economy but also the party-state itself. Market reform, because it was accompanied by only limited political reforms and lacked a legal and regulatory framework, gave rise to bouts of inflation, rampant corruption, growing social and regional disparities, and economic and political decentralization (Merle Goldman and Roderick MacFarquhar, "Dynamic Economy, Declining Party State," in idem, eds. in The Paradox of China's Post-Mao Reforms [Cambridge, MA: Harvard University Press, 1999], 4.) Nonetheless, these reforms ended the political chaos and economic stagnation of the Cultural Revolution. Deng and most of his colleagues rejected Mao's utopian visions of the egalitarian society of the Great Leap Forward, the unending class struggle of the Cultural Revolution, and state control of the economy, collectivization of agriculture, and emphasis on heavy industry. The failures of the Mao era led Deng to believe the only way for the party to hold on to its weakened mandate was to improve the standard of living for the majority of the population. Despite the student demonstrations of 1989, which were a reaction to some of the problems in the growing commercial economy (e.g., government profiteering, uncertainty about losing the iron rice bowl and finding a job on their own, inflation, unfair competition in the job market against children of government leaders), in 1992, Deng Xiaoping reemphasized the need for greater economic reforms in order to stave off a Soviet style collapse.
In the process of economic reform Deng Xiaoping withdrew the power of the party from many areas of life except for two: birth control (because of China's one billion plus population) and politics (because of a market economy and because Deng wanted to repair Chinese life damaged under Mao's rule when politics dominated everything). But even in the area of politics, the party's control of the state has changed from the Mao era. The party/state's loosening grip on the economy set in motion, however, processes in society, the political structure, and the cultural arena that it could not control. The establishment of the special economic zones in the 1980s (four coastal Chinese cities in the south) and foreign-Chinese joint ventures helped reduce the party/state's control. Their appearance was concomitant with the state's decision to develop private and collective enterprises. Many state enterprises, formerly subsidized by the state, now were allowed to go bankrupt if they did not turn a profit. By the late 1990s, the state enterprise (or work unit) made up less than half of China's economic production was shrinking at an accelerating rate. In December 2001, China joined the WTO (World Trade Organization) which stipulated that by 2006, China should become a market economy and except for in a few areas, completely open its market to the outside world.
Deng did realize the need for political reform, although he did not want a checks-and- balances system. He did try to introduce measures into the party that would limit the concentration of political power in the hands of one or a few individuals. First government leaders, and now the highest party leaders, came to have fixed terms. The Chairman of the Communist Party, the chairman of the People's Republic of China, and the chairman of the People's Liberation Army, all have fixed terms. It was by these rules that the chairman of the party, Jiang Zemin, successor to Deng Xiaoping (d.1997) as the number one leader of China, and the Chinese premier Li Peng both retired in September 2002, their positions filled by the new party chairman, Hu Jintao, and premier Wen Jiabao.