The Genesis and Evolution of China’s Economic Liberalization

China has made much progress since it first opened to the outside world in 1978 under the guidance of paramount leader Deng Xiaoping. The devastation caused by Mao Zedong during the Great Leap Forward (1958–60), the Great Famine (1959–61), and the Cultural Revolution (1966–76) led Deng to rethink Marxist ideology and central planning. Rather than adhering to Chairman Mao’s “Little Red Book” and engaging in class struggle, Deng elevated economic development to the primary goal of socialism. His vision of “market socialism with Chinese characteristics” — and his mantra, “Seek truth from facts” — paved the way for the emergence of the nonstate sector and the return of private entrepreneurs. The success of that vision is evident from the fact that China is now the world’s largest trading nation and the second largest economy.

This article tells the story of how China’s pro-market reforms were initiated and continued despite many bumps in the road. What is striking is that many of the reforms began at the local level and were motivated by the desire for greater economic freedom. Entrenched interests opposed departing from state-led development under the plan, but courageous individuals were willing to experiment with market alternatives to increase their freedom and prosperity.

The bottom-up reform movement eventually led to the creation of a vibrant market economy sanctioned by the state. It would be misleading, however, to think that China has established a genuine free-market economy. Such a change would require limited government, widespread private property rights enforced by an independent judiciary, and the safeguarding of basic human rights.

There is still no free market for ideas, and state planning is far from dead.

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