The geographical preconditions of radical price reforms in post-Mao China: Critical reflections on How China Escaped Shock Therapy

This paper offers a critical engagement with Isabella Weber’s fascinating new book, How China Escaped Shock Therapy. It foregrounds the book’s contributions to knowledge on a hitherto under-explored topic – why shock therapy advocates were unsuccessful in launching all-out price liberalisation across China during the 1980s – and introduces new questions through assessing Weber’s analysis vis-à-vis three geographical aspects of Chinese political-economic evolution: (a) the role of landownership control and redistribution in stabilising the Chinese economy following the Communist Party of China’s (CPC) revolutionary victory in 1949; (b) the path-dependent effects of Mao-era (1949-1976) landownership institutions on economic reforms during the 1980s; and (c) Deng Xiaoping’s approach to the multi-dimensional emergence of coastal-oriented industrialisation. These three aspects collectively accentuate how the territorial configuration and regulation of the Chinese political economy, so fundamental for producing and sustaining CPC regime durability, undermined the neoclassical bias towards price liberalisation. Understanding the geographical preconditions that underpin post-1949 Chinese political-economic evolution is therefore crucial for understanding why shock therapy was ultimately deemed incongruent with CPC rule.

prices right.Specifically, the book reveals the competing logic of retaining price controls inherited from the preceding Mao era and unleashing a once-and-for-all price liberalisation during the first decade of Deng Xiaoping's leadership.Weber's presentation of the price debate is both intriguing and incisive in itself, but the book's core strength lies in how the analytical narrative transposes from price to a stirring conclusion -the 'escape' was ultimately about politics.
This book addresses several themes that align with geographical political economy and would therefore be of immense interest to readers of Environment and Planning A. In the discussion to follow, I will outline three geographical aspects of Chinese political-economic evolution that are related to but are underplayed vis-à-vis key themes introduced in the book, namely (a) the role of landownership control and redistribution in stabilising the post-1949 Chinese economy; (b) the path-dependent effects of Mao-era (1949Mao-era ( -1976) ) landownership institutions on economic reforms during the 1980s; and (c) Deng Xiaoping's approach to the multi-dimensional emergence of coastal-oriented industrialisation.These concrete aspects further accentuate the limits of neoclassical bias towards price liberalisation and illuminate the importance of understanding the geographical preconditions of Chinese political-economic evolution.

The constitutive role of land in price determination
A distinctive strength of this book is Weber's attempt at grounding the 'escape' story historically.Readers would obtain a strong sense of 'traditional Chinese conceptions of markets and prices' (Weber, 2021: 18) through Weber's focus on the logic of Guanzi and the Iron and Salt Debate in Chapter 1.The historical focus then shifts to the roles of state trading agencies in arresting hyperinflation in Chapter 3. Here, the connection to Chapter 1 is clearly presented: 'on a conceptual level, a very similar logic underlies the 1940s "economic warfare" as that articulated for the challenges of fiscal policy and price stabilisation, particularly in times of war and fiscal crisis, in the Guanzi, the Salt and Iron Debate, and later statecraft writings' (Weber, 2021: 70).While the readership of Environment and Planning A would not find issues with this logical connection, it would become apparent that one major geographical aspect of the 'economic warfare' has been underplayed -landownership redistribution.
According to the 1947 Resolution by the Central Committee of the CPC on the Publication of the Basic Program of the Chinese Agrarian Law, rich landlords, who made up less than 10% of the rural population and yet owned 70%-80% of the total land, generated 'grave conditions' that 'are the root of our country's being the victim of aggression, oppression, poverty, backwardness, and are the basic obstacles to our country's democratization, industrialization, independence, unity and strength in prosperity' (Lee, 1948: 29).Overcoming this problem, Javed (2022) reveals, entailed a localised drive at moral mobilisation of mass violence against a clear economic target -the cruel and corrupt landlord class.So while hyperinflation was a major problem that needed arresting, and one which Weber explains cogently in the book, it would be helpful to examine the connections and effectiveness of this 'economic warfare' and the CPC's attempts at land confiscations and landownership redistribution.Indeed, the importance of landownership transfer in engendering a 'deep transformation of production' (Weber, 2021: 20) is already highlighted earlier in the book's reference to the transitional period between the Western Zhou dynasty and the Qin dynasty.Extending this historical connection to the Mao era would similarly foreground a 'deep transformation' that both stabilised the economy and consolidated CPC political power.This extension would impact, in three ways, how the other chapters of the book would be read.
First, it enhances the relevance of using American price controls during the Second World War as a 'novel point of comparison' (Weber, 2021: 44) with CPC policymakers' experimental approach to economic governance.Landownership rights and distribution were not a direct target of price controls in the United States.There was also no proclivity on the part of US political actors to politicise landownership and its concomitant effects on production and consumption.For this reason, price controls had to be targeted at other commodities that policymakers felt could directly impact on input-output relations (and hence price levels).Land is a major input in input-output relations, but its exclusion by American price fixers stands in sharp contrast to the post-WWII Chinese economic reconstruction experience.As I will elaborate shortly, this contrast will substantially enhance Weber's argument that there 'is nothing quintessentially Chinese, traditional, or premodern about controlling prices.Yet, the practice of price regulation through state participation in the market, is revealed to be particularly prevalent in China' (Weber, 2021: 42-43).Indeed, a key practice of price regulation not seen in the United States has been found to be 'particularly prevalent in China' -and this practice is the absolute control of land prices through political means.Because this control was secured in the early 1950s, it would be more apposite to compare the American experience with the CPC wartime and post-war recovery experience rather than with the reform period of the 1980s.
Second, considering the landownership question immediately reveals the highly narrow and selective attempts by pro-liberalisation reformers to use Japan as a comparative reference point (Weber, 2021: 188-189).Exemplifying this narrow selectivity is Wu Jinglian's reference to the 'Dodge Line' -a financial and monetary contraction policy drafted by an American economist, Joseph Dodge, to help Japan gain economic independence after WWII -to justify why 'China should have combined austerity with overnight price liberalization' (Weber, 2021: 189).If Japan is to be used as a reference point to justify price liberalisation, it would be necessary to undertake a like-for-like historical-geographical evaluation.And this is where Weber's finding is of massive significance: notwithstanding the institutional innovation that produced what Johnson (1982) terms the Japanese developmental state, the Japanese developmental experience went the opposite direction of the 'Dodge Line' by widening the scope of government intervention in land management: political mandate (which was similar with post-1949 China) was combined with price controls (which was different from China) to drive land redistribution.In short, right after WWII, the Japanese government made it mandatory for landlords who owned agricultural land but did not farm it themselves to sell the land to the state.This land was then sold to tenant farmers who would pay the landlord a high proportion of their crop yields as rent.The key difference in the Japanese approach is the price mechanism was not removed (unlike the approach in China from the mid-1950s through to the late 1980s) but became integrated in an interventionist strategy that was widely admired globally as an exemplar of egalitarian land reforms.The prevalence of state intervention therefore calls into question the logic of Wu's deployment of the 'Dodge Line' to justify 'decreasing government intervention into the economy' (Weber, 2021: 189) in post-WII Japan.Similarly questionable was Wu's use of one period -post WWII Japan -as a reference point for another period (the first decade of post-Mao China): why was post-WWII Japan not compared with post-WWII China (the Mao era)?A like-for-like comparison is necessary if it is to be convincing.
Wu's exclusion of landownership issues in his debates exemplifies an aspect that is consistently strange about other pro-shock therapy thinkers like Guo Shuqing, Qiu Shufang and Liu Jirui.As Weber (2021: 189-190) reveals, these thinkers believe that 'market pricing was the only right target for reform' for all goods except those defined in neoclassical economics as 'public goods' such as 'transport, communication and health'.Yet there is no reference to the market pricing of land, an entity that is not defined as a 'public good' and that is widely regarded as a fixed capital and/or a fixed asset in production.It is very likely, indeed, that the exclusion of land was more than just a coincidence; landownership control has become fundamental to the sustenance of CPC regime durability after 1949 (Lim, forthcoming).Just as the shock therapy proponents were fomenting their ideas, the CPC mandated clearly in Article 10 of the amended Constitution in 1982 that 'No organization or individual may appropriate, buy, sell or lease land, or unlawfully transfer land in other ways'. 1 Viewed in relation to this stance of quiet avoidance, the 'book worship' of shock therapy advocates arguably did not exist in an 'oscillating' relationship with 'seeking truth from facts' (Weber, 2021: 111): by implicitly acknowledging the untouchability of land for the 'package reform', their proposed shock therapy was already a case of 'seeking truth from facts' from day one.To be explicit, this acknowledgement underscores one core 'fact' of CPC rule -Mao-era institutions and policies generated constraining effects on the attempt at 'wholesale liberalisation' (Weber, 2021: 13).There were clear 'red lines', as regulatory boundaries are called in Chinese policymaking circles, that neoclassical votaries simply did not wish to breach.
Third, the logic of the 'escape' from shock therapy could be better understood by incorporating one key Mao-era effect: the uncertain status of land in rural price reforms during the 1980s.Readers of Environment and Planning A would find it interesting to discuss the role of price in determining landownership and land use access in relation to the CPC's 'decisive reform question' of the late 1970s and 1980s: 'how to (re)create the economy and markets' (Weber, 2021: 71, original emphasis).A major characteristic of market-oriented reforms in the 1980s was the proliferation of Township and Village Enterprises (TVEs) from an estimated 1.5 million to more than 12 million in 1985 (Huang, 2008).The pressure on land use increased correspondingly, yet the access to and use of land continued to be determined in a fuzzy and path-dependent manner.Specifically, many TVEs made use of their status as 'collective' entities to access and appropriate the use value of what was nominally 'collective' land even though not every member of the collective would benefit from their operations.Not having to budget for the exchange value of land substantially reduced both production and transaction costs and contributed to the economic competitiveness of the TVEs during the 1980s.
This development engendered a paradoxical phenomenon.To the shock therapy advocates, 'clearly defined property rights' were a fundamental target of reform and the CPC should work at 'guaranteeing property rights' (Weber, 2021: 206, 239).At the same time, however, the very fuzzy property rights regime inherited from the Mao era was integral to the economic growth story of the 1980s.In other words, an institution that was putatively a problem in itself was proving to be a panacea to the prevailing problems of low productivity and slow growth.Williams (2001: 240) offers an incisive summary of this situation: 'The absence of clearly defined TVE property rights has presented analysts with a problem; despite unclear property rights, however, TVEs have arguably been the most dynamic sector in China's extremely dynamic economy'.Crucially, as Williams (2001) discovers, attempts at clarifying TVEs' property rights in the 1990s did nearly nothing to address the ongoing problems faced by the TVEs.This outcome highlights, in turn, 'a mistaken belief in the importance of property rights to TVE performance -a belief echoed back and forth between Chinese officials and academics and Western academics and institutions' (Williams, 2001: 249).In short, there are clear inherited institutional effects that served the TVEs well -effects that could not be easily replaced by a fullblown embrace of neoclassical economics.
The importance of the institutional context is a point well-articulated throughout the book.Readers are regularly reminded of 'the institutional realities of China's war-torn, disintegrated, and still largely agricultural economy', 'the given institutional reality', 'China's given institutional arrangements' and 'China's given institutional structure' (Weber, 2021: 83, 195, 199, 214).Yet, most of these institutional contexts are portrayed as unsuitable for new approaches and/or ideas from being implemented.As the case of the TVEs shows, the prevailing institution of collective landownership was also capable of positive effects.Another related Mao-era institution -the hukou system of demographic control -similarly proved instrumental in creating a large 'floating' migrant labour market that jumpstarted both urbanisation and export-oriented industrialisation (Rozelle and Hell, 2020).Why, then, has the senior CPC leadership come so close to radical price reforms despite these positive institutional effects?Some answers could possibly be discerned from a major event that Weber presents in Chapter 7 -the implementation of the coastal development strategy in 1988.

Geography to the rescue?
A key feature of the 'escape' story presented in this book is the constitutive role of geography -or, more specifically, geographical differentiation.Driving this process was then General Secretary of the CPC, Zhao Ziyang.Specifically, Zhao proposed a 'soft landing' to address China's economic challenges in 1988 through 'gradual stabilization, deepening enterprise reform, and coastal development' (Weber, 2021: 241).Deepening global economic integration on a geographically-differentiated basis was integral to steering reforms towards gradualism and further away from the possibility of radical price reforms.And here, it is important to note that other groups of planners and advisors were similarly working in parallel to the package reformers clamouring for radical price reforms.There were, in short, alternative ideas in the making.
Zhao's approach was heavily shaped by the contributions of Wang Jian, then a research fellow at the Institute of Planning Economics in the State Planning Commission.In what is now widely referred as the precursor of the CPC's ongoing 'dual circulation strategy', Wang's formulation, first published in 1987, 2 was based on an urban-rural distinction: relatively modern coastal city-regions were reintegrated into the global economy through exported-oriented and labour-intensive industrialisation, while goods manufactured in the interior provinces could be allocated to the domestic economy.The ensuing foreign exchange income derived from engaging with the 'international cycle' could then be allocated to support agricultural development.As Li Shuqiao, Zhao's secretary at the time, recounts, Wang's work provided theoretical grounding for Zhao's belief in developing an externally oriented economy (Li, 2008: 26).Wang's work was ultimately integrated into the coastal developmental strategy that Zhao presented to Deng Xiaoping in January 1988, to which Deng replied: 'Fully agree with this.Implement this courageously, intensify the pace, absolutely do not mess up this opportune moment' (quoted in Li, 2008: 28;my translation).
One important aspect not detailed extensively in the book is another approach to the coastal development strategy that Deng also endorsed without reservation.Specifically, Wang Jian's 'large international circulation' formulation extended an approach termed the 'ladder-step transition theory', or tidu tuiyi lilun (梯度推移理论).First espoused by the Shanghai-based academics Xia Yulong and Feng Zhijun in 1982, this prescriptive 'theory' permeated central policymaking circles and was instituted as a policy blueprint during the 7th Five-Year Plan (1986)(1987)(1988)(1989)(1990).The theory divided Chinese state spatiality into three economic-geographical belts: the eastern (coastal), central and western (Xia and Feng 1982).The Deng administration allowed one belt (the eastern seaboard) the priority in ascending the development 'ladder'.It assumed that the fruits of development in the 'first mover' belt would diffuse downwards to other rungs of the ladder.By the time Zhao worked on formalising a coastal development strategy, there was already a very distinct coastal orientation in economic 'opening up': the CPC allowed foreign investments in 14 coastal cities 3 and Hainan Island in 1984.That Zhao's gradualist approach was 'sidelined' (Weber, 2021: 242) against this backdrop of unwavering support from Deng raises questions both on Deng's approach to economic reforms -an aspect that is given a relatively light touch in the book vis-à-vis Deng's role as the decisive actor of the 'escape' story -and on the role of coastal development in Deng's idea of package reforms: was Deng's embrace of radical price reforms in 1988 a denigration of spatially-selective development that Deng had previously endorsed himself, or does it reveal Deng as the ultimate dual-track reformer who actually considered rolling out the coastal development strategy, only officially confirmed as a major part of the 'open door' policy in February 1988, in tandem with radical price reforms?The answers to these questions are contingent on whether geographical differentiation (through the coastal development strategy) was viewed in zero-sum or complementary terms vis-à-vis radical price reforms.This point did not come through in the 'escape' story, but it is important for understanding whether Deng was truly convinced by the package reformers that he was prepared to undermine all other instituted policies and processes.In other words, was Deng finally revealing a fundamental belief in Western neoclassical economics, or was he affirming different economic approaches simultaneously in the hope that one or more would deliver positive outcomes?
For Walder (2015: 11), Deng's actions during the post-Mao era only reinforced Mao's earlier judgment of Deng as a 'capitalist roader': 'In view of the path taken by Deng Xiaoping in the 1980s, [Mao's] concerns appear to have been based on accurate perception, not paranoia'.Yet, as Bao Tong, Zhao Ziyang's one-time policy secretary, argues, there was a 'two-faced' aspect to Deng's approach to governance: Deng's two-sidedness was like a pendulum.One minute he wanted reforms, the next he was resolutely upholding the four basic principles of socialism.One minute he wanted to escape from a political dead end, the next he had returned to it.Deng was like that.You could criticize him for logical inconsistency, but you couldn't say he said one thing and did another.Both his words and his deeds were in earnest.He was a genuine supporter of reforms, and yet also a staunch protector of the very things we were supposed to be reforming (Bao, 2008: n.p.).
And Bao could very well be right.The coastal oriented economic reforms not abolished but were intensified in the early 1990s, which strongly suggests this strategy enabled Deng to cushion the impact of halting radical price reforms by providing a geographical basis for what Weber terms a 'forceful restart of the marketization agenda' (Weber, 2021: 269).In this sense, geographical differentiation came to the rescue not in the way Zhao Ziyang envisaged -that is dissuade Deng from pushing through radical price reforms in 1988 -but in enabling Deng to fulfil his overarching objective: sustaining CPC rule.This objective, the key reason for jettisoning shock therapy (Weber, 2021: 253), was a defining characteristic of Deng's leadership.As Bao (2008: n.p.)

puts it:
Once you grasp the logic of saving the Party, it is possible to get a basic understanding of Deng Xiaoping's logic.Everything he did was done to save the Party. . .It was for this reason that Deng Xiaoping supported economic reforms with all his might.He deserves to be credited as a supporter of economic reforms, even though he didn't care much for economics and didn't understand the market; and he was their most powerful supporter.However, his goal was still to save the Party, and for that reason he was a fierce protector of Party power and status If we follow Bao's assessment, a new interpretation of this 'escape' story emerges: Deng embraced radical price reforms not so much because he was convinced by its intrinsic benefits, but by its ability to reinvigorate the party and reproduce its sovereign rule (cf.Lim, 2019;Su and Lim, 2023).Likewise, the 'ladder step' theory and then Zhao's coastal development strategy provided a strong theoretical basis for legitimising the inevitable inequality that reforms would generate.Deng regularly repeated these now-famous lines during the 1980s: 'let some people and some regions get rich first' (rang yibufenren, yibufendiqu xianfuqilai, 让一部分人, 一部分地区先富起来). 4When it ultimately became apparent that one economic aspect (radical price reforms) that was supposed to sustain CPC rule became an existential threat to the party-state, Deng had no qualms jettisoning it.The only strategies that were politically viable were those that were compatible with the reproduction of CPC sovereignty.After all, as Deng would say, it does not matter if a cat is black or yellow; any cat that catches mice is a good cat.

Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.