Understanding Chinese Economic Reform

Abstract

From the foundation of the PRC in 1949, the Chinese government had uneasily followed the Soviet Union and adopted a centrally planned economy (CPE). Generally, this kind of planning system has the following problems. First of all, it makes almost all productive enterprises subordinate to administrative organs. To a large extent, this neglects the economic independence of the enterprises and thereby leads to the neglect of their material interests and responsibilities, blunting the levels of initiative and enthusiasm. Secondly, the system involves excessive command planning from above and is overly rigid. So long as the enterprises meet their stipulated targets, they are considered to have performed satisfactorily — regardless of whether or not its products satisfy society’s needs.

There lived a young man in the state of Yan (today’s Beijing). He was at a loss as to how to behave all the time. As the days went by, he even began to doubt whether he should walk the way he did, for he felt more and more that his walking gestures were too clumsy and awkward. One day, he learnt that people in Handan walked most gracefully. He could not picture in what way their walking gestures were graceful and, therefore, decided to go there to learn how to walk. As soon as he arrived in Handan, he was dazzled to find that everything was novel. He learnt from the children there how to walk, because he thought the children’s walking gestures were lively and pleasing to the eye. He learnt from the old people there how to walk, because he thought the old people’s walking gestures were steady. He learnt from the women there how to walk, because he thought the women’s walking gestures were beautiful. That being the case with him, in less than half a month he even forgot how to walk. As he had already used up his traveling expenses, he had to crawl back home.

— Zhuangzi (c.369–286 BC)