Setting the Scene: The Impacts of China’s 1978 Economic Reform

The collapse of the Soviet Union in the early 1990s left the US as the sole global hegemon in almost every sphere of international life. Economically speaking, wielding the dollar as the world’s reserve currency granted the US substantial leverage when servicing loans or funding infrastructure projects abroad. America lay at the helm of international policymaking.  

 Our military was the pinnacle of strength, domination, and relentless determination. American culture— media, movies, character traits, and rights— held immense global influence. 

As the 90s progressed, however, things began to change: China was starting to rise, and it wasn’t an accident. China’s impressive exponential growth—which today has culminated in becoming the world’s second-largest economy and an additional world hegemon— can be attributed to the economic reforms enacted by statesman Deng Xiaoping in 1978. It’s hard to believe that the dramatic shift in the world order into what it is today— a battle for economic, political, and cultural supremacy (or, some might say, the struggle for co-existence) between the US and China— can be attributed to these reforms. But the reality is, it’s true. So the next question is, what were these reforms? What was his system of “socialism with Chinese characteristics.”

In the late 1970s, Deng Xiaoping recognized that the Chinese economy—stagnant due to decades of wars— required certain capitalist elements to initiate growth. It decentralized the economy, gave more jurisdiction to local officials, and allowed the market to self-regulate property values, prices, and production. More emphasis was placed on individual— as opposed to collective— farming production, giving individual farmers more autonomy and control incentivizing increased production. State-owned enterprises became a whole new sector of the economy: “ownership” was distinguished from “usage,” so the state could sell usage rights to managers, who were granted authority to make business decisions with the land. In other words, it allowed for privatizing both land and enterprise. “Special Economic Zones” were established to attract foreign investment and contribute to development. 

China’s economic growth and globalization paved the way for diplomatic relations between the US and China, both economically and culturally. Deng Xiao Ping’s 1979 trip to the US “brightened American’s perception of China.”  

With immense economic growth comes vast benefits. Since 1978, China’s GDP has risen tenfold. Eight hundred million people have been lifted out of poverty, contributing to a collective nationalist sentiment that anyone, anywhere, regardless of wealth or occupation, could achieve some level of agency and contribute to China’s economic development. 

But at the same time, the economic miracle had its downsides. With economic development came extreme pollution and environmental degradation. Rapid urbanization has destroyed almost a million villages in the last 15 years. And perhaps most subject to Western criticism, income inequality was heightened to the point where the top 1% of the population owned a third of the wealth. A significant reason for this is that the decentralization of authority to local officials lacked any regulation. It made it very easy for these officials to conspire with business people to increase profits in exchange for protection and, in some cases, political power. This process is known as “crony capitalism,” which is why China—despite its incredible economic growth— is unfathomably corrupted at an institutional level. 

Despite its positives and negatives, Deng Xiaoping’s economic reforms ignited the transformation that reshaped the contemporary economic order into what it is today, with China and the US neck and neck. If history has taught us anything, it’s that economics and politics are interlocked. Hence, Deng Xiaoping’s reforms also shifted the global political dynamic: China offered a legitimized,  alternative method to American politics and nationhood. Democracy was no longer the “universally correct” mode of government… because something else worked: Deng XiaoPing’s “socialism with Chinese characteristics.” 

We see the effects of this today: Some US politicians are fixated on politicizing the China-US relationship, with some taking any opportunity to delegitimize the “Chinese Model.” Some have gone as far as to call it a culture war: the concept of the free American voter is the only valid definition of citizenship; therefore, China’s version is wrong. Economic supremacy is the indicator that validates which supremacy is “correct.” Because only one can be correct. Right? 

In a world where the politically popular sentiment is that only one hegemon can exist, the China-US dynamic raises interesting questions that should be examined closely. Is democracy the universally correct form of governance? Are there alternatives, and is China one? Can the two coexist? Can we create new criteria for universal human rights by considering these drastically different political systems? How do we facilitate cultural understanding? How can we cooperate to solve global problems like climate change? These are questions that dominate the modern as well as the future. And there are questions we need to ask.