Readjustment (1962-1966)

Failure of Great Leap Forward

Mao bore full responsibility and retreated to the second line; Liu and Deng introduced new economic policy of ‘Readjustment, Consolidation, Filling out and Raising standards’

Industrial measure

the production scale and targets of heavy industry were reduced; investment in light industry increased; enterprises were required to streamline their workforce; unproductive factories were closed down and merged with others to lessen wage and urban population pressure

‘3 Freedoms and 1 Fixed Quota' 三自一包 (Agricultural)

plots free for private use 自留地, free market 自由市場, enterprises free to take responsibility for bearing their profits and losses 自負盈虧, and fixed output quotas on the basis of individual households 包產到户

Measure of People's Communes

replaced by village-ones (5000 households to 1620 households); peasants received farm yields based on the output they produced; communal canteens were closed

Relieving social tension

intellectuals who had been wrongly labelled as rightists were released; stopped launching political mass movements so that national economy was able to recover in a more stable environment

Sowing the seeds of Cultural Revolution

Liu corrected the ‘left’ mistakes made by Mao; Mao thought that policies like ‘free market’ would ‘lead China back to the road of capitalism’ and showed ‘right deviation’; Mao was irritated by Liu's words ‘three-tenths was natural calamity and seven-tenths was human mistakes’; Mao desired to purge capitalist-roaders

Putting economy back on track

total agricultural output increased by 6.2% (1962/1961); turned 8 billion yuan deficit into 830 million yuan surplus (1966/1962); the use of agricultural tractors and chemical fertilizers, as well as the use of electricity were 6 times and 70 times as much as that of the previous year; proportion of light industry in terms of total output increased from 33.3% in 1960 to 46.5% in 1962