¶ … political economy of China explores the following issues and questions: When did Deng Xiaoping start China's economic reform? What were some of the motivations for his open-door policy?

What achievements has China made since then?

What are the major problems in today's Chinese political economy?

Why is China not a democracy yet?

The roles of Deng, Jiang and Hu's three generations of Chinese leadership in China's political economy.

Deng Xiaoping's Economic Reforms

Deng Xiaoping emerged as China's de-facto leader in the years following Mao Zedong's death in 1976. Under his tutelage, China entered an era of sustained economic process that continues to date.

Deng started China's economic reforms in 1978 with the announcement of the "Open Door Policy."

Prior to the introduction of the new Policy, China had followed the radical, centrally directed economic policies of Mao that emphasized self-reliance and closed its door to trade with foreign countries on the premise that the rich capitalist countries exploit the poor third world countries through international trade.

Motivations for the Open-Door Policy:

Deng initiated his "Open Door Policies" to generate sufficient surplus value, through increased foreign trade, in order to finance the so-called "four modernizations." The 'four modernizations' were to improve the existing fields of Agriculture, Industry, Science and Technology, and the Military -- areas in which China had fallen behind after decades of isolation and repeated revolutionary upheavals under Mao.

Deng, a pragmatic rather than an ideological Marxist, was acutely aware that China needed to accelerate its economic development urgently or it would face food shortages, falling living standards, and would not be able to defend itself against foreign aggression. He realized that the only way to achieve the goal of the 'four modernizations' was through the creation of surplus value by increased foreign trade.

Deng implemented his "Open Door Policy" by setting up Special Economic Zones (SEZs) in four southern cities, i.e., Shenzhen, Zhuhai, Shantou and Xiamen. These cities were specifically chosen due to their close geographic proximity to Hong Kong, Taiwan and Macau. Deng's aim was to attract investment from ethnic Chinese living in these areas near Mainland China and to invite Foreign Direct Investment (FDI) by offering incentives such as tax exemption and reduced tariffs.

Achievements by China Since the Initiation of Economic Reforms

Since the initial economic reforms by Deng Xiaoping in 1978, China has experienced consistently high levels of economic growth during which its economy has grown faster than any other in history and incomes of people more than quadrupled. ("Economic Overview" Country Watch) China's success is particularly remarkable since it has tackled the daunting tasks of converting from a command economy to a market economy, moving from a rural society to an urban society and maintaining its political stability -- all at the same time.

Since the early eighties China's economy has grown at an average rate of about 8%. This has enabled hundreds of millions of people to rise out of poverty and its per capita GDP now stands at $5,600

that is four times the level in 1978("China" CIA World Factbook). Agriculture and industry have posted major gains especially in coastal areas near Hong Kong and opposite Taiwan and in Shanghai, where foreign investment has helped spur output of both domestic and export goods. Modernization in the fields of agriculture, industry and technology has also been significant mainly due to the success in attracting foreign investment.

The country has managed to retain social and political stability and avoided major upheavals except for a period in 1989 when the Tiananmen Square Protests demanding greater democracy, were brutally crushed by the government. After a sustained diplomatic campaign lasting over 15 years, China was able to join the World Trade Organization ("WTO") in 2001.

It has improved its foreign relations with most countries including the United States, Russia and India

and managed to regain sovereignty over Hong Kong and Macau

by adopting the flexible "one country two systems" policy.

Major Problems in Today's Chinese Political Economy?

Corruption, Unemployment & Inequality:

Despite considerable economic gains made by China in the post-1978 period, it is still faced with a number of serious politico-economic problems. Corruption and other economic crimes have proliferated in China as it has moved towards a market-oriented economy. Unemployment, though not too high in terms of percentages (3% according to official figures

), translates into more than 20 million unemployed workers due to the large Chinese population. ("Economic Overview" Country Watch) In addition to the unemployed, it is estimated that 50 to 100 million surplus rural workers are adrift between the villages...

There is a growing trend of inter-regional and urban-rural inequality with the rural areas and areas away from the booming coastal regions, falling significantly behind. Despite efforts at reforming state owned organizations and the closure of a number of loss-making industries, over half of China's large state-owned enterprises are still making losses.
Environmental Deterioration & Demographic Changes:

Rapid industrial development has resulted in the deterioration of the environment such as air pollution, soil erosion, and the steady fall of the water table in the north. A demographic consequence of the "one child policy" is that China has now become one of the most rapidly aging countries in the world, giving rise to possible labor shortages and an unsustainable pension bill in the future. ("China" CIA World Factbook)

Politico-economic Problems:

While China has practiced increasing economic liberalization, it has not been matched with political liberalization; its political system still remains highly centralized that may result in social tensions in future. The Taiwan issue remains unresolved and threatens to escalate into a global conflict with China promising military action if the Taiwanese declare independence.

Why China is not a Democracy Yet?

The Chinese government and most Chinese people have concentrated on economic development since the introduction of economic reforms in 1978. Unlike the commonly believed theory that democracy promotes economic growth, the Chinese authorities have argued that a Western-style democracy would jeopardize the continuing economic gains made by the country. This was the main reason behind the firm suppression of the democracy movement in 1989. The sustained economic growth in China has lent credence to the government's argument and support for greater democracy remains lukewarm.

Evaluation of the roles of Deng, Jiang and Hu In China's Political Economy

Deng Xiaping's influence on the recent Chinese history and its political economy overshadows that of every one else. In the words of journalist Jim Rohwer, "the Dengist reforms of 1979-1994 brought about probably the biggest single improvement in human welfare anywhere at any time." (Quoted in "Deng Xiaoping" Wikipedia Article) Deng, the most prominent of the "second generation" Chinese leaders, was instrumental in moving China away from the dogmatic, revolutionary policies of Mao to a pragmatic adoption of any ideas "that worked" regardless of their origin. He emphasized that socialism does not mean shared poverty and famously said, "to be rich is glorious" -- an unthinkable thought in the Mao days. He adopted capitalist ideas without calling it "capitalism" and cleverly termed it 'Socialism with Chinese Characteristics.'

Unlike the failed 'Perestroika' reforms of Gorbachev in the Soviet Union, Deng was flexible enough not to impose reforms from top-down but encouraged local reforms at lower levels; the successful and promising reforms were gradually adopted by larger and larger areas and ultimately introduced nationally.

Even as Deng gradually surrendered his public titles, he remained China's de-facto ruler until the early 1990s, and oversaw the consolidation of Jiang Zemin's power over the Chinese Communist Party and the government to ensure the continuity of his economic and political policies. He also set the trend for a peaceful transfer of power in China.

Although it was almost impossible for a successor to eclipse the stature and achievements of Deng Xiaoping, Jiang Zemin

(General Secretary of the CPC from 1989 to 2002 and President of the country from 1993 to 2003) outgrew his reputation as a handpicked, compromise candidate and played an important role in the political economy of China. During his rule, China's economy grew at a break-neck speed while the Communist Party maintained its tight control over the government. Jiang's tenure is also significant for the entry of China in the WTO and its successful bid to hold the prestigious 2008 Olympics. At the same time, Jiang has been criticized for seeking economic growth at all costs and not caring enough about the economic inequality and environmental degradation caused by the growth. ("Jiang Zemin')

Hu Jintao, a "fourth generation" Chinese leader, took over the posts of the General Secretary of the CPC and the President of China in 2002 and 2003 respectively. Since then he has overcome the initial impression that he would be working in the shadow of Jiang or that his predecessor would continue to exercise real power ala Deng. Jintao has proceeded to stamp his own mark on the China's political economy by concentrating on aspects largely ignored by his predecessor, i.e., the increasing gap between the rich and the poor, uneven development between the interior and coastal regions, and environmental degradation. He has also favored more openness and flexibility in governance and discouraged administrative extravagance. At the same time, Hu has contradicted initial…