Communist father of modern China left much chaos that would become the spark for market-based reforms that now mean private companies are the Middle Kingdom’s major job creators.
The world is getting used to a China that is an engine of innovation in digital payments, artificial intelligence, green energy and e-commerce. It’s a vastly different China from the one envisioned by its founding father, Mao Zedong.
In 1949, in the ruins of World War II and a civil war at home, the Communist Party led by Mao quickly made plans to transform China into a socialist state modelled on the Soviet Union.
It set up agrarian co-operatives – which later morphed into People’s Communes – in the countryside and pressured private merchants in cities to hand control of businesses to the government.
By the end of 1956, Mao had purged millions of landlords and business owners to eliminate any form of private property, which he saw as the basis of capitalism, according to The Cambridge History of China .
A collectively owned, centrally planned command economy took shape, controlling everything from factory output to workers’ wages and product prices.
But the string of tragic economic and political disasters that happened during the following two decades, including mass starvation that left millions of Chinese dead, prompted Deng Xiaoping and other party leaders to see the system’s deep-seated problems when they rose to power.
To rescue the country from the brink of bankruptcy after Mao’s Great Leap Forward and Cultural Revolution, Deng in 1978 shifted the party’s priority to economic development from class struggle, and decided to reform the economy.
With the landscape shift, the Chinese people’s long-repressed entrepreneurship and energy burst out.
Villages across the country that had engaged in the illegal practise of private farming in the late 1970s to avoid another great famine had their experiments recognised by Deng in 1980. Township and village enterprises flourished in rural areas subsequently.
Small business sprang up as millions of youths returned to urban districts after being mobilised into rural areas by Mao, and they pushed for the further relaxation of constraints on private enterprises, wrote Ronald Coase and Wang Ning in How China Became Capitalist .
Zhang Huamei, a 19-year-old street hawker selling buttons and toys to support her family, became the first registered private business owner in 1980, marking the official birth of China’s private sector.
