Deng's Economic Reforms

While other reform strategies may not have posted as remarkable of results as the agricultural reform, it was easily apparent that China’s new economic approach was effective. As a result, China moved into a time of widespread institutional reform with the ultimate goal aimed at gradually creating a capitalist style free-market economy under the direction and authority of a communist party. The following reforms, which were implemented in stages, sought to disperse centralized state-owned economic control to various enterprises of local and provincial governments. Inefficient state-owned enterprises were either handed over to local and more specified entities or converted into privately owned and operated organizations in attempts to increase

Building on the Open-Door Policy, Chinese policymakers created four coastal regions that were treated as key developmental areas open to foreign trade and acted as havens for foreign investment. Trade restrictions were loosened and international trade became an important factor for the continuance of China’s economic success. Prior to the reform period, when China maintained a nearly closed economy, the value of imports and exports in China only tallied approximately 7% of China’s national income and foreign investment amounted to a rate of less than one billion dollars a year. Following Deng’s lessening of the trade restrictions and encouragement of foreign investment, trading volume numbers rose to as high as 37% of national income and foreign investment increased to nearly 30 billion dollars by 1998 (Chow).

These results are only a few of the many impressive outcomes that China realized due to this revolutionary economic reform. Perhaps the most indicative measure of economic success can be captured by the rapid growth rate of China’s real gross domestic product (GDP) throughout the years of the

This idea of gradual reform, a process that economists term as “gradualism”, was a method that was not often pursued by many Western economies at that time. Instead, these Western-style democracies often utilized the ideas of “shock therapy”, a method that involves the use rapid systematic changes to promote periods of reform, to bring about necessary components of economic reform. Many believed that rapid transitions from state-owned communist institutions to market institutions that promoted the privatization of industries and other public goods were the only way to effectively create a new system that worked in the ways that it should. Although Russia, a country that shared a similar communist structure of China, seemed to adhere to this idea of “shock therapy” as seen by their rapid construction of market institutions that quickly privatized property and eliminated the state’s control over the economy, China seemed to ignore these Western style ideologies and decided to take their time in ushering in its new system of capitalism, all while using the established pillars of communism to assist in the