China’s Economic Reform Movement Since 1978

Subject: History
Pages: 6
Words: 1427
Reading time:
5 min

China has a long history of historical development and a complex Cultural Revolution. This is an integral part of Chinese thinking and affects how people think, act and respond in a given situation. These factors, along with the economic reforms and the enterprise reforms, play an important role in understanding the local management with which foreign companies would have to deal with for successful operations in China regularly.

The historical development of the country has a bearing on the manner in which its inhabitants think. The country was, for a long period, dating back to 1949, state-controlled, with the “…state sector-dominant personnel administrative system of China.” Over the last 25 years, the country has undergone massive political as well as economic reforms that require an understanding of what transpired as an asseveration for this examination of the historical survey. The relevance of the preceding is that the managers of today are the children of those citizens that worked under the state-owned and controlled system. Thus, their education includes a mixture of the older system, along with newer thinking that has been taught in the country’s universities. As pointed out by Cooke, the state-controlled system fixed personnel policy along with how organizations operated via a system of regional and local labor departments as set forth by the Ministry of Labor.

The preceding oversaw blue-collar workers, and the Ministry of Personnel governed white-collar as well as managerial staff. Under the lifetime employment job security scheme, wages were low but included “… a broad range of workplace welfare provisions, including housing, pensions, health care, children’s schooling, transportation to and from work, and employment for spouses and school-leaving children, as part of the responsibility of the ‘nanny’ employer.”

The importance of the foregoing is that by 1980 75% of all urban Chinese employees were employed in state-owned enterprises. The state-controlled system also created dependencies on the part of Chinese workers in that performance standards were low, and the enterprises were filled with bureaucracy layers that padded management staffing, adding to costs. In the late 1970s, China began to move toward an open-door policy in a direction aimed at the attraction of foreign investment in order to improve the economy. As a result, the state had to undergo some dramatic “… changes in its personnel policy, and practices as part of the Economic Reforms and Enterprise Reforms that begun in the early 1980s.”

Autonomy increased, as did the responsibility at the enterprise level, and state control was gradually eased as the government prepared for a new system of internal company operation that was more in keeping with the competitive atmosphere of globalization. China’s reforms and an open-door policy were implemented in the realization that “…the planned state economy characterized by ‘high employment rate’, ‘high welfare’, ‘low wage’ and ‘low productivity'” had to come to an end in order to introduce a market economy in preparation for the country to take its place in the international economy as for admission to the World Trade Organization.

The bold decision made by Deng Xiaoping in reference to the modernization of China, in his statement that “the market economy is not to be divided into two parts –capitalism or socialism, that we must not argue about the character of the market economy, nor get tangled in the character of market economy, that we must construct a market economy in China. Now, the market economy has become the underlying system in China, although we call it a socialist market economy.” This is the first time that revolutionary options came to the forefront.

The objective was to find diverging ways to realize the dream of modernization in China. The historical references have paved the way for the modernization of China, and that has been closely connected with revolutions until 1976. Deng Xiaoping took the bold move to use reform instead of revolution after the disaster and the horror of the Cultural Revolution as the basic principle for transformation. The primary focus of the modernization agenda was the development of the economy and of the nation. The shift was from revolution towards liberalization and reform. In some ways, it was through the mechanism of reform that true people’s revolution took place.

In his book “Wild Grass,” Johnson presents a very good analysis of the social, cultural, political, and economic experiences as integrated into the everyday life of the citizens. He attempts to predict China’s future authentically, but the picture he gives is of a society that is going to have inevitable conflicts with the government. Even though on the road of modernization and westernization, at the speed of the lightning with the 2008 Olympics right on the corner. One can see the reform, where governmental control and bureaucratic regulations are very dominant. This is very closely connected with culture and politics.

This spirit of the real period of modernization, which was brought about by economic reform, has been very well presented in the book “Revolution and Its Past: Identities and Change in Modern Chinese History” by Schoppa, where China’s international showcase is highlighted in the year 2000, in the central Chinese coastal city of Hangzhou, which sponsored an International fair. The West Lake Millennial Exposition for the city’s most famous tourist attraction was designed to showcase the new China in its international contexts.

This was interestingly combined to portray China’s rise as an emerging power in the world. This is displayed using the platform of exposition and harmonious political and economic strides, which opened new frontiers for China in the 21st century. The exposition showcased the international context of China’s growing modernity. China is moving into the modern world with enormous speed to catch up with other merging economies and to challenge the western economies. In the 21st century, China is a significant player in the international market. They want to use their past mistakes intelligently to steer their future growth, which has immense potential.

China today is simultaneously the world’s largest start-up and the world’s largest turnaround. It is strongly leaning towards the capitalistic and westernized economy, but with a difference. It draws on a 2,000-year tradition, yet it is inhaling Western business know-how and technology, doing everything at the same time and for the first time. A Communist dictatorship was determined to practice its own form of capitalism. China has long perplexed foreign investors who find Chinese business practices opaque and contradictory. “One Billion Customers” focuses on personal stories, business deals, and the lessons learned by multinationals, Chinese and foreign entrepreneurs, state-owned enterprises, and government entities.

And because understanding China’s history is crucial to conducting business, McGregor chronicles how 200 years of foreign domination and duplicity continue to make China distrustful of outsiders and how those suspicions still influence its business practices. According to McGregor, “Long term mentoring is the single most effective technique for foreign companies to build an effective Chinese executive corps.” A sound network of business relations and involvement in a social network is very important to successful business relationships in China. While doing business, one should never put one’s business in apposition where one is dependent on one individual for access to government officials.

It is an essential destination for the foreign-funded enterprises who need to understand China’s culture, especially regarding the culture of Guangxi (relationship), so as to be able to gain the popularity and trust of China’s population. With a good relationship, a business can become smoother, and the probability of failure will be greatly reduced. Stronger bonds can also be built with the customers, suppliers, and partners.

The partnership is the key to a strong business relationship and understanding the cultural and social setup is important in understanding and fostering that relationship. Now the world has opened up to China, and understands China’s culture, and integrates its business strategy with success and commitment. The reform and open policy, since 1978, has most certainly been a push for success and secured a position on the world platform. China is one of the powerful and leading economies, which still is a mystery for foreign companies who are trying hard to merge with culture to understand the economy. The complexities of the culture, the historical phenomena, and the political revolutions have made China a unique and progressive country after the reform of Deng Xiaoping.