China, 1976-89 » Deng's Economic Reforms: Agriculture, Industry and Privatisation

Farming: the household responsibility system

Under Mao, most farmers worked in communes, large units run by the Party in which land was shared and farmers worked in teams. Farmers had little reason to work harder, because they were paid much the same whatever they produced. By the late 1970s, China was still struggling to feed its people well.

The new approach began in the countryside. In 1978 farmers in the village of Xiaogang, in Anhui province, secretly agreed to farm the land family by family and to keep any extra grain. Leaders under Deng saw that this raised output. The idea was allowed to spread, and by the mid-1980s almost all farming families worked this way. The communes were wound up.

The land still belonged to the state. Families farmed it under contract, but they did not own it.

Industry: the Four Modernisations

The Four Modernisations had first been set out by Zhou Enlai in 1975. In December 1978 a Party meeting made them the main aim under Deng. The aim was to make China strong by making its farming, industry, defence, and science and technology modern. China also began an “open door” policy, which meant welcoming trade with, and money and ideas from, other countries. This was a big change from Mao's idea of relying only on China's own efforts.

Changes inside industry included:

• factory managers were given more freedom to make decisions;
• factories that met their targets for the state could keep some of their profits;
• more goods for ordinary people, such as clothes, bicycles and radios, were made, instead of putting almost everything into heavy industry.

Special Economic Zones and foreign investment

In 1980 China set up four Special Economic Zones: Shenzhen, Zhuhai, Shantou and Xiamen. They were on the south-east coast, with good sea links for trade. Shenzhen and Zhuhai were next to Hong Kong and Macau. Foreign companies were offered low taxes and could take advantage of China's cheap labour.

Shenzhen, next to Hong Kong, grew from a small fishing town into a large city of factories. Foreign investment brought money, new machines and new skills. Over the 1980s China opened more coastal cities to foreign business. Goods made in China were increasingly sold abroad, which earned the country money.

The emergence of privatisation

Privatisation did not happen all at once, and the Party did not use that word at the time. But private business began to return. Families were allowed to run small businesses, such as street stalls, shops, restaurants and repair workshops, and to employ a few helpers. In the countryside, small factories run by villages and towns grew quickly. Farmers who sold their extra produce at markets were also acting as private traders.

The biggest industries stayed in state hands, so this was only the start of a long process.

Change and continuity

Change: under Mao, farming was collective, the economy was run by the state and China kept out foreign firms. Under Deng, families farmed for themselves, foreign companies were welcomed, and private business was allowed.

Continuity: the Communist Party still controlled China and the state still owned the land and the biggest industries. Deng changed how the economy was run, not who ran the country.

Common mistakes

Exam-style question

Explain TWO causes of the increase in China's farm output in the years 1978-84. [8 marks]

Recap

• The household responsibility system let families farm for themselves and keep any extra, and output rose.
• The Four Modernisations, made the Party's main aim in December 1978, covered agriculture, industry, defence, and science and technology.
• In 1980 Shenzhen, Zhuhai, Shantou and Xiamen became Special Economic Zones, to attract foreign investment.
• Small private businesses began to appear, but the state kept the land and the biggest industries.