How China’s Market Reform Began

The Third Plenum of the Eleventh Central Committee of the Chinese Communist Party was a decisive event in the history of the People’s Republic; it re-consolidated the power of the Party and paved the way for the reunification of a fractured society. The decisions made there would re-channel the energy, enthusiasm, and creativity of the Chinese people from the politics of class conflict to socialist modernization. At the end of 1978, China once again stood at a historic moment as it had done in 1949. This time, China would be more fortunate. Both the Chinese government and academic circles worldwide view the Third Plenum as the beginning of China’s market transformation, the genesis of the extraordinary story that unfolded in the following three decades, as the world’s most populous country turned from a poor, stagnant socialist economy into one of the world’s most dynamic economies.1 It is, however, tempting to read too much into this watershed event — to think that the historical significance of the Third Plenum was preordained. After all, it did not set in motion a chain of events that meticulously brought about China’s great market transformation. Rather, it was the transformation itself that elevated the Third Plenum to historical prominence as the most recognizable turning point in the history of the People’s Republic. Had China’s economic reforms been unsuccessful, the Third Plenum would have been just another wishful attempt by the Chinese leadership to modernize the economy.