GEOG 128
Geography of International Affairs

Economic Development: Opening and Reforms


Deng Xiao Ping came to power (1978-1992) and set a new course for the PRC.

Ezra Vogel

Watch an interview with Ezra Vogel, author of Deng Xiaoping and the Transformation of China, to understand the importance of Deng Xiaoping and the policies he implemented to shape the China we know today.

Click for a transcript of Ezra Vogel: The Transformation of China Video

INTERVIEWER: And joining us now here in studio, Ezra Vogel, a Lionel Gelber prize winner for his book Deng Xiaoping and the Transformation of China. And we have a nice tradition here of welcoming the Gelber prize winner to our studio. We're glad you could continue the tradition.

EZRA VOGEL: I'm glad to receive the prize. I'm glad to be here.

INTERVIEWER: Let me start by just reading a short excerpt of your book that will help set up the first question here. You write, "In the summer of 2000, I told my friend Don Orberdorfer, one of America's greatest 20th century reporters on East Asia, that I was retiring from teaching and wanted to write a book to help Americans understand the developments in Asia. Without hesitation, Don, who had covered Asia for half a century said, 'You should write about Deng Xiaoping.'"

First question. Why is understanding Deng Xiaoping so important to understanding today's China?

EZRA VOGEL: Because after Mao died in 1976, China took a completely new course. And just as if you understand the United States' government, you have to understand how Jefferson Madison formed the government and their philosophy and direction. So to understand China's new course, they have to understand how it was built and who built it. Deng Xiaoping was the one who built the new course that China has followed.

In 1978 if you had asked, could a communist country grow faster than a capitalist country, nobody would have said yes. And nobody did say yes in the Western world. And yet he brought it about.

INTERVIEWER: Now we're asking the opposite question. Can the capitalist countries grow as fast as China? Not sure about that. He was-- I mean, you talk about a political survivor. This was a guy who was at the center of things and then ostracized three different times?


INTERVIEWER: He made a political rehabilitation. How did he do that?

EZRA VOGEL: Well, the first time he had been cut down about six months. It was in the early 1930s, and he was accused of being too much of a follower of Mao Zedong. At the time it cost him about six months because Mao was then in trouble with the Central Committee. And then after Mao came back he brought Deng back with him. And when Deng had a chance to rise in the early 50s in Beijing, Mao was a great sponsor. But Mao was a purist and revolutionary, and Deng was more practical. So Mao wanted to teach Deng a lesson. And he put him aside at the beginning of the Cultural Revolution and attack him. But he didn't put him in jail and didn't punish him so badly that he couldn't come back later. He was teaching him a lesson.

INTERVIEWER: Why do you think he did that? Because obviously Mao was absolutely brutal and ruthless to many of his political adversaries, but not Deng.

EZRA VOGEL: I think there are perhaps three reasons. One was because the first time Deng was birds it was because he was a Mao faction. He'd been a loyal follower of Mao for decades. Secondly, his performance, moving so quickly and so rapidly and doing things so well, that Mao was very proud of his performance. And the third thing was he was especially good at arguing with the Soviet Union. In the early one 19602 he thought Deng was getting a little too pragmatic about approving markets, but Deng was the key arguer with the Soviet Union, and Mao loved and respected that. So I think those are all three bound up in why Mao was not going to dispatch Deng and to just teach him some lessons.

INTERVIEWER: It's funny. He was more of a hawk on the Soviet Union than many American presidents were. In fact, he kept telling them, you guys got to pick up your socks and get in there and get tougher with these guys.

EZRA VOGEL: Deng was tough. Especially after the United States pulled out of Vietnam and 1975, Deng, who is beginning to have a strong power, felt that the Soviet Union was the greatest threat and was taking advantage of the vacuum that America had created in Asia, and was going to cause lots of problems with China. So he became very tough on the Soveit Union.

INTERVIEWER: I want to show a bar graph right now. If any picture shows, perhaps, what Deng Xiaoping's influence was on the Chinese economy-- if we can, let's bring up this next bar graph here-- this might show it. That was the value of the Chinese economy before Deng became the paramount leader. And that's where it is as of a couple of years ago. Now if that's not a stark picture of this man's influence, I'm not sure what was. He inherited a large party bureaucracy. He inherited a stagnating economy. He inherited a country that he described as backward. What approach to reform did he uniquely bring that allowed that bar graph to take place?

EZRA VOGEL: Well Deng had been overseas in France for five years a young man. And he was familiar with the outside world having visited the United States and France in '74 and '75. And he understood what you had to do to catch up with the world. And he believed that you had to send scientists abroad and young students to bring back technology in all spheres. He didn't have any single model. He wanted to send bright young people abroad in all fields to bring back the most modern up to date way of thinking, the technology, management that would help China grow.

INTERVIEWER: What were the fields that interested him the most?

EZRA VOGEL: Surprising enough it was natural science, even more than economy. I've gone through the list of the people that Deng met over many years. I haven't found one meeting with an economist. The people that he liked to meet-- number one scientists, and number two businessmen, and number three politicians. He wanted people who had run things themselves. He wasn't interested in a broad theory. He was interested in people who had confronted problems and figured out a way to make them work.

INTERVIEWER: Speaking of Brzezinski, Jimmy Carter's national security advisor--


INTERVIEWER: Looked at him and said, you're a guy in a hurry.

EZRA VOGEL: And he was. And he also said, this is a guy we can deal with.

INTERVIEWER: OK, let's bring this up. I'm in chapter three right now, Michael. This is another excerpt from the book. This is Deng Xiaoping's visit in 1978 to Japan. "At Kimitsu, then the world's most advanced steel plant, Deng saw a new continuous-casting production line and computer-controlled technology that would become the model for China's first modern steel plant at Baoshan, just north of Shanghai. Dung said that to make the Baoshan work, the Chinese needed Japanese aid to learn management skills. He tried to explain to his countrymen, who believed what they had been taught under Mao about Western exploitation of workers, that the reality was quite different. Japanese workers owned their own homes, their own cars, and electronic equipment that was unavailable in China."

Here's a question. He obviously was blown away by what he saw in terms of what a capitalist economy could achieve. I guess what's somewhat surprising is that he never felt China needed to take the next step, which was economic liberalization, yes, but political liberalization, absolutely not. How come?

EZRA VOGEL: He thought that China had been so divided from the time of the Opium War right after 1949. They couldn't grow because there were too many contending forces and led to chaos. His experience was that the Cultural Revolution, when you let people have full blown democracy, encourage them to express their views, including on the street, that it could ruin China. China did not yet have the commitment of its people. They weren't rich enough to have a comfortable way of life. There were too many people who'd been upset with the way that landlords intellectuals had been treated, that there was not the basis, at the time when he was empowered, to have a confident leadership, you can count on the support of the people. And he felt in this short run, you certainly needed a strong government that was united and can make things happen quickly.

INTERVIEWER: Do you think by the end, though, he still believed in communism, per se? Or was it more just the power of the Communist party?

EZRA VOGEL: Deng was not one to quibble about words. He wouldn't quibble about the word of communism. But I think it was not what we Westerners call capitalism. Some people thought of what Deng did as capitalism, just under another name. But land ownership is still by the state in China. They have large state companies that control more than half the economy. They still have a planned economic system. The Communist party is still in charge. And so it's not exactly what we would call capitalism. But open markets wide, and that he had no hesitation in opening markets and encouraging competition.

INTERVIEWER: Socialism with a Chinese character.

EZRA VOGEL: That's what he called it. That was a way of allowing him to do whatever he wanted without getting bogged down by any logical arguments.

INTERVIEWER: I want to take it to June 4 1989, which I suspect, sadly for Deng Xiaoping, is how many people in the West are going to remember him-- as the guy who, when he saw a couple of 100,000 Chinese students protesting in Tienanmen Square, gave the order to clear the square by any means necessary.

EZRA VOGEL: Exactly.

INTERVIEWER: Why did he give that order?

EZRA VOGEL: He gave that order at the end of two months of turmoil in which he was really frightened that China was going the path of Eastern Europe where communist parties were falling apart. The Soviet Union was falling apart. And he felt the only way to enforce order, at that time, when so many people were demonstrating-- and on May 20 of '89 had blocked the entrance of the military, who then went in an armed, to try to restore peace. And they were unsuccessful. So he felt the country was just getting too lax. And the only way to bring it back together was, as you say, sadly, by force. And he would do what was necessary. And he never regretted it.

INTERVIEWER: It's odd because I guess, what? 12 years earlier? 13 years earlier? There had been demonstrations in Tienanmen Square for him. And yet, I guess, he didn't see the irony.

EZRA VOGEL: You read the book carefully, and you're exactly right. He understood the difference. And it wasn't that he believed that all demonstrations are bad, or that all democracy was bad. Some Westerners thought Deng was against all democracy, but not so. In 1978 he allowed students to write on the wall, what was known as Democracy Wall. And it took about three months before he decided it was getting out of hand, and he had to clamp down. And the same way in 1986, and the same way in '89. He didn't reflexively stop every demonstration. But when he felt it was getting out a hand and he needed to use force, he was always ready.

INTERVIEWER: One of the things that I'd forgotten about this time, which you reminded me about in the book, was the Tienanmen happened, in part-- I mean, the gathering of the students in the first place-- because Mikhail Gorbachev was there. He had come to visit to sign a friendship treaty, I guess, with China.


INTERVIEWER: And Deng Xiaoping didn't want having happen to him what was about to happen to Gorbachev.

EZRA VOGEL: Exactly. Exactly.

INTERVIEWER: And did he respect Gorbachev?

EZRA VOGEL: He regarded Gorbachev as a young man who was trying to move things ahead. But his son once told a foreigner that my father thought Gorbachev was stupid because he was trying to have political economic reform at the same time. And if you had economic reform, you had to have a strong political structure to make it happen. And so he thought that Gorbachev was trying to deal with the problems of the Soviet Union, but he made a serious mistake in allowing things to get out of hand.

INTERVIEWER: In looking at the research material that you encountered to write this book-- and I understand that Deng kept it all up here. He didn't leave notes.

EZRA VOGEL: Right. He left no notes.

INTERVIEWER: Did you ever find anything that would lead you to believe that this man, who I guess was 84 years old at the time when he ordered Tienanmen Square cleared out, that he had any regrets about the fact that he had, who knows how many-- maybe 5,000 people put to death with automatic machine guns in public?

EZRA VOGEL: Oh, it wasn't 5,000.

INTERVIEWER: How many was it?

EZRA VOGEL: The best estimate is by a Canadian scholar Tim Brooke were 700 and 800. He was there, went to the hospitals, took the data.

INTERVIEWER: Maybe 5,000 including injured?

EZRA VOGEL: Oh yes. There were 5,000 casualties.


EZRA VOGEL: But some 700 to 800 died. Deng had fought for 12 years-- first against the Japanese and against the [INAUDIBLE]. He had seen people killed in land reform, in the anti-rightist campaign. He felt that, as Mao said, the revolution is not a dinner party. To get established power, you do what's necessary. And Deng was far more willing to have the voice of democracy than Mao was. But, in the end, if he felt the country were falling apart-- he had experienced lots of battles and lots of deaths. And it was a lot more important to him to keep 1.3 billion people under some kind of stable order than it was to protect the lives of the 500 protesters, 800 protesters.

INTERVIEWER: That actually leads nicely to the next quote I was going to take from the book here. Which of the following: "When many Chinese people compare Deng's response to the Beijing student uprising with those of Gorbachev and his Eastern European counterparts to their own versions of the Beijing Spring, they believe the Chinese people and the Chinese nation today are far better off. They are convinced given its early stage of development, China could not have stayed together had the leadership allowed the intellectuals the freedom of thought. They believe even greater tragedies would have befallen China had Deng failed to bring an end to the two months of chaos in June 1989. You've looked at it. Are they right?

EZRA VOGEL: I think that there are a lot of students who believe that. And if I had to come down, I would guess yes. There's no way to prove one way or the other counter-factual, something didn't happen. Many of my Chinese friends that I respect thought if he had been moved more to democracy before Tienanmen would have never happened, and China would be far better. That's possible. I don't really know. I mean, I try to tell what happened and why it happened. Try to tell what he thought. But the ultimate judgment of could he have done it another way to have it work? History just doesn't answer that. And any scholar who seriously tries to understand can't leap and suddenly say one of the other. We just don't have that data.

INTERVIEWER: Well, fair enough. But the sprite inside you must occasionally ask yourself, what if he'd listen to his number two instead of ostracized him, and what if he'd allowed a liberalization, and what if he'd allow this? Would it have been so bad for him to go out and speak to the students? How might history have been different?

EZRA VOGEL: It's possible if he had gone out and talked to the students in May or June that they would have quieted down. But he was already, at that time, as you say, 84 years old. He didn't get out much. And he was determined to be fairly tough with the students. He thought that the students had benefited from the measures that he had brought about, and he had worked so hard to bring about. And now they were complaining and trying to overthrow the kind of structure that had brought all the changes to China. So I think he was really angry with the students at that point.

INTERVIEWER: In the long run, did China's relations with the rest of the world suffer all that much because of the Tienanmen Massacre?

EZRA VOGEL: For several years it suffered. There were a lot of sanctions. China was not involved in a lot of international affairs. And some of the sanctions for the sale of military weapons are still in existence even today. But as Deng said at the time, Westerners have a short memory. Businessman will want to be in the China market. And before long, we can resume contacts. We should not only stay open, we should open wider. And some people in China said, you know the foreigners are a threat. We have to stay clear of them. And they're the ones supporting the students who caused all the trouble. Deng said, no. We have to be open even wider to the outside world.

INTERVIEWER: It's odd because he didn't suffer from the xenophobia that many of his colleagues would have suffered from.

EZRA VOGEL: He certainly did not.

INTERVIEWER: Maybe because he was in France so really?

EZRA VOGEL: I think that the French five years had a lot to do with it. He understood the outside world. And he understood that countries that did well in the contemporary era were those that were linked to the world economy. And he was prepared to endure a few more years of difficulty, as China done in the 50s and 60s when it was closed, but in the long run, he wanted it wide open.

INTERVIEWER: The China that we see today, how closely do you think it mirrors what he had in mind?

EZRA VOGEL: I think it's very close to what he had in mind. I think if Deng, who died in 1997, were back today, 15, 16 years later, he'd be very pleased that more Chinese were now able to afford a comfortable way of life. And he would be proud that China is now a stronger and respected and listened to in world affairs. I think he would be strong against corruption. He would feel that his followers have not done enough to tighten up on corruption. I think he would still feel that they could begin to experiment with democracy, when the time came. And I think that, as a whole though, he would feel that the leaders are just a little too cautious. He was a broad revolutionary willing to make big stances. His followers who grew up in the system by being nice people and getting along with everybody else were not bold enough in tackling the problems that China faces.

INTERVIEWER: And unlike Mao, he didn't feel the need to kill millions of his fellow citizens to make it happen.

EZRA VOGEL: That's right. And he believed that China should be a peaceful country in the world. The Soviets made a big mistake by having too many enemies, putting all of the money in the military, which wasted the country and led to the ruin. He wanted China not to spend so much on the military, to keep good relations with the countries, and put the resources in the domestic economy. And that's what he believed should happen.

INTERVIEWER: A couple of minutes left. I want to touch on two more things. He dealt with a number of American presidents. Who do you think was his favorite?

EZRA VOGEL: That's hard to say, but I wouldn't be surprised it was Bush Sr. Because he had known Bush Sr. In 1975 when he, under Mao, was in charge of running China, basically. And Bush was in charge of the liaison office in Beijing and therefore saw them very often. Surprisingly enough, he probably liked Nixon because Nixon was a grand strategist. He didn't meet him in 1972 because he was [INAUDIBLE] at that time. When he met Nixon at the White House, and he met him when Nixon and later came China after that. And he also got along with Reagan. He and Jimmy Carter hit it off very well. Tip O'Neill and he hit it off. It's surprising the range of American political leaders-- he got along with all of them.

INTERVIEWER: And just finally, as a person-- he's not a person who managed to avoid personal tragedy, right? A first wife who died and a child who was--

EZRA VOGEL: Died seven several days later, yes.

INTERVIEWER: Yeah. And another son who was handicapped I think from having been--

EZRA VOGEL: In the Cultural Revolution, he was pursued by Red Guards. And there's a question whether he was pushed or jumped out the window. I think the evidence is that he was jumped out of the window.

INTERVIEWER: Do you have any sense of how all of those personal tragedies might have affected the man he became?

EZRA VOGEL: I think he was steeled by the time he came to office. Particularly 12 years in war time fighting-- I think this is one very tough person who was just determined to think of the big picture and to look at things and not to be frightened. And I think that he was there for a very bold and doing what he thought was good for the country.

INTERVIEWER: Professor Vogel there aren't many people who can say I beat Henry Kissinger at something. But you beat Henry Kissinger for your book on China against his book on China for the Lionel Gilbert prize, for which we congratulate you.

EZRA VOGEL: Thank you.

INTERVIEWER: Ezra Vogel. Deng Xiaoping and the Transformation of China.

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Chinese Central Television (CCTV) Series: China 30 Years

The following video clips are from a Chinese Central Television series on the impacts of these policies with a 30 year retrospective. They provide some insight into China’s period of opening and reforms. Below are select clips to view, though you can certainly view all of them for a fuller picture of the impact of these reforms (from the perspective of the PRC).

1978—The Turning Point

Click for a transcript of "The turning point" video.

Thirty years have flown by since China adopted reform and opening-up policies in 1978. Starting today our new Biz China 360 series takes you through enormous changes over the decades. In this first installment, we take a brief look at how this historic decision set China on the road to becoming the country as we know it today.

It's the Beijing Olympic games and the Shenzhou 7 manned space flight has surprised and fascinated the world. It was a decision made 30 years ago that made all this possible.

In December 1978, the 3rd Plenum of the 11th Central Committee of the Communist Party of China was held in Beijing. Looking back, it can be considered a turning point in Chinese history opening up a new era that outside world that has since referred to as reform and opening-up.

BI JIYAO, DEPUTY DIRECTOR INST. FOR INT'L ECONOMIC RESEARCH, NDRC: The decision to implement economic reform and opening-up policies was very important decision in the 1970s for China. Since then, we have been on the road to economic reform and opening-up and we have graduated from the traditional centrally planned economy to the market economy. Our economy has moved from a closed one to an open one.


While Chinese people were pushing ahead to change their lives, the outside world was also moving on and wondering what this Asian Eastern nation could achieve.

MELINDA LIU, BEIJING BUREAU CHIEF NEWSWEEK: Even among my own friends and colleagues the reaction was very mixed. My personal reaction was curious and surprised and again, I think excited. I think simply the idea that things were starting to change even if we didn't know what the outcome would be made this an extremely unusual situation. I think I even then I had a feeling it might be a once in a lifetime type of story for a journalist.

It was never going to be an easy task. It required great focus and determination to stay the course. The world's most populous nation began its march out of the closed and planned economy towards a socialist market economy which aimed to expand rural income, encourage experiment in enterprise autonomy, and join in more overseas investments. To ensure the experiment would prove a success, China started a series of pilot programs in selective cities and villages such as setting up economic zones and household contract responsibility experiments in rural areas.

LAURENCE BRAHM, POLITICAL ECONOMIST: The thirty-year changes [INAUDIBLE]... and basically cross through a wall walking on the rocks. And this approach made China transform from a nation of scarcity to a nation of surplus, from a nation which had tremendous poverty to you know, removing so many people from poverty. And this shift presented the world with an alternative to the Washington Consensus.

Reform and opening-up brought a fundamental change to the China of the time. It freed up people's minds, unleashed productivity, injected a great vigor and vitality into the nation, and greatly stimulated economic and social development. As a result, China's economy has maintained nearly a 9.8% annual growth rate for the past three decades. Back in 1978, China's GDP accounted for only 1% of the world's total.

By 2007, it had reached more than 5%. China's share in global trade also jumped from less than 1% to roughly 8% during this period. And the development got a further lift when China joined the World Trade Organization in 2001, 23 years after it adopted the reform and opening up policy.

BI JIYAO, DEPUTY DIRECTOR INST. FOR INT'L ECONOMIC RESEARCH, NDRC: When China adopted the WTO, China had been significantly involved, integrated into global economies. And our contributions to the world economic goals have surpassed the United States as the number one over past three years. So we can see China's economic development providing important driving forces for the whole economy.

Reform and opening-up has also brought new benefits to the people whose lives have undergone great changes. From suffering the lack of basic living necessity to enjoying moderated prosperity.

"The development of Chinese cities including Beijing, is very impressive. I think they are even better than foreign countries. Very modern."
"Buses, flyovers...Changes are huge."
"People's living standards improved a lot. It's just that simple."
"I'm feeling well, and quite satisfied with the current life."
"Food clothes...people used to need those quota coupons to get what they need. With China's economic development, these have become things of the past."
"Now whatever you want to eat, you can have it. I feel even better than what ancient emperor's ate."

Great changes have swept across this world's most populous country during the past three decades. Including wealth and more open-mindedness, changes can be found in every corner and in all walks of lives. But there is one thing that remains unchanged, that is China's determination to carry on its reform and opening up and ensure a better life for its people. This is Feng Ling reporting with Biz China 360.

1978—Rural Reforms Started

Click for a transcript of "Rural Reforms Started" video.

December the 18th, 1978 is a very special day for all Chinese. It was on this day that other reform and opening-up policy was issued. With only 30 days to go before the 30th anniversary of his historic event, we bring you a special series on events that have taken place on each December the 18th since 1978. We will look at three decades of changes in China. Today will begin with 1978 and the country's most authoritative paper. The cultural revolution ended two years earlier and big changes are in store.

This is people's feeling on December 18th 1978. No advertisements, no entertainment, and no mention the day's most important news. But, the message can be seen in the headlines. Three-fourths of the front page deal with agriculture. The top story shows how Zhejiang province revived agriculture production. The next is the success of the collective system Yantai cotton harvest. And this article calls for setting up agricultural product bases across the country.

The focuses are different, but all share the same purpose. To share the country's main concern, how to boost agriculture to feed the world's largest population after 10 years of economic stagnation due to the cultural revolution. Farmers have already lost interest in the people's common system. Regardless of how much or how little they work, everyone gets an equal share.

Land reform is necessary. Senior party leaders address the issue at a meeting on December 18. And from this meeting, comes a decision to establish a house hold responsibility contracting system. The reform gives farmers freedom in rights, hoping to invigorate the rural economy. In 1978, the reform was controversial. It told farmers, it was the beginning of a new chapter.

Rural Reforms

Click for a transcript of "Rural Reform" video.

PRESENTER: 30 years of reform in China have had an enormous impact on the country's vast rural areas. In fact, the earliest blueprint for change arose from farmers wishing to improve their lives in a tiny village in Anhui Province, in eastern China. In today's part of our BizChina 360 series on three decades of reform and opening up, Qi Tianxing shows us how life has changed dramatically in another village. That's Sunzhuang in central China's Henan Province.

QI TIANXING: Zhang Xiuying is preparing lunch for her family. She's happy with her daily life. She's able to take on some work on the farm, cook for the family, and take care of her grandchildren.

ZHANG XIUYING: [SPEAKING CHINESE] (English Translation: I'll cook rice and meat.)

QI TIANXING: Now, the family can eat whatever they want, but 30 years ago, that was impossible. Like farmers across the country, people in Sunzhuang Village worked for production teams, basic farming units of the time. They handed in what they'd grown to the team and got allotments of grain in return. And this amount was the same however much or little each family worked. That meant most of the farmers had little incentive to till the land. Poor soil conditions and the effects of natural disasters left a very low standard of living.

ZHANG XIUYING: [SPEAKING CHINESE] (English Translation: I picked leaves from elm trees after work and cooked soup with them. I only earned 6 yuan a month at that time.)

QI TIANXING: Xu Guizhen's family was even poorer. They had to beg for their bread.

XU GUIZHEN: [SPEAKING CHINESE] (English Translation: We staved in those days, when people worked for the production team. I went to other places, begging for food with which to feed my child.)


QI TIANXING: Starving farmers had to find a way to change their lives, and 18 of them in Xiaogang Village of Fengyang County in Anhui Province came up with what were revolutionary ideas for the time. In 1978, they secretly carved up farmland and allotted them to households. Each household was allowed to keep what they grew on their own piece of land. This sounds simple, but what happened in Xiaogang Village was a bold step towards rural economic reforms.

This scheme was later promoted across the country by the Communist Party of China after its Third Plenary Session of the 11th Central Committee. The scheme was officially established in 1982, giving a big boost to agricultural production.

XU GUIZHEN: [SPEAKING CHINESE] (English Translation: After the farmland was divided up and handed over to households, we had enough food and never went begging again.)


ZHANG XIUYING: [SPEAKING CHINESE] (English Translation: We grew enough grain to feed the family, we didn't need to buy grain anymore.)

QI TIANXING: Since 1982, the CPC Central Committee issued number one central documents for five years in a row to develop rural areas. That's liberalizing production. Xu Guizhen's son, Chen Zhong, was one of the first batch of individual business operators in the village. He began to work in the transportation business when he was 17 years old. Over the last 20 years, he has moved from using a tractor to driving a truck.

CHEN ZHONG: [SPEAKING CHINESE] (English Translation: When local residents earned 10 yuan per day, I could earn 70 to 80 yuan by driving a lorry, well, at least 50 to 60 yuan a day.)

QI TIANXING: With China entering the 21st century, agriculture and rural development still remain the top priority for the government. A series of preferential policies were issued to farmers. The party branch secretary for Sunzhuang Village will never forget what happened on the 1st of January, 2006, when China abolished its agricultural tax nationwide, a tariff that had existed for more than 2,000 years.

WEI GUODONG: [SPEAKING CHINESE] (English Translation: The agriculture tax was canceled for the first time in thousands of years. Farmers were very glad. Prior to that, a family had to hand in 40 to 60 kilograms of wheat, that costs between 40 and 60 yuan.)

QI TIANXING: In addition, the government also offered subsidies to farmers to help them buy farming materials.

XU GUIZHEN: [SPEAKING CHINESE] (English Translation: We can get 70 to 80 yuan in subsidies for each mu(666 square meters) of farmland. Farming has been mechanized, we don't have to labor so hard.)

QI TIANXING: 30 years ago, there were 250 million Chinese farmers who were inadequately fed and clothed. Per capita income of Chinese farmers then was only 134 yuan. But by the end of 2007, the per capita income of Chinese farmers had increased to 4,140 yuan. Farmers now are pursuing more than enough food.


This is Wei Guodong's wedding photo, but taken 40 years after the happy day.

WEI GUODONG: [SPEAKING CHINESE] (English Translation: This picture was taken in 2006, on the 40th anniversary of our marriage. But we consider this our wedding photo.)

QI TIANXING: [SPEAKING CHINESE] (English Translation: Did you take any photos when you got married?)

WEI GUODONG: [SPEAKING CHINESE] (English Translation: No, no, we had never taken a wedding photo before 2006. In fact, the first photo in my life was taken in 1963 when I graduated from middle school. I had no money to take a photo but we were all part of the graduation photo.)

QI TIANXING: Now, having a photo taken is something anyone can enjoy. Farmers also care more about the quality of life. Some villagers are helping workers build a road. Like other roads in the village, it's partly funded by local government and partly funded by villagers themselves.

WEI GUODONG: [SPEAKING CHINESE] (English Translation: In recent years, we have built more than 10 thousand meters of roads that connected almost the whole village. 95 percent of the families here now have roads leading right up to their homes.)


QI TIANXING: The CPC Central Committee decided in the latest plenary session held in October to improve markets for the needs of contracted farmland and the transfer of rights for the use of farmland. This gives farmers opportunities to conduct relatively large-scale management and new business operations. In Sunzhuang, the local government has collected some lands for enterprises. Outside capital has boosted the local economy. And the rights of farmers whose land have been taken away has also been protected.

WEI GUODONG: [SPEAKING CHINESE] (English Translation: Farmers whose per capita land is less than 0.3 mu(200 square meters), will be transferred from rural residents to urban residents. The government will provide them subsistence allowances under the urban standard, that is 200 yuan a month.)

QI TIANXING: The CPC Central Committee has also set a goal of doubling per capita disposable income for rural residents by 2020. Sunzhuang Village is moving toward that goal by exploring more business opportunities.

WEI GUODONG: [SPEAKING CHINESE] (English Translation: We are having talks with a mushroom company. We plan to encourage villagers to grow mushrooms at home. By doing so, the income of a family is likely to increase by 10 to 20 thousand yuan a year.)

QI TIANXING: Maybe in the near future, urban residents can enjoy delicious mushrooms cultivated in Sunzhuang. To the people, food is all important. To the country, agriculture is the foundation of the national economy. 30 years ago, the reforms began on the farms. 30 years later, the CPC's Decision on Major Issues Concerning the Advancement of Rural Reform and Development will lead to new breakthroughs in farmers' lives. Qi Tianxing, reporting for BizChina 360.

PRESENTER: Now 30 years of reform in China have also greatly boosted the country's private sector. Our next installment of the 360 series will focus on the extraordinary development of the private economy.

Financial System

Click for a transcript of "China 30 years: Financial System Video" video

If you just joined us, you're watching Biz China, about halfway through this program now. Let's continue with Biz China 360 as our ongoing series as we take a look at the country's 30th birthday in reform and opening-up. This episode today will focus on the development of the financial system over that period Quentin has the details.

In 1988, when the American investment expert Jim Rogers came to Shanghai and bought a few Chinese stocks in small outlets of ICBC, the Shanghai Stock Exchange still hadn't opened, in fact it will be another two years until it existed. Needless to say, few of the over one billion Chinese knew much about stock investment.

No one knows that early time better than millionaire Young. He's one of the earliest individual investors in China. His original name was Young Qi Din. People began to call him millionaire Young after he earned the first million assets through stock investment during 1980s. At that time up our key and shortage, a family with ten thousand grand was already considered wealthy. At first, Young was worried what people thought about his way of making money because using one's hands to earn money was thought to be honorable. He was even afraid to be put into jail. Marketing investment was considered speculation and capitalism. But the words of Deng Xiao Ping, the chief designer of China's reform and opening-up reassured him.

YANG HUAIDING, INDIVIDUAL INVESTOR: When Deng Xiao Ping completed his southern China tour, and traveled to Shanghai, he said the securities market does not belong to capitalism or socialism. We should give it a try first. If it failed, we could close it then. But we should develop it first. Now 20 years have passed, and how things have changed!

Such a change of mind was turning point. Since then China's market has been growing at a rapid China has established two stock exchanges in Shanghai and Shenzhen. There are already more than 1,500 companies listed on the two stock exchange. People with a more disposable income are also taking increasingly active parts in stock investments By October 2008, big jumps accounts in Shanghai and Shenzhen stock markets reached $121 million. Millionaire young helps us investors also growing more mature with the development of the securities market.

YANG HUAIDING: Although the history of our securities market is short, we have been able to successfully complete the set up of the market in a short time. It took the west a hundred years. It's a great achievement. We cannot judge the success of the market according to the fall and rise of our shares. The securities market cannot ensure everyone makes money. However, it provides equal opportunity. If you seize the opportunity, you can grow along with the reform and opening up process.

The reform of the securities market is only one part of China's Financial System reform.

What's even more amazing is a banking reform. Banks are considered the core of the nation's financial system. As a result it's reform was given high priority. In 1979, Deng Xiao Ping proposed to develop banks as the leverage point for economic development and technology innovation, and make banks real banks. Lacking historical context people may not understand which real banks meant. Before 1979, China's banks were departments within the government serving the planned economy. However, the reform started centering around markets within the financial institutions.

Ms. Tan Yaling worked as a Senior Analyst at Bank of China, China's second largest bank. She told us the change she experienced, "Previously, we just sat in our offices waiting for customers. However, now we go out to companies, to markets, and to ordinary people to promote our products and improve our business. The change has not only affected the daily operations of the company, but our mind set as well."

However, the development in route was not that smooth. In 1998, Asian financial crisis exposed the problems of having a high non-performing assets ratio and low cap to sufficient rates of Chinese banks. Some foreign experts even said China's banks were on the verge of bankruptcy and when China joined the Dublin to: in 2001 the country promised to open its financial system in five years. This made the challenges for the domestic banking industry even more pressing. However the reform later amazed the world. Steps were taken quickly and decisively. It involved the injection of capital and the introduction of strategic foreign partners. In its biggest move, the government initiative displayed share reform and overseas listing of three state owned commercial banks. Just two to three years later, the listings of the three banks created a China tidal wave in the world's capital markets. The industrial and commercial banks of China set the IPO world records by reaching twenty-two billion US dollars. This market capsule was also one of the largest of the world banks.

TAN YALING, STANDING DIRECTOR, CHINA INT'L ECONOMIC RELATIONS ASSOCIATION: During the whole process of state share reform, and the listing, the inner and exterior structure and social image changed a lot. First Chinese banks became market oriented banks, and it caused their performance and profits to rise. The influence of Chinese commercial banks is undoubtedly growing. Now in the world's top 100 or even top 10, there are Chinese financial institutions and commercial banks. It proves the significant impact that the share reform has brought about.

The reform is considered fruitful. By the end of 2007, the three state-owned commercial banks recorded profits of 67 to 82 bin yuan, one of the most profitable intervals. Their capital sufficient rate was around 13% compared to the global standard of 8%. The non-performing loan ratio dropped from the peak of 40% to less than 3%. Their healthy development has cured China's financial stability in the world's financial system. Lead by these large banks, city commercial banks, private banks, and other financial institutions are also burgeoning in China. China's banking industry now has over 8,000 banking corporations and over 190,000 around the country that greatly support the nation's economic development.

Although remarkable progress has been made over the past 30 years, China's finance industry is still young and will face tough challenges such as global financial crisis. But although China's increased integrations with the world economy does make it more vulnerable to situations. But China's strong economy as well as continuing reform, and opening up will ensure a bright future for China's finance industry. I'm reporting for Biz China 360 here in Beijing.