No, China's Communist Party Is Not Running on Borrowed Money

Salvatore Babones

WHEN CHINESE leader Mao Zedong died in 1976, Chinese communism perished with him. Mao had always suspected his successor, Deng Xiaoping, of being a “capitalist roader.” In a sense, he was right. It took a couple of years for Deng to cement his place at the top, but he ultimately emerged victorious at the famous “Third Plenary” meeting of the Communist Party’s central committee in December 1978. On December 18, the meeting opened in Beijing. On December 19, Coca-Cola held a press conference in Atlanta to announce it had signed an agreement to reenter the Chinese market. On the same day in Seattle, Boeing announced the sale of three 747s to Air China.

By the time the Third Plenary closed on December 22, the leadership of the Chinese Communist Party (CCP) had formally committed to “conscientiously transforming the system and methods of economic management” by giving “local authorities and industrial and agricultural enterprises ... greater power of decision in management”—though of course all “under the guidance of unified state planning.”

The 1978 Third Plenary launched China on a forty-year trajectory of reform, opening and epic economic growth. The Chinese economy grew by a factor of thirty-five times between 1978 and 2018, according to official data. If you don’t trust the official numbers, scale that down to thirty times or twenty-five times. Lop a layer off the top to account for the simple remonetization of the economy in the first two decades of reform, as social services like food and housing that were once provided for free came to be bought on the market (and thus included in GDP). Make any adjustments you want; it doesn’t make any meaningful difference. The U.S. economy grew by a factor of 2.9 times over that period; large developing countries like Mexico (2.6) and Brazil (2.3) even less, according to data from the International Monetary Fund. China’s arch-rival India grew by a factor of twelve. By any measure, and despite many caveats, reform-era China has been the world champion of economic growth.

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