Why Did China Become Capitalist?

People ask, “Why did China become capitalist? Was the failure of communism the reason China switched to capitalism?

No. Far from it.

China was the most communist, egalitarian country on earth when Mao died. Let’s pause there and see whether communism succeeded or failed:

  • Communist China, from 1950–1978, was under the most severe American peacetime embargo in world history. Even food was embargoed, along with finance, technology and international recognition.
  • Communist China in 1950 had an industrial base smaller than that of postwar Belgium’s in the ‘50s. In 1978 it was one of the six largest industrial producers in the world.
  • Communist China grew national income 500% between 1950-78, from 60 billion RMB to 300 billion RMB, with industry accounting for most of the growth.
  • On a per capita basis, the index of national income, at constant prices, in Communist China increased from 120 in 1950 to 440 in 1978.
  • From 1957 to 1975, Communist China’s population doubled but per capita national income increased by 63%, more than doubling overall and while laying the foundations for modern industrialism and outpacing every other development takeoff in history:
    • In Germany the decadal rate of economic growth 1880-1914 was 33 percent per decade.
    • In Japan from 1874-1929 the rate was 43 percent.
    • The USSR, between 1928-58 grew 54 percent.
    • Communist China between 1952-72 the rate was 64 percent.
  • Except for limited Soviet aid in the 1950s, which Communist China repaid in full and with interest by 1966, Communist China’s industrialization proceeded without benefit of foreign loans or investments–under punitive embargoes–yet Communist China emerged with neither foreign debt nor internal inflation.

Without Communist China’s industrial revolution, later economic reformers would have had little to reform because the higher yields obtained on individual family farms during later years would not have been possible without the vast irrigation and flood-control projects–dams, irrigation works and river dikes–constructed by Communist China’s collectivized peasants in the 1950s and 1960s.

By 1978, Communist China compared favorably with middle income countries whose per capita GDP was five times greater. By 1974 Communist China was producing jet aircraft, locomotives, oceangoing ships, ICBMs, hydrogen bombs and satellites and had reunited, reimagined, reformed and revitalized the largest, oldest civilization on earth, modernized it after a century of failed modernizations, liberated more women than anyone in history and ended thousands of years of famine.

No, China didn’t allow limited capitalism because Communism failed, it did so because Mao had warned them that, if China’s economy did not outstrip America’s by 2016, “China will be wiped from the face of the planet.”

So, knowing the capitalism would raise Communist growth from 6.25% per year to 10.5%, the government added capitalism to the economy while keeping its core industries Communist: banking, insurance, finance, railways, education, health and defense. At its core, China is a Communist country with capitalist characteristics.

Why China Leads the World: Talent at the Top, Data in the Middle, Democracy at the Bottom

  • Why China Leads the World

    The only book that explains all three elements of China's success: 1. Talent at the Top means that China's brightest, most idealistic people are are admitted to politics–a policy unchanged in 2200 years. 2. Data in the Middle means that every policy is implemented, tracked, and optimized based on terabytes of data. The PRC is the world's largest consumer of public surveys. 3. Democracy at the Bottom means that ordinary, honest amateurs assemble twice a year to check the stats and sign off on new legislation. Policies need a minimum of 66% popular support to become law. That's why 95% of Chinese say the country is on the right track.
  • January 13, 2021
  • 288 pages
Capitalist | Cato Institutewww.cato.org › policy-report › january › february-2013

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2 thoughts on “Why Did China Become Capitalist?”

  1. Pingback: How Communist is China? - Here Comes China!

  2. However, nowadays, we can see that in China, there are lots of officials embezzle money via their power, especially who work in those cities far away from Peking.
    After the Great Reform, at first, Chinese life became much better, and the gap between poor and rich became narrow. However, since the 1990s, the gap between poor and rich has been wider and wider. In China, you can see those new capitalists like Jack Ma, and what is ridiculous is that he is one of the party member.

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