What Deng Xiaoping Learned from Japanese and Singaporean Advisors
Rick, one back story: ca 1978-9 China was actively seeking eurodollar syndicate loans based on oil exports, which would have put it on the path to be the next Nigeria — and we all know how that has gone.
But the oil turned out to be inaccessible. So they began pushing exports of crafts and anything else they could find, including Hong Kong textile producers who moved simple production steps into small villages such as Shenzhen.
Early growth though was driven by a rise in grain production stimulated by big price increases and ironically the fruits of central planning that was finally able to deliver pumps and cement and fertilizer, allowing the Yangtze delta in particular to improve water control and the fertilizer that allowed high yield rice cultivars and more double cropping. Better dikes reduced flooding to minimal levels from an average of 25% crop levels which alone gave an effective 33% increase in yields. That allowed villages to grow more cash crops yet deliver more rice to the government. And with the end of the Cultural Revolution in 1976 farmers were able to market their produce.
But what was there to spend money on?? New houses!! You can still see brick kilns from that era across rural China. There was also a boom in rural transport and trading enterprises. SEZs came later, but were very local in their impact. Modern industry came later, and arose partly by accident, I can give you lots of details. Deng for example worked for Renault when he was a student in Paris, Shanghai Auto Industry Co was an important source of patronage for the Shanghai cadre who dominated national politics. The VW and later GM joint ventures were an attempt to bolster SAIC against grey market imports.
Construction, though, has remained central to the economy across the last 45 years.