How China reformed and survived the reforms

Written by Amitendu Palit | Updated: Jan 30 2011, 05:31am hrs
No other growth story has captured the imagination of economists and socio-political analysts over the last couple of decades as much as that of China. Modern economic literature on growth and development has copious interpretations and analyses of Chinas startling progress. Most of these, however, fail to address the central question regarding Chinas economic story: Despite being a command economy, how could China successfully reform itself, while the erstwhile Soviet Union and the East European economies could not One possible explanation is that the collapse of Soviet Union and East Europe was so sudden and dramatic that it took most by surprise, and left analysts little room for calibrated post-facto analysis.

It should not be overlooked though that in both instances, reforms implied the demise of socialism, both politically as well as economically. In China, however, reforms have not resulted in the demise of socialism though the latter, in terms of its manifestation in organisations of modes of production and ownership of assets, has experienced substantive changes. Chinas success in reforming its economy for achieving high economic growth without experiencing political setbacks is a unique experience of modern times.

Narayan Sens Chinas Economic Reform: Ideological Legitimacy and Deng Xiaoping Theory is an unusual attempt to examine how China reformed and survived the reforms. It is unusual because it studies Chinas reforms not with a top-down view, as is usually the case with most such analysis, but with a bottom-up approach that tries to figure out why Deng did what he did and how he went about doing so. As the book subtly emphasises on several occasions, Dengs difficulties lay in not only changing a huge command economy to a different mode. It was also due to the collapse of the Soviet Union that left a huge void for socialist systems in the world as far as emulation by other socialist economies like China were concerned. This is probably what forced China to figure out its own distinct development trajectory: embracing markets under the watchful eyes of socialism.

The book digs into vast swathes of literature on ideological and political debates surrounding reforms in China. Reorganising ownership of productive assets was the biggest challenge Deng faced as he set out to reform China. It is fascinating to follow the course of debates that took place in the Communist Party of China (CPC) as Deng and the pro-reform group of theoreticians set out on their mission. Defending private ownership meant departing from one of the fundamental tenets of socialism. Deng and his followers were convinced that correcting imbalances that had grown deep roots in the Chinese economy, because of its historical past and mistakes committed during three decades of China becoming a republic, required re-interpretation of socialist principles. They argued that Marxist-Leninist principles were dynamic and should be deployed according to objective circumstances prevailing in each country. But while employing the deviations from core socialist principles in sensitive matters such as ownership of production or introduction of stock markets, care was taken to ensure that the escape route remained. This is why Chinas history of economic reforms and transformation is replete with Dengs repeated utterance and emphasis on several reforms being experiments and the possibility of abandoning them if they did not prove beneficial to socialism.

For those unfamiliar with Chinas reform process and literature, this book is a valuable resource in terms of not only a preamble to the theoretical debate, but also the course of reforms and how modern China accommodates apparently irreconcilable features of socialism and capitalism. For those familiar with the literature, this book is equally valuable. Not only because it contains precious nuggets of information such as the origin of Dengs famous reference to colour of cats being unimportant as long as they caught mice being attributable to traditional practices of farmers in Sichuan province. But also because it dares to interpret the heavily discussed economic reforms in China in a refreshing different and painstakingly rigorous fashion.

The writer is a visiting senior research fellow at the Institute of South Asian Studies, National University of Singapore