
	Inheritance Tradition's Legacy Socialist Foundations Revolution to Reform The roots of China’s recent boom extend deep into its imperial and communist past. But tradition’s legacy is a complicated one. To achieve modern development, China had to throw off the “yoke” of traditional society. Yet the long traditions of centralized government administration, kin-based entrepreneurism, and value placed on education and diligence prepared the Chinese well for capitalism. Despite catastrophes like the Great Leap Forward and the famine in its wake, Mao Zedong’s nation building efforts between the founding of the PRC in 1949 and the unleashing of the Cultural Revolution in 1966 laid socialist foundations for the subsequent boom. Even the disastrous, decade-long Great Proletarian Cultural Revolution contributed to the boom: By eroding public support for radical politics, the ground was cleared for a transition from revolution to reform—for new policies that were gradualist, internationalist and capitalist.

China's Opacity Protected it from Crisis

Period: Inheritance (Pre-1978)

John Bussey

Washington Bureau Chief, The Wall Street Journal

John Bussey is the Washington bureau chief of The Wall Street Journal. He is responsible for the team of reporters covering the nation's capital, foreign and domestic policy, regulation, and national politics. Bussey has worked for the Journal since 1983 in positions that included deputy managing editor, foreign editor, economics editor, Tokyo bureau chief and editor in chief of The Far Eastern Economic Review and The Wall Street Journal Asia.

In 2002, The Wall Street Journal was awarded a Pulitzer Prize for its coverage of the September 11, 2001, terrorist attack on the World Trade Center in New York, which was across the street from the Journal headquarters. Bussey wrote a front-page, first-person account of the attack that was part of the prizewinning package. During his tenure overseeing foreign coverage, the Journal won three Pulitzer Prizes for international reporting, the first in 1999 for coverage of Russia's financial crisis, the second in 2001 for coverage of China's dissident Falun Gong movement, and the third in 2007 for coverage of the social and environmental consequences of China's rapid economic growth.

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In this particular instance, China’s opacity, lack of transparency, and lack of openness, worked to its advantage. These are banks that are, to this day, heavily controlled by the government. They might have foreign partners, some of them might have spun off shares, but they are basically still, and they certainly were back in '96-'97, dominated by national government policy. So, it was really not a betting against them, there was really not a breaking of the banks or of the currency. Now, the government did something else that turned out to be quite memorable for the rest of Asia, which was that in the face of these torrents working their way through the financial system, there was a temptation to devalue your currency as a way of continuing to be competitive in global markets through your exports. And China, for a lot of different reasons, did not do so. I think it was seen as a position of strength, or a move by China to try to forestall further devaluations that might have happened by other countries to remain competitive with China were it to have devalued. I think to a certain part, this was really just realpolitik. To alter the value of your currency is a traumatic event, particularly in economies with profoundly rickety financial systems. And, even today, China has a rickety financial system. And back in '96-'97, the shocks and aftershocks that it might have caused, and the dislocations in the banking system, or in the export market, if it were to have taken a sort of radical step with its currency, might have been highly counterproductive, so it chose not to. But that was seen as a bulwark in Asia and something that China got some good PR points for.