Weak incentives, political campaigns and isolation left China poor by 1978. These problems explain why reform began and why catch-up growth was possible.
From the 1950s China followed a Soviet-style planned economy. The state set prices and output targets and put heavy industry first.
Mao's campaigns did great damage. The Great Leap Forward (1958-1962) caused a famine in which tens of millions died. The Cultural Revolution (1966-1976) disrupted education, management and production.
Incentives were weak. Farmers in communes were paid in "work points" however much they produced, so extra effort did not pay. Factory workers had jobs for life, the "iron rice bowl", however well they worked.
By 1978 most Chinese were poor, and about four in five lived in the countryside. Consumer goods were scarce. China was largely cut off from world trade and technology.
Leaders could see the gap. Deng Xiaoping visited Japan and Singapore in late 1978 and was struck by their prosperity. The Third Plenum of December 1978 shifted the Party's focus to economic modernisation.
- Great Leap Forward
- 1958-1962: famine; tens of millions died.
- Iron rice bowl
- Jobs for life whatever the performance.
- Third Plenum
- December 1978: focus shifts to modernisation.
Worked example: Using the Maoist legacy in an essay
How did the problems of the Maoist economy shape reform?
- Push: poverty and weak incentives made change urgent.
- Legitimacy: after the Cultural Revolution the Party needed results.
- Opportunity: a low starting point allowed fast catch-up growth.
- Limit: problems explain why reform began, not why it succeeded.
Watch out for this
China's economy grew fast because Mao had built a strong base.
Mao left some heavy industry and a literate, healthy workforce, but the planned economy wasted resources. Much of the growth after 1978 came from removing its weaknesses.
Check your understanding
Why did farmers in the communes have little reason to work harder?
- They were paid in work points however much the commune produced.
- They owned their land and kept all profits.
- They were paid by foreign companies.