Last December, China held a grand gathering to celebrate the 40th anniversary of the country’s enforcement of the Reform and Opening-up policies, a great revolution that has changed the destiny of the Chinese nation and also rocked the world.

Chinese President Xi Jinping and CCP leaders attended the event at the Great Hall of the People in Beijing. For Australian businesses, which are closely tied with the prosperity of China, it could be a piece of essential knowledge to understand the history of China boom and then judge with your own method, if this gigantic nation will have another 40 good years.


Open the Door, Go to Market

On Dec. 13, 1978, at the close of a one-month-long Communist Party gathering, Chinese leader Deng Xiaoping delivered a speech that laid out a pragmatic vision for China’s future. It was a country that was then not long out of the grip of the chaos and terror of the Cultural Revolution followed by the Korean War and civil wars.

He proposed that China learn from the example of richer countries, allow workers and farmers to “vie” to get ahead so those with a better standard of life would inspire others to work harder, and proposed that provinces and enterprises be given the power to make decisions or try new things.

“We need large numbers of path-breakers who dare to think, explore new ways and generate new ideas,” Deng said. “Otherwise, we won’t be able to rid our country of poverty and backwardness or to catch up with—still less surpass—the advanced countries.”

Five days later, at Beijing’s Hotel Jingxi , a group of nearly 300 party elite agreed to adopt Deng’s vision, and China kicked off its journey from economic isolation to becoming the world’s factory. That landmark meeting kicked off on Dec. 18, 1978—approximately 40 years ago.


In 1974, when George H.W. Bush was in Beijing as the unofficial American ambassador—full diplomatic ties were still four years away—the future president noted in his diary that “on our trade with China we have a very favorable balance, over 10 to 1.” But interestingly, by 1985, the US imported $6 million more in goods from China than it exported to it. In 2017, the US trade deficit with China reached $375 billion.


Free trade reflects a part but not all of China’s economic boom along the 40 years of Reform and Opening-up. Domestic factors play an essential role in contributing to this miracle as well. From an unimpressive third-world country to the 2nd biggest economy on the planet, China evolved from many aspects and let us have a look what are they?

US trade deficit in goods with China

The US played a key role in helping transform an impoverished nation into a major trading nation, removing export controls for a wide range of its advanced technology to China.

There’s concern within China about its direction, too. The 40th anniversary comes in a year when one of Deng’s most important goals—ensuring an orderly transfer of power and putting in place limits on lifetime rule—has been reversed. In March, China abolished term limits for the role of president , enable Xi to be infinitely reelected. Longtime China watchers also can’t help but notice that in this year’s commemorations, the current leader, Xi Jinping, sometimes seems more prominent than the man widely considered to be the father of the reforms.

At that gathering, China will plan economic policy for 2019, and grapple with how to assuage US anger about how China supports its economy, with a March 1 deadline looming for China to face more tariffs if it hasn’t come up with a convincing plan.

Poverty plummeted

In 1981, just three years after Deng’s reform project was launched, almost 90% of Chinese people lived in extreme poverty by the definition of the World Bank. By 2013, that number had dropped to less than 2%.

Incomes skyrocketed

Not only is the typical Chinese person now not living in poverty, but many of them are in fact doing quite well. GDP Per capita grew by nearly 24 times from 1978 to 2017, which is only inferior to the incredible economic boom of modern Singapore.


Income Inequality Increased

China’s Gini coefficient, the most commonly used measure of inequality, rose from about 0.3 in the early 1980s to nearly 0.5 in 2010 (0 is perfect equality, and 1 is perfect inequality).


The unbalanced regional development gave the Chinese people living in eastern coast a better goal than the fellow Chinese in the Great North West.

What Changed Made-in-China?

In 1980, agriculture was a largest part of the Chinese economy, compared to industry (e.g. construction and manufacturing) and services (e.g. health-care and education). Now, agriculture makes up less than 10% of the economy, marks the progressive industrialization of Chinese cities.


Massive Urbanization Campaign

With a shift away from agriculture, Chinese people moved to the cities in droves. The share living in rural areas, which barely budged from 1960 to the late 1970s, fell precipitously after 1978.


Now, around 60% of Chinese population dwell in cities, which boosted the economy, provide tremendous human resources in industries and sufficient customers for local and international businesses.

The Economy Turned Outward

The success of Shenzhen and other Chinese manufacturing hubs was a result of Deng’s embrace of globalization. Exports went from a small share of China’s economy in the 1970s to more than one-third of GDP in the mid-2000s.

Chinese Had Fewer Children

In addition to reforming the economy, Deng also oversaw the introduction of China’s One-Child Policy, which was introduced to reduce the birth rate as China’s population neared 1 billion. (China relaxed the edict to a two-child policy in 2015.) The one-child policy likely led to a significant reduction in births, though some researchers believe birth rates would have declined regardless, as families tend to have fewer children as they get more wealthy, busy and educated in China.


CO2 emissions increased

China’s immense environmental challenges are a result of the rapid growth set off by Deng’s reforms. The amount of CO2 emitted per capita has increased more than seven-fold since the 1970s.


On the other hand, according to EVdata, in the first quarter 2018, the sales volume of new energy vehicle in China topped the world, doubled to the US at the 2nd place. Allowance and policies were enforced to encourage people purchasing zer0 emission cars.

Reform and Opening-up Continues on

Again, over the past 40 years, China’s economic progress has been extraordinary. China’s gross domestic product (GDP) has grown miraculously at an average annual rate of 9.3 percent, and its GDP share of the world’s total economy has jumped from 1.8 percent to 15 percent.

China has been the second largest economy for years, only after the United States. Meanwhile, China has achieved self-sufficiency in food and successfully lifted 800 million people from absolute poverty, a miracle of poverty reduction in human history. Today, China’s foreign exchange reserves, manufacturing capacity, and international trade volumes are all number one in the world.

However, China has accumulated many social problems too, such as still-widespread corruption, serious environmental pollution, deepened income inequality, as well as a flawed social security system where the property bubble is still booming, and education and health-care resources are unfairly distributed. Politically, China has been criticized for being less democratic and more authoritarian, where human rights are not fully respected, religious freedom has been restricted and media censorship has increased. While China has been much more open in many areas compared to 40 years ago, its political system has yet to become closer to the liberal democracy that the West expected.

Apparently, China will continue its reform and opening-up. Chinese top leaders have repeatedly promised that “China will never close its open door to the outside world.” However, China’s internal desire and momentum to push further reform and opening-up have been significantly weakened due to the resistance from vested interests. After 40 years, China’s reform and opening-up now is standing at a crossroads again. Left or right? Opportunities or patience?

(The contents are edited from, Atlas, Dan Kopf & Tripti Lahiri from