History  (I)

The first reforms in the late 1970s and early 1980s consisted of opening trade with the outside world, instituting the household responsibility system in agriculture, by which farmers could sell their surplus crops on the open market, and the establishment of Town and Village Enterprises (TVEs).

The process of economic reform began in earnest in 1979, after Chinese leaders concluded that the Soviet-style system that had been in place since the 1950s was making little progress in improving the standard of living of the Chinese people and also was failing to close the economic gap between China and the industrialized nations.

The reforms of the late 1980s and early 1990s focused on creating a pricing system and decreasing the role of the state in resource allocations. The reforms of the late 1990s focused on closing unprofitable enterprises and dealing with insolvency in the banking system. After the start of the 21st century, increased focus has been placed on narrowing the gap between rich and poor in China.

Chinese economic reform, unlike perestroika, has been an economic success, generating over two decades of rapid economic growth. The standard of living of most Chinese has improved markedly since 1978. The CCP goal of modernization also seems to be moving forward. Throughout China one can witness the rapid modernization of infrastructure, including new superhighways, airports, and telecommunications facilities.

The first part of Chinese economic reform involved implementing the household responsibility system in agriculture, by which farmers were able to retain surplus over individual plots of land rather than farming for the collective. This was followed by the establishment of TVE’s, which were industries owned by townships and villages. An open door policy was introduced by which the PRC began to allow international trade and foreign direct investment. These initiatives immediately increased the standard of living for most of the Chinese population and generated support for later, more difficult, reforms.

The second phase of reform occurred in the 1980s and was aimed at creating market institutions and converting the economy from an administratively driven command economy to a price driven market economy. This difficult task of price reform was achieved using the dual-track pricing system, in which some goods and services were allocated at state controlled prices, while others were allocated at market prices. Over time, the goods allocated at market prices were increased, until by the early-1990s they included almost all products.

In the late 1980s the Chinese economy was still transitioning steadily, as it moved cautiously away from central planning and gradually adopted some more of the institutions and mechanisms of a market economy.