20 { China’s Quest
operation under all three approaches was that leaders at local levels could
devise their own profit-making business plans, procure on markets what-
ever inputs they needed, sell their output on markets at market prices, and
retain a hefty portion of the resulting profit. Although few at first, gradually
more and more people seized the opportunities being offered. The political
efficacy of this approach was that the emergence and growth of these new
market-based economic elites did not immediately threaten the established
plan-based heavy industrial fiefdoms. It would take well over a decade for
nonplan market activity to begin to challenge the old plan firms. By then
there were dynamic new elites and whole regions of the country that had a
vested interest in continued opening and reform.
Again there were powerful links between China’s domestic processes
and foreign relations. Deng and his reformers did not have much wealth to
hand out to supporters of reform. Central coffers were drained by the vast
requirements of supporting inefficient heavy and defense industry. Instead
of resources, Deng granted autonomy and thus opportunity for market ac-
tivity. A large portion of the inputs that made market activity successful
came from outside the PRC. International resources—financial, human,
and technological—fueled the growth of market-based activity under Deng.
Foreign capital, technology, and managerial know-how flowed in from Hong
Kong, Singapore, Japan, and later South Korea and Taiwan to help make suc-
cessful many of the TVEs, special economic zones, and two-tier enterprises
that had dived into market activity. This was the key nexus between restruc-
turing of the CCP’s rule and PRC foreign relations during the post-1978 era.
“Opening” under Deng after 1978 meant drawing on the resources of global
capitalism—markets for exports, acquisition of new technology and scientific
knowledge, utilization of foreign capital—to accelerate China’s development.
“Reform” initially meant policy-making on the basis of pragmatic criteria of
whether or not a move facilitated economic development, not whether it com-
ported with Marxist-Leninist doctrine as under Mao. Increasingly, however,
“reform” came to equal marketization. Over a decade or so, the result was
an amazing economic transformation. The old Soviet-style planned economy
was discarded step by step, and China developed a peculiar form of capi-
talism with Chinese characteristics.
This transformation was immensely popular. First tens of millions and
then hundreds of millions of Chinese escaped poverty and began enjoy-
ing comfortable if still modest standards of living. At the beginning of the
reform period, large quantities of consumer goods were imported to imme-
diately motivate people and show that China was now on a different course.
The dynamism and entrepreneurship of millions of Chinese given economic
freedom proved far superior to guidance by economic planners in Beijing.
Soon domestically produced consumer goods and food stuffs supplied by
market-based firms and entrepreneurial rural families began to supply a