Socialist market economy
The socialist market economy (SME) is the economic system and model of economic development employed in the People's Republic of China. The system is based on the predominance of public ownership and state-owned enterprises within a market economy. The term "socialist market economy" was first used during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China's economic reforms. Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or "primary stage" of developing socialism. Despite this, many Western commentators have described the system as a form of state capitalism.
History of the Communist Party of China
Following the death of Mao Zedong in 1976, however, the CPC under the leadership of Deng Xiaoping moved towards "Socialism with Chinese characteristics" and instituted Chinese economic reform. In reversing some of Mao's "extreme-leftist" policies, Deng argued that a socialist country and the market economy model were not mutually exclusive. While asserting the political power of the Party itself, the change in policy generated significant economic growth. The ideology itself, however, came into conflict on both sides of the spectrum with Maoists as well as progressive liberals, culminating with other social factors to cause the 1989 Tiananmen Square Protests. Deng's vision for economic success and a new socialist market model became entrenched in the Party constitution in 1997 as "Deng Xiaoping Theory".