page_title: Chinese economic reform
section_title: Reasons for success
hierarchical_section_title: Chinese economic reform / Academic studies / Reasons for success
caption_attribution_description: DAVOS/SWITZERLAND, 26JAN13 - (From left) Rui Chenggang, Director and Anchor, China Central Television, People's Republic of China, John Zhao, Chief Executive Officer, Hony Capital, People's Republic of China, Lawrence H. Summers, Charles W. Eliot University Professor, Harvard University, USA, Kevin Rudd, Member of Parliament, Australia; Global Agenda Council on Fragile States, Zhang Xiaoqiang, Vice-Chairman, National Development and Reform Commission, People's Republic of China, Gordon Brown, UN Special Envoy for Global Education; Prime Minister of the United Kingdom (2007-2010), Jin-Yong Cai, Executive Vice-President and Chief Executive Officer, International Finance Corporation (IFC), Washington DC, on the panel during the Session 'China's Next Global Agenda' at the Annual Meeting 2013 of the World Economic Forum in Davos, Switzerland, January 26, 2013.. . Copyright by World Economic Forum. . swiss-image.ch/Photo Monika Flueckiger
context_page_description: The Chinese economic reform refers to the program of economic reforms termed "Socialism with Chinese characteristics" and "socialist market economy" in the People's Republic of China. The reforms were started by reformists within the Communist Party of China—led by Deng Xiaoping—on December 18, 1978, during the "Boluan Fanzheng" period. They went into stagnation after the 1989 Tiananmen Square protests, but were revived after Deng Xiaoping's Southern Tour in 1992. In 2010, China overtook Japan as the world's second-largest economy.
  Before the reforms, the Chinese economy was dominated by state ownership and central planning. From 1950 to 1973, Chinese real GDP per capita grew at a rate of 2.9% per year on average, albeit with major fluctuations stemming from the Great Leap Forward and the Cultural Revolution. This placed it near the middle of the Asian nations during the same period, with neighboring capitalist countries such as Japan, South Korea and rival Chiang Kai-shek's Republic of China outstripping the PRC's rate of growth.
context_section_description: Scholars have proposed a number of theories to explain China's successful transition from a planned to a socialist market economy. This occurred despite unfavorable factors such as the troublesome legacies of socialism, considerable erosion of the work ethic, decades of anti-market propaganda, and the "lost generation" whose education disintegrated amid the disruption of the Cultural Revolution.
  One notable theory is that decentralization of state authority allowed local leaders to experiment with various ways to privatize the state sector and energize the economy. Although Deng was not the originator of many of the reforms, he approved them. Another theory focuses on internal incentives within the Chinese government, in which officials presiding over areas of high economic growth were more likely to be promoted. This made local and provincial governments "hungry for investment," who competed to reduce regulations and barriers to investment to boost both economic growth and their careers. Such reforms were possible because Deng cultivated pro-market followers in the government. Herman Kahn argued that Confucian ethic was playing a "similar but more spectacular role in the modernization of East Asia than the Protestant ethic played in Europe". 
  Taken together, Yuen Yuen Ang argues in Foreign Affairs that political reforms took place with economic reforms under Deng, except the former did not take Western forms. She writes, "To be sure, Deng's reforms emphasized brute capital accumulation rather than holistic development, which led to environmental degradation, inequality, and other social problems. Still they undoubtedly kicked China's growth machine into gear by making the bureaucracy results oriented, fiercely competitive, and responsive to business needs, qualities that are normally associated with democracies." But this only applies to the Deng era. Ang notes that since 2012, when Xi Jinping took over, the new leader has reversed Deng's political reforms and limits to power, "just as political freedoms have become imperative for continued economic growth."  
  China's success is also due to the export-led growth strategy used successfully by the Four Asian Tigers beginning with Japan in the 1960s–1970s and other Newly industrialized countries. In 2001, China joined the World Trade Organization (WTO). As of 2006, over 400 of the Fortune 500 companies had entered the Chinese market, while at the same time a considerable number of Chinese companies had opened their markets outside of China. Foreign aids to China, including those from Hong Kong, Macau and Taiwan, also played an important role. Since the beginning of opening, China has received a significant amount of aid from major developed countries such as the United States, Japan, Germany, France and the United Kingdom. For instance, through its Official Development Assistance (ODA), Japan had offered China various forms of assistance worth 3.65 trillion Yen as of 2018. On the other hand, the assistance from the U.S. reached a total of US$556 million as of 2012, and has "helped Tibetan communities improve livelihoods, promote sustainable development and environmental conservation, and preserve cultural traditions...also supports targeted programs that strengthen cooperation on combatting the spread of HIV/AIDS and other pandemic and emerging diseases as well as rule of law programs."  
  The collapse of the Soviet Bloc and centrally planned economies in 1989 provided renewed impetus for China to further reform its economy through different policies in order to avoid a similar fate. China also wanted to avoid the Russian ad-hoc experiments with market capitalism under Boris Yeltsin resulting in the rise of powerful oligarchs, corruption, and the loss of state revenue which exacerbated economic disparity.
caption: Discussion of "China's Next Global Agenda" during the World Economic Forum (2013).
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