How has China weathered the economic crisis since the reform and opening up?

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Author: wenboling source: the fireworks world of wenboling (ID: wenboling2020)


Boling said:

There is calmness in every major event. I don’t believe that there are no ancient sages.


Recently, Ren Zhengfei’s articles published in Huawei’s internal forum flowed out, causing the whole network to discuss.

Ren Zhengfei said in his article:

“The next decade should be a very painful historical period. The global economy will continue to decline. The world’s economy is unlikely to improve in three to five years. With the impact of the epidemic, no region in the world should be a bright spot.”

Although Ren Zhengfei says every year that the difficult period has come, this year’s wording is particularly serious. In addition, people’s feelings about the economic recession over the past six months have made this article the focus of discussion.

What is certain now is that the economic crisis has really come.

This is an old-fashioned word. Let alone the global economic crisis caused by the great depression in the United States, China has experienced at least four economic crises since the reform and opening up.

However, there is a problem that people under the age of 35 either have not really experienced the economic crisis, or because they are young, they do not feel the economic crisis deeply.

In today’s article, let’s briefly review the four economic crises since the reform and opening up. What are the causes and how to solve them.


In the early 1970s, with Nixon’s visit to China, Sino US relations began to ease after more than 20 years of hostility.

In terms of international relations, China is seeking survival from the US Soviet Union and transforming to “uniting with the United States to resist the Soviet Union”. In terms of economy, the “4-3 plan” proposed by Premier Zhou and agreed by Chairman Mao has been launched.

As for the “four three plan”, we said in the “30 years of China’s industry”, that is to invest US $4.3 billion to introduce the light industry system of European and American countries, including 26 projects such as chemical fiber, petrochemical and chemical fertilizer, which were started in 1972 and completed and put into production in 1983 at the latest. This has changed China’s industrial system dominated by heavy industry.

Later, China’s economy took off, and the “four three plan” was a great achievement.

However, everything has both advantages and disadvantages. The “four three plan” has changed China’s industrial system dominated by heavy industry, but it has also consumed a large amount of financial accumulation.

In 1974, only two years after the implementation of the plan to introduce projects, China had a fiscal deficit of 10 billion yuan, and at that time, the national fiscal revenue was only 80 billion yuan.

The heavy financial pressure has become an unsolved problem for Chairman Mao and Premier Zhou, and is left to the succeeding Chairman Hua.

When the new leader came to power, he should have given priority to quietness and let the introduced light industrial projects settle down safely. However, the new leader was eager for governance and launched a larger-scale “August 2 plan”. The original plan was to invest 6.5 billion US dollars to continue to introduce projects. By 1978, the investment plan was expanded to 18 billion US dollars after the project was reported and the target was issued.

In the same year, various government departments signed contracts with foreign countries for 22 projects, worth US $7.8 billion, half of which were signed in the last 10 days of the year.

The following year, vice premier Gu Mu led a delegation to Europe. All countries were interested in China’s investment.

The French president said: “I heard that you are going to launch large projects. We are willing to make contributions. Can you give us 10 projects?” The governor of the Federal Republic of Germany said: “if we need a loan, we can provide $5 billion at any time.”

It looks promising, but the problem is that the Chinese government has made a huge introduction plan, but it does not have enough funds to pay for it.

In 1978, for example, China’s foreign exchange reserves were only US $178 million, its fiscal revenue was about 110 billion, and its deficit had climbed to nearly 30 billion.

Therefore, the introduction plan of the “August 2 plan” was doomed to failure. At that time, it was called “foreign leap forward”. Fei Zhengqing, who studied China, also saw it very clearly. He said that China’s goals were unrealistic, and the signed contracts were bound to be cancelled, and the projects launched were bound to be completed.

In a word, if the follow-up supporting measures fail to keep up, the money already spent will be wasted, resulting in the central government’s financial difficulties.

Moreover, the “high accumulation and low consumption” since the founding of the people’s Republic of China has led to a very difficult life in both urban and rural areas. After December 1978, the government began to provide a large number of welfare and subsidies, including bonuses to employees, improving the housing environment of employees, raising the purchase price of agricultural products, and tax exemption in poor areas.

These welfare subsidies have worsened the central government’s finances.

The government has no money, but it still has to take care of its own affairs.

The financial system at that time was that the central government collected taxes from the whole country and then distributed funds to all levels. Now that the central government has no money, it is naturally hard to allocate funds to all levels.

In the vast rural areas, due to the light industrial projects introduced by the “four three program”, people’s communes can purchase chemical fertilizers and tractors, which promotes the degree of agricultural mechanization and increases the production costs of people’s communes.

However, according to the principle of unified purchase and marketing, the price of agricultural products purchased by the state is extremely low. In this way, the commune basically makes no profit in agriculture, and even loses money.

The central government has no money and the local communes have no money. This is what the textbooks say. The national economy is on the verge of collapse.

In order to solve this economic crisis, we have the familiar reform and opening up.

At that time, almost all of the national assets were owned by the state and the collective. When the state could not afford all of the national assets, the state divided the part that could not afford it out of the system and let them find their own way.

Therefore, after several years of disputes, the state officially issued a document to admit that the farmers are allowed to contract the land, pay enough to the state and keep enough to the collective, and the rest is their own. It is not necessary to sell the land to the state at a low price as before.

So there were tens of millions of educated youths who had no jobs and went back to the city to set up stalls and do small businesses in the streets.

As a result, there are urban citizens who open shops as self-employed businesses. As long as they do not break the law and pay taxes to the state, the state does not care what they sell.

As a result, there are courageous factory directors and teachers who are skilled workers. Some of them have contracted factories with poor efficiency, and some even contracted factories in major cities across the country to become “contract trusts.”

In the short term, the reform has achieved very good results. In just a few years, the grain output has increased from 600 billion jin to 850 billion jin, and tens of millions of people without jobs have their own rice bowls.

But it is not without cost.

Farmers become self-employed farmers when they come out of the system. No matter whether they lose money or earn money, they have to be responsible for their own profits and losses. They can no longer rely on the state, and gradually become marginalized groups. In cities, contracted factories have become the starting point of privatization.

In the words of teacher Wen Tiejun, this is to throw away the burden.

After throwing away the burden, the central government’s financial pressure has been reduced, and the productive forces have been liberated outside the system. No matter what happens in the future, at least this economic crisis has passed.



In 1979, China began to implement a two track system of prices, that is, the means of production that are within the state’s planned distribution are uniformly priced by the state, and those that are not within the state’s planned distribution are subject to market regulation. The State shall set the price for the grain within the contract, and the price for the grain outside the contract shall be set according to the market conditions.

Generally speaking, the price in the national plan is low and the market price is extremely high.

Therefore, the double track system of prices directly created a “rogue” group in the 1980s.

Through the back door relationship, they get the government’s approval, buy the state priced materials at extremely low prices, and then take them to the market and sell them at high market prices. Moreover, it became more and more outrageous later. Some materials did not need to be taken out of the warehouse, and the men directly reselled the approval notes, resulting in the price of materials more than ten times.

There is an even more exaggerated thing in Nanjing. A batch of steel products remained in place and were sold 129 times by the inverted men.

It was so outrageous that there was a saying circulating at that time: “900 million people fell, and another 100 million were looking for.”

The hoarding of these men led to the soaring prices of steel and other means of production, and gave birth to a huge foam. The large-scale investment by local governments in the 1980s indirectly led to the soaring prices of consumer goods.

The key problem was that the industrial system in many parts of China was not complete and could not supply enough materials.

As a result, investment and reselling cause the price to soar, which in turn attracts people to rush to buy materials, and the shortage of materials in turn catalyzes investment and reselling.

This becomes a dead circle.

At the beginning of 1988, in order to solve these problems, the central government decided to deregulate prices and “break through the price barrier.”

Ideal is beautiful, reality is cruel.

As soon as the policy was released, the national prices began to soar. In less than a month, the price of meat food increased by 70%, and the retail commodities increased by 30% – 50%. The price was like a runaway horse, which could not be controlled at all.

In the general environment of inflation, the citizens of major cities fear the devaluation of the currency and the reduction of their purchasing power, so they rush to the market to buy goods, such as grain, salt, cloth, soap, wool, electric fans, and so on.

Everyone thinks that as long as they can buy things, their money will be saved. Otherwise, they can buy a bag of noodles before. Who knows if they can buy two steamed buns tomorrow?

And the rush purchase further causes the shortage of materials, which in turn drives up the commodity prices… Endless, just like the dolls.

By October, the “price breakthrough” had actually failed.

According to official records, 1988 was the year with the largest price increase and the most serious inflation since 1950. In addition, the country was plunged into a stagflation economic crisis due to the complicated triangular debts in various places. The number of private enterprises was halved from 200000 to 90000, and a large number of government investment projects were dropped. As a result, urban unemployment spread.

Therefore, since 1989, China’s economy has been in a slump.

This domestic economic depression, combined with the drastic changes in the international climate in Eastern Europe, caused an even greater crisis that year.

It can be said that everything went wrong in those years. Until the early 1990s, China’s economy was very bleak.

For some unexplainable reasons, to a certain extent, the economic crisis was caused by the collapse of consensus. To save the crisis, the most important thing is to rebuild consensus.

In the economic aspect, the central government has personally taken the initiative to build large-scale infrastructure, which has driven a series of downstream industries.

Taking the opportunity of the Beijing Asian Games, the central government invested 2.5 billion yuan to build more than 20 large-scale sports facilities. In this process, hundreds of thousands of people participated in the labor, which was equivalent to providing jobs, purchasing a large number of materials such as reinforcement and cement, and sending profits to the downstream.

In April 1990, Premier Li announced the development of Pudong and the construction of an economic and Technological Development Zone and a special economic zone in Pudong. Once this policy was announced, Shanghai became a hot spot in the eastern coastal areas, and thus began more than 30 years of glory.

The central government’s large-scale infrastructure construction in Beijing and Shanghai has sent a positive signal to the whole country: “the opportunity is here, come quickly.”

At the political level, Deng’s southern tour in early 1992 completely ended the debate of “surname capitalism and surname society”, and “emancipating the mind and developing the economy” became the mainstream voice of the whole country. At the 14th National Congress held in the same year, Comrade Jiang announced in his report:

We will accelerate the pace of economic reform around the establishment of the socialist market economic system.

We will further open up to the outside world and make better use of foreign capital, resources, technology and management experience.

The socialist market economy is clearly written into the party constitution and the introduction of foreign capital is clearly stated. This is a signal to the outside world that China should adhere to the road of market economy and never turn back on the old road it has gone through.

After several years of efforts, the once shattered consensus on “economic construction” has been rebuilt. Both at home and abroad believe that making money is not a crime and the policy will not be changed.

Therefore, in 1992, at least 100000 party and government cadres went to the sea to do business. Local governments began to invest in development zones, resulting in the number of development zones increasing from 117 in 1991 to 8700 in 1993.

To build development zones, we need water supply, electricity supply and road construction. The number of workers, reinforcement and cement, and mechanical equipment required by these thousands of development zones must be astronomical. The whole of China has become a hot construction site.

Meanwhile, foreign investors such as general motors, Microsoft and Motorola have also invested and set up factories in China one after another, and they have received the preferential treatment of “three exemptions and two half reductions”, that is, enterprises are exempt from tax in the first three years and reduced by half in the second two years. With the encouragement of policies, foreign investment of US $320 billion will enter China in the next eight years.

Since then, China has liberated the productive forces internally and attracted foreign investment. It has entered a period of rapid growth again. In 1992 alone, the gross national product increased by 12%.

It can be said that rebuilding consensus and major infrastructure will help China tide over this economic crisis.



After China’s deep participation in globalization, it will be bound with the international economic climate. Any disturbance in the world will have a great impact on China.

At the beginning of 1997, George Soros’s quantum fund began to attack the Thai baht, directly causing the Thai baht to plummet. Subsequently, Malaysia, Indonesia, the Philippines, South Korea and Hong Kong, China, a far-reaching Asian financial crisis broke out.

In the financial crisis that has spread across Asia, bank failures, family bankruptcies, and enterprise closures are everywhere.

After five years of rapid growth in China, there has been a “surplus of industrial products”, and the value of products in excess of 3 trillion yuan. The financial crisis in the whole East Asia has made things worse.

People do not dare to consume, and a large number of enterprises go bankrupt, which belongs to the proper meaning of the topic.

The state-owned enterprises are the sons of the central government and an important weapon to control the national economy. In this severe crisis, the first thing the central government should do is to protect the state-owned enterprises.

How can I guarantee it?

In fact, as in the late 1970s, they still dumped their burdens, except that the peasants have been dumped. This time, they will dump the workers of state-owned enterprises whose economic efficiency is not high.

As early as 1991, Chen Guang, mayor of Zhucheng, Shandong Province, decided to sell all 272 enterprises under urban management to collectives or individuals for operation, so that they would be responsible for their own profits and losses. The government was only responsible for tax collection and supervision.

Because the burden has been thrown away, the financial losses of the cities have been greatly reduced and they can basically operate normally. Meanwhile, Chen Guang has also been criticized as “selling state-owned assets at a low price”, which is more ruthless than the Japanese Sanguang policy.

However, Premier Zhu attached great importance to Chen Guang’s approach.

In 1996, Premier Zhu personally inspected Zhucheng and thought that Chen Guang’s practice was good, and the “experience of Zhucheng” was positive. Subsequently, the central government formed a new idea for protecting state-owned enterprises:

“The state-owned enterprises have completely withdrawn from the downstream market consumption field, established large-scale state-owned enterprises, and monopolized the upstream energy, telecommunications, power, aviation, banking, media and other fields.”

As long as they monopolize the basic resources of the upstream, state-owned enterprises will control the lifeline of the national economy, and they are not afraid of private capital rising. As for the too complicated downstream consumer market, they can completely let private capital do it. Anyway, private capital is flexible and flexible, and let them do it can also prosper the market.

Fengyang County, which took the lead in “assigning output to households”, set another “example” this time by selling hundreds of collective enterprises to private enterprises within a year, and the county government did not leave any of them.

This idea of state-owned enterprise reform has directly affected the pattern of China in the next 20 years.

The advantage of this is that the state-owned enterprises can get rid of their burdens and control the national economy while still making huge profits. However, the price is that the 30 million workers who have dedicated their lives to the country and the country has promised to support their lives are abandoned to the market.

Although some people have been laid off and re employed, most of them have suffered a lot in the second half of their lives.


When the plan for protecting state-owned enterprises is finalized, the second thing Premier Zhu will do is to expand domestic demand, which will also affect the real estate in the next 20 years.

Because in 1998, China’s total national savings had reached 5 trillion yuan. To promote consumption and invigorate the economy, we must let people spend all the money saved in the bank.

With such a large amount of money, daily consumer goods are definitely unable to bear. Only large commodities such as houses can do.

Therefore, in July 1998, the central government announced that it would stop the welfare housing distribution system. In the future, housing needs to be bought in the market, and banks are allowed to provide housing mortgage loans. The longest loan term is 20 years, and there are two repayment methods, namely, equal principal and interest and equal principal.

The real estate that has affected three generations has emerged.

From the personal point of view, the house price has gradually risen to the point of emptying six wallets, and more and more people can not afford to buy a house, which is definitely not a good thing.

However, from the national perspective, the economic model with real estate as the core is an important means for China’s rapid economic growth.

If the real estate development commercial housing needs to be auctioned, then the local government can launch a wave of land finance and allow 40% of the house price to enter the local finance in advance. Local governments can use this money to build parks, build highways, subsidize education, distribute welfare, and so on.

To build a house, real estate developers need building materials such as steel and cement, steel-making needs coal, coal needs transportation, transportation needs refueling and catering. After the house is sold, the householder must decorate it. Then, the decoration needs wood furniture, TV and air conditioning and other appliances, curtains and quilts and other textiles.

Around the house, there should be flat roads, street lamps, small supermarkets and restaurants, and night snacks and pancake stands.

Around a house, it drives the national industrial chain and provides national employment opportunities.

Therefore, the rapid development of China’s economy in the past 20 years is essentially driven by real estate.

If Premier Zhu did not release the domestic demand for real estate and there was no leading high-tech industry at that time, China would not be what it is now. It is more likely that China will become a primary factory of the United States, and even the middle-income trap in Latin America will not be touched.

This is not to make a fuss about real estate, but to look back on history in a realistic way.

To solve the problem of domestic demand, the third thing the central government should do is to expand foreign trade.

Since the 1980s, China has applied to join the WTO. It was not until April 1999, when Premier Zhu visited the United States, that the United States promised to “firmly support China’s accession to the WTO in 1999.” however, only one month later, China’s embassy in Yugoslavia was bombed.

However, at that time, China was not strong enough and did not have the right to turn around. It chose to swallow its anger, and after a little protest, it continued to negotiate with the United States. In November, the agreement was formally signed and agreed by the United States.

China joined the WTO in November 2001.

This time point is when the United States encountered the “9 / 11 incident” and sent troops to Afghanistan.

In order to enter the Central Asian region, the United States needs to appease China in the East. At the juncture of the economic crisis, China also needs the United States to open the world market and drive the domestic manufacturing industry through foreign trade exports.

Because of the advantage of China’s cheap labor, the cost of goods made in China is very low and the price is also very low. Therefore, made in China began to go to the world.

Generally speaking, in the process of getting out of this economic crisis, the reform of state-owned enterprises is to protect the capital, and the land finance and made in China are to open up new sources.

It is also driven by real estate and foreign trade that China has embarked on the journey of the 21st century.



As time goes into 2008, China’s crisis seems to repeat itself ten years ago.

As the only superpower in the world, the United States is constantly stirring up the world situation with its military strength and the dollar. Therefore, the subprime mortgage crisis in the United States quickly affected the world through the dollar.

Specifically, in China, there are several million foreign trade enterprises in the coastal areas, which have lost a large number of orders. People are worried all day. The tens of millions of family workshops downstream of these foreign trade enterprises are full of a sense of crisis.

The leg of foreign trade is a little lame.

The house prices in major cities have also started to plummet. By September, the house prices of Vanke, country garden and other large-scale buildings had dropped by more than 85%, not to mention those unknown small buildings. I remember that my neighbor bought a flat in the suburb of the city at that time. The house was half built, and the boss ran away.

The cold weather in foreign trade and the sharp drop in real estate mean that the two engines driving China’s economy in the past few years have failed.

This is a very serious problem.

If it is an agricultural society, the economy will not grow. Everyone goes to the fields. However, when a country enters industrialization and urbanization, it will come to an alley where it can only enter and cannot retreat.

The tens of millions of college students who graduate every year need to work and have a future, and millions of people in cities need income. If the country wants to meet the needs of these people, it must ensure economic growth. Otherwise, unemployment will occur, which will cause serious social problems and even political stability.

Want them to go back to farming?

When I graduated from college after ten years of study, you asked me to go back to farming? It’s hard to take root in the city. You want me to go back to farming? Don’t be kidding.

Therefore, an agricultural country is always flexible and can survive any crisis. However, an industrialized country looks more developed, but it is actually more vulnerable.

But there is no way. If you choose industrialization, you can’t turn back.

That year, the central government made an account that to ensure social stability, the economic growth rate must be maintained at more than 8%. Under the influence of the subprime mortgage crisis in the United States, large infrastructure and real estate are needed to maintain the economic growth rate of 8%.

In October 2008, the Ministry of Finance announced that the deed tax of personal first home was reduced to 1%, and stamp tax and land value-added tax were temporarily exempted. The central bank allowed the down payment ratio to be 20%.

In November, the central government led by Premier Wen Jiabao launched the “four trillion plan”, announcing that it would use four trillion yuan of investment to stimulate domestic demand, and then completed the adjustment of ten major industries such as automobile, shipbuilding, petrochemical and equipment manufacturing, which is called the “ten major industrial revitalization plan”

In December, the central government launched the “home appliances to the countryside” program, providing 13% subsidies to farmers who buy color TVs, refrigerators, mobile phones and other household appliances.

In just three months, the central government has intensively launched so many rescue policies. Apart from the ten major heavy industries, the rest can be summed up in four words – spending money and buying houses.

It’s OK to say so.

After the sub-prime mortgage crisis, it has become a consensus that it is difficult for entities to do business. The trillions of loans issued by banks basically flow into the real estate that is “easy to do and quick to make money”. Moreover, the local government’s finance comes from land, and local enterprises are encouraged to engage in real estate.

This is the flow of funds determined by interests, and it is difficult to change it once with political correctness.

On the other hand, people who feel the subprime mortgage crisis in the United States also need a stable thing to preserve their property. In China, which has experienced the development of real estate for nearly a decade, people have reached a consensus on what can preserve their property, that is, houses.

Therefore, under the joint promotion of the central government, local governments and urban and rural population, the land finance was restarted. In 2009, the national land transfer fee reached 1.5 trillion yuan, and the price was soaring. The house price in Beijing, Shanghai and other cities doubled in just two years.

Judging from the facts, the rescue of the economic crisis was successful.

China has not been knocked down by the subprime mortgage crisis of the United States. By 2010, China’s economic aggregate exceeded that of Japan and became the second largest economy in the world after the United States.

Looking back on history, we can find that 2008 is the best time to suppress house prices. If the central government did not rescue the market, the house would have become the price of cabbage long ago. It is unlikely that the high house prices will affect our happiness and fertility rate.

However, at that time, if there was no land finance and the local government had no money, then it could not carry out a series of urban construction. If we do not support real estate, then the steel, coal, furniture, transportation and other industries will be finished.

As a result, it is not the problem of high housing prices, but the cold winter of 22 years is brought forward to 2009.

The unemployed people in all walks of life do nothing, and nearly 10 million college students can not find jobs every year. I am afraid it is not necessary to say what will happen when this social environment meets the “Arab Spring” that will soon be launched in the United States.

If history goes this way, not to mention that you can’t afford to buy a house, you may not have the opportunity to buy a house.

We always imagine that when we come to a certain crossroads, we can do this or that. In fact, in the position of the central government, their choice range is very small, small as No.

After the event, Zhuge Liang said that the merits of the 2008 rescue plan outweighed the demerits.

At the press conference in March 2012, Premier Wen said the following in response to a reporter’s question on “evaluating his own work”:

“I have the courage to face the people and history. I know that I have sinned against myself, but only in spring and autumn.”


Looking back at the four economic crises since the reform and opening up, we can find that the central government’s measures to rescue the economic crisis are not complicated, and mainly include four aspects:

Throw off the burden that they can’t afford and let them find their own way.

The government invested in large-scale infrastructure to stimulate domestic demand.

Foreign trade and export drive the manufacturing industry.

Real estate guides national consumption and enriches government finance.

In 2022, we will encounter another economic crisis, but it is very likely that all the previous methods have failed.

First of all, after more than 40 years of reform, the burden that should be thrown away has been basically thrown away. The central government has been very lean and has no burden to throw away.

Second, after the epidemic has passed, although all countries in the world need Chinese manufactured products, it is doubtful whether foreign trade can recover to the scale of 10 years ago due to Sino US relations.

Finally, the high house prices have seriously affected people’s lives. If the house prices are pushed up again, there will be problems. Moreover, too many houses have been built, and there is no need to sell land to build houses.

The most important thing is that after the adjustment in recent years, the consensus that “house prices only rise but not fall” has been broken, and the house may not be able to maintain its value.

This year, the central government encouraged people to buy houses, but the response in the market was flat, which shows their attitude.

Therefore, the three board axe to save the economic crisis is no longer available. As for whether the big infrastructure construction can make great efforts to achieve miracles, I will not make any evaluation. Let’s wait and see.

In a word, the problem of 2022 is unprecedented in the past decades. It is a new challenge for both the country and the individual.

I have written about the comparison between World War I, the eve of World War II and the present. I have a feeling that it is easy to judge history from the perspective of God. When history repeats itself, I still hope it will not come

Let me conclude with two sentences:

There is calmness in every major event. I don’t believe that there are no ancient sages.

Fame and great achievements are created by the times, and cannot be obtained by human efforts.

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