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2 Phase 1, 1949 to 1976: The Mao Phase of Building the FoundationAs is classic in all cycles, internal political challenges to Mao’s leadership and ideology arose.Phase 1, 1949 to 1976: The Mao Phase of Building the FoundationChapter 6: The Big Cycle of China and Its Currency2020-10-09JournalEconomically from Mao’s founding of the PRC in 1949 until Mao’s death in 1976, the Chinese economy grew at a rather good average annual rate of about 6%, with an average annual inflation rate of just around 1-2%, and the Chinese acquired around $4 billion in foreign exchange reserves, so it improved moderately but remained poor.  This happened with a lot of volatility. More specifically: Between 1949 and 1952 the new government consolidated power and eliminated opposition.  This included wiping out the elites such as the landlord owners of agricultural lands, which included killing many of them.  Deng Xiaoping led that move in the southwest and was praised by Mao for doing it well. Through most of the 1950s to consolidate power Mao undertook programs to identify capitalists (called “anti-rightist” campaigns) and either disable, imprison, or kill them. Between 1952 and 1957, with the help of the Soviets, industrial production grew at 19% per year, national income grew at 9% per year, and agricultural production grew by 4% per year.  The Chinese government built industrial facilities and imported lots of equipment from the Soviets.  It also reformed agriculture by creating cooperatives to achieve economies of scale by having farmers work together.  These were highly productive years.  However during this period, after Stalin's death in 1953, Nikita Khrushchev came to power, criticized Stalin and his policies, and alienated Mao, which led to these Chinese and Soviet leaders openly criticizing each other, which began a period of reduced Soviet support. Around 1960 the Soviet Union shifted from an ally to an enemy and withdrew economic supports. From 1958 through 1962, due to a drought, economic mismanagement from the top-down mandated attempt to become an industrial power called the Great Leap Forward, and reduced Soviet economic support, the economy contracted by 25% and an estimated 16-40 million people died of famine.  Industrial output fell by 34% and fell by 12% more in 1962.\[16\]  All parties agree that it was a terrible period, though there is some disagreement about how much it was terrible because of terrible management by Mao versus terrible because of the other causes. The economy recovered and went to new highs from 1963 to 1966.  Then came the Cultural Revolution. Continue reading…