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Emancipation
“Reform and opening” started from the top with the seminal leadership transition from Mao to Deng. Deng Xiaoping heralded China’s boom in late 1978 when he called for experiments with “economic democracy” and “emancipation” from orthodox ideas. But the boom was not simply a top-down, state-orchestrated phenomenon. In fact, the biggest contribution of the state, especially in the first phase of growth, was to get out of the way. Farmers were liberated from collectives, sparking a wildfire of capitalism in the countryside. Urban markets and industry were freed to “grow out of the plan,” making profits on surplus production and creating powerful incentives for rapid growth. |
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Phasing Out The Planned EconomyPeriod: Emancipation (1978-84)
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Click to expand So, I use the term growing out of the plan to describe the Chinese economic strategy during the 1980s. I think it encapsulates quite well the overall experience, along, of course, with this famous Chinese expression of mozhe shitou guohe, cross the river by groping for stepping-stones. That phrase, which people often attribute to Deng Xiaoping but, of course, it was Chen Yun who said it, is meant to say we should be very careful, we should proceed very cautiously. Very characteristic of this person. But, as the strategy was successful, it turned out to encapsulate a lot of the overall strategy. "Growing out of the plan" is not a Chinese expression, it’s just something I made up, but I coined it for the first time in 1984, after I was talking to some people from the material supply bureau, which is the part of the planned economy apparatus that does the most planning in the very nitty gritty sense. They’re the ones who allocate the materials from one factory to another. And they described to me very clearly, in 1984, the fact that they intended to fix the absolute level of the allocation plan, but encourage factories to produce more outside, or above the plan on the market. So I then asked them, "But this means that the economy, as it grows, will increasingly become a market economy. Is this right?" And they said, "Yes, that is exactly what we envision." And so, it was this idea that was clearly there in their minds that I then labeled "growing out of the plan." And that is, in fact, pretty much what we see through the 1980s. As the planned economy is fixed, but the growth impetus is still substantial, a larger and larger proportion of the economy is on this second track in the dual track system. And then, by the early 1990s, this dual track, the market track, has become large enough that, in the beginning of 1993, they just eliminate the planned economy and nobody even notices. It sort of disappears not with a bang, but with a whimper and the economy is driven by market prices.
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