Chapter 7 New Policies of Jiang Zemin and Zhu Rongji

Jiang Zemin's political career began in Shanghai.Before the founding of New China, Shanghai had always been the commercial center of China, where the commercial interests of China and the West met. In the 1980s, development opportunities began to appear in Shanghai.Jiang Zemin, secretary of the Communist Party of China's Shanghai Municipal Committee, played an important role in Shanghai's renaissance as a new industrial city and the birth of the Pudong New Area.Support for economic modernization and loyalty to the Communist Party are important reasons why he was able to become Deng Xiaoping's successor in the early 1990s.

For the revival of Shanghai, Jiang Zemin has a lot of credit, and Zhu Rongji, who is slightly younger than him, also played an important role.In many respects, Zhu Rongji's political career is similar to that of Deng Xiaoping's, both of whom have had their ups and downs.Zhu Rongji has shown extraordinary courage, creativity and foresight in his work.Foreign diplomats were amazed by his intelligence and super memory.He cannot tolerate corruption and incompetence, and his efforts have alleviated this chronic disease in China.After Jiang Zemin became Deng Xiaoping's successor, Zhu Rongji was also quickly transferred to Beijing, where he played a prominent role in advancing reforms as governor of the People's Bank of China and later as Premier of the State Council.

Under the leadership of Jiang Zemin and Zhu Rongji, the Chinese government has become not only a champion of reform but also its driver.Both Jiang Zemin and Zhu Rongji strongly supported the expansion of "regional experiments".Although the old system will not be eliminated quickly until the new system is established, in the 1990s, preferential policies that used to be enjoyed only by a few special economic zones were more aggressively extended to the wider area of ​​China.As the number of private enterprises increased, the old system of state-owned enterprises, which had been challenged in the Deng Xiaoping era, began to change.

The most significant change may be that in the late 1990s, state-owned enterprises began to experience layoffs. Some banks also had the right to require state-owned enterprises to repay their loans and take punitive measures for non-repayment behaviors. Many limitations are removed.Many workers were laid off, which shocked people who were used to holding "iron rice bowls". The "iron rice bowl" can bring them lifelong security. Although this kind of security is not very good, it is better than nothing.Even the collapse of some state-owned enterprises was simply unimaginable in the 1980s, because it was impossible for state-owned enterprises to fail for most of the past few decades.

The old system of state-owned enterprises has become an obstacle to future economic development.Regardless of output, these state-owned enterprises consume funds; employees can stay in state-owned enterprises regardless of their ability to do the job; most state-owned enterprises produce mediocre products and service levels.Of course, there are some state-owned enterprises that are exceptions.Reform is to allow state-owned enterprises with higher production efficiency to continue to survive and grow stronger, and to let state-owned enterprises with low production efficiency withdraw from the stage of history.The dramatic rise in layoffs is alarming, but it is also an opportunity, with some workers able and willing to seek employment in vibrant private sector.This often leads to the movement of people, with tens of millions of people moving back and forth across China every year as the strict restrictions of the past are lifted.

Thousands of old factories and businesses closed their doors during the SOE reform process, leaving a vacuum that needed to be filled, and was filled.Millions of workers had to find new employment opportunities, and many were reemployed even though many lacked the ability to do so.People leave the old industrial areas and rural areas to go out for employment, which not only means the increase of the urban population, but also an important part of the "new economy".The urban population rose from 25 percent of the total population in 1990 to nearly 40 percent in the late 1990s, implying the migration of as many as 200 million people.Urbanization has also changed people's attitudes toward private property.Many people live in dormitories or units provided by their bosses when they first move to a new city for work.With the influx of foreign populations from Shanghai, Guangdong, Shenzhen and Beijing, people's ideas and national laws have undergone significant changes.People strongly demand to own their own housing, and the government also allows individuals to purchase private housing.Not only have state-owned enterprises started to lay off employees, but they have also been allowed to sell off corporate assets, including housing, on the cheap, for which the market is desperate to buy.Later, the urban housing market became a major area of ​​financial speculation.

The importance of urbanization to China's development over the past 20 years cannot be overemphasized.In 19th-century Britain and early 20th-century America, urbanization was an important part of industrialization and rapid economic growth.The same was true in China in the 1990s.The rapid growth of population has forced cities to invest more and more funds in infrastructure construction, new roads, water supply and sewage systems, public transportation facilities, buildings, bridges and tunnels, as well as power stations and power grids.After that, supporting infrastructure construction including shopping malls, schools and housing will be carried out.Initially, the growth of urbanization was most evident in Shanghai and the southern coastal areas of China.By the end of the 1990s, this trend had spread to other coastal areas and inland cities such as Wuxi, Chengdu, and Chongqing.

State-owned enterprises have not disappeared in the reform.The banking system dominated by the four major banks, as well as steel, coal, oil, natural gas, electric power companies, fixed-line and mobile communication companies, and a large number of medical institutions are still state-owned.However, the managers of these state-owned enterprises began to be more and more responsible for the production of the enterprise. They have more autonomy in improving the operation of the enterprise, and the effectiveness of the enterprise will determine the rewards and punishments they receive.Corruption gets attention, but the focus is misplaced—what changed in China in the 1990s is more important than what didn't change.Regardless of short-term economic viability, some projects do need to be built.For example, roads connecting new cities and ports.Such roads must be repaired before actual traffic needs can be manifested.The construction of a road can be a waste.However, the construction of thousands of roads will enable China to have a modern transportation infrastructure, which is conducive to China's faster development.

In the early 1990s, the Shanghai and Shenzhen stock exchanges were established.The creation of a domestic stock market is another development in China.The companies initially listed were all state-owned enterprises, and it was the companies rather than the shareholders who benefited from the stock purchases.The stock market is a way for the government to inject capital into ailing businesses, and once an initial public offering is completed, it is difficult to attract investor interest in subsequent transactions.At that time, the Chinese stock market did not allow foreign capital investment, and investment from Hong Kong, China was not allowed, so there was a lack of liquidity in the stock market.Some large and well-known state-owned enterprises can be listed in Hong Kong, which provides foreign investors with the first opportunity to "participate" in the economic development of mainland China.However, most of the transactions at that time were speculative transactions, and these equity investment markets did not become an important part of China's transformation and rise until more than 10 years later.

In the extremely complicated reform process, Jiang Zemin and Zhu Rongji quietly made a fundamental decision. After Deng Xiaoping passed away in 1997, they not only continued to advance the cause started by Deng Xiaoping, but also made it obtain new development.The focus of Deng Xiaoping's work was to open China's door to the world and to reform the domestic mode of production, which generally strengthened China's ties with the world.But in the early 1990s, these linkages were only a small fraction of the overall economic activity in the country.Jiang Zemin and Zhu Rongji understand, or at least their actions show that they understand, that the next step is to integrate China into the global economy.What they intend to do is not just open up some regions and allow foreign capital and enterprises to participate in the Chinese economy, but to allow China to fully participate in the global economy.Joining the World Trade Organization is one way, because the WTO is the main driver of the global economic system.

The predecessor of the World Trade Organization was the General Agreement on Tariffs and Trade.When Deng Xiaoping was in office, China formally submitted an application to resume its status as a full contracting party to the General Agreement on Tariffs and Trade.When Zhu Rongji was in office, he pushed this process forward again.It is not enough to reform the bureaucracy, change the culture of state-owned enterprises and promote urbanization.Zhu Rongji pointed out that China's economy has reached a crossroads, and it cannot continue to develop without restructuring.Instead of directly managing the economy, the Chinese Communist Party and the central government take steps to move the economy toward a market economy.The success of China's market economy is not only determined by China's own judgment standards, but also by China's ability to attract global capital and produce products that are competitive in the global market. At the same time, Jiang Zemin and Zhu Rongji also maintained a high degree of vigilance against the risk of reforming too much too quickly.Together with the whole world, they witnessed the process of economic reform in the Soviet Union.The disintegration of the Soviet Union shocked them, and the state of Russia later worried them even more. In the early 1990s, Russia's leaders had to take orders from the United States and financial institutions such as the World Bank and the International Monetary Fund due to economic dislocation and rapidly declining productivity.This led to the sudden opening of Russia's economy to the world (especially to foreign capital).However, Russia's economy cannot withstand the influx of foreign capital, or Russia cannot make rapid economic changes to become competitive in the international market.Chinese leaders have learned a lot and lessons from Russia's experience: reform, but in a controlled way; change, but at your own pace; globalization, but in stages; Attract foreign capital, but do it in your own way and on your own terms.