Rural Reform in 1984–8: Progress and Stalemate
If the essence of reform in socialist countries is assumed to be the transition from a planned economy to a market economy, it should then be made clear that there are significant differences between China and the East European countries both in the conditions under which such a process began and the problems it needed to solve. The transition towards a market economy in the Soviet Union and the East European countries became necessarily long after urbanisation and industrialisation had been completed under the planned economy, but in China the planned economy seriously hindered the natural development of the shift of rural labour to non-agricultural activities and forcibly confined a huge proportion of the surplus rural population and labour to rural areas to engage in self-sufficient farming. The 800 million peasants were deprived of almost all economic freedom by the planned economy, but they were not included in the planned economic system as far as health and social security were concerned. All peasants knew very clearly that the state would not be responsible for their employment and welfare simply because they had been born in rural areas. If there were no extraordinary natural calamities, they had to look after themselves through their own efforts, by exploiting the natural endowment of their native place with a limited degree of freedom.
KeywordsChinese Leader Production Team Rural Industry Collective Enterprise Rural Enterprise
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- 1.As a low-income, developing country, China had an economy characterised by unusually high investment rates in heavy industry, especially in the capital goods manufacturing sector (World Bank, China: Economic Structure in International Perspective, 1985). One characteristic of this sector is that it can recreate the demand for its own products directly: the machine tool needs machine tools to produce it. In a planned economy, in which the planner’s preference is often to produce more capital goods and the quota for raw materials is often linked to processing capacity, this led to a very absurd pattern of industrial development: the more machine tools being produced, the greater the demand for machine tools in the country. This was one important reason why China became the country with the largest stock of machine tools in the world but with the lowest capacity utilisation rate. Of course, this type of industrial growth could not be sustained and the major adjustment which began in 1980 caused a severe recession in the capital goods sector during 1980–1 which the Chinese leaders, especially Chen Yun, predicted would last at least three years. Nevertheless, the unexpected boom brought about by rural reform changed the situation, as rapid expansion of light industry and the shift of rural labour to non-agricultural activities created a huge demand for capital goods, and in 1982 growth in heavy industry recovered its momentum.Google Scholar
- 52.The representative articles of the economists who were more associated with reform policymaking were written by scholars from the Development Institute at the Rural Development Research Centre under the State Council. See: ‘A new stage of the national economy and rural development’ in Jingji Yanjiu (‘Economic Research’), No. 7, 1985;Google Scholar
- 52a.and see: Chen Xiwen, The Chinese rural economy: from extraordinary growth to normal growth’ in Economic Research, No. 11, 1987; and The development of China: the growth of wealth and the corresponding institutions’ in Economic Research No. 5, 1988.Google Scholar
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- 57.See Zhou Qiren et al., The Reform is Facing Institutional Innovation (Shanghai Sanlian Publishing House) March 1988.Google Scholar
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