The first was in 1978 when the Chinese Communist Party (CCP) agreed to a deregulation of the agricultural sector. The second was in 1984 when the CCP extended the contract responsibility system from the agricultural sector to the industrial sector. The third was in 1988, which marked a transition in the economic policy making leadership from plan-oriented conservatives to market-oriented reformers. The fourth turning point was in 1992, after the implosion of the Soviet Union, when Deng Xiaoping transformed China with the support of the provinces to a socialist market economy with Chinese characteristics". (Fukasaku, 1999, p. 8), (Lardy, 1998).
III. The political impact on the economy.
Within the CCP exist two competing political camps, the conservative reformers and the liberal reformers, which have vastly different ideas on the organisation of the economy. Since the Cultural Revolution showed that factional struggle could cause political instability, social chaos, economic stagnation and even undermine the legitimacy of the party, Deng Xiaopeng, who led China during the first decade of reforms, played an important role of forging compromises between the two factions. (Harding, 1987) This political balancing and the fact that economic reforms always create winners and losers, and frequently the losers include politically powerful groups, caused the gradualism of reforms that continues until today. (Lynch, 2002).
IV. Current economic situation.
China has already realised that economic transformations have vastly improved the lives of hundreds of millions of people. The reforms made China the strongest growth pole in the world economy. China is after the USA the biggest absorber of international capital with an accumulated foreign direct investment (FDI) of over US $ 400 billion over the last 20 years. (Lardy, 1998) Now China is the 8th largest exporting country and the 11th largest importing country in the world.