There was one favourable omen. By the end of the seventies China ’s relatively modest growth rate constituted something of an exception in East Asia. Many countries in the region were on the economic move: Japan was booming; South Korea, Taiwan, Singapore and Hong Kong had already experienced take-off; Malaysia, Thailand and others were in its early stages. The Chinese diaspora – centred on Hong Kong and Taiwan, but also in Singapore and Malaysia – were key players in this economic transformation. There were, in other words, examples around China ’s borders of the possibilities that now beckoned. The country’s East Asian hinterland was being transformed by a region-wide economic revolution based on catch-up. Of course China faced unique problems, in particular its vastness and diversity, together with the legacy of civil war, turmoil and occupation. In addition it had been isolated, a condition partly self-imposed and partly a result of an American embargo (involving a total ban on all transactions with China until 1971), plus the withdrawal of all Soviet aid and personnel in 1959. The challenges facing the new Chinese leadership, therefore, were far more formidable than those that had confronted Taiwan or South Korea, especially as these had enjoyed considerable American patronage and munificence during the Cold War.
The process of reform began in 1978 with the creation of a handful of special economic zones along the south-eastern seaboard, including Guangdong province, in which the rural communes were dismantled and the peasants were given control of the land on long-term leases and encouraged to market their own produce. It was based on a step-by-step, piecemeal and experimental approach. If a reform worked it was extended to new areas; if it failed then it was abandoned. Such down-to-earth pragmatism stood in sharp contrast to the grand ideological flourishes that informed the Cultural Revolution era and the Maoist period more generally. As Deng put it, in the time-honoured tradition of pithy and popular quotes by Chinese leaders from Confucius onwards: ‘Seek truth from the facts’; ‘Truth is to be found in practice’; and ‘Cross the river by feeling for the stones’. The new economic approach involved a new kind of mindset and way of thinking in the Party and government, which necessitated a massive change of personnel, starting at the top and working rapidly downwards. In 1978 Deng declared: ‘To make revolution and build socialism we need large numbers of path-breakers who dare to think, explore new ways and generate new ideas.’ [422] The
a gigantic social systems engineering project, which involves straightening out the relationships between the Party and the government, power and judicial organs, mass organizations, enterprises and institutions, and between central, local and grassroots organizations; it concerns hundreds of millions of people. This is an arduous and protracted task. [423]
The reform project has usually been seen in narrowly economic terms, as if it had few political implications. In fact Deng’s project involved not just an economic revolution, but also a largely unrecognized political revolution, which entailed a complete overhaul of the state, both in its modus operandi and its personnel, with the universalist, ideological model of the Maoist era being replaced by something closer to the developmental model of the East Asian tigers. An essential element in this transformation was the decentralization of the state, which was seen as a precondition for the reform of the economic system and economic growth. Decision-making, including the granting of de facto property rights and fiscal power, was decentralized to different levels of local government. [424] As a consequence the central government budget, as a share of GDP, shrank considerably. [425]
