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1978 Third Plenum Effects

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Third Plenum 1978 * The first time china had ever embraced to idea of foreign investment – SEZ (special economic zones) * ‘Fall of the bamboo curtain’ 1978 * Deng fought off Hua Guofeng – a ‘whateverist’ - to reach party leadership * China has prioritised modernisation since the third plenum * Hua wanted to initiate his own ten year plan – but once Deng gained power he realised that china didn’t have the recourses to fund the ten year plan, so he initiated his own scaled down 5 year plan * To fully initiate Deng’s plans he had to first over come poverty/famine – so normal people could spend their money on consumer goods, instead of food. * When people started to gain more purchasing power, the central planners were unable to cope, and were forced to diversify the grain production – main product of consumption * The changes brought about a 50% rise is procurement prices * The money that was gained from this increase in funds, was handed to the local governments, and was re-invested in to agriculture * The rapid growth in local agriculture, was so effective and widespread – it lifted 67% of all peasants out off abject poverty * Rural enterprises grew at a 20-33% increase per annum – this sector grew far more rapidly than any other economic sector in china * Deng’s fiscal changes gave local businesses tremendous stimulus * Due to Deng’s opening off competition of state enterprises labour became very cheap and the state was made to drastically reduce its ‘iron rice bowl’ policy to keep up with the low prices of the rural businesses * China was starved of simple consumer goods, more than any other developing nation, as the still 80% peasant population was rapidly gaining spending power. * Peasant entrepreneurial skill has to be given some credit. The family economic support that

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