Editing Reform and Opening Up (section)

==== Economic Situation prior to Reform and Opening Up ====
Economically, as of 1978, although China's gross national product reached 362.4 billion renminbi, more than double the 171.6 billion renminbi in 1965, with an average annual growth rate of 6.8%, and established an independent, categorically complete industrial system.<ref>[https://baike.baidu.com/reference/886098/21dbKMXcR5f6O59KQmgy4I02ooSYBYiHHU_FF-uattv6m5cAyVSUrfPU_sCetdJFpsAuaKOuc4MjyocwKSQgtbMSjilLfDiy5_7J4K3wx4SCxYX-1eust5qXRX8 Decision of the State Council on Financial System Reform] -Xinhuanet</ref> But the people are still poor, the technology is relatively backward, and after the Cultural Revolution, the CPC has a certain degree of governance crisis and crisis of trust. An estimated 30 percent of rural residents, about 250 million, lived below the poverty line, relying on small loans for production and state grants for food.<ref>Justin Yifu Lin. Demystifying the Chinese Economy. Cambridge: Cambridge University Press, 2012, p6</ref> Despite the rise in grain output, earnings per capita in the 1970s were almost the same as in the mid-1950s<ref>Lardy, Nicholas R. 1983. Agriculture in China’s Modern Economic Development. Cambridge and New York: Cambridge University Press</ref>  Housing showed almost no improvement during the 1960s and 1970s<ref>China National Bureau of Statistics, 1999</ref> Even by 1978, per capita levels of rural consumption – nearly thirty years after the start of the socialist era – of almost every food in an absolute sense were low, only 1.1 kilograms of edible oil and 6.4 kilograms of meat per year<ref>Huang, Jikun and Howarth Bouis. 2001. “Structural Changes and Demand for Food in Asia: Empirical Evidence from Taiwan.” Agricultural Economics. 26, pp. 57–69</ref>

According to Professor Luo Yuanzheng, Deputy Director of the Institute of the World Economy, Chinese Academy of Social Scienes stated that in 1979:<ref>The Chinese Economy and Foreign Experiences: A Chinese Economist's View - Luo Yuanzheng The Australian Journal of Chinese Affairs, No. 3 (Jan., 1980), pp. 67-77 (11 pages) https://doi.org/10.2307/2159010</ref><blockquote>But our country is very backwards in terms of production; the eight hundred million people living in the countryside are basically manual labourers. Per capita production does not exceed on the average exceed 2,000 jin; in france it is 30,000 jin and in the USA, 147,000 jin. Basically, industrial automation and the levels of specialization have remained at the level of the 1940s and 1950s. The gap is even greater with new and developing industries. Work efficency in industry is also very low. Per capita annual steel production for workers employed in the steel industry is approximately 10 tons. While in Japan it is 300 tons.</blockquote>In the construction industry, for example there was always a marked decline in economic results, as measured in per hundred yuan of fixed assets from 1957 to 1976. Industrial enterprises under the ownership of the state (or the whole people) declined for the same time period by 48.8 per cent from 23.6 yuan in 1957 to 12.1 yuan in 1976.<ref>Ma Hung, The New Strategy for China's Economy (Beijing: New World Press, 1983) pp. 9 - 30</ref>According to ''The Chinese Steel Industry's Transformation''<ref>The Chinese Steel Industry's Transformation By Ligang Song, Haimin Liu, page 3</ref><blockquote>In 1978 China's total steel production was only 32 million tonnes, less than three weeks of current output levels. The per capita steel production was merely 33 kg, a fifth of the world average levels. The industry's technology, equipment, product variety and quality, as well as technical and economic indicators, all lagged far behind developed countries. For example, when the world average ratio of open-hearth steel-making to total steel-making fell below 20 per cent in the late 1970s, China's ratio still stood at 35.5 per cent. When the ratio of continuous casting was more than 50 per cent in Japan and 30 per cent in Europe, China's was merely 3.5 per cent. As a result of obsolete technologies, out of total production, the energy consumption per tonne of steel was as high as 2.52 tonnes of standard coal.</blockquote>Due to political turmoil from the cultural revolution, output was significantly affected. In 1966, Steel output was at 15 million tons, then dropped to 10 million tons in 1967, then dropped to 9 million tons in 1968. In 1968 only 40% of it's steel capacity was being used, 13 million potential tons of steel went unmade. In 1973, China's steel production peaked at 25 million tons. It is only in 1977 did Steel production output beat the previous peak , at 31.7 million tons.<ref>[https://www.cia.gov/readingroom/document/cia-rdp86b00985r000300040017-8#:~:text=The%20spurt%20in%20production%20in,grams%20per%20capita%20in%201978. CHINA: THE STEEL INDUSTRY IN THE 1970S AND 1980S - CIA.GOV]</ref> Labor productivity in industry was stagnating from 1970 to 1982.<ref>Chinese Economic Performance in the Long Run by Angus Maddison, page 83</ref>

Per capita grain production had never risen above the historical peak in 1955 by the end of 1976.<ref name=":1">'''[https://archive.li/KTYDn#selection-1799.25-1799.82 China's success in increasing per capita food production - Jianhua Zhang]'''</ref> Total factory productivity peaked in 1958, but fell and never reached that peak by the time of 1976. In fact, in 1976, agricultural TFP fell to an all time low.<ref>Lin Yifu, “Institutions, Technology, and Agricultural Development in China”, Truth & Wisdom Press, 2008 First Edition, p. 19</ref> Labor productivity in agriculture from 1952 to 1978 only grew by 0.2%<ref name=":5">Chinese Econonomic Performance in the Long Run: 960–2030 AD by Angus Maddison, page 80</ref> Labor productivity was declining from 1958, falling into below 1952 levels in 1960, never rising above 1952 levels until 1979.<ref>Chinese Economic Performance in the Long Run - by Agnus Maddison, page 75</ref>

Labor productivity in industries peaked in 1966 and never recovered by the end of 1976, constantly rising and falling sharply.<ref name=":2">China's Economic Development by Chris Bramall - page 403</ref>  In fact, the gap in productivity being the USA and China had widened over the period of the 60s and 70s. Total Factor Productivity rose only 0.9% between 1965 and 1978.<ref>China's Economic Development by Chris Bramall, p402 - 403</ref> By the end of 1978, the level of manufacturing productivity was a mere 5.9 per cent of that of the USA, only marginally up on the 5.3 per cent recorded in 1952. GVA per capita only grew by 0.5% as a percentage of the USA's from 1952 - 1978.<ref name=":3">Chinese Econonomic Performance in the Long Run: 960–2030 AD by Angus Maddison page 82</ref>

There was also an issue of Abseenteism/Loitering and lack of worker's efficiency in the workplace that still persisted well after Deng Xiaoping's Reform and opening up. For some time, customs continued in the public sector as described by a witness and Western scholar, “even the last attendant […], if he wants to, can decide to do nothing, stay home for a year or two and still receive his salary at the end of the month.” The “culture of laziness” also infected the expanding private sector of the economy. “The former employees of the State […] arrive late, then they read the newspaper, go to the canteen a half-hour early, leave the office an hour early,” and they were often absent for family reasons, for example, “because my wife is sick.” And the executives and technicians who tried to introduce discipline and efficiency into the workplace were forced to face not only resistance and the moral outrage of the employees (who considered it infamy to impose a fine on an absent worker caring for his wife), but sometimes even threats and violence from below.<ref>"La differenza tra la Cina e il mondo. La rivoluzione degli anni Ottanta"</ref>

The phenomenon of “loitering labor” [was] such that by the late 1970s, the same farm tasks … were taking one and a half times as long to accomplish as they required under family management.<ref>The Peasant Family and Rural Development in the Yangzi Delta, 1350-1988 by Phillip C. Huang - page 249</ref> Similarly, this was recorded in a book which defends the Maoist collective farms, stating that farmers during the cooperative [collective] days used to work all day, every day, year-in and year-out, but got almost nothing done – work a little, take a break, work a little more, take another break. They felt harassed and they produced very little. What they were doing looked like work but in fact they were stalling around. Now they make every minute count.<ref name=":4">The Great Reversal: The Privatization of China, 1978-1989 by William Hinton - Page 53</ref>

In order to accelerate economic development as soon as possible, the Party Central Committee with Deng Xiaoping at the core began to solve these problems one by one, and tried to change the deep-rooted image of the Communist Party and socialism in the people's minds. The purpose of this reform movement was to maintain the socialist system as the premise and change the management system and policies that are not suitable for production development, and the establishment of a Socialist Market Economy. The economic aspect of this reform made the first breakthrough in the countryside, and then quickly implemented reforms in various economic fields across the country.