By IPS Correspondents
HONG KONG, Feb 20 1997 (IPS)

Politically, China’s now dead paramount leader Deng Xiaoping may be remembered variously as a survivor of purges, a pragmatist and a staunch marxist who ordered the 1989 Tiananmen Square crackdown on pro-democracy student protesters.

But economically, there is little dispute about Deng’s role in turning what was a destitute economy in the late 1970s, into a regional powerhouse by the early 1990s. By the time he succumbed to prolonged illness late Wednesday, the world’s most populous country had become a major trading force on the world stage.

Deng’s economic pragmatism, which put Marxist ideology second to economic growth was summarised in his famous dictum: “It matters not whether cats are white or black, they are all good cats as long as they catch mice.”

Indeed, economic reforms kicked off in the early 1980s by Deng’s “open door” policy to foreign investment have radically altered the Chinese landscape, living conditions and society as a whole.

In the cities, Deng called for a return from ideological dogma to hard work, and in the countryside he freed peasants from endless debates about Marxism to get on with farming.

Throughout the mid to late 1980s, political commissars who had ensured ideological purity reigned in factories, the army, universities, schools and farms, were on the decline. They were to be replaced by those with skills and the energy to “make money”.

After decollectivising agriculture, Deng initiated his bold ‘two tier” economic experiment by launching the Special Economic Zones (SEZ’s), beginning in 1979 with Shenzhen — then a patch of rice fields and duck ponds just over the border from Hong Kong; now a teaming metropolis and one of the wealthiest in China.

The SEZ’s, which were later permitted greater autonomy over foreign trade, finance, natural resource distribution and wage levels, offered tax breaks and special concessions to foreign investors willing to build up the country’s export economy.

The country’s foreign trade soared to 290 billion dollars last year compared to less than 20 billion dollars when Deng assumed power in 1979, three years after the death of Mao Zedong, founder of the People’s Republic of China.

China was to become the largest developing country recipient of foreign investment year after year in the late 1980s. By the end of 1996, foreign exchange reserves totalled 105 billion dollars.

Market forces, not state planning was the driving force, even though as a sop to Marxist hardliners, this was dubbed “socialism with Chinese characteristics”.

Four other SEZ’s were launched in coastal regions, plus the city of Shanghai but it was in Shenzhen in 1992 that Deng used the phrase “to get rich is glorious”, during a famous tour of China’s southern Guangdong province — widely publicised as an example to all of what economic freedom could achieve.

Other Chinese leaders then rallied around him and backed his “experiment” ensuring it would survive – even if Deng did not.

Most radically, blatantly capitalist stock markets were launched. The Shanghai stockmarket opened in 1990 after more than 40 years. The same year in Shenzhen, there was a near riot as punters rushed to buy shares.

The lack of regulation and sophistication of the markets, resulted first in a long and gradual decline, and later a roller coaster ride as rumours of Deng’s demise began to cause wild swings in the markets.

Most importantly, in the space of less than ten years, people’s lives were radically altered, economic improvements were dramatic in many urban areas, particularly in the coastal provinces and Chinese consumers were for the first time in decades faced with an array of goods.

From the drab “Mao suit” uniform of the Mao era, the Chinese were transformed into a fashion conscious, well dressed people, hardly to be distinguished – in dress at least – from their richer cousins in the soon-to-be returned British colony of Hong Kong.

In millions of households, telephones, refrigerators and televisions became commonplace, while cars are slowly pushing the bicycle, the traditional means of transport, onto the sidewalks.

Yet the success of Deng’s economic policies were tempered by runaway inflation, a failure to bite the bullet on dealing with loss-making state enterprises, huge unemployment and an influx of migrant workers to the towns.

Also, he was never able to erase the mark left by the 1989 Tiananmen Square massacre when an army crackdown on thousands of pro-democracy student protesters left hundreds dead and many more injured.

The incident also caused a deep crisis in the Chinese leadership and resulted in the economic programme grinding to a two-year halt during a period of re-centralisation and retrenchment. Reforms were relaunched by his famous southern tour in 1992 which marked the official end of the retrenchment policy.

Analysts are confident that the reforms will survive the post- Deng era.

“A reversal of the tide, at a time when the people have become used to economic freedoms and rising incomes, could result in social instability,” noted one Beijing-based diplomat, and that is something the leadership is keen to avoid until Deng’s successor President Jiang Zemin has cemented his hold on the party leadership.

“China will not introduce radical economic reforms in the six to twelve months immediately after Deng’s death because the new leadership will want to maintain stability,” noted Hong Kong based economist Qu Hong-bin of UBS securities.

And even if there is some tightening of the regulations, with economic crises being tackled by administrative measures, economists agree that China’s economy can no longer dominated by so-called “economic plans”.

The share of government expenditure has already shrunk to just 10 per cent of the country’s Gross Domestic Product, and is thus less able to influence the economy. Market forces mean that economic blueprints have become less relevant, just as the importance of the country’s five year plans has diminished. Even annual targets are becoming difficult to set.

“Now it is a guide, not a statement of how the state will spend its money,” noted Chinese economist Zhou Zhenhua of the prestigious Shanghai Academy of Social Sciences.

State-owned industries where government planners still have a say, now account for less than a third of total economic output compared to 100 per cent in 1979.

And analysts say the focus of five year plans now is to redress regional income imbalances, which allowed the coastal regions to soar ahead, and take the lion’s share of natural resources and investment while the inland areas lagged behind.

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