15.1 The Four Modernizations and economic reforms

Deng Xiaoping's economic reforms aimed to modernize China through the Four Modernizations policy. This approach focused on agriculture, industry, science and technology, and national defense, marking a shift from Mao's ideology towards a more market-oriented economy.

The reforms led to significant changes in various sectors. Agriculture saw increased productivity through decollectivization, while industry benefited from private enterprises and Special Economic Zones. These changes propelled China's rapid economic growth and integration into the global economy.

Deng Xiaoping's Economic Reforms and the Four Modernizations

Components of Four Modernizations policy

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• Agriculture
  • Decollectivization of agriculture dismantled the commune system and allowed farmers to make their own production decisions
  • Introduction of the Household Responsibility System divided land into individual plots leased to households, incentivizing productivity (Anhui Province)
• Industry
  • Encouragement of private enterprises through reduced regulations and increased access to capital, fostering entrepreneurship (Wenzhou model)
  • Establishment of Special Economic Zones in coastal cities to attract foreign investment, technology, and expertise (Shenzhen)
  • Attraction of foreign investment and technology through joint ventures, wholly foreign-owned enterprises, and technology transfer agreements (Coca-Cola)
• Science and Technology
  • Emphasis on research and development increased funding for key areas such as agriculture, energy, and materials science (863 Program)
  • Modernization of education system reformed curriculum, expanded higher education, and promoted vocational training (Project 211)
  • Sending students and scholars abroad for advanced training in fields like engineering, medicine, and computer science (Tsinghua University)
• National Defense
  • Modernization of the military focused on improving training, logistics, and command and control systems (People's Liberation Army)
  • Development of advanced weaponry and equipment such as missiles, aircraft, and naval vessels (J-10 fighter jet)

Impact of reforms on economic sectors

• Agriculture
  • Increased productivity and output due to greater incentives for farmers to invest in land and adopt new technologies (hybrid rice)
  • Improved living standards for rural population through higher incomes, better housing, and access to consumer goods (televisions)
  • Surplus labor migrated to urban areas for industrial jobs, contributing to rapid urbanization (Guangdong Province)
• Industry
  • Rapid growth of light industries and consumer goods production, such as textiles, electronics, and household appliances (Haier)
  • Expansion of private enterprises and township-village enterprises (TVEs) in rural areas, creating non-agricultural employment (Jiangsu Province)
  • Gradual shift from state-owned to market-oriented economy, with increased competition and efficiency (Lenovo)
  • Integration into the global economy through foreign trade and investment, leading to export-driven growth (Pearl River Delta)

Success of Household Responsibility System

• Dismantling of collective farming system ended the practice of pooling labor and resources in communes (People's Communes)
• Land divided into individual plots and leased to households for a fixed period, typically 15-30 years (Household Contract Responsibility System)
• Households responsible for meeting production quotas set by the government, ensuring a stable food supply (grain procurement system)
• Surplus production could be sold in the market for profit, providing a strong incentive for farmers to increase output (free markets)
• Incentivized farmers to increase productivity and efficiency through better management and use of inputs like fertilizer and machinery (Hebei Province)
• Resulted in significant increases in agricultural output and rural incomes, with grain production nearly doubling between 1978 and 1984 (Sichuan Province)

Role of Special Economic Zones

• Designated areas with preferential policies for foreign investors to attract capital, technology, and expertise
  1. Reduced taxes and tariffs, such as exemptions on import duties for raw materials and equipment
  2. Streamlined bureaucratic procedures, including simplified approval processes and one-stop services
  3. Improved infrastructure, such as roads, ports, and power supply (Shekou Industrial Zone)
• Served as "testing grounds" for market-oriented reforms, allowing experimentation with new policies and institutions (Pudong New Area)
• Attracted foreign capital, technology, and management expertise through joint ventures and wholly foreign-owned enterprises (Samsung)
• Promoted export-oriented industries, such as electronics, textiles, and toys, leveraging China's low labor costs (Dongguan)
• Contributed to rapid economic growth and development, with GDP growth rates often exceeding 20% per year (Guangdong Province)
• Notable examples
  • Shenzhen transformed from a small fishing village to a major manufacturing and technology hub (Huawei)
  • Zhuhai attracted investment in tourism, logistics, and high-tech industries (Gree Electric)
  • Shantou focused on light industry, textiles, and food processing (Chaozhou porcelain)
  • Xiamen developed a strong electronics and software industry (Xiamen Software Park)