China in the World: Chapter 1. From backwater to world power.

Time hangs heavily on Chinese civilisation. For nearly four thousand years, depending on when the first dynasty is dated, up to thirty dynasties have ruled for varying lengths of time over the Middle Kingdom. Not surprisingly, the prevalent Chinese interpretation of history has been of historical cycles, whereby the broad tapestry of human existence is for ever re-played. Typically, traditional Chinese historiography has a new dynasty begin with capable rulers receiving the mandate of heaven to carry out various reforms and extend the boundaries of Chinese administration. These are followed by a golden age of stability, prosperity and cultural achievement. However, as routine sets in, so does corruption and decay. Finally, the dynasty loses heaven’s mandate through internal rebellion or external invasion, only for a new dynasty to be established in war and violence, and for the pattern to repeat itself.

The question suggests itself where the communist dynasty may be in this circuit:  Is it heading for a new golden age, or about to succumb to corruption and decay? The answers depend much on the evidence deployed, and the time horizon adopted. The two are intimately associated:  the closer the future is, the more turbulent China appears. The farther the future lies ahead, the more serene the judgment becomes.[1] This trick of perspective is explained by the many facets of China’s present transition from what was a Maoist- Leninist-Marxist party state, to what has been called a market-Leninist state.  Mao Tse Tung, the founder of the communist dynasty, conceived of politics as permanent warfare.  Affirming China’s sovereignty was paramount; economic development was of secondary importance. His successor, Deng Xiao ping’s successor,  took a different tack: China’s external relations would henceforth take their cue from the imperative of development. Inserting China into the world system, dominated by the western powers, would be the priority.

China’s memory of greatness.

For millenia, the Chinese had lived in the belief that their country stood at  the centre of the civilized world, of which the nucleus was the rest of Asia. China’s economy and population had accounted for anywhere between one quarter and one third of the world total (see Table1) Marco Polo, the Venetian traveller, wrote in the thirteenth century of China, with its 70 million of inhabitants,  as “the richest country in the world”, where Chinese inventions such as gunpowder, the marine compass or printing were unknown. Yet on the eve of the industrial revolution in 1820, China was clearly lagging. Its population had grown to over 380 million, while per capita income had fallen from near parity to below forty per cent that of western Europe. This lag in Chinese civilization and technical progress, notably in agriculture, presaged more than a century of da luan, the terrible times whose broad outlines are sketched below, as China’s per capita income contracted to a fraction of that of the more technically advanced nations. Indeed, relative decline accelerated through the nineteenth century, furthered by the wars and revolution of the first part of the twentieth century, and continued unabated over the next fifty years of the communist dynasty.

Table 1: China as a percentage of world totals.

1000  1500  1700    1820   1900       1950     2000

Population                      22.1    23       23        37     25.6       21.7         21

Income                            23      25       22        28     13.2         6.2          3.4

Western Europe’s            113     77       60         41    16.2          6.6      3.1

Per capita income

Source: IMF, Angus Maddison, Chinese Economic Performance in the Long Term. Paris, OECD, 1998. The World Economy: Historical Statistics, OECD, 2003.

China’s self image as the centre of the world was rudely shattered during the first and second Opium Wars of 1838-42 and 1856-60, when the Manchu government suffered a crushing defeat at the hands of the British and French expeditionary forces.  It was forced to open its ports and to conclude humiliating, inequitable treaties, as well as having to pay huge amounts in ‘indemnities’. Hong Kong, a barren rock, was ceded to the British Crown in perpetuity, and later Kowloon and the New Territories were leased for 99 years. A succession of civil wars wracked the country, by far the most savage of which was the Taiping Rebellion of 1851-1864. About twenty million people died before the dynasty managed to quell its leader, Hong Xiuchuan, a self-declared younger brother of Christ. Further humiliating defeat by Japan in 1895 prompted government officials to try and convince the ruling dynasty of the necessity of “self-strengthening” and reforms, and particularly of developing a modern ordnance industry.  But the imperial court feared it would lose power and influence if economic and political reforms were implemented. The Qing dynasty, which had ruled since the 1640s, collapsed in 1911.

The Qing dynasty’s fall began when revolutionaries exploded a bomb accidentally in the Russian concession in Hankou, one of three cities in Wuhan. The police discovered the names of the agitators, soldiers mutinied, the governor and his family were slain, and loyalist troops were defeated in December in Nanjing—the nation’s capital in the fourteenth century. In January 1912, Sun Yat Sen, the founder of modern China, became provisional president of the Chinese Republic.

The historian Ho Pingti picks up the story:  “For a whole decade from 1917 to 1927 there were incessant civil wars in various parts of the country…From 1928 on the Nationalists were repeatedly at war with the Communists…These wars were brought to an end in 1936; then war with Japan broke out in July 1937…”  [2] As Jung Chang and Jon Halliday have pointed out in their biography of the founder of the People’s Republic, Mao: The Unknown Story, [3] at key moments, the Communists faced annihilation: in 1931, when Nationalist  troops had to withdraw from Jiangxi in response to Japan’s invasion of Manchuria ; and in 1937, when Stalin helped detonate a full-scale confrontation in southern China in order to keep Japan away from the Russian border, thereby setting the spark to the Sino-Japanese war.

In the initial battle for Shanghai, Chiang Kai-Shek, the Nationalist Generalissimo, lost 73 of 180 of his divisions. By 1945, China had lost 20 million dead, 95 million were refugees, Chiang’s state was seriously weakened, and Mao was able to emerge with an army of 1.3 million. Three days after the nuclear bombs fell on Hiroshima, Stalin’s armies invaded northern China, opened the Japanese arms depots, and replenished Communist weaponry.  In August 1945 civil war between the Nationalists and Communists was renewed. Within four years, the Communists were able to defeat the US-backed, more modern and four times as numerous Nationalist forces. Chiang Kai-shek fled to Taiwan, still claiming to be the legal leader of China.  Mao Tse Tung proclaimed the People’s Republic of China (PRC) on 1 October 1949, declaring that at last “the Chinese people have stood up”.

The Red Emperor.

Mao reigned as Red Emperor from 1949 until his death in 1976. Policy for him was not about the achievement of equality, wealth or justice—but first and foremost about China’s affirmation as a power in the global jungle. His overarching theme was to make China into a military superpower, and  in his own lifetime. In this, Mao resembled the Hitler portrayed in Sebastian Haffner’s 1978 study, Anmerkungen zu Hitler, [4]  which Ian Kershaw described as one of the most brilliant studies of the Nazi dictator. For Haffner, Hitler was a man in a hurry. His hubris was to crush his programme for Germany, Europe and the world into his own lifetime, requiring him to launch permanent revolution and war in a mad, destructive bid to challenge his own mortality. One important difference between Hitler and Mao, was that Mao came to power in the nuclear age, requiring a rather clearer divide than prevailed prior to 1945, between state policy and revolutionary policy. In a nuclear age, sending troops across international frontiers involved high risks for the perpetrators, especially if those troops came into conflict with the troops of other nuclear powers—in the case of the Korean war, the U.S. and the U.K., the only two powers ever to have countenanced the use of nuclear terror in war on an enemy state.

Communist predominance on the Eurasian landmass, heralded by the Chinese Communists’ entry to Beijing in October, 1949, appeared to be confirmed with the conclusion of a Sino-Soviet treaty in February 1950. The Sino-Soviet treaty of friendship, alliance and mutual assistance included the declaration of a military alliance against Japan and its allies. In April, the State Department’s NSC 68 memorandum urged a political, economic and military strategy for the security of the free world. [5] In June, North Korean troops invaded the South, with Chinese and Soviet support. President Truman thereupon announced military intervention in the Korean conflict, United States naval protection for the Chinese nationalists on Taiwan, and support for the French forces opposing the communists in Indochina. In September 1951, the United States signed a peace and security treaty with Japan. With this, the security structure of North East Asia came  firmly into place: US predominance in the Asia Pacific region has since provided the overarching presence of Asia’s security system. Japan subsequently devoted its resources to industrial expansion under U.S. military protection, and entered Asian markets as European colonial tariff schemes were dismantled. U.S. predominance in the Asia Pacific region provided the context in which the Asian Pacific economies were to prosper.

In his first decade, Mao “leant to the Soviet side” in the cold war. This entailed a  harsh assertion of China’s sovereignty. Sovereignty was a treasured and tangible acquisition, bought in blood and tragedy after a century marked by internal turmoil, invasion, civil war, and inflation. Exercising sovereignty would enable the party-state to establish a command economy along the lines of the Soviet Union, and reject China’s incorporation into world markets, where the capitalist powers called the shots. China had  to be master in its own house: that meant intrusive party control over the daily life of the Chinese people, the elimination of capitalists and landlords at home, and China’s withdrawal from world markets.  Self-sufficiency at home meant autarky abroad. Commercial relations were sustained with the Soviet Union until 1960, when the two communist giants fell out, while the US imposed a trade embargo on China, that lasted from 1950 to 1971. Mao applied his demonic will to drag the country by force, and regardless of human suffering, on the path to modernization. In the frantic search for success, policy swung from one extreme to another. He sought to introduce a socialist utopia to China, to build up its industrial base, make the country self-sufficient, prepare it for wars with either or both of the two world powers, consolidate his political power base, transform Chinese people, promote revolution in developing countries and abolish class differences.

Mao ranks with the greatest of utopian tyrants. His vision was nothing less than to renovate Chinese culture. A number of devastating consequences followed as night follows day. The first was for the party-state to Wipe the Slate Clean of inherited social arrangements, which were considered intrinsically worthless precisely because they were old. The second was to have the population collectively make a Great Leap Forward in order to put as much distance as possible between the past and the future utopia.  The third was to place trust in theoretical and abstract reasoning as the primary input for the Design of society’s new arrangements. The fourth was to consider that once policy had been adapted, and changes introduced, they were Irreversible. And finally, because utopian thought and action was theoretical by derivation, the prime source of inspiration was the knowledge held by party theorists and technicians.

As Angus Maddison has argued,[6] Chinese communism involved risky experimentation on a grand scale. He identifies four major sets of measures that were implemented with a view to interpreting the communist vision into reality:

  1. The first fundamental change to be introduced was to wipe the slate clean of landlords, the national bourgeoisie and foreign interests through expropriation. The aim was to abolish property rights as the definitive feature of a class society, and thereby to enable the party to expropriate the agricultural surplus, and to do away with class enemies. In 1958, all private property disappeared and 123 million peasant households, working in co-operatives, were dragooned into 26,000 giant people’s communes. Private enterprise was then eliminated in the Great Leap Forward, during which up to 30 million people are thought to have lost their lives. In the 1960s, military-related industries were de-centralised in fulfilment of Mao’s “Third Force” concerns about the imminence of war. The number of people engaged in retail trades fell to 6 million.
  2. The second fundamental change was to run a command economy. Labour and financial resources were controlled and allocated by the central government to the four types of organization–industrial, agricultural, service units and administrative– functioning in the Maoist economy. Funds were raised by siphoning the surplus from the agricultural sector and allocating investment to industrial purposes through the plan. Corporate taxation was the prime source of government revenues. Labour movement was also strictly controlled, trapping people in low income, low productivity employment. Management powers over the workforce were limited, and managers tolerated worker absenteeism and sloppy work. In 1972, measures were taken to limit family size on Malthusian grounds that, if technological innovation could not be accelerated, then demographic growth had to be checked.[7] The “one child per family” policy was really only implemented as if 1978-79. This has had far-reaching effects. One favourable feature of the command economy was the emphasis placed on collective consumption, notably in health and education. The literacy rate rose from 20% of the population in 1949 to 60% by the late 1970s, and life expectancy rose from 38 to 65.
  3. The third fundamental change was to cover the country with a dense web of regulations. These included the regulation of investment funds and physical inputs, the  movement of labour, and fixed prices and wages. Control  over resources was designed to maximise the potential for a “great leap” of China to modernisation. But as Barry Naughton has pointed out, agriculture was never able to generate the requisite surplus, with the result that investment rates swung wildly between positive and negative over the whole period of Mao’s reign. [8]  As in other Soviet-style economies, single-minded pursuit of industrial growth was characterised by negative returns on investment;  low employment—only 50% of people in working age  participated in the workforce; the neglect of services,  and the suppression of private consumption. Welfare provision was delegated to enterprises, which provided housing, education or health services to employees. By 1978, per capita income had trebled over 1952. Industry, particularly the heavy sort, overtook agriculture as the prime sector in terms of aggregate production.
  4. The fourth fundamental change was to convert foreign trade into a state monopoly, the aim being to make China net self-sufficient. Such goods as were imported came mainly from other communist-ruled countries, and were essentially producer goods not available at home. In the 1960s, as the population continued to grow in absolute terms, and farm output was disrupted, China began to import grain from Canada and Australia. Foreign direct investment almost disappeared, and foreign borrowing was held to a minimum. In effect, China was not quite so isolated as appeared. Relations with the UK were conducted on a pragmatic basis, so that China could enjoy a substantial injection of foreign currency earnings from the sizeable trade surplus with Hong Kong. There were also trade agency connections abroad, and a high-profile channel for special trade diplomacy. Japan was an important trade partner.

On the plus side, the centralised system established under Mao had shown that it could mobilise massive resources, China had established an independent industrial system, and moved towards food self-sufficiency. Growth had resumed after the disastrous years of the early part of the century, and collective investments in health and education were showing significant returns. On the negative side, when Mao died, in 1976,   China was a desperately poor country. Per capita income was 7% of the US’s; sixty per cent of the population survived on less than $1 a day, food shortages were rife, and international trade at 1% gdp was the lowest out of 120 developing countries.

Mao’s policy legacy.

Mao’s political legacy was no better.  After the disaster of the Great Leap Forward, Mao was forced to back down- prompting him to nurture what his biographers call  a “volcanic hatred” of officials. In 1966, he launched the Cultural Revolution, and gave  his wife Jian Qing far reaching powers to revolutionize Chinese society. His biographers calculate that as a result  3 million people died violent deaths, two-thirds of Beijing’s historic sites were destroyed, terrified households dismantled their libraries (Mao stole volumes for his own pleasure, much like Goering’s plunder of art works in Europe during the second world war), and up to 100 million people suffered in one way or another during the upheavals. Most Chinese families still have  to support un-or under-educated 60 year old members who failed to attend schooling, or were incited by Mao to believe that thoughtless action was a reasonable substitute for learning.

Latent tensions with the Soviet Union broke into the open in 1960. Ever wary of his big neighbours’ motives, Mao resented Moscow’s claim to leadership in the communist movement, feared its efforts to seek accomodation with the US, notably over nuclear weapons, and berated the Soviet Union for reducing support for revolution in developing countries.[9] Dispute over its Himalayan frontiers with India escalated into armed conflict in 1962, when the People’s Liberation Army (PLA) inflicted severe losses on badly equipped Indian forces. Towards the end of the decade, China’s leaders became anxious about the Soviet military build-up along the disputed Sino-Soviet 7,000 kilometre frontier. Meanwhile, the two communist powers entered as competing rivals into the Indochina war, but as support waxed in the US to bring the boys home from Vietnam, Mao’s enthusiasm waned for US retrenchment from the Asian mainland. A serious Sino-Soviet clash on the Ussuri river in 1969—the first armed conflict between two nuclear powers—served to underline the danger to China of not “leaning to one side”.

As the world’s prime power, the new configuration of world politics which began to take shape around the end of the 1960s, was designed in Washington D.C.. The broad lines of U.S. foreign policy were defined by President Nixon and his adviser, Henry Kissinger. The key to the new team’s redefinition of U.S. policy lay in Pacific Asia. The Nixon-Kissinger strategy of an opening to Beijing and détente with the Soviet Union was predicated on the idea that the two communist powers could be contained at lesser cost to the U.S. economy. [10] For Mao, the purpose of closer relations with the US was to counter Soviet ambitions in Asia, and win access to US military technologies. But alliance with the US in containment of the Soviet Union spelt an end to Chinese support of revolutions around the world. In October 1971, the US acquiesced in a UN vote to grant Beijing the China seat at the UN, previously held by the Nationalists. Subsequently, the parameters of US-Chinese relations were set out in three key documents. The first, and most important communiqué, was signed by Mao and Nixon in February 1972. The Shanghai Communiqué acknowledged “the position on both sides of the Taiwan Straits that there is One China, of which Taiwan is a part.  The US also affirmed interest in the “peaceful settlement of the Taiwan question by the Chinese themselves”. [11] Nixon’s visit to Beijing,  followed by China’s move to improve relations with Japan and all Western European states, came in counterpoint to the signing in May 1972 of the Strategic Arms Limitation Talks (SALT) by Nixon and Brezhnev. In January 1973, the Paris accords ended the war between North Vietnam and the United States, thus consecrating the continued division of Vietnam. Peace for the countries of the maritime Pacific was now to be assured by U.S. retrenchment from military engagement on the Asian mainland, and by U.S. encouragement of foreign direct investment into the region. The Pacific became more than ever a dollar-based economy.

As his biographer records, Mao’s last years were mired in failure: To judge by the company that Mao kept, after the brief interlude around the early 1970s, when Mao and Chou negotiated the key relationship with the US, there was little to boast about. China’s competition with the USSR for leadership of “revolution” in the post-colonial world ended in failure. Enver Hoxha, Albania’s tin-pot Stalin, upbraided Mao for “the shitty business” of talking with Nixon; “Marshall” Mobutu of Zaire dropped by to say hello. Hanoi’s victory in 1975 was a Soviet, not Chinese victory. Mao backed the monster Pol Pot, in Cambodia. A longer time bomb of Maoism was triggered in Peru’s Shining Path movement, which came into its violent own in the 1980s. Closer to the present, Nepal is being convulsed by Maoist revolutionary tactics. In western Europe, Maoist break-away parties challenged Moscow-oriented parties in Portugal—the European Commission president, Barroso, was a “Maoist”, but suspected of being on the CIA payroll  at the time of Portugal’s “revolution of carnations”. John MacDonald, the Stalinist deputy-leader of the Labour party, waved Mao’s Little Red Book from the despatch box of the House of Commons as worthy of study.  He failed to mention that when Mao died, China was an impoverished backwater, hundreds of millions lived below any modest threshold of poverty, technology was hopelessly outdated and China’s main exports were oil and raw materials. Over his lifetime, Mao was responsible, his biographer records, for the death of 70 million people—far outclassing Hitler’s 20 million, and Stalin’s 50 million.[12]

What can be said of Mao’s legacy? As Mao conceded at the end of his life to President Nixon in response to the question what he considered his achievements to be, that all that he had managed to achieve was to change a few place names in the neighbourhood of Beijing.[13]  Philip Short in his biography of Mao [14] tries to be fair-minded: China under Mao,Short writes, made the great leap from semi-colony to great power; from millennial autarky to socialist state; from imperialist victim to UN Security Council member. He then goes on to claim that the overwhelming majority of those whom Mao’s policies killed were unintended consequences of policy failure. Chang and Halliday’s book on Mao rubbish this idea:  Mao’s failures flowed, they argued,  from his relentless search for power for power’s sake, his shedding any shackles of restraint in the form of ethical principles, and his cynical regard only for his own self-gratification. They demolish the myth of Mao, and lay a powerful axe to the roots of the present regime.

As I have recorded on this blog, Mao has never been repudiated by his followers. There was excellent reason for this position: reneging on Mao -the regime’s founder- risked shaking the regime’s foundations. China’s post-Mao leadership have been close students of the USSR’s fall, and in particular follow in Mao’s footsteps in criticising the impact of Chairman Khrushchev’s denunciation of Stalin in February 1956.  The problem was dexterously handled in a Central Committee document of 1982 entitled On the various Historical Issues since the Founding of the People’s Republic of China, in which Mao retained his status as a “great Marxist, proletarian revolutionary, militarist and general”, but was criticised for starting the Cultural Revolution. With this definition available, the 1982 constitutional reform re-affirmed the ‘Four Cardinal Principles”, guided by Marxist-Leninist-Mao Zedong Thought”: party-state hegemony; the leading role of the party; a unitary state; the concentration of powers, and democratic centralism in the party. “His accomplishments must be considered before his mistakes”, the document declared. Deng personally commented that Mao was “seven parts good, three parts bad.” The 7/3 ratio has entered children’s history books.

Deng Xiao-ping takes charge.

In the course of 1978, Deng consolidated his position as China’s paramount leader, with a series of interlinked domestic and foreign policy initiatives. He had joined the CCP in 1923, participated in the  Long March, become Secretary-General in the 1950s, fell out with Mao over the Great Leap Forward, was purged twice during the Cultural Revolution, but brought back into  a senior position in 1974 on the suggestion of Chou en Lai. Mao suspected him of seeking to reverse the Cultural Revolution-which the Great Helmsman considered his prime achievement. But following Mao’s death in 1976, he outmanoeuvred Mao’s chosen heir, Hua Guofeng.  Initially reforms stressed mixing western managerialism and state planning in a self-sufficient economy.  As the leadership stepped up the pace of reform and opened the economy to  imports of machinery and technology from the advanced industrial countries, official descriptions of the Chinese economic system evolved. In 1978, Mao’s leaps towards socialism were described as “premature”.[15]   In 1980, official documents described it as “ a planned economy with commodity production and exchange”. [16] By 1992, Deng stated during his famous southern tour  that “Singapore enjoys good social order and is well-managed. We could tap on their expertise and learn how to manage better than them”.[17] It is, he famously stated, “glorious to get rich”. He died at the age of 92 in February 1997.

Once in harness, Deng initiated a blizzard of far-reaching reforms: college entrance examinations, suspended during the Cultural Revolution, were re-introduced. The core of his measures was presented at the December 1978 Third Plenum of the 11th Central Committee, where Deng Xiaoping announced the official launch of the Four Modernizations, formally marking the beginning of the reform era. The aim of the Four Modernizations in the fields of agriculture, industry, science and technology and national defense was to make China a great power in the 21st century. Deng travelled to Japan, Singapore and the United States to highlight China’s opening on the world economy;  started a brutal, one month war with Vietnam; launched political reforms, placing term and age limits on officials, and culminating in the Constitution of 1982 and  still effective to the present. Deng supported his predecessors one-child policy, with major consequences for China in the short and longer term.

Deng is heralded as the architect of China’s modernisation in a revolution conducted from above. In fact, though, China in 1978 was in pre-revolutionary turmoil. Up to 400 million people existed on or below the Chinese threshold of poverty. It is scarcely an exaggeration to say that agricultural reform was initiated by the peasantry. Peasants took control rights over all production, except for the right to dispose of the land. This practice, initiated in December 1978 by the Xiaogang Production Brigade of Fengyang County in Anhui Province soon spread to other parts of the province, and received strong support from the provincial governor. Twenty peasants representing twenty households put their fingerprints with their own blood on a “contract” to divide the brigade’s land among the households. By doing so they also promised to fulfil the procurement quota of grain to the state. This was the “household responsibility system” which the party only reluctantly agreed to. Deng had the intelligence to appropriate the “reform” as the party’s own.

In January 1979, Deng undertook an official visit to the United States, met President Jimmy Carter at the White House, and  insisted that former President Nixon be invited to a White House reception to underscore the centrality to China’s foreign policy of the February 1972 Nixon-Kissinger visit to Bejing. He also visited Houston, Atlanta and Seattle to make clear that the new Chinese government’s priorities were economic and technological development. Not least, the visit coincided with a rapid deterioration in relations between the USA and the USSR. The détente between the powers during the early 1970s had run its course.  Moscow, fearful of encirclement by an alliance under U.S. leadership, responded favourably to Bonn’s overtures for a peace settlement, while expanding its own network of allies in Asia to encircle China. In April 1975 North Vietnam conquered the South. The USSR also established footholds in Africa, following the collapse of the Portuguese empire; became ever more deeply embroiled in Afghan politics, and in November 1978, signed a Treaty of Friendship and Cooperation with Vietnam. Beijing’s response was to send troops into Vietnam to forestall Hanoi’s primacy in Indochina. The brief and bloody clash ended the Beijing-Hanoi alliance, and helped to identify China’s new leadership  as the best ally of Tokyo and Washington, in a world-wide alliance against the `social imperialists’ in Moscow. The prize for Beijing came in the wake of Deng’s meeting with President Carter at the White House. In the Normalization Communiqué of January 1979, the US government confirmed the One China policy, but broke formal relations with Taiwan. The text stated that the US would maintain “cultural, commercial, and other unofficial relations with the people of Taiwan.”

The White House decision to sever diplomatic ties with the Nationalists prompted a backlash in Congress, which passed the Taiwan Relations Act in April. The Act stipulated that US policy considers any effort to determine Taiwan’s future by “other than peaceful means” as a “matter of grave concern to the United States”. The US would continue to supply “arms of a defensive character” to Taiwan, while maintaining US capacity to resist any mainland efforts to coerce the island into changing its economic and social system. “The preservation and enhancement of the human rights of all the people on Taiwan are hereby reaffirmed as objectives of the United States.” The Act refers to “ the governing authorities on Taiwan”, thereby treating Taiwan as a sub-sovereign foreign state equivalent.

As Washington-Moscow relations reached their nadir in the early 1980s, China moved backed to a policy of equidistance. It opposed the Reagan administration on the matter of arms sales to Taiwan, but in August 1982, reached an agreement with Washington on the principles governing sales of US arms to Taiwan. In the PRC interpretation, the communiqué obliges the US to cap the quality of weapons and progressively reduce the quantity it sells. President Reagan’s interpretation of the communiqué was that it maintained a balance across the Taiwan Straits and created a stable context for continued close US-Taiwan relations. In April 1984, Reagan made a six-day visit to China — the first by a US President since the resumption of diplomatic relations. In his speeches, the President repeatedly referred to US values of freedom and democracy,–a precedent followed by his successors -while highlighting common interests in trade and anti-Soviet strategy. As Reagan put it on his return from China, the Chinese “weren’t really Communists at all”.[18] Then in December, the UK and China issued a joint declaration, stipulating the return of Hong Kong to Chinese sovereignty as of July 1997. It was agreed, in accordance with the “One Country, Two Systems” principle, that Hong Kong’s capitalist system and way of life would remain unchanged for 50 years thereafter. Talks were resumed with the Soviet Union on frontiers. With the revival of the containment spirit in the United States, China could turn to its true priority of internal development, cut the military budget, and introduce market mechanisms. By 1985, China was setting the pace for reform in centrally-planned economies.

The five following years may be seen in retrospect as halcyon days for China’s relations with the western powers. Control over China policy in the United States flowed back to the White House and away from Congress. The US won a partner to help contain the Soviet Union around Asia, while China understood that a continued US military presence in North-East Asia acted in restraint of Japanese ambitions. Both sides shared intelligence. The PLA purchased US weapons and technology, and co-operation was intensified on satellite development. Trade boomed, with the US becoming one of the leading foreign investors in China. Over 40,000 Chinese students in the 1980s attended US universities. Not least,  the relationship helped build China’s credentials as a reliable partner on the world stage. China established bilateral diplomatic relations with nearly all states, joined international organizations, became an honorary member of NATO and signed on to dozens of non-governmental organizations. China applied for membership in the GATT, – the General Agreement on Tariffs and Trade, – the ancestor of the World Trade Organisation. With such favourable political winds blowing, China’s own economic reforms opened a vista on the country’s eventual reunification. If all Chinese territories came to apply similar rules, powerful forces would be set in train promoting convergence on shared norms of market-democracy. China’s relations with Asia Pacific neighbours eased.

The events of June 1989 in Tiananmen Square dramatically changed the Western world’s view of China. Talks were broken off  on mainland accession to the GATT. Beijing tried to shore up its relations with the Bush administration by co-operation in the Gulf war, but this China-US rapprochement was greatly complicated by Taiwan’s bid for accession to the GATT in 1990. The fear in Beijing was that the western powers, including Japan, might be tempted to bring Taiwan into the WTO, and keep China out. China was again on its own.

Which way out of Soviet-style communism?

1989 to 1992  were truly anxious years for China’s leadership. To their horror, they witnessed the collapse of the Soviet Union, that had served as blueprint to the People’s Republic. The fear was expressed in a best-selling book, Viewing China Through a Third Eye, published in 1994, and written by Wang Shen, a confidant of one of the regime’s “princelings”, or sons of prominent regime members. [19]  “The latent crisis in Chinese society is very serious”, Wang writes. The disaster about to overwhelm China is triggered by massive rural emigration, as get-rich-quick practices push aside the communist regime’s prime constituency of working class and peasantry. Signs of political collapse lie all around: corrupt officials, rural riots, stock market scams, the proliferation of sects to fill the vacuum left by the death of communist ideals, major policy rifts within the communist “emperor’s household,” centre-province tensions, widening income disparities, rising pollution, weak public finances, a floating population of up to 200 million unemployed, and mounting lawlessness. China, this line of reasoning continues, is not on the verge of independent industrialisation, but on the verge of more than a century of da luan (great chaos), where 1989 stands for the year 1839, at the cusp of the First Opium War.

What to do?  Deng was very consistent. “In the China of today”, he declared,” we can never dispense with leadership by the Party.”[20] The party’s task, he added, is to provide the authority to create a “socialist market economy”.  In pursuit of this objective, Deng in June 1989 ordered the PLA to suppress the student movement in blood. There was no question of  the CCP following Gorbachev’s lead in allowing an extra-regime opposition to form. The precondition for China’s evolution to a wealthy society under a powerful state was that the communists hold on to power, while pushing ahead with the open door policy. In his famous “southern tour” of early 1992, Deng put reform back as a priority in his famous statement that “it is glorious to get rich”. His offer to the Chinese people was for a de facto opening up of the sphere of private liberties, combined with a clear warning to stay out of politics. For the privileged members of the party-state, he opened a wide grey zone where the “nomenklatura capitalists” of the new China could seek to maximise business opportunities, outside of or alongside an incomplete legal system. The substance of this is spelt out clearly in the 1993 Decision of the CCP Central Committee on Some issues Concerning the Establishment of a Socialist Market Economic Structure. This is one of the key documents in China’s transition.  “ The establishment of (the socialist market economic (SME) structure)…aims at enabling the market to play the fundamental role in resource allocation under macro-economic control by the state ».

The political intent of the Decision was to create a state of law,- crucially under the leadership of the CCP, and not a western-style democracy. In The China That Can Say No, a book written by a group of young Chinese intellectuals and that sold two million copies in 1996-its year of publication–China must modernise,  but not on Western terms. [21]  At the 15th National Congress on September 12, 1997, President Jiang Zemin—a prime author of the 1993 Decision—went a step further. His report declared that the CCP supports “holding democratic elections, making policy decisions in a democratic manner, instituting democratic management and supervision, ensuring that the people enjoy extensive rights and freedom endowed by law, and respecting and guaranteeing human rights.”[22] The theme was picked up by President Hu Jintao, who oversaw the publication of a White Paper on Democracy, published in October 2005, and entitled “Building of Political Democracy in China ». The White Paper stated that there was still a long way to go in building political democracy in China, adding that the country meanwhile was under management of a safe pair of CCP hands. To dispel any doubts on the matter, the White Paper defined democracy as “the Chinese Communist party governing on behalf of the people…while upholding and perfecting the people’s democratic dictatorship”.

Reform of the Maoist political order in China was ripe with risk for the party-state. Tampering with state enterprises  threatened urban working populations, 90% of whom in the big cities in the early 1990s were still employed by the party-state. With competition opening up across the regions of China, state enterprises were in parlous financial condition, and could no longer ensure job security. Effective reforms entailed ending the implicit pact between the urban working class and the party-state, whereby job security was provided in exchange for no strikes, no votes. Dismantlement of the communes in the countryside, much accelerated in the 1980s, led to their transformation into the formidably competitive “town and village enterprises”, while farm incomes surged following the breakdown of Mao’s agricultural policies. The greatest fear of the leadership was that political concessions would encourage opponents to organize – in league with China’s enemies abroad. The Western countries- a train of thought ran – would use every method in the book to subvert, undermine and weaken China, the better to hold it down. None other than Jiang Zemin cited the words of the Dowager Empress, Ci Xi, who compared China to a watermelon, to be cut in small pieces– the instrument for cutting China into pieces in this case was “the knife of Taiwan”. [23]

China’s leadership in the 1990s avoided the temptation of xenophobia, and instead took the politically fraught path of an opening on the world. They were aided by a number of favourable inheritances. The conundrum facing the leadership was how to reform without following the Soviet union into oblivion, how in brief to avoid Gorbachev’s fate.

One major difference between the reform histories of China, Poland and Russia has been the Chinese communists’ aversion to policies with unknown outcomes.[24] The post-Mao leadership had too much experience of Big Leaps and Clean Slates to be tempted again. The Great Leap Forward launched in 1958, led to country-wide famine and the death of upwards of 30 million people; the ten year Cultural Revolution, initiated in 1966, represented Mao’s effort to wipe China’s metaphorical slate clean of inherited culture. To Mao’s heirs, the Big Bang policies that western economists recommended in eastern Europe and Russia, on the grounds that piecemeal reforms were a non-starter in Marxist-Leninist states,[25] were all too reminiscent of Mao’s utopian economics.  In Poland, for instance, Big Bang policies took the form of a simultaneous move to free prices, to liberalize trade, adopt non-inflationary monetary policies, and to promote private enterprise. [26]And just as Mao had done away with capitalists, so the hidden agenda behind the Polish “shock therapy” in 1990 was for the anti-communists to sweep away as many communist public officials as possible. Their pretext was that Poland’s command economy suffered from high and rising inflation, budget and external deficits and spiralling foreign debt. So apply Big Bang.  This yielded two lessons for China’s conservative communists: keep in office; avoid financial meltdown like the plague.

Another major difference was that after 1978, gradualism became a deliberate strategy of China’s communist party leaders, and for two distinct reasons. First, Deng was convinced that the best way to proceed was by “feeling the stones to cross the river”, in other words that socio-economic constructs are best built through a process of accumulative, small changes. Second, they were not agreed, or clear, about the ultimate destination of policy. So they allowed experience to speak for itself. As Gao Shangquan of the State Council said, “The method of reform achieves gradual advances through popularizing experiences gained at pilot units. That is, prior to implementing any reform measure on a nationwide scale, it must go through a stage of experimentation at a pilot unit, to accumulate experience. Reform measures are carried out boldly at the trial stage, and daring breakthroughs are encouraged.”[27] Thus, by the century’s end, a curious inversion of roles occurred: communists in China practised politics as if they were Burkean conservatives, tentatively feeling the ground before venturing into an unknown future, [28] while western liberal economists adapted a global leninist vision, which dictated that there was only one policy-fit for all, and it was “made in the U.S.A”. China’s conservative communists were pragmatic leninists by default; they were not convinced by western liberal economists, in a hurry to apply their recipes.

There was a further factor playing favouring  the Deng reforms, although it was not widely recognised at the time. Mao left a weakened central bureaucracy, and well entrenched provincial governments—the result of his violent swings in policy, resulting in equally wild fluctuations in the growth of investment.[29] As Mao said in his 1956 speech “On Ten Important Relationships”, “We must not follow the example of the Soviet Union in concentrating everything in the hands of the central authorities, shackling the local authorities and denying them the right to independent action”.[30]  Subsequently, local governments were given powers to supervise all but the large state enterprises, while the country was divided into 24,000 people’s communes, and production was further de-centralised. Then, during the Cultural Revolution, which lasted from 1966-1976, Mao established all-embracing “revolutionary committees”, and purged sixty per cent of officials, including the head of state and defense minister. His phobias about centralised bureaucracy left  the country organised along territorial lines, but also vertically by sector in a dual structure of overlapping and competing authorities. The consequence was a nominal central planning authority, and a de facto devolution of powers to local governments . This “federalism, Chinese style” [31] allowed for multiple experiments regarding agriculture, fiscal measures or free trade zones. By contrast, Gorbachev faced powerful, centralised bureaucratic resistance to his reform measures.

Another differentiating factor between China and the USSR is the nationality composition of the two countries: according to the census of 2000, China was 91.5% Han. Up to 50% of the population of the Soviet Union was composed of non-Russian nationality groups, compared to the 8.5% of China’s inhabitants. This held at least two implications for reforms of the party-states: one was that administrative or economic policy measures of decentralisation did not mingle with nationality in any central way in China, whereas in the Soviet Union economic reforms inevitably cut across ethnic and nationality lines. The other was that China experienced no major clash between opposing forces, which challenged the foundations of the party-state. When Yeltsin was elected President of Russia, in that country’s first-ever direct and open election to the office of head of state in 1991, there was no prospect of his being won round to recognise the inherited appointment of Gorbachev as the Soviet Union’s secretary-general. Here was a direct clash between two irreconcilable claims on power, the one bureaucratic in origin, the other democratic. China never came close to such a confrontation.

Not least were the significant structural differences between the economies of China and Russia. In retrospect, it proved easier to reform the agricultural sector in China, than was the case for both farm and industrial sectors in the Soviet Union. In 1978, 75% of China’s workforce was employed in agriculture. The author of China Through a Third Eye considered this inheritance a major threat to the party-state. “Eight hundred million peasants, he wrote,  are like a living volcano, which could erupt at any time”.[32] China’s coming disaster, he forecast,  would be triggered by a massive and uncontrollable rural emigration.  He could not have proved more in error. Once agriculture was de-collectivised in the early 1980s, an economic dynamic based on family enterprises was unleashed. As Martin Whyte has eloquently argued, Chinese “entrepreneurial familism” is structured around trust and can operate with a minimum of explicit contracts in what amounts to a spontaneous market mechanism.[33]  By contrast, up to 90% of Soviet citizens worked in state enterprises,–whether farm, industrial or service–which provided them with an all-encompassing welfare. Given the lack of market incentives, organizations ran at a loss, subsidized by the Soviet Union’s vast energy sector. Once oil prices collapsed in early 1986 – engineered by  the Saudis at US behest – the USSR leadership faced the dire option of choosing inflationary financing in a non-competitive structure, or a balanced budget, huge layoffs of the workforce, and privatization in a country without the rule of law. Not surprisingly, resistance to reform there was massive. Gorbachev’s downfall may in large part be ascribed to the depth of damage inflicted on Russian society by Lenin and Stalin, whereas Deng’s good fortune lay in the limited time available to Mao to inflict his tyranny on China.

So what can be said about China’s transformation path, compared to Russia’s?  With Deng, step-by-step conservative reforms became a constant of China’s reform style. As a result,  China’s economy grew into the 1990s and beyond,  whereas Russia’s gyrated to the tune of global commodity markets. Russia introduced nominal democratic reforms, but failed to establish anything approaching a western constitutional state, while China’s leadership talked of democratisation, but insisted on maintaining  the party-state monopoly hold on power. Marketisation- the selling of state or collective properties to other state or collective organisations- modified direct state control over economic resources in both China and Russia, and highlighted the importance to both states of developing effective and efficient institutions and instruments of indirect control over markets. In China, the Leninist state is afflicted by an explosion in corrupt practices and interests, while establishing trust in the state, law, finances and administration has become a vital precondition for further success. China, like Russia, is one of the worst polluted countries in the world, with air and water pollution levels many times that of international standards. Air and water pollution has incurred an economic cost per annum, according to the World Bank and the Asian Development Bank, equivalent of 3-8% gdp per annum. [34]

China in the post-cold war world.

Deng was well aware of the challenge confronting the party-state. In December 1992, he is reported as having the leadership  sit through a special performance of Durrenmatt’s Romulus the Great.[35] The barbarians (the western democracies) are at the gates of Rome(Beijing), and the emperor Romulus (Deng) announces that he intends to save the empire (Communist China) by transforming it. The only hope, he says, is to go into business with the barbarians in order to avoid a catastrophe—collapse and annihalation, worse than the introduction of capitalism.

A cold look in the early 1990s of China’s situation in comparison to the developed world was sobering. China had 14 neighbours, and its frontiers by land and sea were longer than the earth’s circumference.  If as Deng wished, the focus of Chinese efforts would be on development, its geographic location implied the urgent need to de-escalate any conflicts. Peace is notoriously cheaper than war. China’s  national income was one third that of Japan; it ranked among the poorest countries in the world in terms of per capita income, and its domestic market was one half of Germany’s. US and EU corporate investment there was no bigger than their stakes in Latin America, and reputedly less profitable. Its outward foreign direct investment stock was minimal.  In military terms, China spent under 2% of its gdp on defence, to sustain an armed forces with over 4 million personnel, compared to the USA’s just under 5% gdp in an economy nearly 10 times the size of China’s, and with about 1.6 million personnel under arms, and backed with the best available equipment.

The global constellation confronting the Chinese leadership following the collapse of the Soviet Union was without precedent. Measured in terms of traditional power resources—population and territory, and five measures of economic prowess, the US had no equal. Decades of heavy investments across the board in new technologies gave the US a commanding lead in hi-tech warfare, and in hi-tech exports.  Its military budget was larger than all other powers combined. America’s primacy stretches across all measures of economic power resources. After decades of stellar economic performances, the US share of world income was at over 25%.  In terms of ease of doing business, the US ranked third among all countries in the world, preceded only by New Zealand and Singapore.  Its share of outward foreign investment stock was just one indicator of the range and scope of America’s “extra-territorial empire”. The dollar reigned supreme. US corporations were prime players in the world energy industry. The United States was the hub of a global network of multilateral and bilateral alliances. Its corporations and research laboratories were prime sites for the discoveries that drive forward the new technologies. It held 191 of the world’s top universities. The major international institutions such as the UN, and its family of organisations were imbued, at least by their intellectual origins, with the liberal vision, which inspired the foundations of the US.

A consistent theme running through the Chinese leadership’s reforms since the late 1970s had been admiration for the achievements of the countries of the Asia Pacific. At different times, Japan, South Korea, Taiwan, Hong Kong or Singapore have been proposed as models from which mainland China could learn.  The Asian developmental state, modelled on the Leninist doctrine of Kuomintang Taiwan, or on the dominant party-state of Singapore, held much to attract the CCP. In abstract terms, the developmental state had demonstrated ability to drag populations out of poverty in the space of a generation. [36] Central controls over society ran through the hands of a governing élite, chosen through a rigorous process of selection. Leaders led, and did not swing between policies in response to market fluctuations or the whims of public opinion. Corruption was punished by disgrace, or worse. The legal system provided justice, subject to political discretion. At its heart lay state control over the capital allocation process. Funds were distributed authoritatively to corporations which were required to compete on domestic markets (protected where possible) and to win market shares abroad.

Yet Asia Pacific growth strategies had been conceived first and foremost as an anti-communist strategy.[37] Nowhere more than in Asia Pacific was America’s anti-communist crusade carried into the structure of the allies’ domestic politics. Harsh anti-communist governments laid the foundations for Asia-Pacific’s successful authoritarian capitalist states. Preferential access to US aid, markets, and know-how was granted for security reasons to US Asia’s allies, and their firms. The 1960s proved the crucial decade, as Mao’s China blundered from one man-made tragedy to another. The answer to marxist class war, Asia Pacific  governments proclaimed in their own way, was modernisation. Integration of states into the world economy would bring  democratisation sometime in the future in the wake of economic development. Meanwhile, the living conditions of masses of people would improve through a combination of strong government, a public drive for literacy, support for agriculture, and rapid transition to low rates of population growth, along with prudent fiscal policies, high rates of saving, export-led growth and openness to inward direct investment. States had to procede by stages, first meeting their peoples’ basic needs, and once those were satisfied, developing a more sophisticated political system. The more “well-to-do” a nation became, and the larger was its “middle class”, the more democratic it was  likely to be.[38]

East Asian growth strategy was inspired by the “flying geese development paradigm” [39]  whereby lower wage locations followed Japan up the value added chain of production and exports. This model held that leader countries would phase out production in areas of activity where they were losing competitiveness, and replace local production with imports from “followers”, which succeeded in building up a competitive industry in that product. Once a product matured on the market, the comparative advantage of producing it would pass to the follower country, while the leader launched into the production and sale of  a new product. Applied to East Asia, the model described the shift of labour intensive production among US electronics firms, followed by Japanese, then European corporations to low cost production platforms. Taiwan, Singapore and Korea in the 1960s, then Malaysia in the 1970s, were swept into the worldwide electronics revolution. China joined in the 1980s and at accelerated pace after 1991, and the Soviet Union’s collapse. East Asia’s high growth pattern thus charted a shift out of agriculture, into export-oriented light industry, driven by technology transfers through direct investment from leading industrial countries.

The result was a leap in human welfare for millions of East Asians. Economic growth drove this transformation. East Asian per capita income grew faster than anywhere else in the world. Life expectancies  rose sharply, and income inequalities narrowed—indicating the growth of opportunities for poorer people. In China, too, private final consumption rose sharply, driven by average real wage increases in the 1990s of 8% per annum. The result was a significant rise in purchasing power, with rural incomes benefitting by the sharp rise in urban purchasing power; the flow of remittances back home from workers employed temporarily in urban areas, and by the rise in demand for labour.[40] Mainland China also followed East Asia’s example as a manufacturing export champion, piling up foreign exchange reserves.  East Asian countries doubled their export share on world markets, and led the world in growth, with rates in the 1990s twice those in Latin America and the Mid-East, and nearly four times those in Africa.

Table 2 : GDP Growth: China and Selected Countries, 1980–2000 (in %

1980–1990     1990–2000     2000-2008

China                                                           10.1                  10.3                  10.1

Other low-income countries                     4.4                  3.2                 4.2

India                                                               5.8                  6.0                 7.1

Indonesia                                                       6.1                  4.2                   5.1

South Korea                                                   9.4                  5.7                  5.0

Russian Federation                                       ….                 -4.8                   6.9

East Asia                                                         7.9                   7.2                 8.7

Japan                                                               4.0                   1.3                   1.6

United States                                                    3.0                   3.5                 2.7

SOURCES: China: State Statistical Bureau (SSB), World Bank, IMF. 

By the first decade of the new millennium, the full impact of the changes in the world economy since about 1980 were taking effect. On the demand side, as Asia’s share of the world economy rose from around 12% to over 20%, the contribution of China and India together accounted for around one third of global growth on a yearly basis. The result was to lift the growth rates in the slower growing economies in Latin America, Africa, the Mid-East and Russia, as both giants compete around the world for farm products, raw materials, and sources of energy supply. On the supply side, their entry extended the global labour pool, lowering global wages and fattening global corporate profits. In 1980, the active labour pool of world economy numbered 960 million. China’s entry to global markets alone brought in 750 million, while India added 460 million. China became the location of choice for commodity manufacturing for global corporations, with India carving itself a place on global service markets.  At the same time, China and India’s entry to the global economy coincided with the revolution in world communications, lowering the costs of information exchange, transport and travel. This revolution was driven by the transformation of corporate strategy, by the further opening of product markets, by the revolution in product technology, and by the development of global supply chains. This is the context framing China’s transformation from a command to a market economy. [41] The key events along this path were Deng’s move to become paramount leader; his insistence on maintaining the CCP monopoly on power; the inflection in foreign, then in economic and industrial policies in the 1990s, followed by China’s entry to the WTO in  the course of 2001. Entry to the WTO marked the launch of China on to its great power trajectory.

The following chapters will analyse the transformation of the Chinese economy in the thirty years since the turning point of 1990; the central role of China’s transport infrastructure development, and China’s resulting maritime orientation on to the economies of the Asia Pacific, North America and Australasia; the counterpart to China’s maritime development are its relations with its continental neighbours, notably Russia, the Central Asian states, the Himalayan nations, India and Pakistan; China’s impact on world energy markets, and its ineluctable insertion in the politics of the Middle East, the Gulf and North Africa; China’s search for raw materials, food stuffs and export markets and its presence in Latin America and Africa; and not least, the complex set of relations between China and Europe. The final chapter will pull the threads together and discuss what China’s re-emergence may or may not mean for both China and the world.

[1] Minxin Pei “Is China Unstable?” Foreign Policy Research July 1997.

[2] Ho, Pingti, The Population of China, Harvard University Press, 1959, p.249.

[3] Jung Chang, Jon Halliday, Mao: The Unkown Story, London, Jonathan Cape 2005.

[4] Sebastian Haffner, Anmerkungen zu Hitler, Kindler Verlag, Munich 1978

[5] Dean Acheson,: Present at the Creation, My Years at the State Department. New York: Norton. (original edition 1969) 1987  pp. 373-81

[6] Angus Maddison, Chinese Economic Performance in the Long Run, 960 to 2030 AD, Development Centre Studies, OECD, pp.59-92.

[7] Thomas Malthus, An Essay  on the Principle of Population, as it affects the Future Improvement of Society, first published in London, by J.Johnson, 1798.

[8] Barry Naughton, The Chinese Economy: Transitions and Growth, MIT Press, 2007.p.62-63.

[9] William Griffith, The Sino-Soviet Rift, Cambridge, MIT Press, 1964.

[10] Robert Osgood, Retreat from Empire? The First Nixon Administration. Baltimore: Johns Hopkins Press.

[11]. An excellent account is provided by James Mann, About Face: A History of America’s Curious Relationship with China, From Nixon to Clinton, New York, Alfred A. Knopf, 1998.

[12] Jung Chang, Jon Halliday, Mao: The Unkown Story, London, Jonathan Cape 2005.

[13] Henry Kissinger, White House Years, Boston, Little Brown,1979.

[14] Philip Short, The Man Who Made China, Tauris, 2016.

[15]  See Yingyi Qian, “The Process of China’s Market Transition(1978-98): The Evolutionary, Historical and Comparative Perspectives(1978-98), Journal of Institutional and Theoretical Economics, March 2000, 156(1), pp. 151-171; also “Understanding China’s reform: Looking Beyond Neoclassical Explanations”, by Shu-Yun Ma, in World Politics, 52(July 2000. pp.586-603.

[16] Collection of Reform Drafts for China’s Economic System(1979-1987), Beijing: CCP School Publishing House, 1988 op.cit. p.57

[17] In Selected Works of Deng Xiao Ping, 1993: p.378, cited in Pien Wang, Chow Hou Wee, Peck Hiong Koh, Establishing a Successful Sino-Foreign Equity Joint Venture: The Singaporean Experience, Journal of World Business, 34 (3), 1999;pp.287-305.

[18] Jean A. Garrison, Making China Policy: From Nixon to G.W. Bush, Boulder: Lynne Rienner.,2005, p.98.

[19] Joseph Fewsmith, “Neoconservatism and the end of the Dengist era”, Asian Survey, Vol.XXXV.No.7, July 1995.pp.635-651. Christopher R. Hughes, Interpreting Nationalist Texts: a post-structuralist approach, Journal of Contemporary China, (2005), 14(43), May, 247-267;  Richard Baum, China After Deng: Ten Scenarios in Search of Reality”, The China Quarterly, 1996.pp.153-175; “Viewing China Through a Third Eye” in translation in FBIS Daily Report, China (Supplement), 19, April 1995.

[20] Deng Xiaoping, “The necessity of upholding the four cardinal principles in the drive for the Four Modernisations”, in Major Documents of the People’s Republic of China, Beijing, Foreign Language Press, 1991, p.49.

[21] Suisheng Zhao, “Chinese Intellectuals’ Quest for National greatness and Nationalist Writing in the 1990s”, No.152. China  Quarterly, December 1997.pp. 725-745.

[22] Jiang Zemin,. “Hold High the Great Banner of Deng Xiaoping Theory for an All-Round Advancement of the Cause of Building Socialism with Chinese Characteristics into the 21st Century”, Beijing Review,, October 6-12, 1997, pp.16-18.

[23] Speech of Jiang Zemin, Renmin Ri Bao, and Interview with Prof Sheng Lijung .

[24] Wing Thye Woo, The Art of Reforming CPEs: Comparing China, Poland and Russia”, Journal of Comparative Economics 18, 276-308(1994).

[25] See Janos Kornai, The Socialist System, 0xford, Oxford University Press, 1992.

[26] Interviews at the time by the author with Polish Finance Ministry officials.

[27] Gao Shangquan, “China’s Economic Restructuring, Structural Adjustment and Social Stability”, China Economic Review, Vol.8, No.1, pp.83-88.

[28] On conservatism versus utopia, seePeter Murrell, “Conservative Political Philosophy and the Strategy of Economic Transition”, Eastern European Politics and Societies, 1992,6(1),pp.3-16.

[29] See the revealing table in Barry Naughton, The Chinese economy: transitions and growth, MIT Press, 2007.p.63.

[30] Mao Zedong, Selected Works of Mao Zedong, Vol.5. Beijing, People’s Press, 1977.

[31] Gabriella Montinola, Yingyi Qian, Barry R.Weingast, “Federalism, Chinese Style: (provided) The Political Basis for Economic Success in China,”World Politics, October 1995, 48 (1),pp.50-81.

[32] China Through a Third Eye, p.8.

[33] Martin King Whyte, “The Social Roots of China’s Economic Development”, The China Quarterly, no.144(December), 1995,  pp.999-1019.

[34] IBRD, Government of China, Cost of Pollution: Economic Estimates of Physical Damages, 2007.

[35] The Romulus story is told in, June Teufel Dreyer, “ China: The Monocultural Paradigm”, Orbis, Fall, p597.

[36] See Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialisation, Princeton, Princeton University Press, 1990.

[37] Walt Rustow. The Stages of Economic Growth: A non-Communist Manifesto, London. Cambridge UP, 1960.

[38] Seymour Martin Lipset, London, Political Man, 1960..

[39] K. Akamatsu, “A Historical Pattern of Economic Growth in Developing Countries”, The Developing Economies. Vol.1.No.1.March—August 1962.

[40] Heiner Flassbek et al, “China’s spectacular growth since the mid-90s—macroeconomic conditions and policy challenges”,in China in a Globalizing World, UNCTAD. New York, Geneva 2005. pp.1-44.

[41] Peter Nolan, (2001) China and the Global Economy: National Champions, Industrial Policy and the Big Business Revolution. Houndsmill: Palgrave

About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) ( His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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