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The Changing Fate of Private Ownership since 1949

six days after the Chinese People’s Political Consultative Conference decided on the design for the new national flag, Mao took the podium at the Gate of Heavenly Peace in Beijing and proclaimed to the world the founding of the People’s Republic of China. In keeping with Mao’s “New Democracy Theory" the new political regime retained private ownership. During 1950-1953 the CCP made good on what it had promised during the civil war—confiscating the land owned by landlords and redistributing it to poor peasants who had little or no land. That move solidified the rural base of popular support for the CCP and helped the economy to make a quick recovery. In urban areas, the government relied heavily on private industry and commerce for the supply of essential goods and services and for the military provisions used by the Chinese troops fighting the Korean War (1950-1953).

The ensuing six years, however, ushered in drastic changes in the ownership of economic resources. In rural areas, peasants were first coerced to give up family-based farming and join government-controlled cooperatives; then they saw a quick erosion and eventual loss of the essential rights to make decisions on, to derive income from, and to dispose of the land, draft animals, and farm tools that they had brought into the cooperatives. In 1959 the government reorganized the cooperatives as people’s communes, where “collective" ownership replaced the nominal private ownership of cooperative members. In urban areas, the government made use of massive Soviet aid and newly added investment to expand the public sector, which had been formed with the assets accumulated in CCP-occupied areas before 1949 and those taken over from the KMT or left behind by foreign and Chinese capitalists who had fled the revolution. In the meantime, it forced private industrial and commercial concerns to give up private ownership through mergers with public enterprises or conversion into cooperatives controlled and ultimately owned by the government in the newly created “collective sector.” By 1959 state-owned enterprises and collective enterprises occupied the entire landscape of urban industry and commerce.1

This process of “socialist transformation” and the subsequent total dominance of public ownership throughout the 1960s and 1970s are well documented in many existing studies (e.g., MacFarquhar and Fairbank 1987; Shue 1980; Solinger 1984); so are the processes of the resurgence of private ownership since 1978 (e.g., Dickson 2008; Garnaut et al. 2001; Garnaut and Song 2004; Garnaut et al. 2005; Tsai 2002, 2007; Young 1995). What I want to highlight here is the incompleteness of the elimination of private ownership before 1978, which has implications for understanding the transformations since the end of the Cultural Revolution (1966-1976). I will also highlight sweeping policy changes adopted by the central authority that represented major turning points or landmarks in the process of post-Mao privatization despite recurrent attempts at retaining public ownership to the extent possible. I will then provide a statistical mapping of that process, including an account of the increasingly important role of FDI in the spread and deepening of private ownership.

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