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CHAPTER 1

Evolution in the Revolution

Crossing the river by feeling for stones.

—A phrase popularly attributed to Deng Xiaoping and emblematic of China's pragmatic approach to reform since 1977

First of all we must recognize the huge gap between China and the rest of the world in the area of science and technology. We cannot fool anyone because you can't visit our country without seeing how backward we are. We can only fool ourselves by saying that we are not backward.

—Deng Xiaoping, October 23, 1977

I accompanied Deng [Xiaoping] in 1992 [on his Southern Journey—nanxun], and one day he met officials and said that historically [China] was poor for thousands of years—we need development as soon as possible. This is our task. Cities like Guangzhou need a fast growth rate. If [the growth rate of GDP] is below 10 percent [per year], we cannot handle the problems and it brings lots of difficulties.

—Mayor of Guangzhou Li Ziliu, "Remarks," June 9, 1994

Beginning in 1979, Chinese have experienced great transformations in their lives. Of course future difficulties will be inevitable. But as we Chinese often say, the most important thing is that "we've broken the ice and the ship has begun to sail."

—Professor Li Shenzhi, "The History and Future of Sino-American Relations"

The core interest is regime survival and regime security. "Opening and reform were not to improve China, it is to improve the survival of the party; it is a by-product of the improvement. For its own survival [the party] has to bring benefits to the people, as the Kuomintang [in Taiwan] did before 1987."

—Remarks of a senior academic, August 1, 2011

In 1977, the question for China was simple: Could the nation and the state become stronger and more prosperous? More than thirty-five years later, the original question is almost laughable, and now the question is: Can a much stronger China control itself, become more just, and contribute to global stability and development?

Deng Xiaoping's second communist-era revolution cannot be as precisely dated as the first, which officially started on the day that the PRC was founded, October 1, 1949, and which I choose to end in mid-1977, when Deng Xiaoping reappeared after his second Cultural Revolution–era exile. From the vantage point of the twenty-first century, the revolution we associate with Deng and his reform-minded colleagues represents the accumulation of initial key strategic decisions concentrated in the eight years following his return. Some consequences of these early decisions were anticipated, others were not, and still others have yet to be fully revealed. These outcomes have included

• Vastly improved material circumstances for the Chinese people and an enormously expanded, relatively positive role for China in the world

• Growing economic and social inequality and market failures resulting from the spread of market mechanisms in the absence of effective regulatory and tax institutions, the absence of land rights in rural areas, and the presence of corruption on a very large scale

• The explosion of China's accumulated capital, the abrupt expansion of international financial and trade roles, and the global imbalances to which all of this has given rise

• A staggering pace of urbanization and a swiftly growing middle class that is gradually becoming a force for participatory political change

• Economic growth that is testing the still blurry outer limits of environmental sustainability, as well as the capacity to keep military strength within bounds that China's neighbors can accept

Thus, while Deng Xiaoping pushed the stone of "his" revolution down the mountain, its precise route, effects, rate of movement, and final resting place have been and will continue to be shaped by a myriad of forces, many of which will prove to have been beyond initial intentions, expectations, or control.

This scene-setting chapter first describes the seven principal strategic decisions made at the outset of the Deng era and then examines some of the resulting transformations. In subsequent chapters we examine how Chinese leaders at various levels and in different areas of responsibility have understood important continuities and discontinuities since 1977 and how they have sought to shape the developing circumstances in which they find themselves and their nation.

BACKGROUND

Following Chairman Mao Zedong's death on September 9, 1976, there was a brief interregnum in which Mao's nominal successor, Hua Guofeng, and a cohort of revolutionary elders around him were rooting out the key leftist Cultural Revolution holdovers, stabilizing the economic and political situation, and deciding what role, if any, the still-exiled Deng Xiaoping would play moving forward. On July 17, 1977, the issue of Deng was officially announced as settled by the Third Plenary Session of the Tenth Party Congress: he was reinstated to all the positions from which he had been ousted in April 1976 (vice-chairman of the Central Committee, vice-chairman of the party's Central Military Commission [CMC], chief of the general staff of the People's Liberation Army [PLA], vice-premier of the State Council, and, of course, member of the Central Committee and the Politburo Standing Committee). Little more than a year earlier a failing Mao Zedong had yet again turned on Deng in the aftermath of unrest in Beijing that had been sparked by Premier Zhou Enlai's death in January 1976—unrest that the Cultural Revolution leftist contenders for power in the fast-approaching post-Mao era correctly judged was aimed at them, and for which they found it expedient to blame Deng.

Upon returning to his duties in the summer of 1977, Deng initially focused on science and technology and education policy. However, he rapidly accumulated influence and started to make a series of policy pronouncements establishing the overall direction and dimensions of change that he foresaw. By 1982, Deng had completed easing Mao's weak successor Hua Guofeng out of power, though as a sign of things to come he did not humiliate him. Unlike Chairman Mao, Deng left his vanquished opponent with a shred of dignity by letting him recede gracefully into the background, thereby lowering the temperature of elite politics considerably. After this, though never as omnipotent as Mao, Deng became China's uncontested principal leader, or its primus inter pares, by a considerable margin. Between 1977 and 1985, Deng identified and initiated the principal strategic policy departures associated with the second Chinese communist-era revolution.

Below, we examine these directions and the transformations to which these policy changes have given rise. China's point of departure in comparative economic and social perspective at this moment is illustrated in table 1, which shows the situation in 1980 according to World Bank figures. China's then nearly 25 percent of global population accounted for somewhere around 2 percent of global GDP. The PRC at that time accounted for less than 1 percent of global trade. The urban population was less than one-fifth of China's total, and nearly half of the overall population had not completed a primary school education. At the time, except for health indicators that the Maoist system did drive up (bringing great human benefit to China's people), the PRC was behind India in several categories of societal performance, including percentage of population living in urban areas. Tiny Hong Kong accounted for a larger share of world trade than mammoth mainland China. And even Italy's population had two times more of the global share of GDP than did China's.

The point is clear—the China that Deng inherited was poor, very poor, albeit able to pin down large contingents of the Soviet military along a vast common border. Most of the outside world did not foresee the day when Chinese modernization would give birth to a far different actor on the world stage, a result of the initial strategic decisions made and implemented by Deng and his colleagues. Yet by retrospectively talking about "strategic decisions" one runs the risk of imposing an order on the process that, at the time, did not exist; in his day, Deng's push was above all experimental, opportunistic, reactive, and relentless—essentially seeking those places where the population wanted to run in the direction he desired to take China.

THE MAJOR STRATEGIC DECISIONS

Between 1977 and 1985, Deng and his allies created and immediately began to feverishly implement strategic policy initiatives that fall into seven fundamental categories. Not all of these initiatives were entirely new, and from today's perspective, they have not all proven to be equally successful or even mutually consistent. While their overall success has been considerable, some have had enormous downsides, others have not yet been taken to their logical conclusions, and still others remain difficult to assess.

These seven categories of decisions or policy tendencies are not listed in presumed order of importance, nor can one necessarily point to one "decision" having been made at one precise time. All of them were clearly articulated by Deng, with some being signaled as early as 1974 but most being promulgated between 1977 and 1985. While the majority of these policy tendencies pertained to domestic initiatives, two were international in focus, and all had enormous domestic and international impact.

Strategic Category 1: From War and Revolution to Peace and Development

A governing necessity in China has always been to first define the era in which the nation finds itself. Defining the era helps establish goals and priorities and provides the parameters for messages going out from the center to tens of millions of party and state cadres and to a citizenry whose population was closing in on one billion by the time Deng returned to power. Mao defined his era as one of "War and Revolution." By way of contrast, Deng clearly defined his era as one of "Peace and Development."

Deng and his colleagues were fortunate that history developed as it did in his early years of taking the helm, making his description of a new era credible. This new focus helped establish the generally peaceful and economically oriented regional environment that he needed and from which most other players in the region and the world benefited. Much that was helpful was happening in the years in which Deng's policies took shape:

• The United States had recently exited Vietnam.

• Taiwan was in a relatively open phase under Chiang Kai-shek's son and successor, Chiang Ching-kuo.

• Globalization of trade and manufacturing was gaining momentum.

• The dynamic East Asian economies of Japan, South Korea, Singapore, and Taiwan were taking off, in search of opportunities for surplus capital and sites for the low-wage components of the production chain as their labor and land costs rose.

With the costs of international shipping dropping, and the U.S. economy moving up the value chain, China had opportunities and Washington was willing to cooperate. Although the Soviet Union was (and would remain) a threat well into the 1980s, with new "friends" China no longer had to confront Moscow alone, and economics quickly became the game throughout the country and in much of Asia.

Deng was ready to learn from others and participate in the global economy, as he told a group of American visitors in October 1977, less than three months after his return to power: "We must, for instance, learn from advanced countries something that the Gang [of Four] had called slavish imitation.... One must have enough confidence in one's own ability to take in other things. By self-reliance we should also absorb from advanced countries." In a single sentence he turned Mao's concept of "self-reliance" on its head.

This calculation on Deng's part was fundamental to nearly all of the other policy thrusts. Had he and his colleagues not judged that the international environment was relatively benign, and would remain so for a considerable period, it would have been difficult for him to keep military expenditures very low in terms of absolute renminbi, as a percentage of the PRC's GDP, and as a percentage of the Chinese budget for the first dozen years of reform. This enabled him to focus scarce resources on domestic investment and reduced the anxiety level of most of China's neighbors, thereby further relaxing the regional environment. Had Beijing faced the threat it faced in the 1960s from both America and the Soviet Union simultaneously, the military would have played suffocating domestic, economic, and political roles. Because of his own military credentials, Deng could talk about the need to constrain military expenditures—postponing increases until the domestic economy was far stronger (see figure 1). Having been a major military figure, Deng was able to constrain the armed forces in a way that his civilian successors without such stature would one day find more difficult.

Strategic Category 2: Pragmatic Experimentalism

Deng's revolution was as much a state of mind as it was a specific set of policies. That state of mind was "Let's see what works to produce economic growth," by permitting different regions and levels of the system to develop responses to problems, and then popularizing successful policies—allowing these to spread from the grassroots up. Lower-level leaders want many things from superiors (money and resources being central), but often the most valued thing that the top can give the bottom is policy leeway. Deng provided this type of freedom: he often encouraged local initiative and hung back without committing himself. Only when success was assured did he weigh in definitively, encouraging successful models to be tried elsewhere. In one 1979 conversation Deng put it this way to a group of U.S. governors: "The most important method we have accepted is since China is so big, we are carrying out decentralization, including giving large powers and decision making to enterprises. Only in this way can they naturally find the right way.... During the past two years, [we have] carried out experiments and in this respect all have proved successful. This has been confirmed and now this will be made part of the system." While Mao could also be described as an experimentalist, his experiments were always to serve ideological aims, and they usually ended with an enforced uniformity in the name of giving the initiative to the "masses." Deng allowed for diversity, although he sometimes then had to try to recapture at least partial central control when deviations became too great and the loss of central authority too extreme in key areas such as central revenues.

Strategic Category 3: Material Incentives, Markets, and State-Society Balance

Political leaders have different predispositions with respect to which tools of power they find most effective or congenial. The available instruments of power are coercion, material reward (remuneration), and ideological (normative) persuasion. Mao was a believer in the first (coercion) and the last (ideology), with a distinct bias against material incentives. Mao would consider the latter only if China was in a severe economic crisis, as was the case in the immediate post-Liberation period from 1949 to 1953 and in the aftermath of the Great Leap Forward in 1960. Because he emphasized coercion and ideology, Mao needed a strong state and party that could create and wield such instruments.

In contrast, Deng relied principally on remunerative power, employing coercion only when the political system was threatened, as in 1979 with the Democracy Wall movement and again a decade later with the Tiananmen demonstrations. Deng wanted a strong state, but one that was far less intrusive in its relation to society—using material incentives, as opposed to direct administrative control and mass mobilization, as often as possible. Some of his policies, most notably those in agriculture, were almost self-implementing because they so closely aligned with the interests and inclinations of those applying them and because people were so relieved simply to be freed from policies that had proven catastrophic. In speaking to a group of visiting Americans in 1979, Deng could not have been clearer: "[It is] impossible to give play to personal enthusiasm and initiative without linking it to incentives. During the past ten years [1969–79], it has been proved that all those enterprises which had decision powers—the workers themselves increased income and have given more profit to the state. Not only in factories but in the countryside as well." In a fall 1977 conversation in which he seemed worn and wary shortly after his return to power, Deng said: "As for wages, over the past decade there were no raises of wages. In 1974 there was a proposal to raise some wages, but the Gang of Four opposed it. Again the same thing happened in 1975, and now we are working again on raising wages." Deng believed that higher pay produced more work and that more work produced more benefits for both the workers and the state. Mao was a zero-sum type of political leader, while Deng was a win-win leader, except when it came to keeping the CCP in its solitary leading role.

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Excerpted from "Following the Leader"
by .
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