China’s Capitalist Revolution (Part 6 of 9)

For those Red Hat capitalists who survived harassment from the hardliners, the rewards were huge—fortunes were made. Some Chinese were following Deng Xiaoping’s advice “To Get Rich Gloriously.”

However, there was an area of China’s industry that Deng couldn’t change—factory owned industries, which were outdated and inefficient. The state industries still placed politics over profit. In the average state-owned factory, 15 to 20% of the workers did nothing but read and shout slogans.

Deng decided to take state-owned industries from government management.  He said we are going to bring in experts to run our factories like they do in the West. In fact, Beijing was spending a quarter of its revenues supporting state-owned enterprises. The Chinese constitution guaranteed jobs and no one could be fired.

In 1986, Deng decided to allow unprofitable state-owned enterprises to close. Millions lost jobs. With people out of work, crime soared.  In 1989, Deng did away with price controls. There was a panic while workers in private industries were earning much more than people in state-owned industries.

Then bribery became a problem as those in charge at the local level started to accept bribes from foreign investors.

Return to China’s Capitalist Revolution Part 5 or go to Part 7


Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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