Phase 2, 1978 to 2013: The Deng and Deng Successors Phase of Gaining
Strengths Through Economic Reforms and Opening Up Without Creating
Threats to Other Countries
Deng Xiaoping became China’s paramount leader in 1978 at age 74 with a wealth of experience under his
belt. He was a “reformer,” so from 1978 until he died in 1997 Deng Xiaoping’s most important policies were
conveyed in a single phrase: “reform” and “opening up.” Reform meant “market reforms” which meant
using the market to help allocate resources and to help motivate people, and “opening up” meant
interacting with the outside world to learn, improve, and trade. This led the Chinese Communist Party to
start to bring capitalism into the mix20 and open up to the outside world. Deng knew that these two related
directions—to greater “reform” and greater “opening up”—would make China stronger financially if it was
not disrupted by the far more powerful foreign powers wanting to prevent the development of the weak
China that he inherited, so the key was to pursue these directions in ways that benefited and didn’t threaten
those foreign powers, most importantly the United States. In 1979 Deng established full diplomatic relations
with the US, which was consistent with his strategy to open up and reform China. At the time China was
extremely poor—per capita income was less than $200 per year—so China needed the improvement and
was no threat to developed countries, especially the US.
Early on, in February 1979, Deng invaded Vietnam with an assault that was similar to Mao’s intercession in the
Korean War early in his term, in that it was to deal with the growing threat on China’s border and to make a clear
display of China’s willingness to fight to defend itself. After a one-month fight, China withdrew, contending that it
made its point.
Early on Deng set out a 70-year plan to a) double incomes and assure that the population had enough food and
clothing by the end of the 1980s, b) quadruple GDP per capita by the end of the 20th century (which was achieved
in 1995, five years ahead of schedule), and c) increase per capita GDP to the levels of medium-level developed
countries by 2050 (at the 100th anniversary of the PRC). Underpinning that goal was a plan to dramatically
improve China’s education system.21 He wanted to have a socialist market economy, which he referred to as
“socialism with Chinese characteristics” that would be achieved by taking in all facts to “seek truth from facts.” He
made that radical shift without criticizing Mao or Marxism-Leninism, which he believed meant shared prosperity.
Rather than seeing communism and capitalism at odds I am told that these seemingly opposing ideologies were
seen through the lens of Marx’s dialectical materialism—i.e., believing that conflicting opposites naturally go
together and that the conflicts between them and dealing with those conflicts naturally leads to resolutions of the
conflicts, which produces progress along that long development arc. I am told that he saw this coexistence of
communism and capitalism as a necessary phase along a development arc toward the ideal communist state. Also
the continuity and the legitimacy of the government’s philosophy, while making big reform changes to make China
richer and stronger, were very important, so the coexistence of communism and capitalism was clearly the right
move for China.
Deng also reformed government’s decision-making structure. More specifically he moved China’s government
decision-making process from one that was dominated by a single leader (previously Mao) to one in which the
Politburo Standing Committee made decisions using majority voting when consensus couldn’t be reached. He also
changed the system of choosing the Standing Members of the Politburo from the supreme leader personally
selecting members to choosing them via consultation and negotiation with experienced party elders, generally
drawing from the most qualified government officials. In order to institutionalize his philosophy and how it would
be implemented in this government, Deng shaped a new version of the Chinese constitution, which was adopted in
1982. This new constitution also made a number of changes to facilitate the economic reforms and open-door
policies that Deng wanted. It established governance changes such as leadership term limits consisting of two five-
year terms (10 years) and limiting the power of one leader by making decision making more collective. The new
constitution also provided for greater freedoms such as freedom of religion, freedom of opinion, freedom of
speech, and freedom of the press. These reforms later led to the first orderly and rule-based transition of
power from Deng to others in the next-generation Politburo Standing Committee, at first led by Jiang
Zemin, then led by Hu Jintao, with these transitions occurring via the prescribed 10-year term limits. Each
successive leadership team followed Deng’s same basic path of making China richer and more powerful by
making the economy more market-driven/capitalist and by increasing China’s trade with and learning from