China’s Economic Growth and Cultural Renaissance in the 1980s

By Richard Baum, Ph.D.University of California, Los Angeles

A primary focus of economic reform in the spring of 1979 was the introduction of Special Economic Zones, or SEZs. The idea for SEZs originated in 1978, just across the border from Hong Kong. With its labor and material costs steadily rising, Hong Kong’s largest shipping firm owners were seeking a low-cost alternative site for their plants.

Image of Hong Kong’s Victoria Harbor.
The owners of Hong Kong’s largest shipping firm provided Deng with the idea for Special Economic Zones. (Image: e X p o s e/Shutterstock)

The Four Special Economic Zones

Hong Kong’s largest shipping firm owners had come to She’kou searching for a suitable location to build a new factory for salvaging scrap metal from old ships. When Deng Xiaoping heard about the proposal to locate the new facility on Chinese territory, his response was positive. Thus was born the first Chinese “Special Economic Zone”.

Within a year, four new SEZs had been provisionally authorized. Two of them—in Shenzhen and Zhuhai— were located near the mouth of Guangdong’s Pearl River Delta, immediately adjacent to Hong Kong and Macao, respectively. The third Special Zone, Xiamen, was located directly across the strait from Taiwan, on the coast of Fujian Province. The fourth, Shantou, was on the Guangdong coast, halfway between Xiamen and Shenzhen.

Modeled loosely after export processing zones found elsewhere in Asia, the four coastal SEZs were expected to become advanced centers of high-tech manufacturing and industrial processing and were geared to the rapid expansion of China’s export trade.

They were offering foreign investors and joint-venture partners substantially reduced taxes and import duties, as well as low labor costs and flexible terms for repatriating their profits. The four Special Economic Zones were destined to become the leading edge of China’s economic “opening” to the outside world, as well as the engine driving China’s spectacular export manufacturing boom in the 1980s and 1990s.

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Economic Growth

However, the Special Zones proved to be a significant bone of contention between Deng Xiaoping and some of his less open-minded coalition partners, including his close friend, Chen Yun.

Image of old Shanghai.
Because of Chen Yun, Shanghai had slower economic growth than places with Special Economic Zones. (Image: 4045/Shutterstock)

Chen disapproved of the special privileges that Deng proposed to offer foreign investors in the Special Zones, which he viewed as reminiscent of concessions granted to foreign imperialists by the Manchus in the 19th century. 

As a result, Chen Yun famously refused to allow his hometown of Shanghai to become China’s fifth Special Economic Zone. Consequently, throughout the 1980s, Shanghai’s economic growth lagged well behind the more dynamic and heavily invested coastal SEZs of Guangdong and Fujian. 

Only in the early 1990s, when Chen Yun’s advanced age rendered him unable to cast an effective veto, did Shanghai’s Pudong district join the ranks of the fast-paced, free-wheeling SEZs. The split between Deng and Chen Yun on the issue of Special Economic Zones was symptomatic of a broader and deeper rift that was emerging between these two longtime comrades in the 1980s.

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Deng and Chen: Emerging Rift

At the Third Plenum, Chen had endorsed Deng’s proposal to undertake limited experiments with market reform to raise productivity. By training and by instinct, however, Chen Yun was more economically conservative than Deng.

In the early 1980s, Chen Yun began to chafe at Deng’s willingness to allow market forces to replace central planning willy-nilly. His differences with Deng were graphically expressed in the form of an extended metaphor, in which Chen famously likened the Chinese economy to a captive bird inside a cage.

[Of course] one cannot hold a bird tightly in one’s hand without killing it. It must be permitted to fly—but only within its cage. Without a cage, it would fly away and become lost. [Naturally], the cage must…have appropriate space, [and] one may [thus] enlarge its size…[But] regulation of economic activity by the market must not entail the abandonment of…[socialist] planning.

This emerging dispute between Chen Yun and Deng Xiaoping over the optimal size of the socialist birdcage and, by extension, the proper limits of economic “reform and opening up” was destined to grow substantially broader and more contentious as the 1980s progressed.

But for now, in the early 1980s, China was enjoying a renaissance in popular culture. 

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Chinese Renaissance

Freed from the iron grip of Jiang Qing’s cultural tyranny, the Chinese people began to let their hair down, literally and figuratively. The renaissance started in 1979 and was visible first and foremost in China’s major eastern cities. In Beijing in that year, a Pierre Cardin fashion show was held in the shadow of Tiananmen Square. At the same time, nearby, disco dancers shimmied nightly and swilled martinis at Peking’s International Club.

In the same year, Western businesspeople signed deals for a chain of modern tourist hotels in China, including such future Beijing landmarks as the Hyatt Jianguo Hotel, the Sheraton Great Wall, and the Holiday Inn Lido. Meanwhile, between classes, Chinese college students openly discussed the virtues of romantic love, President Carter’s human rights policy, the films of Laurel and Hardy, and the virtues of Coca-Cola..

Common Questions about China’s Economic Growth and Cultural Renaissance in the 1980s

Q: How did the first SEZ come about in China?

The owners of the largest shipping company in Hong Kong had come to She’kou looking for a low-cost site to build a new factory. When Deng Xiaoping heard of this idea, he welcomed it, and thus was born China’s first Special Economic Zone.

Q: Why did Deng and Chen have differences on the topic of SEZs?

Chen disapproved of the special privileges that Deng proposed to offer foreign investors in the Special Zones, which he viewed as reminiscent of concessions granted to foreign imperialists by the Manchus in the 19th century. He, therefore, refused to allow his hometown of Shanghai to become China’s fifth Special Economic Zone.

Q: What were the consequences of Chen not allowing his hometown to have an SEZ?

Since Chen refused to allow his hometown of Shanghai to become China’s fifth Special Economic Zone, Shanghai’s economic growth lagged well behind the more dynamic and heavily invested coastal SEZs of Guangdong and Fujian. 

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China’s Economic Growth and Cultural Renaissance in the 1980s