Written by Emilio Luppino
In 1949, after the Civil War, the Chinese economy was already heavily influenced by foreign powers. During the occupation, Tokyo decided to invest into the industrialization of Manchuria and coastal regions of China in order to support its military efforts during World War II. The initiative saw significant success, with iron production soaring from 430k tons in 1933 to 1,700k tons in 1943, easing China’s recovery after the war. Meanwhile, the Soviet Union sought to influence the Nationalist government and its economic policies through credit agreements since 1938. By 1946, the Soviets had gained enough influence to propose joint-managed factories, though de facto only under Russian management.
Something, however, was on the verge of transforming the entire political and economic landscape.
In 1949, Mao’s victory heralded a profound transformation in China bringing the cult of Stalin into every policy. Echoing the triumphs of the communist regime in Eurasia, the Chinese ruling class embraced Soviet-style models, including a centralized and planned economy, manipulated electoral processes and constitution, oligarchic structures, and emphasis on bolstering the military industrial complex. The revolution, while not the Trotskyist vision of a permanent one, was after all a global struggle.
The Chinese Communist Party (CCP) started pursuing a unitarian approach to governance aimed at safeguarding the nation against perceived internal threats and external adversaries. Mao swiftly adopted a rhetoric aimed at classifying capitalists into distinct categories: the 民族资本主义 (minzu zibenjia), encouraged to remain as citizens of the Republic, and the 官僚资本家 (guanliao zibenjia), accused of colluding with foreign imperialist officials.
The outbreak of the Korean War in June 1950 and subsequent US sanctions, prompted by China’s support for North Korea, propelled Beijing further into the orbit of the Soviet sphere of influence, making China increasingly integrated into the Council for Mutual Economic Assistance (Comecon) while fostering trade with Warsaw Pact members. The embracement of Stalinism was intense, Chinese economy was essentially planned as “half in Moscow, half in Peking” while laying the foundation for the implementation of the First Five-Year Plan (1FYP) in 1957.
Aimed at significantly accelerating industrialization within the heavy industry sector, the Plan made the national income expanding at an average annual rate of 8.9 percent. The engine of Chinese economic machine had been started greased by Soviet oil. Approximately 10 thousand specialists from Eastern Europe offered their expertise to aid Maoist scientists, while around 50 thousand Chinese students underwent training in the Soviet bloc. This collaborative exchange encompassed the sharing of blueprints and knowledge, significantly contributing to the enhancement of the Chinese economy, particularly given the absence of an intellectual property system in the Soviet Union.
One fateful morning, however, the Soviet Union awoke only to find itself fractured by the sharp edges of the new. Khrushchev’s words, like thunder through a silent dawn, tore apart the tapestry of a nation once bound by the iron will of Stalin. Monuments, streets, buildings, and even words—everything that had once honored the leader who led the Soviets to victory in the Second World War—was wiped away, swept up in the tide of de-Stalinization, China included.
China embarked on a series of destalinization processes, characterized by partial liberalization and increased openness to the market, complemented by the Hundred Flowers campaign while Chinese economists criticized the former Soviet approach and its neglect of agriculture. Concurrently, Chinese officials, increasingly interested in acquiring nuclear technologies, faced opposition from Soviet commanders, exacerbating tensions between the two nations.
By 1958, after initially encouraging intellectuals during the Hundred Flowers campaign to critique the party only to subsequently persecute them, Mao thought that the Nation was ready to walk on its own legs. He introduced the Great Leap Forward (GLF), an intensified version of the 1FYP, characterized by heightened mobilization of agriculture and substantial infusion of capital in industry.
During the Great Leap Forward, the once familiar landscape of collectivized farms was irrevocably transformed into vast communes, now tasked with duties that extended far beyond agriculture. These new entities assumed the weighty responsibilities of government—collecting taxes, administering the police, overseeing education, and managing health services. Private farming, the lifeblood of subsistence food, was eradicated, along with the very concept of monetary reward. Yet, this sweeping decentralization had a devastating side effect: it shattered the system of data collection on agricultural output, leaving the Party to focus its energy on the urgent need to address food shortages in urban centers. Rather than prioritizing the rural population, the government redirected its investments to the industrial sector, desperately fueling an unrelenting drive for production. Workers were pushed to achieve output levels rivaling those of Britain, while food reserves dwindled and targets for steel and materials escalated each semester. The country’s industrial ambitions were grandiose, with 1,384 projects initiated in 1960 alone—more than the total of the entire First Five-Year Plan. But all of this came at a heavy cost.
As a kid trying to ride for the first time a bicycle without training wheels, Mao’s plan resulted in a crash. The collapse of agricultural production unleashed a catastrophic famine, plunging the nation into despair. Food supplies dwindled to a trickle, and the death toll climbed mercilessly, with mortality rates surging to 25.4 per thousand in 1960. An estimated 20 million lives were lost, their absence echoing across the fields once cultivated. By 1961, even the hope of new manpower faltered, as the fertility rate plummeted from 33 to a mere 18 per thousand, a testament to the famine’s unrelenting grip.
Meanwhile, in August 1960, the final break with the Soviet Union became a reality. Khrushchev withdrew all Soviet scientists and technicians from China, abruptly halting twelve vital financial and technological collaboration projects. This decisive act deepened the already dire socio-economic crisis, leaving China to face its mounting challenges alone.
In the aftermath of this turbulent era, Chinese party economists moved swiftly to implement crucial policy reforms. Partial liberalization measures aimed at stabilizing prices saw exports curtailed and replaced by vital food imports. To address the agricultural crisis, 20 million workers were reassigned to the farming sector, while centralized financial control was reinstated. Investments in industry were sharply reduced, paving the way for the gradual recovery of economic growth.
Amid these internal adjustments, China grappled with the economic void left by the Sino-Soviet split. Trade with the Soviet Union plummeted from $1.67 billion in 1959 to just $830 million by 1961, forcing a recalibration of foreign relations. Determined to weaken the Washington-Tokyo alliance, open new markets, and diminish Japanese support for Taiwan, Chinese officials launched an ambitious campaign to secure trade agreements with Japan. By 1963, Japan had stepped in to fill the gap left by the Soviet Union, providing China with the technologies and expertise it desperately needed to chart a new path forward.
And even though China’s present affirms the positive trajectory of its economy, the breakup with the Soviets and the autonomous path charted by Mao remain, for many, a fatal error – a risky ideological coping mechanism to survive the breakup with the Soviets.
Bibliography
Coble, Parks M, Chinese Capitalists in Japan’s New Order. Berkeley: University of California Press, 2003.
Kirby, William C. “China’s Internationalization in the Early People’s Republic: Dreams of a Socialist World Economy”, The China quarterly, 188 (2006): 870–890.
Lardy, Nicholas R. “Economic Recovery and the 1st Five-Year Plan,” 14:144–183, In The Cambridge History of China. Cambridge: Cambridge University Press, 1987.
Lardy, Nicholas R. “The Chinese Economy under Stress, 1958—1965,” 14:360–397, In The Cambridge History of China. Cambridge: Cambridge University Press, 1987.
Maddison Project Database, version 2020. Bolt, Jutta and Jan Luiten van Zanden (2020), “Maddison style estimates of the evolution of the world economy. A new 2020 update”.
Naughton, Barry, The Chinese Economy Transitions and Growth. Cambridge: MIT Press, 2006.
Sherman Cochran. “Capitalists Choosing Communist China: The Liu Family of Shanghai, 1948–56.” In Dilemmas of Victory: The Early Years of the People’s Republic of China, 359-385. Cambridge: Harvard University Press, 2008.
Zhang, Shu Guang, Beijing’s Economic Statecraft during the Cold War, 1949-1991. Washington, D.C: Woodrow Wilson Center Press, 2014.
Zhang, Shu Guang, Economic Cold War: America’s Embargo against China and the Sino-Soviet Alliance, 1949-1963. Washington, D.C: Woodrow Wilson Center Press, 2001.
Featured image credit: “Chinese Communist party propoganda poster, with Mao at the top” by Wesley Fryer is licensed under CC BY-SA 2.0.
Retrospect Journal 