun, Hu Yaobang and Chinese Communist Politics (Taipei:
Liu Hsueh Press, 1983, pp. 11-49).
14. San Francisco Examiner, 18 September 1985.
15. Ibid., 29 September 1985. See also China Daily, 29 September 1985.
(English edition published in the USA).
16. The People's Daily, 30 September 1985.
17. The People's Daily, 14 December 1984.
18. Workers Daily, 4, March 1984.
19. Ibid., 11 March 1981.
20. Editorial office, Worker's Press, Persistence on the Four Cardinal
Principles, (Beijing: Workers Press) 1 May 1981 (Chinese).
21. Hsinhua Book Store, Deng Xiaoping Wenxuam, 1975-1982 (Beijing;
The People's Press, 1983) pp. 35-6.
22. Ibid., pp. 131-43.
23. Ibid., p. 151.
24. Beijing Review, 23 September 1985, p. 4
25. Editorial office, Beijing Review, China After Mao: A Collection of 80
Essays, 1984, p. 54. See also: Learning From the Constitution of the
12th Party Congress, by the Research Centre of the CCP Secretariat,
December 1981 (Beijing: Hsinhua Press, 1981).
26. Chen Yun, Guang Ming Ribao, 18 September 1982 (an influential daily
newspaper in Shanghai)
27. Beijing Review, 30 September 1985.
28. Deng Xiaoping, Selected Works of Deng Xiaoping, 1975-1982
(Beijing: Foreign Language Press, 1984), pp. 394--7.

3 New Political Orientation and Economic Development

1. David W. Chang, Zhou Enlai and Deng Xiaoping in Chinese Leadership

Succession Crisis, ch. 3, pp. 111-52.
2. The People's Daily, Beijing 17 December 1984. See also Christian
Science Monitor, 'Moscow Weeps as Peking Pulls Down Marxist
Bridge', 14 December 1984. At first, the The People's Daily said 'We
cannot use Marxist and Leninist works to solve our present day
problems'. This sentence was modified as 'to solve all of today's
problems' on the next day.
 Notes and References 281
3. See the resolution of 27 June 1981, Sixth Plenum of the Eleventh Party
Congress.
4. Deng Xiaoping, Selected Works 01 Deng Xiaoping, 1975-1982 Beijing:
Foreign Language Press, (1983), especially speeches since December,
1978.
5. Ibid., pp. 297-9.
6. Deng Xiaoping, 'Implement the Policy of Readjustment, Ensure
Stability and Unity', 25 December 1980. Also see ibid., pp. 335-53.
7. Deng's preferred definition of democratic centralism is: use 'collective
decision making against any single person who alone has the final say in
all decisions' and that 'the party members are subordinate to the
organisation, the minority to the majority, the lower party organisa-
tions to the higher and all constituent organisations and all members to
the central committee'.
8. Those main rules and points for good military discipline also stressed the
relations of the guerrilla army and the peasants in addition to internal
unity. In October 1947, the army issued them again as folIows. Three
main rules: obey orders in your action, take no needle or piece from the
peasant property, and turn in all things captured; and eight points: speak
politely, pay fairly for what you buy, return everything you borrow from
the people, pay for anything you damage, do not hit or swear at people,
do not damage crops, do not take liberties with women, and do not
mistreat captives.
9. His many other speeches and central documents on party reforms can be
found in Deng Xiaoping Selected Works on Deng Xiaoping, 27
September 1975, pp. 47-50, 40ctober 1975, pp. 51-2, 15 September
1978, pp. 141-4, 29 February 1980, pp. 259--68, and in many other
speaking occasions he often stressed the need of party reform and unity.
10. Deng Xiaoping, Selected Works 01 Deng, pp. 192-5.
11. Ibid., pp. 53-4.
12. For further documentation on Deng's new political orientation and
economic development, other government and party documents reflect
his emphasis in policies. For example, Major Documents Since the 3rd
Plenum ofthe 11th Party Congress (Shi, Uijie, Sanzhong Quanhui Yilai
Zhongyao Wenxian Jainbian)(Beijing: People's Press, 1983), is a good
source book.
13. Xue Muqiao, China's Socialist Economy (Beijing: Foreign Language
Press, 1981), p. iii.
14. Ibid., p. 9.
15. Ibid., p. 9.
16. Ma Hung, The New Strategy for China's Economy (Beijing: New World
Press, 1983), p. 20.
17. Ibid., pp. 9-30.
18. For details see Xue Muqiao, China's Socialist Economy eh. VII, pp.
163-95.
19. Ma Hung, The New Strategy for China's Economy p. 26.
20. Hu Yaobang, Report to the 12th Party Congress, The Twelfth National
Congress of the CPC (Beijing: Foreign Language Press, 1982), p. 15.
21. Ibid., p. 24.
282 Notes and References

22. The People's Daily, Beijing, 21 October 1984. Also see the first half of
Chapter 6 of this book.

4 Broad Implementation of the New Economic Strategy

1. China's Economic Structure Reform-Decision of the CPC Central

Committee (Beijing: 1984 Foreign Language Press). This long and
detailed document is relied on in this analysis.
2. Ibid., p. 10.
3. Ibid., p. 14.
4. Ibid., p. 29.
5. Ibid., p. 30.
6. Zhao Ziyang 'Report on Government Work', The Third Session of the
Sixth National People's Congress, (Beijing: Foreign Language Press,
1985), 1st edn p. 10.
7. Ibid., p. 15.
8. Ibid., p. 19.
9. Ibid., p. 22.
10. Ibid., p. 28-34.
11. The Third Session of the Sixth National People's Congress: Main
Documents, (Beijing: Foreign Language Press, 1985), p. 48.
12. Ibid., p. 57.
13. Ibid., p. 62.
14. Ibid., pp. 6H.
15. Wang Bingqian, Report on the Execution of the State Budget Jor 1984
and on the DraJt State Budget for 1985, (Beijing: Foreign Language
Press, 1985), p. 69.
16. Ibid., pp. 7~7.
17. Ibid., pp. 81-8.
18. Zhang Xingxiang, State Industrial and Commercial Administration,
made the announcement in Beijing, 16 November 1985. See People's
Daily, 16 November 1985, and also San Francisco Chronicle, 17
November 1985, A-14; China is to build 30,000 free markets in five
years. Every community of20,000 people should have at least one such
free market.
19. Zhao Ziyang, 'The Draft Plan for the Seventh Five-year plan, 198~90',
Guang Ming Ribao, 19 September 1985.
20. The entire document was published in Chinese in the daily publication,
Guang Ming Tibao, 26 September 1985. The English translation is my
own to summarise the major points not discussed so far on economic
reform and development. Quotations from the document may not be
footnoted each time in the next several pages.
21. Xue Muqiao, weIcome speech. Conference on Chinese Economic
Development, 6 September 1985, Chongqing, China. The speech in
Chinese language was obtained by the author through Librarian C.P.
Liu at the Centre for Chinese Studies at University of California
Berkeley, in November 1985. Translation into English is my own.
Thanks to Liu and Annie Chang of the Centre Library.
22. Ibid., p. 2.
 Notes and References 283
23. Ma Hung, 'Speech at the Conclusion of Chongqing Conference on
Chinese Economy', September 1985. This was made available to this
author through the Institute of East Asian Studies at the University of
California, Berkeley. My special thanks are due to the IEAS as a visiting
scholar in the autumn of 1985.
24. Ibid., p. 5-6.
25. See Renmin Ribao, overseas edn, 21 September 1985.

5 Rural Economic Development

1. The ancient management of Well-field system was innovated in the

Zhou Dynasty. The government divided a large piece of land into nine
equal shares. #letter resembles the shape of the nine-unit together.
Eight families each farmed their private pieces. The central, ninth piece
of land was royal land, jointly farmed by them all for royal income free
of charge. It was a form of taxation on their private piece.
2. Fei Xiaotong (Fei Shiao Tung) , Chinese Village Close-up, (Beijing: New
World Press, 1983), pp. 198-9.
3. Professor W. R. Geddes wrote a monograph published in 1963, The
Peasant Life in Communist China. It also dealt with the same village
Professor Fei had studied since 1936.
4. Ibid., pp. 13-14.
5. Ibid., p. 87.
6. The General Office of the Central Committee of the Communist Party
of China (ed.), Socialist Upsurge in China's Countryside, 1st edn
(Beijing: Foreign Language Press, 1978), p. 5.
7. Li Kai and Ching Shen in The People's Daily, 28 November 1955.
8. Fei Xiaotong, Chinese Village Close-up, p. 122.
9. Ibid., 'An Interpretation of Chinese Social Structure and Its Changes.'
1946. pp. 124-57.
10. Yu Guanguan (ed.), China's Sodalist Modernisation (Beijing: Foreign
Language Press, 1st edn 1984), pp. 207-70; 'Agriculture' by Zhan Wu
and Liu Wenpu, pp. 209-11.
11. Ibid., p. 217.
12. Xu Dixin, China's Searchfor Economic Growth: the Chinese Economy
Since 1949 (Beijing: New World Press, 1982), (in Chinese)
13. Ibid., pp. 36-7.
14. Liang Wensen, 'Balanced Development of Industry and Agriculture',
China's Searchfor Economic Growth, see Ibid., pp. 45-6.
15. Ibid., p. 55.
16. Statement by Vice-premier Yao Yilin, Chinese Agricultural Bao, 11
July 1982. .
17. Lu Xieyi, Golden Age of Rural Economic Development: A Study of
Family Responsibility System. Nanzhou: Kan Xu Province People's
Press,
Nanzhou, 1983), p. 1.
18. Ibid., p. 2.
19. Ibid., p. 14.
20. Ibid., pp. 38-40.
21. Christopher S. Wren, 'China Announces Sweeping Changes to Create a
Freer Economic System', The New York Times, 21 October 1984. See
284 Notes and References

also Beijing Review, No 25, 24 June 1985, p. 26, 'An Economist on

Soeialist Commodity Eeonomy', an interview with Liu Kuoguang,
Vice-president of the Chinese Aeademy of Social Scienees.
22. My interview with Hu Qili took plaee in the Xinzhiang reeeption room
ofthe People's Hall in Beijingon 7 July 1985. He had justreturned from
an inspeetion tour into southwest rural China. See also Cheng Ming
Monthly, June 1984, p. 59.
23. See 'Marxist Theory gets a Shave, a Limo and a Three-pieee Suit', San
Francisco Examiner, 22 September 1985. Seetion A, page 7.
24. Peng Xianchu, 'The Colleetive is Alive and Weil at Wanyu,' China
Reconstructs, September 1982. Also see Wang Xinmin 'Cultural
Center Livens Up Commune' , China Reconstructs, May 1981.
25. Andrew Watson. 'New Struetures in the Organization of Chinese
Agrieulture: a Variable Model', Pacific Affairs, vol, 6, no. 4, Winter,
1984-5,pp.621-45.
26. See 'Nongye Jingji Wenti,' (in Chinese) no. 2, Feb, 1982, Beijing, pp.
3-7.
27. See 'New Trends in the Development of China's Rural Cooperative
Eeonomy' , Jingji Yanjiu, no. 11, 1983.
28. Liang Liang, 'County Government Seat: its Construetion and Develop-
ment', Chinese Economic Problem Bi-Monthly, March 1985, pp. 2--6.
29. See Jingji Wenti Tansuo, April 1985, no. 4. See also 'Circular of the
Central Committee of the Communist Party of China on Rural Work
During 1984', China Quarterly, March, 1985, p. 133.
30. Y. Y. Kueh, 'Second Land Reform in China', China Quarterly, March
1985, p. 131.

6 Chinese Urban Economic Reform and the Case of Shenzhtm

1. See Ma Hung, New Strategy for China's Economy, esp. eh. 2, pp.
31-82 (Beijing: New World Press, 1983).
2. Xue Muqiao, China's Sodalist Economy, eh. 9, pp. 234--65. (Beijing:
Foreign Language Press, 1981). See also Beijing Review, no. 14, p. 8,
April 1985.
3. The China Handbook Editorial Committee, Economy, (Beijing:
Foreign Language Press, 1984). (translated into English by Hu
GengKang, Liu Bingwen and others). p. 3.
4. Peasant households in mutual aid teams of early private cooperatives by
growth percentages between 1950 and 1956 as folIows: 1950 (10.7),1951
(19.2), 1952 (40.0), 1953 (39.5). 1954 (60.3), 1955 (64.9), and 1956
(97.2). See the handbook series title Economy, p. 19, 1984. Point
system was adapted to local circumstances.
5. The China Handbook Editorial Committee, Economy, p. 40.
6. Ibid., p. 42.
7. Ibid., p. 52; see also Beijing Review, no. 5, p. 4, February 1985.
8. Ibid., p. 54.
9. Decision of the Central Committee of the Communist Party of China on
Reform of the Economic Structure, adopted by the Twelfth Central
 Notes and References 285

committee of the CPC at its Third Plenum on 20 October, (Beijing:

Foreign Language Press, 1984).
10. The Eighth National Congress of the Communist Party of China,
(Beijing: Foreign Language Press, 1956), vol. IJ, pp. 175-6.
11. Yu Kuangyuan (ed.), China's Socialist Modernisation (Beijing: Foreign
Language Press, 1956), Vol. 11.
12. Ibid., p. 48.
13. China Handbook Editorial Committee, Economy, pp. 68-9.
14. Yu Kuangyuan, China's Socialist Modernisation, p. 8.
15. The Thirty-Three subsidiary branches represent the long-term develop-
ment of greater Shenzhen special zone. These thirty three branch
companies are: Nan Shan Development Co., Zhan Hua Construction
Material Co. Ltd, Honey Lake Country Club; Shenzhen Golf Club Co.
Ltd, Su Fa Union Co., Tutian New Town Development Co. Ltd, Hong
Kong Restaurant; Shenzhen Railway Station Deve10pment Co. Ltd,
Head Co. of Shenzhen special economic zone Deve10pment Co.,
Shenzhen Classic Project Design & Decoration Co., Real Estate &
Properties Co., Shenzhen International Arcade; Regal Freight Service
Co., Shenzhen Lian Cheng (Wen Jin Du) Joint Development Ltd, Sang
Hing Hong Filling Station Ltd, Shen Xi Building Decoration Co.,
Machinery Installation Division of Shenzhen Properties & Estate Co.,
Shenzhen Lian Hua Industry & Trade Co., Duacheng Develoment Co.,
Zhen-tung Air-Conditioning and Engineering Co., Xiao Meisha Beach
Vacation Camp Development, Shenzhen Properties Management Co.,
Hua Hui Aluminium Fabricating & Engineering Co., Shui Bei
Industrial District, China-Japan Automobile Engineering Co., Sanho
Limited; Xin Fa Enterprise Co. Ltd, Wan Lai Renovation and
Furniture Co., Oriental Pearl Cooperation Development Co. Ltd,
Shenzhen Chia Tai Conti Ltd., Texaco Petroleum Products Distributor
Ltd, and Shenzhen Cement Enterprise Co. Ltd.
16. My interview with deputy director of Shekou Industrial Zone took place
on 13 July 1985 at his office. Chen himselfwas instrumental in Shekou's
deve1opment. I am grateful to hirn. Some of the statistical figures and
quotations in the next several pages have been taken directly from my
taped interview.
17. Shekou Investment Guide, 1984, p. 18.
18. Beijing Review, no. 13, p. 23, March 1985, which reviews the Chuhai
development at the Western end of the Pearl River Delta. Chuhai and
Shantou are the other two special economic zones in Guangdong
Province, while Xiamen, the fourth special economic zone, is located in
Fujian province.
19. Shenzhen University, a university publication which explains the
uniqueness of the University, published in April, 1985, p. 8. (It was
created in 1984 to meet the special needs of the special economic zQnes
in techonology and management science).
20. Fang Sheng, 'My View on Some Economic Problems in Special Zones',
Journal 0/ Shenzhen University, vol. 1, no. 1,1984, pp. 3-7.
21. Ibid., p. 7.
286 Notes and References

22. Fang Sheng, 'Is Chinese Special Economic Zone a Capitalist Develop-
ment? - Answer to the Question of a Foreign Friend'. This was given to
me to read during the interview. I am not aware of its publication
outside China anywhere yet. See p. 7. (Fang is a well-known
economist.) The essay advoeates a mixed or pluralistie eeonomy for
China.
23. China's Foreign Economic Legislation (CFEL), vol. 1, no. 1, published
by Foreign Language Press, Beijing, 1982 and 1984 (seeond printing).
It includes some twenty-two different laws, regulations, and procedures
governing foreigners, their investment, ineome, profit, wh ether in joint
venture or individually.
24. CFEL, vol. I, no. 1, p. 2, articles 3 and 4.
25. Ibid., p. 7.
26. CFEL, p. 3fr-7.

7 'One Country, Two Systems'

1. Mirrow Monthly, Toward the year 1997: the Future problems of Hong
Kong, A special Issue, (Hong Kong: The Mirrow Cultural Enterprise
Co., July, 1983), p. 173.
2. Ibid.,174.
3. Hungdah Chiu (ed.), 'The 1984 Sino-British Settlement on Hong Kong:
Problems and Analysis', in Symposium on Hong Kong: 1997, Occas-
ional Papers/Reprints Series in Contemporary Asian Studies, no. 3,
1985, pp. 1-13; and the Joint Declaration itself of26 September 1984.
4. See the Joint Declaration and Article 31 of the PRC constitution.
5. Ibid., p. 13.
6. Hong Kong Government Information Services Publication, No.
6/1985, February 4--10, p. 1.
7. Ibid., no. 10/85, 11-17 March 1985, p. 2.
8. Ibid., no. 39/85,30 September-6 Oetober 1985, p. 1.
9. Ibid., no 44/85, 4--10 November 1985, p. 1.
10. Hsing Kuo-ehiang, 'The Drafting of aBasie Law for Hong Kong', Issues
and Studies, vol. 22, no. 6, June 1986, pp. 1-4.
11. International Daily News, San Franciseo (Chinese language), 25
Deeember 1985.
12. Editorial essay, Ibid., 27 Deeember 1985, p. 2.
13. Ibid., 17 Deeember 1986.
14. See also Ambrose Y. C. King, 'The Hong Kong Talks and Hong Kong
Polities', Issues and Studies, vol. 22, no. 6, 1986, pp. 52-75.
15. Ibid., p. 74; and also Kuan Hsin-Chi and Lau Siu-Kai, 'Hong Kong in
Seareh of a Consensus', Occasional Paper, The Centre for Hong Kong
Studies, (Hong Kong: The Chinese University of Hong Kong,
November 1985), p. 23.
16. Harry Harding, 'The Future of Hong Kong', China Business Review,
vol. 12, no. 5, September-Oetober 1985, pp. 30-7.
17. Beijing Review, vol. 29, no. 49,8 Deeember 1986, p. 5.
18. See I-Ching Tsou, 'The CCP's 'One Country, Two Systems', Studies in
 Notes and References 287

Communism, vol. 12, no. 7, 15 July, 1986, pp. 1-9. This is a negative
view representing Taiwan's position.
19. Beijing Review, 5 October, 1981, p. 10, 'Chairman Yi Jianying's
Elaboration on Policy Concerning Return ofTaiwan to Motherland and
Peaceful Reunification'.
20. Beijing Review, vol. 21, no.l, 5 January, 1979.
21. Hungdah Chiu, 'Prospect for the Vnification of China: an Analysis of
the Views of the Republic of China', Occasional Papers/Reprint Series
in Contemporary Asia, Law School ofthe University of Maryland, no. 3,
1985, pp. 81-92.
22. Ibid., p. 88.
23. Sun Yun-suan, United Daily News (international edn), 12 June 1982,
p.3.
24. Li Shenzhi and Zi Zhongjun, 'Taiwan in the Next Ten Years'. Speech
given at the Seminar of the Council of Atlantic Organization, New
York, 1985. The chief author is the Vice-president of the Chinese
Academy of Social Sciences, Beijing, China. He was an expert and
participant in foreign policy of the PRC since Zhou Enlai's time. This
long paper represents the PRC spectrum on the Taiwan tangle.
25. Ibid., p. 7 (of the original Chinese version)
26. Ibid., p. 8.
27. Huan Xiang, foreign diplomat and former Vice-president of the
Chinese Academy of Social Science. Presently he is the advisor of the
Foreign Policy Research Group of the State Council. Our interview
took place on 12 July 1985.
28. The author of this policy paper, Li Shenzhi gran ted me an interview on
10 July, 1985, in Beijing. He gave me a copy ofhis paper to the Seminar
of the 1985 Atlantic Organization in the United States. My interview
lasted for three hours and focused on this paper. I did not see the second
author, Zi Zhongun, ofthe same artide. (See Ibid., p. 17.)
29. Zhang Hongzeng, 'V.S. Taiwan Relations Act Viewed Against
International Law', in Selected Articles from Chinese Yearbook of
International Law, (Beijing: China Translation & Publishing Corpora-
tion, 1983), p. 189. See also two statements made by a V.S. State
Department spokesman on 6 and 10 February 1981.
30. Ibid., p. 191.
31. Taiwan: Hearings, Spring, 1978,2979, Congressional Record pp. 48-9.
32. Hungdah Chiu, James C. Hsiung and Ying-Mao Kau (eds.), Anthology
on Reunification and Negotiation between the PRC and the ROC,
135-16, 39th Ave. (Flushing, New York: World Daily Journal, Book
Division, 1982), pp. 1-4.
33. This five-point condusion is the summary of a conference held in
Washington, DC on 17 April 1982. Some nine main speakers were
heard. The views of the participants have long been known to
intellectual Chinese in the United States through their own personal
publications.
34. John F. Copper and George P. Chen, 'Taiwan's Elections: Political
Development and Democratisation in the Republic of China, Occas-
ional papers/Reprints Series in Contemporary Asian Studies. no. 5,
288 Notes and Relerences

1984, School ofLaw, University ofMaryland, chs 1 and 4, esp. pp. 57-8
on election statistics.
35. Ramon H. Myers, 'Political Change and Democracy in the Republic of
China, 1986', unpublished paper. Hoover Institution of War, Revolu-
tion and Peace, Stanford University, p. 4. This paper provides a good
evaluation of changes in 1986 and other details on the formation of the
Democratic Progressive Party.
36. Ibid., p. 12.
37. A. James Gregor and Maria Hsia Chang, 'The Taiwan Independence
Movement', in Political Communication and Persuasion, vol. 2, no, 4,
1985, pp. 363-91.
38. Douglas Mendel, The Politics 01 Formosan Nationalism (Berkeley and
Los Angeles: University of California Press, 1970), p. 249.
39. Ibid., p. 147.
40. Ibid.,p.149.
41. A. James Gregor and Maria Hsia Chang, 'The Taiwan Independence
Movement', pp. 371-75.
42. Peter Kien-hong Yu. 'The Taipei-Washington-Peking Triangle: the
Taiwan Experience as a Catalyst for China's Reunification', Asian
Outlook, vol. 21, no. 8, August 1986, pp. 17-19.

8 Conclusion: Revolution, Continuity and Synthesis

1. John K. Fairbank and Edwin O. Reischauer, China: Tradition and

Transformation, ch. 4. (Boston: Houghton Mifflin 1978), pp. 59-65.
2. Ibid., pp. 346-96.
3. C. P. Fitzgerald, 'The Chinese View of Their Place in the World',
Chatham House Essays, London: Oxford University Press, 1964), pp.
1-14.
4. Joseph P. Jiang, 'Tradition al Chinese Political Culture: Its Characteris-
tics and Influence in the Future' (in Chinese, published in Taipei,
Taiwan), Oriental Magazine, Spring, 1981, vol. 15, no. 12. pp. 10-14,
and no. 13, pp. 20-7.
5. David W. Chang, 'Sun Yatsen's Doctrine and the Future of China', a
paper presented at the 27th Convention of American Association of
Chinese Studies, 2 November 1986, Pittsburgh. p. 18.
6. Ibid., pp. 25-40.
7. International Daily News (Chinese). San Francisco, 10 December 1986.
Also Sino Express Weekly, New York, 8 December 1986.
8. Ibid., 3 January, 1987, pp. 2-3. See also New York Times; 6 December
1986 on the election in Taiwan on 6 December 1986.
9. Chiang Ching-Kuo, National Day Message, 10 October 1985. See also
the editorial of International Daily News, 27 December 1985, p. 2.
10. Professor Hung-Mao Tien, 'Three Crises Before the People ofTaiwan',
The Chinese Tribune, no. 199,27 November 1985. p. 1.
11. The Chinese Tribune Weekly, Los Angeles, 30 April 1986, p. 4.
12. International Daily News, 6 November 1986.
13. Beijing Review, 'Intellectual and Intellectual Ideology' A Dialogue
 Notes and References 289
between Fang Lizhi and Dai Qing of Guangming Ribao, vol. 29, no.
50, 15 Deeember 1986, pp. 16-18, See also Milwaukee Journal, 28
Deeember p. 7A. 'Chinese Student Diseontent A Surprise', by Edward
A. Gargan of the New York Times.
14. Ibid., vol. 30, no. 2, 12 January 1987, pp. 17-19.
15. Luo spent five hours with me at my hotel in Beijing. I am grateful to hirn
for his insight through working experienee in thirty-five years with the
Eeonomie Planning Commission as a senior eeonomist. The interview
took plaee on 13 July 1986 in Beijing at the Nationality Hotel.
16. Beijing Review, vol. 30, no. 1,5 January, 1987, pp. 20-21.
17. International Daily News, 30 May, 1986, p. 2.
18. Ibid., and also Beijing Review, vol. 29, no. 49, 8 Deeember 1986, p.
14-15. 'Soeialist Features Reexamined' by Zhao Yao who argues on
behalf of the eurrent reform poliey whieh allows only the separation of
ownership from management and the state must retain the ownership of
the enterprises.
19. Liu Guoguang, 'MajorChanges in China's Eeonomy', Beijing Review, 8
Deeember 1986, pp. 15-17.
20. The eentral idea of the definition of socialist eommodity eeonomy eame
from aresolution of the third plenary session of the Twelfth Central
Committee in 1984.
21. See Journal of the Postgraduate School ofthe Chinese Academy of Social
Sciences, no. 3, 1986 by Liu Guoguang, Viee-president of the Chinese
Academy of Soeial Scienees. He is an economist.
22. Lenin's speech in 1918, Seventh Congress of the RCPCB, Collected
works of Lenin, vol. 27. p. 151.
23. David W. Chang, Zhou Enlai and Deng Xiaoping In the Chinese
Leadership Succession Crisis, chapter IV, esp. pp. 218-46. University
Press of Ameriea, Nanham, MD., 1984.
24. See also Beijing Review, vol. 29, no. 49, 8 December 1986, p. 14.
25. Jan S. Prybyla, 'Economic Development in the People's Republic of
China, 1985-86', A conference paper presented at the 1986 meeting of
the Ameriean Assoeiation of Chinese Studies, Pittsburgh, 1-3 Novem-
ber 1986, p. 2.
26. Ibid., p. 26.
27. Michael S. Serrill 'Proud Legacy ofYouthful Protest', New York Times
Magazine 5 January 1987, pp. 51-2.
28. Ibid., p. 51.
29. Yu-chen ehen, 'An Assessment of Economic Reform In Mainland
China Since 1979', Chung-Hua Institute for Economic Research,
Modern Economic Study Series, no. 8, Taipei, Taiwan, January 1985,
esp. ch 5, pp. 133--63, p. 138.
30. There had been no less than ten sm all democratie parties in China
before 1949. Two of them went to Taiwan to support Chiang Kai-Shek
(the China Youth Party, and Democratic Socialist Party). The eight
parties invited by the Communist Party to underwrite the Common
Program as the Constitution for the period of 1949-54.
31. International Daily News, 7 December 1986.
32. Beijing Review, vol. 30, 15 Deeember 1986. p. 15.
290 Notes and References

33. International Daily News, 22 Deeember 1986, editorial, p. 2.

34. Ibid., 27 Deeember p. 10
35. Edward A. Gargan, 'Chinese Student Diseontent A Surprise', The
Milwaukee Journal, 28 Deeember 1986, p. 7A. (Gargan is New York
Times Correspondent in Beijing).
36. International Daily News, 3 January 1987, p. 1.
37. Ibid., 6 January 1987, p. 4.
38. Ibid., 6 January 1987, p. 12.
39. Editorial of Army Daily News, 8 J anuary 1987.
40. International Daily News, 12/14 January and Asian Weekly Outlook,
12 January 1987.
41. Ibid., 16 January, 1987, p. 12 and also Beijing Review, 'Minister Wang
Mengon Campus Situation', vol. 30, no. 1,5 January 1987, p. 6 and 22.
42. International Daily News, 17 January 1987, p. 1.
43. Thomas A. Sanetion, 'As eraekdown Campaign goes On Peking
Purges Liberals and Slows Eeonomie Reforms', Time Magazine Weekly,
2 February 1987, pp. 45-6.
44. Ibid., 26 January 1987, pp. 25-6.
45. Wan Li,'Demoeraey and Seienee Vital to Good Poliey Making', Beijing
Review, vol. 29, no. 29, pp. 28-31.
46. Robert E. Bedeski, 'Soeialist Legality and Citizenship in China: the
1979 Eleetion Law and Its Implementation'. A paper presented at the
Regional Seminar on Chinese Studies, University of Califomia,
Berkeley, Oetober 1985, p. 5.
Index
academics 178, 268 avaition, civil 106
accountants, training of 98
administration, costs of 5, 104, Bai Hua 269
112, 114, 115, 124-5. See also banking: 91,96, 101, 104, 108, 110,
bureaucracy 117,125,141,170,179,180,
adulteducation 107,110,146,158 193-4,210,259. See also
Africa 152, 154 People's Bank of China
agricultural colleges and Bedeski, Robert E. 276
schools 131 Beijing University, student
Agricultural Sciences, Academy demonstrations 271,274
of 131 bicyc1es 109, 136
agriculture: reforms in 10-11,18, birth control 4, 146
27,41-2,74,77,81,131-2; bonuses 28,84,103,105,107,115,
growth in 71,86,100,116, 145, 148, 168
137,166-7;output 106,169, border areas, development of 120
175,258;under~ao 35,36, border disputes 201
60; shift from to industry xix, brand-name goods 104, 109, 111
124,129,133,140,142-3; bribery 105, 114. See also
market forces on 265; corruption
continuing weakness 118--19; Britain: trade agreement with 113;
subsidies 111, 114, 168, 169; in interest in Shenzhen 181;
Nanhai 145, 146, 148--52; in involvement with Hong
Shenzhen 177,179-181;in Kong 7,197-213; British
Taiwan 141. See also anima) nationality and
husbandry; arable land; passports 210-11
collectives; commune system; Buddhism 266
cotton) Dachai; farm products; Budgets, 1984 and 1985 99,106-15
farming; grain; land; budget systems 124, 259
modernisations, four; peanuts; building industry 94, 100, 175, 177,
quota system; responsibility 181, 182
farming; rural reforms bureaucracy, bad effects of 52,93,
Anhui province 10, 138--9,270 95,132,148,172,195,262
animal husbandry 108,169,181, Burma 197,201
258
Anshan lron and Steel cadres: reform of 34,57,74,142;
Complex 107 training of 43,91,93,98,170;
aquatic production 108,258 abuses by 53, 140, 142, 155,
arable land 266 264; role in
army see People's Liberation Army decentralisation 96; in
assembly, freedom of 17, 56, 80 Nanhai 155
association, freedom of 17,56,80 Cairo Conference (1943) 199,216,
Australia 181 217
automobile industry 107 calamities, natural 112, 132, 133,
Autumn Harvest Uprising 136
(1927) 55 Canada 152,234

291
292 Index

capital accumulation and Chinese People's Political

consumption, balance Consultative Conference 30,
between 81,101,132,133, 48,78-80,155,267-8
166,168-9,257-8 Chiu, Professor Hungdah 207,236
capital construction 106--8,111-15, Chiwan Bay 184
134,260 Chongqing Conference
capital, retrieval of by foreign (1985) 122-4
investors 190,193 Chongshan University 158
capitalism: methods and theories of Chuhai Special Economic
adopted to achieve Zone 177,185
reforms 16,29,64,81,85, 121; Chung-li incident 235
Marxist view of 19,34,47,50, Churchill, Winston 199,216
51,60,68,75-6,84,190; cigarettes, duty on 1799
possibility of combination with civil defence 114
socialism 171,176,189,190, civilliberties 198,215.230.236
195 civil service 242, 247, 248
9, 16,
'cardinal principles, four' dass conflict 18,35,63,89, 150--1,
18-20,28-30,46--52,54,73,98, 158,164,248
214,222,236,238,257,272-6 dothing shortages 118, 119, 156
Carrington, Lord 199 coaloutput 100, 106, 133, 157, 165,
celebrations to encourage 166
production 150--51 coastal cities, opening of 65,98,
cement production 182,258 109,113,187
censorship 247 Coca Cola 181
centralism see democratic centralism collective leadership10,28,30,33,
Chang, Professor C. T. 252 38,43,48,53,56,63,68,76,237
Chang Chun 10 collective ownership 70,97,99,
Chase, General 217 119,127,130,131,136,139,
chemical industry 100, 107 159,160,171,188,261
Chen Lei 250 commerce 94,101,142,143,145,
Chen Tu-hsiu 21 152,175,177-8,181,185
Chen Xilian 31, 32 commodity economy, development
Chen Yongqui 33 of 81,92-5,107-9,117,124-5,
Chen Yun 25,33,35,54,55,65, 169,170,189,259-60,262-4
71,74,171-2 commune system: imposition of 5,
Chen, Jin-Xing 182,183 6,21,25,35,50,55,63,88,126,
Chen, P. Y. 144 129,131,136,137,140,162,
Chiang Ching-Kuo 9,220,231, 262; dismantling of 7, 10,
234,238,249-54,256 21-2,41-2,64,122, 127-8,136,
Chiang Kai-shek 5,9,12,14,70, 137,142,153,159,169,195,262
199,216,218,246,249,254-6 Communication, Ministry of 184
Chiang Tsu-Tsai 234 communications 106,178,184,
chicken-farming 181 185,262
Chin dynasty 244 Communist Party: leadership role
Ching dynasty 196 of 16,28,43-4,47-9,51,58,
China Merchants Steam Navigation 62,170; reforms of
Company 183-5 constitution 17,28,30,33,37,
China National Off-Shore Oil 38,47,52-4,62,63,68,73,76,
Corporation 185 78; report on Mao 34;
 Index 293

opposition to Deng's 57,238-44,247,255-6.Seea&o

reforms 121-2, 168, 190,265, Confucian tradition
272-5; factions within 2, 121; Cultural Revolution 2,5,6,9,15,
relation with minor parties 79, 16,32,34,36,62,68,71,132,
80; excessive control of 218,238,243,256,262
enterprises 93, 137-9, 163; culture, investment in 107, 112,
role in decentralisation 96, 97, 114,180
99; role in rural reform 143, currency: management of 71,81,
148; in Nanhail44, 148-51, 85,101,108,110,123-5,246,
153-6; and Hong Kong 204; 264; foreign, earning of 109,
opposition to in Taiwan 198
221-2, 228-9, 250-2; founding
of(1921) 246; fall ofHu Da Qing Oilfield 10
Yaobang 269-78. See also Dachai rural production model 36,
cadres 132,149, 162
Communist Youth League 38,39, Daching urban production
45,154,271 model 162
competition, encouragement of 96, Dalai Lama 221
104,140,142,170,259,263 Dalian 10
computers, production of 182 decentralisation 4,7, 11,21-2,64,
confiscations: of land and 75,90,96,110,117,123,125,
property 26,55,126,129,146; 172,263,275,276
of foreign-owned defence: capability 12, 30;
industries 165 modernisation of 12,48, 77,
Confucian tradition 66, 67,238-44, 166; technology 109,119; cost
255,266,268 of 72, 112, 114,262. See also
construction industry 71-2,86, civil defence; Hong Kong;
101,106,108,111,114,116--18, People's Liberation Army
178,185 demand, effect of on economy 259,
consumer goods 85,88,89, 101, 260,263
107-9,119,152,258 democracy: Chinese demands
consumption, patterns of 101, 117, for 9,12, 14-18, 267-77; as
118,193-4,260,264 principle of Sun Yat -sen's
contral systems 259 revolution 9,14,161,222-3,
cooperatives 83,127,129,165, 238,240,242,243,245,267;
166,173,188 development of in
copper production 258 Nanhai 153-6; in Hong
correspondence schools 107, 110 Kong 1~8, 203, 206-11, 214,
corruption 2,19,20,32,53,56, 15; in Tai .,an 9, 13, 17,222-5,
105,114,132,231,246 231-2,23',-6,249-54,277; in
cottage industries 35, 109 Singapore 277. See also
cotton 100,104,106,107,111,132, socialist d..:.mocracy
133,165,166,169,258 'Democracy Wall' 32,40,269
craftmanship 173 democratic centralism 21,22,28,
credit 91, 101, 104, 110, 134, 141, 30,34,47-9,53,63,69,73,243
142, 146, 171,259,264. See also democratic dictatorship 267
banking; interest rates Democratic Progressive Party 231,
criticism 75,78,97,268 232,235,236,249-54
cultural heritage of China 1,13-15, Deng Maomao 29
294 Index
Den Xiaoping: early history 22-3, Discipline, Commission for 44
61; struggle against Hua discipline, emphasis on 53,74,77
Guofeng 6,22,24,30--4, 61, draft animals 139,40
167, 175, 237; eonfliet with drought 169
~ao 22,24,28,61,66,175; duty-free goods 179
struggle against Gang of
Four 42,46,61; reform
methods 1,10,15,16,20, economic erimes 53,54,56,76, 195
55-7,65-6,122,237,238; Economic Planning
politieal pragmatism and Commission 19,173,259
ideologieal revision 3,9,21-3, eeonomists 178, 186
26,28-30,40,46-54,63-4,80, economy: ~ao's failure 35-6;
84,87,121,237,256,257; reformof 4,6-7,11,12,19,
administrrative 27,28,34,57,59,8~90,
experienee 23-5,31,33,65; 92-125,161,175-6,194-5,257;
return to power (1973) 27,66, reforms in Nanhai 147-53,
87,175;(1977) 31-3,36-8, 157-59; reformsin
61-2,69,167-8; evaluation and Sichuan 41-2. See also gross
eorreetion of ~ao's polieies national product; incomes;
33-7,62,75,128,256; party industry; special economic
reforms 37-8,52,57,223; zones.
poliey speeches 18-20, 7~9; edueation: previous negleet of 55,
open door poliey 12,20,59, 89; reforms in 4,5,28,49,79;
152,161,163,176,190,195, improvements in 71, 109-10,
237,274,275; 'spiritual 120, 128; eentral policy
eivilisation' 19; on 141; political 48,53;
popularity 46, 67,71, 121, investment and expenditure
240; sueeession to 2,5-6, on 107,112,114;in
38-40,43,44,46,56,57,76, Nanhai 146,147,153,157; in
195,275; reforms resisted by Shenzhen 178-80, 185-7. See
politiealopponents 121-2, also adult education;
168,265,272-6; poliey on Hong eorrespondence schools;
Kong 199,200,205,209,214, evening classes; illiteracy;
215,238; poliey on Taiwan 28, students; television courses
220,238; student Educational Committee 109
demonstrations and downfall of egalitarian ideology, rejection
Hu Yaobang, 271-4. See also of 34,84,85,94,97,127,132,
eardinal prineiples; eeonomy, 135,141,146,150,172,175,263
reform of; modernisations; electoral system: future of 17,30,
'One Country, Two Systems'; 56,275; in Nanhai 146, 153,
praetiee as test for truth; rural 154; in Taiwan 229-31, 25~3;
reforms; 'socialism with Chinese for Hong Kong 206,207,214;
charaeteristics'; soeialist loeal elections 7, 267
democraey; socialist legality electrieity: produetion 133, 165,
Deng Zihwei 35 166; supply of 107,108,157,
depreciation 111, 113 178; in rural areas 128,131,
diplomatic relations 12,216-20, 136
226,233 electronics 100,119,186
direetors, training of 98 embezzlement 54
 Index 295

emperors 1,66,67,198,240-2, Five Year Plans: First 35,71,86,

245,246 162; Second 86; Fifth 11,71;
employment 42, 56, 75, 86, 88, Sixth 11,90,92, 100, 106, 113,
100,107,140,168,178-9 167,170;Seventh 90,91,93,
energy supply, development of 11, llCr-18, 120, 124, 125, 170-1,
27,45,71,90,96,100,101,106, 260; Eighth 120
111,119,147,157,178,187,188 floods and flood control 132, 166,
engineering 98,119,186,187 169
enterprises, autonomy of 6, 28, F1orcruz, Jaime A. 266
92-4,96,101,112-13,117, food production 55,67-8,109,118,
122-3,170-4,257-8,263 119, 152,258
ethnic minorities 119-20 foreign exchange 110,134, 147,
exploitation 60, 190, 264 180,191,259
exports: 27, 107-9, 118, 163, foreign investment and trade, laws
258-60; from Nanhai 146, 148, covering 65,176, 179, 191-3
152; from Shenzhen 177, foreign languages, schools for 158,
179-81,188,191; through Hong 186
Kong 198 foreign loans 111, 114
Europe, East, failure of Soviet foreign-owned industries
economic model 164 confiscated 165
Europe, West, links with foreign residents in
China 154, 179, 185,224,234 Shenzhen 180-1,191
evening cIasses 107 forests 132,157,169
France 22-3,61,113,181
Fujian Province 109
factions 2,27,34,48,60,77,121 Futian New Town 182
factory management 10, 74-5, 86,
163
family Iife, suppression of under 'Gang of Four' 9,22,24,26,31-3,
Mao 69 42,46,58,61,76
family rural industry 7,55,90, Gao, W. J. 144
138-42 Geddes, Professor W. R. 127
Fang Lizhi 270,273,274 General Agreement on Tariffs and
Fang Sheng 177, 185-9 Trade (GATT) 210
farm products: in market geological prospecting, budget
exchange 95; prices of 86, allocations for 114
96, 104. See also cotton; grain Glenn, Senator G. 227
farming: population shift from 7, grain: output 100, 106, 108,133,
143; incomes 100; rural 165,166,169,258; price 86,
responsibility farming 7,55, 104,111,134,168;
85,90,96, 127, 136-42. See also imports 107;
agriculture; commune system; consumption 132
land grassland, destruction of 132
Fei Xiatong 127-31 'Great Leap Forward' 5,6,9,21,
fertilisers 107, 131, 133 25,35,50,63,240,261
feudalism 19,34,50,75, 12Cr-7 gross national product: plan to
finance 91,111,115,124,134,145, quadrupIe 10-11,28,105,118,
264 171,190,195; composition
fishery 169,258 of 174
296 Index

growth rate: national 86-7,90, Hua Guofeng 6,7,22,24, 3G-34,

100, 105, 116. See also 36-7,40,46,51,54,58,61-2,
agriculture; industry 76,144,162,165,167,175,199
Guan Weiyuan 273 Huacheng, development of 182
Guangdong 41,42,158,182,184, Huaihe region, flood control 166
197 HuanXiang 3
Guangxi 173 Huang Wen-hsuing 234
Guangzhou 31, 144, 146-8, 152, Huang, L. S. 200
210 human resources 11, 28, 91, 116,
Guo Yufeng 39 118,152, 178
human rights 9,14,16,17,80,154,
Hainan Island 53,109 156,198,249,268
Han dynasty 242 Hundred Day Reform (1898) 9
handicraft industry 167,173 Hungary, economic model of 265,
handicapped, education of 120 266
HanselI, H. J. 227
Hao Jianxiu 45
Harbin 10 illiteracy 120, 139-40, 167
Hay, John 11 Imperial China see emperors
Hayakawa, Senator 227 imperialism 34, 60, 239
health, public 71,107,112,114, imports 107,109,163,258-60,264,
180 265; to Shenzhen 177,179-81,
Heath, Edward 200 183,184,191
Hefei 270 incentives 81,85,86, 15G-51, 159,
Honey Lake Holiday Resort 182 162,263. See also bonuses;
Hong Kong: prosperity of 50,165, profit-making
197; as free port 3,8,200,203, incomes 42,56, 100, 128, 130, 131,
204; as financial centre 202-5, 134-5, 137, 139, 140, 145,
209,274; links with 14&-51,168,171. See also wages
Nanhai 144,146,148,152-4; India 13,201
links with Shenzhen 163, industry: shift from agriculture
177-84,187; defence forces 8, to 129,140; balance between
25, 199,204,206,207; problems light and heavy 6,81,83,85,
and negotiations on return to 88,100,134,169-70,175,258,
China 3,7-8,57, 196-215, 262; light, increase in 71, 81,
235; Taiwanese in 233; 101,116,140,152,162,169,
reaction to Hu's 195; heavy, increase in 101,
downfall 271-4 116,133, 166, 174; rural 7,55,
Houhai Bay development 187 90,12&-9,138-40,142-3;
housing, expansion in 119, 123, growth rate 86,100,106,167,
145,146,168 174,195,259,260,262;
Hsieh Tung-ming 234 output 175,258; confiscations
Hsiung, James C. 236 by Communists 165;
HuFuming 40 government control of 6a-61,
HuQiaomu 3 92,94,265; reform and
Hu Qili 3,45, 143,275 expansion 12,27,29,30,35,
Hu Yaobang 33,37-40,43-4, 48,72,77; in Shenzhen
52-3,74,76,80,144,184, 177-83, 185; in Hong
263-5,269-75 Kong 187. See also
 Index 297

enterprises, autonomy of; 39,46,47,49,51,54,61,130,

management 162
inflation 90,91, 107, 108, 110, 117, Jiang Xi, Soviet base 34
123,170,171,195,246 judicial system 17,112,144,156,
information systems 117, 118 268
inheritance rights, in Hong Kong
and Taiwan 199 Kaixian village 127-9, 131
inspection system to improve Kang. N. S. 251
economic performance 259 Kang Yu-wei 9,66,144,242
insurance of enterprises, in Kansu province 139-41
Shenzhen 192 Kao-hsuing 235
intellectuals, persecution of 15,16, Kau Ying-Mao 236
35,55,63,68,69,79,89; Keng Biao 33
rein statement and future role Khrushchev, N. S. 9,164
of 15,30,35,39,57,79,80, Kissinger, Henry A. 219
155,268; and Hu Yaobang 43, Korea, North 164, 194
274. See also academics; May Korea South 17, 165,218
4th movement Korean war 215-17
interest rates 104, 130, 138, 146 Kowloon 197,199,201,202,205
international relations 48,56,188. Kuang-ming Daily 40
See also diplomatic relations Kuomintang party 60, 148, 157,
investment: planning and control 216-18,220,221,224-35,
of 11,110,124,134,259,260; 250-54,267
foreign, encouragement of 34,
49,56,65,75,76,89,91,98,
107,113,125,176,194,245, lakes, recIamation of 132
264; in state-owned land; changes of system 34-5,44,
enterprises 106-7,258; in 55,64,81,83,89,126-34,160,
Nanhai 145-9,151-3,158; in 162; policy of Sun Yat-sen 64,
Shenzhen 177, 179, 181-5, 126,245,248; private 199; in
188-93; relation to agricultural Shenzhen 177-83
expansion 101,142 landlords 126-7,136
Ireland 181 law, ruleof 17,20,30,48,153,156,
iron, production of 165,258 256,268. See also socialist
irrigation 128, 131, 166 legality
law schools 186,268
Lee Kuan-Yew 5
Japan: modernisation of 13, 16-18, Lenin 60,84,161
50, 161; China's dependence on Li Desheng 33
for technology 12; trade LiPeng 44,45,109
agreement with 113; Li Shenzhi 224-6
aggression against China 11, Li Teng-hui 253--4
41,246,255,270; investment in Li Xiannian 31,33,45,65
Shenzhen 179, 181, 182, 185; Liang Chi-chao.66, 242
relations with Taiwan 216-18, Lin Biao 6, 22, 26, 27, 36, 46, 47,
222,224,232-6 49,51,54,77,162
Ji Dengkui 33 'Iittle leap forward' 22,32, 165
Ji Pengfei 212,213 Liu Binyan 273,274
Jiang Qing 6,9,26,31-3,36,37, Liu Xiao 66
298 Index

Liu Shaoqi 26,33,35,61,66,126, Yat-sen 223; oppression

128 by 2,5-7,15,25,61,67-8,87,
'livelihood of the people' 9,64,248 141,267; ideological and policy
livestock see animal husbandry mistakes 9-10,14,16,21,30,
Iiving standards: need to 34-6,50,60-3,67-8,81,141,
improve 19,28,49,55-7, 162, 165, 244, 267; changing
67-8,87,91,101,105,116-17, open door policy 12;
120,134,171,175,194,262, relationship with Russia and
266; improvement USA 161; suggested military
achieved 118,257; sacrificed reforms 27,77; appointed Hua
to industry 168-9,174; Premier 30-32,61-2;
rural 130,134,136; regional re-evaluation of33-7, 58, 62,
variations 135, in Nanhai 70,75; achievements 34-5,62;
150; in Hong Kong 197-9,203 personality cult 34,36-9. See
localgovernment 7,110,142,153, also commune system; CuItural
159 Revolution; Gang of Four;
Locke, John 248 Great Leap Forward; purges
Long March 23,25,34,38,76 Mao Zedong Thought: as cardinal
Luo Ruiqing 33 principle 28-30,37,47-9,75,
Luo 259 80,84, 121; interpretation
Lu-shan conference (1959) 35 of 9,39,40,51-54,62,63,65
market, fr..ee, place of, in planned
Ma Hung 3,86,89, 124 economy 91,93,95,171-4,
~acao 152,163,181,184,198-201, 189,193,194,263-5
212 marketing: improvements in 89,
MacArthur, General 216 90,117,163,258; free,
machinery 10 restoration of 4,6,7,41-2,86,
Malaysia, economic development 90,95,136,139,162,169,173;
of 165,194 effect on prices and wages 96,
management: reforms and 102-3
improvements in 5, 19,28,35, Marxism: Chinese embrace of 9,
71,74-5,86,90,91,163,170, 12; revolution of 1949 20,238,
262; capitalist methods to be 240; as cardinal principle 16,
adopted 34,64,75,85,97, 20,47-9,121; economic
123-4,179,184,266; theory 81-2, 84; research
inexperience in 117, 123; in on 120; Sun Yat-sen's criticism
rural enterprises 141, 142; of 248; revision of 13, 16,60,
relation to free market 173-4; 63-5; loss of confidence
in Shekou 185, relation to in 162; not suitable to
ownership 261 China 239-40, 248, 257
Manchu Dynasty 66,198,245,246 Marxism-Leninism: as cardinal
Manchuria incident 246, 270 principle 28-30,37,48,49,80;
manufactured products under interpretation of 39,51-4,
planning control.110 81-2
Mao Zedong: revolution of materials, distribution of 108, 110,
1917 239; revolution of 134
19491,21; conflict with May 4th movement (1919) 14,161,
Deng 22,24,28,61,66,175; 243,246,269
support for policy of Sun meat price subsidy 114
 Index 299
mechanisation offarming 70,131, 'One Country, Two Systems'
140,141,143,160,167 policy 2-3,7-8,205,209,
media: Zhao's handling of 42; 213-15,220,224,238
government use of 51. See also open door policy 11-13,16,20,34,
press; propaganda 59,65,98,105,125,161,163,
medicine, in Shenzhen 179-80 176,188,190,195,237,245,
Mencius 241 274,275; in Nanhai 149, 152.
mental and manual wage See also coastal cities; special
differentials 97 economic zones; trade,
metal industry 100, 166 international
Military Affairs Committee 31,33 overseas Chinese 144, 146,147,
Mill, J. S. 248 152,153,179,184
Min Shing see livelihood of the ownership: changes in 83,85,88,
people 90,165; new policy for 260-1,
Mirror Monthly 203-5 263-4;ofland 126-9, 160;of
modernisations, four, Deng's plan enterprises in special economic
for 4,12,14,21,23,26-8,34, zones 188. See also collective
38,42,48,53,63,65,73,76, ownership; private ownership;
78-80,82,127-8,161,163,165, public ownership
193-4,263
movement, freedom of 200,204, Pakistan 201
206,215 parties, political: in China 17, 30,
mutual aid teams in farming 127, 52,78, 155--f>, 267; in
130,166 Japan 17; in Taiwan 222,
223,230-32,235,236,250,251,
Nanhai county 3,10,144-59,178, 253,254. See also Chinese
184 People's Political Consultative
Nanking 216,230,271-2 Conference
Nationalist Party: corruption in 2, peanuts 165
246,255; alliance with Pearl River development 109,163,
Communists 14,34,246; 166, 185
purge of Communists 246; in peasants, political experience
Taiwan 247,249,251,254, of 129-31,134,136-44,147,
255; underground agents 272. 150-1
See also Kuomintang peddlers 166,173
nagivation projects 143 Peng Dehuai 35, 162
nepotism.20,256 Peng Zhen 25,33,65,253
new products 113, 114,260 People's Action Party 277
NewTerritories 197,199,201,202, People's Bank ofChina 104,180,
205 191,192
Nixon, Richard 12,217-19 People's Congress 23, 26
Norway 181 People's Daily 130, 138,271-4
nuclear power 178 People's Liberation Army 23-4,
27,31,33,40,47,62,74,77
office buildings 182 personality cult: ofMao 34,36-8;
office skills 71 Deng's rejection of 24,52,53,
oil-bearing crops 132,169 56,58,63
oil production 45, 100, 106, 133, petTOchemical industry 182
163,166,178,182,184-5,259 Philippines 18, 194
300 Index

pig breeding.181 protectionism in technology 119

planning 19,106,134,170,189, public ownership: in Sun Yat-sen's
259 theory 64,248; growth
plant, renovation of 108 rates 86; contribution to
police in Nanhai 144, 154 investment 124; reform
political reform 4,17,267-9. See of 64,123, 163, 260-1, 263; to
also Communist Party; remain dominant 19,91,94-5,
democracy; electoral system; 141; combination with Western
parties forms 117,119,121
political rights 16,65,80 pumping equipment, rural 167
population: control of 4,120,146; purges 25-7,33,35,38,41,55,60,
growth of 69,89, 132, 166, 61,68,69,87,128,144,267,273
177,197,266; movements
of 143 Qiao Shi 45
postal communications 106, 178, Qie, Emperor 67
184 Quemoy, attack on 217
'postal courtesy' 155 quality ofproducts 19,28,104,
poverty 120, 143,266 107-9,117,118,259,260,262
practice as test for truth 10,40,42, quotasystem 41,70,85,108,134,
48,122,238,239,257 137,139,172
press: party control of 69,130;
freedom of 17,56,80,198, railways 27,77,104,106,107,178
204,208,213,232,249,275; rape seed 129,132
comment on student rationing 127,142,156,258
demonstrations 270-4 rawmaterials 101,102,104,107,
prices: control of 81,89,92,170; 108,118,142,197,258
irrational 96,134; offarm real estate in Shenzhen '181-3,185
products 90,96; reform RedFlag 40
of 102-5,108,110,141,170, refrigerators 101, 106
171,175,195,264. See also refugees to Hong Kong 197
subsidies regional relations and
private ownership 95,97,119,127, variations 104, 118, 119, 134,
165,199,206,264 135,159
production: increase in 5,18-19, religion 12,69,80,206,268
83,90, 108, 109,264; costs repair services 95, 109
of 102,134,260; diversifying research 120,131,187
forms of 91; planning for 163 resources 72,96,147,167
production, means of 94-5, 167, responsibilityfarming 7,55,85,90,
258,260-1,263,264 96,127,136-42
production, relations of 82-3,263 responsibility system in urban
production teams in land policy 70, development 96-7,102,170
127,137-9,159,166,169 retail trade 95,108, 143, 169
profit-making: in new tax retirement ofparty leaders 4,10,
structure 112,179,180; as 28,44,53,66,74,168
incentive 42,50,138,172-3, revenue, national 94,100,111-13,
175; views ofprofit motive 75, 116,169-70,175,259,260
160 revolution of 1911 1,11-12,20,34,
profiteering 64, 104 60,238,239,241-9,255,266,
propaganda 39,40,48,50-1,149 268-9
 Index 301

Revolutionary Rebel Shanghai Communique (1972) 7,

Committees 61 8,15,225
rice 129, 131, 157 Shan-nan district 138
roads 104,106,128,166,178 Shantou Special Economic
Roosevelt, F. D. 199,216 Zone 177
Rousseau, J. J. 248 Shekou industrial area 178,183-5
rural economic development: 6-7, Shenyang 10
10,30,57,123,126-60; Shenzhen Economic Zone
interaction with urban Development Company 180-3
industry 11,18,89,93,140, Shenzhen Navigation
143, 159, 162,265;changesin Company 178
land policy 34-5,55,64,81, Shenzhen Special Economic
83,89, 126-43; restoration of Zone 3,163,176-90,205,210
private plots 86,90, 127, 162; Shenzhen University 177,178,
removal of controls 34, 90, 92, 185-7
175; rural industry 7,55,70, shop-keepers 42,95, 119, 173
128-9,138-43,162;government Sichuan province 10,39,41,42,45,
aid 112, 114, 131. See also 172,173
agriculture; collectives; sideline occupations 86,88,90,
communes; confiscations; 104,128-31,137,140,142,149,
farming; food; marketing; 151,162,168-9
responsibility farming silk 129
Russia, Tsarist, Chinese territory Singapore 17,50,152,154,165,
taken by 197 181,185,194,277
skilled and unskilled work, wages
safety standards 109 for 97
savings 104, 145-6 slums, need to avoid 159
science: demand for in May 4th Social Sciences, Chinese Academy
movement 14; development of 3,43,120,124
of 12, 71; modernisation social welfare, in Shenzhen 180
of 12, 48, 77; research 28, socialism: definitions of 10,64,
89,107,120; expenditure 264; analysis of 82-4; research
on 112,114,180,182; into 120; superiority to
shortage of personnel 147; capitalism asserted 19,50,51,
foreign 34,63; utilisation 68, 122, 190
of 109 'socialism with Chinese
Science, Chinese Academy of 39, characteristics' 2,3,9, 10,
43,120 13-16,18,19,37,47,48,51,
Secretary-General, post of 37,38 58-9,63-5,83-4,99,118,120,
self-employment 86, 88 122,125,161,174,195,236,
semi-finished materials 101, 104, 237,244,255-67,277
107,108 socialist command economy,
serviceenterprises 94,108-9,119, relation with commodity
142,147,181-3,185,197,262 enterprises 95,99, 132, 141,
sewing machines 136,168 171,174,188-9,257
Shaanxiprovince 39 socialist democracy 10,15-18,51,
Shanghai: experiment in enterprise 52,56,63,76,78,80,237,257,
responsibility 173; student 268,269
demonstrations 270 socialist legality 48,51-3,56,73,
302 Index

78,80,237,257,268,269,276 7-8,15,16,28,57,143,186,
'socialist path' 28,30,47,48,50 215-36,251-5; PRC conditions
soil erosion 132,139 for unification 199-201 , 206,
Song Ping 106 228; links with China 79, 152,
South-East Asia 179, 181, 225 156,187,216,252; tieswith
Special Economic Zones 65,75, West 13; defence treaty with
98,109,113,120,160,163,176, USA 217-19; supply of arms
177,194-5,209,238. See also to 218,219,222,225,228,229,
Shenzhen 252; armed forces 252,253;
specialisation and specialists 53, diplomatie relations 216-20,
72,107,140,142,145,169,178 224-8,233; standard of
speech, freedom of 56,80,206, living 229,234,250; land
208,215 reform and industrial
spiritual civilisation 16,19,28,75, modernisation 127,128,141,
118 144,165,230,266,267,277;
Stalin 60, 161, 164 educational expansion 230;
State Council 17,69, 106, 116, 124, National University 185-6;
173, 183,207 development of democracy
Statistical Bureau 100,260 in 9,13,17,222-5,229-33,
statistics: falsification of 87; 235,236,244,247,249-55;
improved methods 259 refugees from 228,231,233;
steeloutput 133, 165, 166,258 martiallaw 230-2,249,251-3;
steel, rolled, imports 107 effect of Hong Kong's
strike, right to 206,215 relationship with PRC 205,
students: increase in numbers 107, 208,209,225;sovereignty 217,
109, 120; agricultural 131; in 229; Taiwan Independence
Nanhai 158-9; at Movement 232-5
Shenzhen 186-7; Taiwan Relations Act 8,219,
demonstrations 40,223,236, 224-8
257,265,266,269-76 Taoism 242
subsidies 111, 114, 168, 169 taxation: in control of
Sun Yat-sen: revolution of 1911 1, economy 104,110,114,117,
11-12,20,34,60,198,238,239, 260; percentage of revenue 94,
241-9,255,266,268-9; 'Three 111-13;changesin 28,64,81,
Principles ofthe People' 9, 14, 85,96,101,115, 123, 173,264;
15,64,222-3, 236; open door Sun Yat-sen's proposals
policy 11-12; land policy 64, for 248; exemptions
126,245,248; democratic from 168, 169, 179; in Special
policies 15,20, 161; respect Economic Zones 113, 179,
for tradition al culture 247, 180,184,191-3; administration
255-6; plans for of 111,114,260
industrialisation 161; and teachers, shortage of 157-8
capitalism 50 technology: development and
Sun Yan-Suan 223 modernisation of 11, 12,48,
Sung dynasty 126 71,77,90,109,116,120,262;
Sweden 181 transformation of
enterprises 106-8, 111,
Taiwan: problem of independence of 113-15,118-20,160,164;
unification with China 3-4, import from West and
 Index 303
Japan 12,27,34,49,63,65, tyrannicide, right of 67,240,241
75,89,91,97,98,107,125,176,
190-1,224,245; in Union for Formosa's Independence
Nanhai 146,147, 153; in in Europe 234
Shenzhen 178, 180, 182, 191-2 Union of Soviet Socialist Republics:
telecommunications 106, 178 involvement with Taiwan 7,
television courses 107, 11 0 218,226; relations with
television sets 101, 182 China 12,30,85, 161, 164,
tertiary industry see service 201,218,262; Soviet economic
enterprises model adopted by China 6,12,
textile industry 100, 109,258 13,17,55,60,85,127,162,164,
Thailand 185 167,239,243,261,266
Thatcher, Margaret 200-3 United Formosans in America for
'thought liberation' 51-2, 122, 147 Independence 234
Tian Jiyun 44,45 Uni ted Front 39
Tiananmen Square riot 24,30,32, Uni ted Nations 17, 23, 216-19
36,46,51,272 Uni ted States of America: Sun
Tibet 221 Yat-sen's model of
timber imports 107 democracy 161; links with
tourist industry 153, 177, 178, China 8,23,45,113,152,154;
180-2,185,186,197,250 interest in Shenzhen 79,181,
tractors 131, 167 185; and Hong Kong
trade, international 11, 12,56,65, passport 211; involvement
89,91,98,107,109,113,120, with Taiwan 8,196,216-20,
125, 197. See also exports; 222,224-8,233-5
imports urban economic restructuring: plans
traders, small 166,173 for 45, 161-3, 165; defects in
transport: improvements 5,11,71, structure 93; complications
77,89,90,119,262;needfor of 102,117,123,168; reform
system to link rural measures 92-9, 170, 176;
regions 159; key decentralisation and enterprise
projects 111; pe asant responsibility 6, 7, 11, 28, 30,
initiatives to finance 34,96-7,102,170,237;
projects 143; responsibility of restoration of township
government 96; contribution government 7; relation to
to national income 175; rural reforms 11, 18,89,93,
bottlenecks 101; in 140,143,159,162,265;
Nanhai 147, 157; in incomes 100, 134-5; budget
Shenzhen 178,181,185,188, allocation for
189; urban enterprises 94. See construction 114; regional
also railways; roads; waterways centres 119; in Nanhai 145-7
treasury bonds 111, 113-4
treaties: unequal, imposed by Vietnam 194,218
West 11,197,201-3,245,246, village committees 159
255; multilateral, relating to
Hong Kong 210 wages: reforms in system 102-3,
trials, televised, of Gang of 105,108,114,123,141,171,
Four 26,33 175,195,264; differentials 28,
Truman,HarryS. 216,217 84-6,93,97,103,121,134,170,
304 Index

264; excessive 107,115,123; Xianzhang, Nanhai county

increases 168;in chief 144
Nanhai 145,148; in Xinhua News Agency 210,272
Shenzhen 179 Xiqiao 144
Wan Li 10,33, 38, 223, 276 Xu Jiatun 214
Wang An-shih 66 Xu Shiyou 31,33
Wang Bingqian 106, 111 Xue Muqiao, Professor 122
WangHungWen 31
Wang Ruowang 273,274 Yan, successor to Chiang
WangDongXing 31-3 Kai-shek 254
Wang Xiche 156 Yang Dezhi 33
Wang Zhaoguo 46 Yangtze River development 109,
Wang Zhen 33,44,272 166, 143
war damage, restoration of 165 Yao Yilin xxii, 45
warlords 60,243 Yellow River, flood control 166
washing machines 10 1, 106 Yi Jianying 30,33,37,44,54,65,
waterconservation 131,160. See 184,199
also irrigation Youde, Sir Edward 200,202,210,
water supply: of Hong Kong 197, 212,213
199;ofShekou 178 Youth League 38,39,45,154,271
waterways 104,106,178 Yuan Shih-kai 70,245,246,248
wealth, encouragement of in Yugoslavia 263
Nanhai 150-51
Wei Jingseng 156,269 Zhang Chunqiao 31,32,51
'well-field' cultivation system 126 Zhang Pinghua 40
Wen Jin Du industrial distriet 182 Zhang Wei 185
Wen Y. Liao 234 Zhao Ziyang: on political and
Wen-Shing magazine 250 economic reforms 10,41-2,
West Germany 181 264-5; on 7th Five-Year
Western nations and way of life 9, Plan 116; on Hong
11-13,16-18,50,60,63,65, Kong 200; selected as Premier
126,243 by Deng 37; possibly Deng's
wheat 129 successor 43--4,76,275;
whisky, duty on 179 possible successor to 45;
Williams, Peter 211 administrative experience 38,
women, equality of 247 40-43,74,184,274,275
women's organisations 154 Zhou, Emperor 67
wood, shortage of 157 Zhou, Chairman of Nanhai People's
woollen fabries 101 Congress 144-5,147-59
workers: directed movements Zhou Enlai: as administrator of
of 133--4; in consensus policy 21,23-7,35,
Shenzhen 178-9,192; political 36,41,43,87; popularity
power for 49, 85, 264 of 46,67; contacts with
World Bank 122 West 12,219; modernisation
WuDe 33 programme 23,63,80, 128,
Wu Xueqian 45 132,263; duties undertaken by
Deng 22; death of 61
Xi Chongshun 145 Zhou Enlai, Madame 44
Xiamen Special Economic ZhuDe 35
Zone 177 Zhuhai 163