Economic Reform

They prioritised practical recovery and technical Expertise over Maoist ideological purity, which was known as Redness. Deng famously summarised this new practical approach by stating: "It doesn't matter if a cat is black or white, so long as it catches mice."

Agricultural Reforms and the 'Three Freedoms'

How do you motivate a starving peasant to increase food production?

The central framework for agricultural recovery was known as Sanzi Yibao (Three Freedoms and One Guarantee). This system deliberately dismantled the massive, inefficient People's Communes into smaller production teams of 20 to 30 households.

The "Three Freedoms" reintroduced capitalist elements to agriculture to stimulate growth. Peasants were given Private plots, which made up 5% to 7% of arable land, and were allowed to access Free markets to sell any surplus crops they grew for a personal profit.

The "One Guarantee" referred to Baochan daohu, a policy that fixed output quotas at the household level. Under this Individual Responsibility System, families were directly responsible for their own production targets.

By introducing Profit incentives, peasants were finally rewarded for hard work rather than receiving a flat share of collective grain. This causal link—rewarding individual effort with material gain—rapidly increased agricultural efficiency and food output.

Industrial Readjustment and Growth

Reversing industrial decline required planners to value trained engineers over enthusiastic amateurs.

Liu and Deng shifted state focus away from heavy industry towards light industry and consumer goods under the Third Five-Year Plan. They closed over 25,000 inefficient, loss-making projects, including the disastrous backyard furnaces of the Great Leap Forward.

To improve industrial efficiency, the state granted small enterprises Independent accounting, meaning factories had to manage their own profits and losses. Furthermore, the guaranteed wages of the Iron rice bowl were replaced with financial bonuses and piecework rates to motivate factory workers.

Simultaneously, the government took emergency measures to stabilise the urban population. Millions of urban residents were moved back to the countryside to relieve pressure on city food supplies, while China imported approximately 3.5 million tons of grain annually from Australia and Canada.

Economic Success and Mao's Reaction

Solving a nationwide famine might seem like an ultimate victory, but in Maoist China, it made you a political target.

The pragmatic reforms were a resounding economic success. By 1965, grain production had recovered from a famine low of 143–145 million tonnes to 190–200 million tonnes, returning to 1957 pre-famine levels.

Industrial output also surged, growing at an average of 11% per year and surpassing 1957 production levels, aided by the discovery of the Daqing Oil Field which made China self-sufficient in oil.

However, Mao Zedong viewed these successes with deep suspicion, believing the use of profit motives was a form of Revisionism that poisoned the communist revolution. He branded Liu and Deng as Capitalist roaders who were secretly trying to restore capitalism in China.

In 1962, Mao launched the Socialist Education Movement to combat this perceived ideological corruption. Ultimately, his fear that the pragmatic reforms were undermining his legacy became a primary cause for launching the Cultural Revolution in 1966.