The Penguin History of the World

The year 1989 had left much doubt about the future direction of China. Not only had the ruling Communist Party faced a significant challenge from below – which it could only overcome by the use of raw force – but the economy also seemed to be stumbling, with growth flattening out in many sectors. Deng Xiaoping, the man who had engineered the economic reforms ten years earlier and who, at the age of eighty-five, had returned to the centre of political decision-making as the 1989 crisis grew, now embarked on his last campaign. Visiting the southern provinces in 1992, Deng condemned those who saw political retrenchment as synonymous with economic retrenchment. The reforms had to be intensified, Deng said, and private enterprise should be given more room. By then, the 1989 stagnation was already a thing of the past, and from 1992 on China entered a phase of hyper-growth, with its GDP increasing by more than 10 per cent on average for the next fourteen years.

The explosion of economic growth in China may turn out to be the most important global event since the 1990s. Not only did it create a middle class of more than 400 million people with a purchasing power around the EU average, it also made China into the second largest national economy on earth. Most of this growth was in the private sector, but – after much restructuring – there was also some growth in the publicly owned or controlled sector by the early 2000s. China’s economic model seemed to combine extreme capitalism with a very important role for the state and even the Communist Party. It combines rampant exploitation of the masses of young men and women who enter into the factories from the countryside with an emphasis on political control of all companies, including those that are privately owned by Chinese or foreigners. While gradually spreading north and west, economic growth is still heavily concentrated in the south and east, along the coast and along the great rivers, repeating a pattern that has been visible since the earliest dynasties. And while becoming a guarantor of regional economic stability, the regime has done little to make itself more accountable to its people through democratic reforms, and – as a result of the lack of transparency – corruption and the misuse of power among officials is widespread. While the CCP seems to have found a development model that works, at least in good times, it has little to fall back on in terms of legitimacy when times turn bad.

The end of the Cold War also transformed China’s foreign relations. Over 4,000 miles of shared frontier with the former USSR were replaced for about half that distance by frontiers with the newly independent and much weaker states of Kazakhstan, Kyrgyzstan and Tajikistan. Meanwhile, in the later 1990s, concern over Taiwan, the problem that had long tied together Chinese internal policy and foreign relations, was clearly as alive as ever after nearly five decades in which the seemingly fundamental nature of the original clash between the Nationalist regime there and the People’s Republic had, in fact, been slightly blurred after the formal closure of American diplomatic relations with the Taiwanese government and its subsequent exclusion from the United Nations. Yet in the 1990s, while Beijing still maintained its policy of reuniting Taiwan (like Hong Kong and Macao) to mainland China as a long-term goal, more began to be heard of alleged independence sentiment on the island. Beijing was evidently disturbed, alarm reaching its height during a visit by the president of the Taiwanese republic to the United States in 1995. The ambassador of the People’s Republic in Washington was withdrawn and an official newspaper proclaimed the issue of Taiwan as ‘explosive as a barrel of gunpowder’. It was clear that if Taiwan formally declared itself independent of the mainland, an invasion of the island would probably follow.