Reform and opening up: why and what
Before 1978, China ran a planned economy: the state decided what farms and factories made and at what price. Growth was slow, many people were poor, and trade with the outside world was small. After the Cultural Revolution ended in 1976, leaders asked how to raise living standards.
In December 1978 the Third Plenary Session of the 11th Central Committee of the Communist Party decided to shift the main focus from class struggle to economic development and to start reform (change inside) and opening up (links with the world). The guiding method was seek truth from facts: test ideas in practice and keep what works.
Key steps, 1978 to 2001
- Farms (from 1978–84): under the household contract responsibility system a family contracted a piece of land, handed over a set amount of grain and kept or sold the rest. Output rose quickly.
- Special Economic Zones (1980): Shenzhen, Zhuhai, Shantou and Xiamen were set up as test areas with special policies to attract foreign investment and trade. Later 14 coastal cities (1984) and more regions opened.
- Cities and firms (1984 onwards): state firms were given more freedom; private and foreign-invested firms were allowed; prices were slowly freed.
- Socialist market economy (1992): after Deng Xiaoping's southern tour, the 14th Party Congress set this goal: the market plays the main role in sharing out resources, under state guidance, with public ownership as the base.
- WTO (2001): China joined the World Trade Organization and cut tariffs, becoming a larger part of world trade.
Reform was gradual and tested in some places first (pilot areas) before spreading widely.
Results and problems
Results. The economy grew by roughly 9 to 10 percent a year for about three decades. Income per person rose from about US$150 in 1978 to about US$12,700 in 2022 (current dollars, about 80 times). Hundreds of millions of people moved out of extreme poverty (World Bank figures), and China became the world's largest goods exporter.
Problems. Gaps grew between coast and inland, and between city and countryside. Pollution and heavy use of resources increased. Local government debt and an ageing population became concerns. Later policy talks about quality of growth, not only speed. A balanced view lists both gains and costs.
Creation and development of the theory
In the official account, socialism with Chinese characteristics grew as a theory step by step, because practice raised new questions.
- Deng Xiaoping Theory (from 1982; named in 1997): socialism must be fitted to China's conditions; development is the hard truth; poverty is not socialism; primary stage of socialism (1987), meaning China is still at an early stage and will be for a long time; the policy of one centre (economic development), two basic points (keep the four cardinal principles; reform and opening up).
- Three Represents (Jiang Zemin; Party constitution 2002): the Party should represent advanced productive forces, advanced culture and the interests of the great majority.
- Scientific Outlook on Development (Hu Jintao; 2007): development should be people-centred, balanced and sustainable.
- New-era thought (Xi Jinping; 2017): see the next lesson, New era and national rejuvenation.
Pattern: practice raises a problem, leaders and scholars sum up experience, the idea becomes theory, and the theory guides the next stage of practice.
Try it: link practice to theory
Open the free-play step. Set the year to 1984, then 2001, then 2017. For each year write one sentence: what changed in practice, and which idea or theory appeared to explain or guide it? You have written a cause-and-effect chain of reform.
Key formulas and definitions
- Reform = changing how the economy is run inside; Opening up = linking with the world.
- Key dates: 1978 start; 1980 SEZs; 1984 coastal cities; 1992 market economy goal; 2001 WTO
- Theory chain: Deng Xiaoping Theory → Three Represents → Scientific Outlook → new-era thought
- Income per person ratio = 12,700 ÷ 156 ≈ 80 (current US$, 2022 vs 1978)
Worked examples
1. How many years passed between the start of reform and opening up (1978) and China joining the WTO (2001)?
2001 − 1978 = 23 years.
2. Under the household contract system a family must hand over 400 kg of grain and keeps the rest. It grows 1,000 kg. How much does it keep?
It keeps 1,000 − 400 = 600 kg. The extra grain it can sell is its reward, so it works harder to grow more.
3. Why were special economic zones used as 'test areas' first instead of changing the whole country at once?
Testing in a few places lets the government learn what works and what fails at small cost, then spread good policies. This is the 'feel the stones' method.
4. Income per person was about US$156 in 1978 and about US$12,700 in 2022. About how many times bigger?
12,700 ÷ 156 ≈ 81, so about 80 times (in current US dollars).
5. Explain why 'primary stage of socialism' matters for policy.
It says China is still at an early stage of development, so the first task is to develop the economy and productive forces, using the market and opening up, rather than moving quickly to a fully developed socialism.
Common mistakes
- Mixing up reform and opening up. Reform changes things inside the country; opening up connects with the outside world.
- Saying all the changes happened at once in 1978. The steps came in stages over many years.
- Thinking market means no state role. The 1992 goal is a socialist market economy with state guidance and public ownership as the base.
- Writing only gains. A balanced answer also mentions problems such as inequality and pollution.