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The "Made In China" label is found everywhere on almost everything. We see it on plastic toys to electric cars, from the shelves of a Malaysian store to the streets in the US. They are everywhere.
But about four decades ago, this would have been inconceivable and it was all thanks to this guy - Deng Xiaoping.
So how did he do it? 👇
Backstory
- In 1978, China was one of the poorest nations on earth
- 40% of the economy wad agriculture
- Every single business was a state-owned enterprise
- Mao's Great Leap Forward was a total failure that kept the nation's economy stagnant, inefficient and isolated from the global economy
But after Mao's death in 1976, DXP led the economy through a transition from state-ownership to state-led capitalism (or "socialist market economy")
- Decentralized government. High-performing governments like Guangdong got to keep 100% of the tax collected
- Decentralizing land rights in rural areas also triggered sharp productivity increases in agriculture
- These land rights turned into collateral for infrastructure companies to borrow funds against (while local gov borrowing was still officially banned)
- Open-door policy. Before that, the Communist argument against opening up the country to foreign investment at the time was huge economic gaps that would create hot springs & ghost town
- In a radical move, DXP declared it was ok for some regions to become wealthy before others
But things weren't all dandy under DXP
- The socialist market economy incentivized shadow banking
frustratingly low interest rates => People seeking yields elsewhere
- The 2008 global financial crisis only 10x the problem which ultimately led to the Evergrande crisis
That said, Deng Xiaoping still managed to:
- lift 620 mil people out of internationally-defined poverty
- Increase GDP 24x by $1.1B YoY
- Catapult China from *worse than Rwanda* (per capita GDP, 1978) to world superpower
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