The Penguin History of the World

But while Marxist language still pervaded the rhetoric of government, the capitalist market soon became the engine that drove the Chinese economy forward. Deng’s willingness to experiment meant that the CCP gave priority to whatever its leaders believed served their overall aims, what Deng (and his mentor Zhou Enlai before him) called the four modernizations: modernizing agriculture, industry, defence and technology. While much of the change therefore seemed chaotic (and the party’s belief in stringent planning fell by the wayside), there was a general direction to it: away from the stranglehold that the Chinese state had attempted to gain on production since the Qing era, and towards emphasizing the private producer.

One remarkable change was that agriculture was virtually privatized in the next few years in the sense that, although they were not given the freeholds of their land, peasants were encouraged to sell produce freely in the markets. New slogans – ‘to get rich is glorious’ – were coined to encourage the development of village industrial and commercial enterprise. Special economic areas, enclaves for free trade with the capitalist world, were set up; the first was near Guangzhou, the historic centre of Chinese trade with the West. It was not a policy without costs – grain production fell at first, inflation began to show itself in the early 1980s and foreign debt rose. Some blamed the growing visibility of crime and corruption on the new line, and there were both critics who wanted to return to planning and those who argued for political democracy as part of modernization. Deng, through his political skills, sidelined them both.

Yet of the economic success there can be no doubt. Mainland China began in the 1980s to show that perhaps an economic ‘miracle’ like that of Taiwan was within her grasp. By 1986 she was the second largest producer of coal in the world, and the fourth largest of steel. GDP rose at more than 10 per cent a year between 1978 and 1986, while industrial output had doubled in value in that time. Per capita peasant income nearly tripled and by 1988 the average peasant family was estimated to have about six months’ income in the savings bank.

The new line specifically linked modernization to strength, thus it reflected the aspirations of China’s reformers ever since the May 4th Movement, and of some even earlier. China’s international weight had already been apparent in the 1950s; it now began to show itself in different ways. The initial approach towards establishing normal relations with the United States had been made before the reforms began, but it was now made an integral part of China’s development plans. Formal recognition came in 1979. In a Sino-American agreement the United States made the crucial concession that its forces should be withdrawn from Taiwan and that official diplomatic relations with the island’s Guomindang government should be ended. Deng was smart enough, however, not to make the continuation of United States involvement with the island in other fields (including weapons’ sales) a sticking point in Sino-American relations; China’s modernization was far more important to him than the recovery of Taiwan.

In 1984 China and Britain agreed over terms for the reincorporation of Hong Kong in 1997 on the expiration of the lease covering some of its territories. A later agreement with the Portuguese provided for the recovery of Macao, too. It was a blemish on the general recognition of China’s due standing that among its neighbours Vietnam (with which China’s relations at one time degenerated into open warfare, when the two countries were rivals for the control of Cambodia) remained hostile; but some of the people on Taiwan were reassured by Chinese promises that the reincorporation of the island into the territory of the People’s Republic in due course would not endanger its economic system. Similar assurances were given over Hong Kong. Like the establishment of special production and trading enclaves on the mainland where external commerce could flourish, such statements underlined the importance China’s new rulers attached to commerce as a channel of modernization. China’s sheer size gave such a policy direction importance over a wide area. By 1985 the whole of East and South-East Asia constituted a trading zone of unprecedented potential.

Within it, new centres of industrial and commercial activity were developing so fast in the 1980s as to justify by themselves the view that the old global balance of economic power had disappeared. South Korea, Taiwan, Hong Kong and Singapore had all shed the aura of undeveloped economies; Malaysia, Thailand and Indonesia, by 1990, looked as if they were moving up rapidly to join them. Their success was part of that of East Asia as a whole, and Japan had been indispensable to this outcome.