Zhao Shukai: How China Allowed Private Employment

The policy shift emerged through rural experiments, divisions among senior leaders and deliberate policy ambiguity. The transition was also remarkably circuitous.

China’s removal of restrictions on private employment was gradual and contested. It unfolded through local experiments involving farmers, fishponds, and small workshops, amid conflicting instructions from senior leaders and repeated decisions to defer a definitive answer.

At the centre of the debate was a deceptively simple question: how many workers could a private individual employ before becoming a capitalist exploiter? Some officials cited a numerical example in Karl Marx’s Capital that later came to be treated as an eight-worker threshold. Others argued that policy should respond to the realities of rural production rather than abstract formulas.

Deng Xiaoping favoured allowing the practice to develop, observing its effects, and avoiding either immediate endorsement or suppression. The outcome, however, was not simply the result of Deng overruling ideological opposition. Senior leaders remained divided, local officials defended experiments already under way, and policy researchers exercised considerable influence by deciding which disputes appeared in central documents—and which were left unresolved.

Seen in the broader arc of China’s transition from a planned to a market economy, the question of hired labour was anything but marginal. For decades, production had been organised overwhelmingly through state and collective units, while private enterprise had little recognised place in the economic system. An individual might work for himself or operate a family business, but an enterprise that could not employ other people could scarcely grow beyond the scale of a household workshop. Allowing private hiring was therefore an indispensable step towards the emergence of a genuine private economy.

The transition was also remarkably circuitous. From the first possibility of relaxing the prohibition to the effective accommodation of private employment took close to a decade. Change often advanced not through a decisive repudiation of the old rules, but through experiments that were tolerated, questions that were deliberately left unanswered, restrictive instructions that were interpreted flexibly, and prohibitions that remained formally in place but were no longer enforced. Some of the officials who preserved room for reform were working with directives that appeared to leave them very little room at all. Their ability to postpone decisions, omit contentious language, and prevent premature suppression shows how difficult reform was—and how much it depended not only on pronouncements from the top, but also on local initiative, bureaucratic discretion, and the drafting of policy documents.

The following article was written by Zhao Shukai (赵树凯; b. 1959), a Chinese official of rural policy and governance. From 1982 to 1989, he worked at the Rural Policy Research Office of the Communist Party of China Central Committee’s Secretariat (later reorganised as the State Council’s Rural Development Research Centre and subsequently the Research Centre of Rural Economy under the Ministry of Agriculture and Rural Affairs). Starting in 1990, he served at the Development Research Centre of the State Council, China’s government cabinet, holding roles including Director General of the Rural Department’s Organisation Research Office and Director General of the Information Centre.

Zhao published it on 26 August 2024 on the WeChat blog 当代农政 Contemporary Agricultural Policies.

— Yuxuan Jia

邓小平与雇工政策

Deng Xiaoping and Hired Labour

The dispute over whether private hiring of labour should be allowed began in the rural areas. Its implications, however, extended far beyond agriculture. The debate challenged some of the deepest assumptions underpinning the planned economy and laid the groundwork for a market economy.

During the agricultural collectivisation campaigns of the 1950s, the Chinese central leadership expressly prohibited the private hiring of labour. The reasoning was simple and uncompromising: according to classical Marxist theory, hired labour entailed exploitation, and exploitation had no place in a socialist society. In May 1963, the central authorities’s Decision of the CPC Central Committee on Certain Questions Concerning Current Rural Work (Draft) cited “the exploitation of hired labour” as one manifestation of “a serious and acute class struggle emerging in Chinese society.”¹

The 1980 No. 75 Document — Notice of the CPC Central Committee on Issuing Several Questions Concerning the Further Strengthening and Improvement of the Agricultural Production Responsibility System — allowed some impoverished areas to introduce household-based contracting, but continued to stipulate that households were “not permitted to hire workers to conduct their operations.”

Once household contracting began to spread, however, farmers quickly started hiring labour. One prominent case was Chen Zhixiong, a farmer in Guangdong who had contracted a collectively owned fishpond.

In May 1981, People’s Daily organised a public discussion of the issue. In January 1982, Hu Qiaomu wrote to Ren Zhongyi, Guangdong’s first Party secretary, with copies sent to General Secretary Hu Yaobang and Vice Premier Wan Li. Hu wrote:

“This matter departs from the socialist system. Clear rules are needed to stop and correct it, and the case should be circulated throughout the province. Since it concerns the overall direction of the rural social system, I ask the provincial Party committee to consider it.”

After reading Hu Qiaomu’s comments, Wan Li wrote a different instruction:

“This matter should be investigated and studied. We must consider how to protect farmers’ enthusiasm for developing the commodity economy. We should not lightly force it into old and rigid frameworks.”

On 22 April, the Guangdong Provincial Party Committee submitted its Report on Chen Zhixiong’s Contracting Operations to the State Agricultural Commission. The report endorsed Chen’s contracting arrangements and business model, concluding that “in terms of economic returns, they are better than the previous model of collective management where everyone eats from the same big pot.”²

The exchange provides a glimpse of how local policy autonomy emerged.

On 31 December 1982, the Politburo discussed the draft of what would become the 1983 No. 1 Central Document. The debate focused largely on hired labour, which had already divided the Secretariat at an earlier meeting.

The theoretical question was whether the hiring of workers could be compatible with socialism. The policy question was whether it should be restricted and, if so, how many employees an individual business should be allowed to hire.

One side argued, drawing on Karl Marx, that hiring more than eight workers marked the point at which an employer became an exploiter. What the revolutionary forebears had said, this group maintained, remained valid and should be upheld.

Yuxuan’s note:

This is the passage that is often cited as support for the claim that employing more than eight workers makes one a capitalist:

If this labourer were in possession of his own means of production, and were satisfied to live as a labourer, he need not work beyond the time necessary for the reproduction of his means of subsistence, say 8 hours a day. He would, besides, only require the means of production sufficient for 8 working-hours. The capitalist, on the other hand, who makes him do, besides these 8 hours, say 4 hours’ surplus-labour, requires an additional sum of money for furnishing the additional means of production. On our supposition, however, he would have to employ two labourers in order to live, on the surplus-value appropriated daily, as well as, and no better than a labourer, i.e., to be able to satisfy his necessary wants. In this case the mere maintenance of life would be the end of his production, not the increase of wealth; but this latter is implied in capitalist production. That he may live only twice as well as an ordinary labourer, and besides turn half of the surplus-value produced into capital, he would have to raise, with the number of labourers, the minimum of the capital advanced 8 times.

—Karl Marx, Capital, Volume I, Chapter 11 (“Rate and Mass of Surplus-Value”)

The opposing view was that the numerical example in Marx was an “arbitrary assumption.” Policy should not begin with abstract categories but with the realities of economic life.

Wan Li said:

“Some people say that hiring workers is exploitation. But when we export labour services, are we not deliberately sending Chinese workers abroad to be exploited by foreign capitalists? What we are trying to do is make a country with an underdeveloped commodity economy prosperous as quickly as possible.”³

The Politburo ultimately accepted the Secretariat’s recommendation: observe the phenomenon for the time being and keep it out of the newspapers. For private industrial businesses, the limit was two or three apprentices and three or four helpers. Where businesses employed more helpers than the rules allowed, the authorities proposed the “three noes”: such practices should not be encouraged, should not be publicly promoted, and should not be hastily banned.⁴

The question resurfaced at the end of 1983, during the final stages of drafting the 1984 No. 1 Central Document. On 9 December, Deng Xiaoping instructed his secretary to telephone Hu Qili, then a member of the Central Secretariat, and convey his view on hired labour in the rural areas:

“I said at the Politburo meeting that we should let it take its natural course and look at it again in two years.”⁵

On 29 December, Chen Yun wrote two comments on the draft submitted for approval.

“First: We can continue to observe the policy on hired labour for a few more years. Even if some problems emerge, there is nothing to fear.

Second: We must proceed cautiously when Party members hire workers. This is a matter of principle and requires full discussion. In his report on the revision of the Party Constitution at the Eighth Party Congress in 1956, Comrade Xiaoping said: “A Party member must be a person who works and does not exploit the labour of others.” Although circumstances have changed considerably since then, the basic requirements for Party members should still be upheld.”⁶

Chen Yun stressed that Party members who hired labour should be subject to special rules rather than treated in the same way as ordinary citizens.

The draft had already been circulated to and approved by Deng Xiaoping, Chen Yun, Hu Yaobang, Zhao Ziyang, and other senior leaders when Wan Li added a sentence to the section on rural hired labour: “All the above policies apply equally to Communist Party members.” After the document was returned to the Central Rural Policy Research Office, Du Runsheng removed Wan Li’s addition. Only then was the document formally approved by the Central Committee.⁷

During the ensuing period of “observing for a few more years,” the hiring of labour continued to expand, as did the policy debate. Views to suppress or even prohibit the practice never disappeared. Among the officials directly responsible, however, the inclination was to avoid imposing restrictions.

On 24 November 1985, Deng Xiaoping discussed the matter with Bo Yibo. Bo described three kinds of rural Party cadres: those who led the community towards common prosperity; those who took the lead in becoming prosperous as individuals; and those who enriched themselves through privilege.

Some members of the third group operated businesses with hired workers, received special support from higher authorities, occupied public resources, and obtained large amounts of state credit. Deng responded:

“The third category must be controlled. Progressive taxes can be imposed, and lending policies should also differentiate between them. As for hired labour, I said it was necessary to observe it for two or three years. It has now been almost seven years since the Third Plenum — only two months short.”

“But the latter category does need to be brought under control. The time has come to do so. They are using state resources and state loans; we cannot simply leave them alone. In the future, they should still be guided towards the collective economy. Ultimately, they should be guided toward the collective economy.”⁸

“The third category should be controlled. It could be subjected to progressive tax rates of 80 or 90 per cent, as well as differentiated access to credit.”⁹

The issue was subsequently placed on the agenda of the Central Rural Work Conference.

On 6 December, Du Runsheng chaired a meeting of the document-drafting group to consider how to implement Deng’s instructions to “bring the practice under control” and “guide it towards the collective economy.”

The debate was intense, and the group could not reach a consensus. Du finally concluded:

“The document should avoid the issue of hired labor, because it cannot be explained clearly in one or two sentences.”¹⁰

Deng’s instruction to impose control was therefore not translated into formal policy. Du Runsheng’s handling of the issue had a major influence on the subsequent course of rural policy reform.

After the 1986 No. 1 Central Document was issued, the Central Rural Policy Research Office under the Secretariat of the CPC Central Committee and other relevant agencies organised a variety of studies devoted to hired labour and considered several possible policy approaches. When Du oversaw the drafting of the 1987 rural work document, he again chose not to address the issue directly.

This episode illustrates the influence that policy research and drafting bodies could exercise when senior leaders were divided.

In August 1989, the Central Committee issued the Notice on Strengthening Party Building. The document stated that Communist Party members were not allowed to hire labour, and that Party members who privately hired labour were to be cleared out.

More than three decades later, the notice has not been formally repealed. Nor has it been enforced.

China’s Rural Reform: A History Not Designed but Discovered

Zhao Shukai: Pluralism powered China’s rural reform

1. Huang Daoxia (黄道霞), ed., Historical Materials on Agricultural Cooperativisation since the Founding of the People’s Republic of China [《建国以来农业合作化史料汇编》] (Beijing: CPC History Press, 1992), 762.

2. Wu Xiang (吴象), A Man with a Capital M [《大写的人》] (Tianma Publishing Company, 2011), 53.

3. Zhang Guangyou (张广友), working notes, 1983. Zhang was formerly editor-in-chief at Farmers’ Daily [《农民日报》] and had previously worked as a correspondent for Xinhua News Agency (新华社).

4. Du Runsheng (杜润生), ed., A Chronicle of Decision-Making in China’s Rural Reform [《中国农村改革决策纪事》] (Beijing: Central Party Literature Press, 1999), 175.

5. CPC Central Committee Party Literature Research Office (中共中央文献研究室), ed., Chronology of Deng Xiaoping, 1975–1997 [《邓小平年谱（一九七五—一九九七）》] (Beijing: Central Party Literature Press, 2004), 948.

6. CPC Central Committee Party Literature Research Office (中共中央文献研究室), ed., Chronology of Chen Yun [《陈云年谱》], vol. 2 (Beijing: Central Party Literature Press, 2015), 394.

7. Zhang Luxiong (张路雄), “People and Episodes from the Drafting Group for the No. 1 Central Documents of the 1980s” [《1980年代参加中央一号文件写作组的一些人和事》], unpublished manuscript, December 2018.

8. CPC Central Committee Party Literature Research Office, Chronology of Deng Xiaoping, 1,097.

9. This remark does not appear in the official Chronology of Deng Xiaoping. However, this article’s author, Zhao Shukai, told The East Is Read that he was aware of accounts attributing such a remark to Deng.

10. General Affairs Group of the Central Rural Policy Research Office under the Secretariat of the CPC Central Committee (中共中央书记处农村政策研究室综合组), internal meeting materials, December 1985.