Origin of Modern China under Mao

An attempt on understanding the foundations of Chinese state-owned enterprises

China, once considered a third-world country, has become a formidable force in less than a human lifetime. I was going through the list of the largest companies in the world based on their market capitalization. Though I was not surprised to spot 18 of the top 100 companies to be Chinese, to my surprise most of the companies are state-owned. I always had the perception of State-run companies being inefficient and loss-making with the private sector proposed as the viable alternative.

China on the other end with its “state-capitalism” model challenges these pre-conceived notions. The resulting Chinese economy structure is because of the systemic changes that its decision makers have taken over the years. Lets revisit the history of Chinese juggernaut by looking at its formative decades:

1940s:

The Japanese were the ruling authorities in China for the first half of the decade. After the Americans dropped Nuclear bombs on two of the Japanese cities, the empire collapsed and as a result, it had to withdraw from its satellite territories. The power struggle resumed between the Chinese Communist Party and the Republic of China Party leading to a civil war. The winner was soon decided in favor of the CCP as it gets hold of the mainland while the Republic of China had to flee to Taiwan in 1949. Here on started the age of Mao Zedong, popularly known as Chairman Mao.

Outcome: Structural political change in China

1950s:

The new government in the mainland chose to follow the Utopian Socialist model of the Soviets. Collective farming was introduced. Mao gave a vision to the Chinese society of what their bright future could look like. He attempted to instill pride among the citizens. In order to do so, he used the “national humiliation” of the Chinese over its past as the driving force. To showcase the muscle power of newly emerging China, Mao became a party in the Korean War by supporting the Communist forces fighting against the American-backed troops. In order to compete with other nations, farmers were brought out of their farmlands and put into backyard furnaces to produce steel. This led to the loss of agricultural production and hence a famine that killed millions.

Outcome: China attempting to show its muscles to world

1960s:

In order to instill nationalism among its citizens, Chairman Mao started one of its kind cultural revolution in China in an attempt to rewrite Chinese history. Her wife was made the Minister of Culture to ensure tight control over what the society consumes ideologically. Propaganda movies and art forms were created. Books were censored. All dance forms were banned except the Loyalty dance, through which the performers show their loyalty to the chairman. Every information in the public domain was heavily regulated to mold people’s thinking. As a result, there was little scope for alternative perspectives.

Outcome: China trying to rewrite its history & culture

1970s:

The results of Mao’s cultural revolution and promises of a bright future were quite apparent. 30 years of experimentation and people were still starving in the country of hunger. Mao’s model was not able to deliver on its promises. Voices of dissent could be heard in China. Deng Xiaoping, who was criticized by Mao for not being a true socialist, was in power. He had to make a choice: Follow Mao’s path of communism or redefine his own. He chose the latter, an unprecedented path that was never tested elsewhere in the world- marrying communism with capitalism. History remembers Deng as the father of modern-day China.

Outcome: Mao’s failure & Birth of Modern-day China

The next blog in the series would cover, the upcoming decades and its charismatic leaders that shaped up China the way it is seen today.