Deng Xiaoping and the Transformation of China (77 page)

The situation came to a head when Ren Zhongyi and Liu Tianfu were directed to appear on February 13 to 15, 1982, before Beijing's Central Discipline Inspection Commission, chaired by Chen Yun. Local officials informally referred to the call to Beijing as “
jin gong
” (the summons, in imperial times, of local officials to the capital to receive criticism). The two men were told to explain their failure to stop the smuggling and corruption and warned to do better in the future.
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As required, Ren undertook a self-criticism, though he also brought sixty-eight people from the province with him, showing that Guangdong officials were united in their efforts to promote reform
and were making serious efforts to stop the smuggling. The presence of so many Guangdong officials complicated Chen Yun's task of carrying out the criticism and could not have enhanced whatever sympathy he might have felt for Ren Zhongyi. Some of the other Beijing officials at the meeting joined in the criticism, going so far as to say that a class struggle was taking place in Guangdong and the bourgeoisie were benefiting.
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When Hu Qiaomu remarked that the situation raised broader political and ideological questions, Guangdong officials understood that the case against them was becoming very serious.

Before leaving Beijing, Ren Zhongyi consulted privately with Hu Yaobang, his key supporter in Beijing, about how to pass on Beijing's message to his subordinates and the business community in Guangdong. If he relayed the passionate attacks from the critics in Beijing, especially the discussion of class warfare, it could stifle the economic dynamism in his province. Hu Yaobang told Ren Zhongyi that Ren himself could decide what should and should not be passed on. After returning to Guangdong, Ren called an enlarged meeting of the provincial standing committee to convey Beijing's concern about the smuggling, but he did not convey the full force of Beijing's anger and he did not mention class struggle. He did say that where they had made errors, they should be corrected. Illegal activities should end. “But,” he added, “we are not going to carry on campaigns or lay the blame on particular people. We will firmly oppose personal profiteering, but we will firmly support reform and opening. As first party secretary, I bear responsibility. My subordinates do not.” Ren's subordinates were very grateful, for they knew that without his willingness to accept responsibility and to protect them from criticism, the experiments in Guangdong would have to be vastly scaled back.
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After the Beijing meeting, Chen Yun told Hu Yaobang that he was deeply disappointed with Guangdong's response. Hu then called Ren Zhongyi to tell him that they had not passed the test, and he must return for another round of criticism. Ren asked if he could bring Governor Liu Tianfu, and Hu agreed. A meeting of the party Secretariat scheduled from February 23 to February 25 was to examine Ren's failure to control smuggling, corruption, and bribery. Immediately after his arrival but before the meeting, Ren and Governor Liu Tianfu had a long talk with Hu Yaobang and Zhao Ziyang who, as friends of Guangdong's reform, explained the criticism against them. Hu told Ren Zhongyi to write a new self-criticism, which Ren agreed to do. Ren also accepted Liu Tianfu's revisions, which strengthened his self-criticism.

The formal meeting during Ren's second summons was attended by more party and government representatives than the first meeting and the criticism was more severe. An official of the Central Discipline Inspection Commission said that strange things were happening in Guangdong, and yet Guangdong officials did not seem to consider them strange. Another official said that Guangdong leaders were allowing the sheep to get out of their sight. One critic announced that the struggle against corruption was a class struggle. Ren responded to these comments by presenting his penetrating self-criticism, but he and Liu also explained the efforts Guangdong had made to deal with the problems. When Ren and Liu asked that the special policies for Guangdong not be withdrawn, Zhao Ziyang and Hu Yaobang assured them that those policies would not change, but Guangdong would have to crack down on smuggling and corruption with more vigor.
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This second visit to Beijing still did not resolve the problems. Following the two Beijing meetings, Gu Mu spent most of his time from April to September in Guangdong leading investigations.
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The Central Discipline Inspection Commission also dispatched a team headed by Zhang Yun, a senior official and deputy head of the commission, for two months of further inspection. At the end of the two months, she concluded that Ren Zhongyi and others in Guangdong had made great efforts to deal with the problems.

Deng Xiaoping had been following the reports raised at the various meetings, yet avoided speaking out in public to support Guangdong and Fujian. When he read Zhang Yun's report, however, which in effect resolved the issue in favor of Guangdong, he immediately sent it on to the Politburo. The Politburo's own Document No. 50, issued on December 31, 1982, affirmed the efforts in Guangdong to deal with the economic crimes. It quoted Chen Yun's conclusion: “We must operate the SEZs, but we must continuously summarize our experiences and seek to make sure the SEZs are done well.” Deng had succeeded in continuing his experiment without putting his personal authority on the line. Guangdong officials breathed a sigh of relief.
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Until he left office, Ren Zhongyi was under constant pressure from Beijing but he continued the reforms and kept up the rapid pace of growth.
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In 1985, Ren reached the retirement age of seventy, and although other regional officials with comparable achievements were asked to stay on beyond retirement, Ren was honorably retired.
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He was allowed to keep his housing and his perquisites. First Party Secretary Xiang Nan of Fujian suffered a worse fate. He was held responsible for the crimes of Jinjiang Pharmaceutical Company in Fujian, which had been found guilty of selling fake drugs. Xiang Nan had been enormously respected by reform-minded officials in Beijing for his
ability and dedication to reform. But in February 1986 he was removed, forced to write a series of five humiliating self-criticisms, and given an inner-party warning by the Central Discipline Inspection Commission. Yet even though conservatives in Beijing managed to remove Ren Zhongyi and Xiang Nan, the groundbreaking policies they pursued in Guangdong and Fujian not only continued, but were expanded.

Affirming the Experiment: Fourteen Coastal Cities, 1984

Deng carefully waited for a favorable political atmosphere before expanding the policies in Guangdong and Fujian to other areas. After the Central Discipline Inspection Commission gave its stamp of approval for Guangdong's efforts at the end of December 1982, the tide of hostility began to ebb. In June 1983 Deng was able to announce, “Now, most people are saying good things about the SEZs.”
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Deng encouraged Beijing officials to travel to Shenzhen and Zhuhai to see for themselves; he knew they would be impressed by the visible progress. By then support for Deng and his policies of reform and opening in general had built up a strong momentum within the party. The problems that had led to widespread support for Chen Yun's readjustment policy had begun to disappear. Food supplies were adequate, economic growth was rapid, and budget imbalances had declined. Exports in 1984 surpassed 100 billion yuan, a 238 percent increase from 1978.
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On January 24, 1984, during his winter “vacation,” Deng arrived in Guangdong on his special train. He spent more than two weeks visiting Guangdong and Fujian, including three of the four SEZs—Shenzhen, Zhuhai, and Xiamen—and two dynamic counties near Zhuhai, Zhongshan and Shunde.
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Deng already had a positive view of developments in the SEZs before his trip, but he was cautious about praising them until he had listened to local reports and seen them with his own eyes. Deng was sufficiently excited by the modern skyscrapers and factories in Shenzhen that he affirmed Yuan Geng's slogan displayed on the big billboard in the center of the city: “Time is money, efficiency is our life.”
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Only after observing Shenzhen and Zhuhai and arriving in Guangzhou did he say, “The development and experience of the Shenzhen SEZ prove that our policy of establishing such zones is correct.” In Shenzhen, several square kilometers of high-rise buildings, virtually unknown in China in 1978, had already given Shenzhen the appearance of a modern Western city.

Television sets were just beginning to become popular in 1984, so millions
of Chinese could see on television the high-rise buildings and factories as Deng saw them. After visiting Guangdong and Fujian, Deng announced, “As for our policy of opening . . . the problem is we haven't opened enough. . . . In Shanghai we need ten more big hotels and we can rely entirely on outsiders to be the sole investors.”
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He announced that phase two of the Baoshan Steel Works could begin; there was no need to wait until the next five-year plan. Reports of the successes Deng had observed in Guangdong and Fujian helped build support for the opening of the coastal cities and the decisions on structural reform that were announced later in the year.

In saying that the “basic policies of the SEZs” were correct, Deng did not defend local officials. In effect, his message was that smuggling, bribery, and corruption were not a consequence of the policy but of its implementation, and should be stopped. Conservatives attacked the leaders in Hainan, Guangdong, and Fujian who were promoting Deng's policies, but they succeeded only in toppling the targets of their attacks, not in changing policy. Deng's concern was not with the fate of individual officials but with the plan to extend the opening to fourteen coastal cities and other areas along the coast. On this he was both vocal and successful.

On February 24, shortly after returning to Beijing, Deng called in Hu Yaobang, Zhao Ziyang, Wan Li, Yang Shangkun, Yao Yilin, Song Ping, and others to prepare the policy statements that would open the fourteen coastal cities. Reporting on the speed of construction in Shenzhen, Deng said that the construction workers were from inland cities and that their efficiency was due to a contract responsibility system whereby they were paid based on their performance. Deng stressed the advantages of the SEZs for learning about foreign technology and management skills. He reiterated that it would not be possible to pay high wages everywhere immediately, but that they should allow some areas to get rich first.
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He also reported that because of new job opportunities in Shenzhen, many of those who had fled to Hong Kong were now returning to Shenzhen. He then instructed Yao Yilin and Song Ping to convey all of these views to Chen Yun.

Over the next two months, the party Secretariat and the State Council worked on preparing a circular, to be issued on May 4, announcing the extension of the opening policy to fourteen coastal cities, each of which would be allowed to adapt the policy to local circumstances.
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Gu Mu, experienced in negotiating with Guangdong and Fujian, was tasked with coordinating relations between Beijing and the fourteen coastal cities. This expansion of privileges represented public acknowledgment of Guangdong's and Fujian's
successes in building modern industry and accumulating foreign capital. It was also testimony to the pressure from other areas that wanted to be granted the same privileges.

To mollify officials in inner China, the circular also stated that the coastal areas would assist the inland areas by providing material and financial support and by helping to train workers. The contents of the circular were presented in such a way as to soften the objections of Chen Yun and the other more conservative officials. Chen Yun did not oppose the gradual opening of more coastal areas, but he was especially critical of new economic zones with boundaries, for they created new troublesome procedures as goods flowed between the zones and the surrounding areas.

Some other officials, too, had complained that although Guangdong was supposed to bring in high-tech factories, it had concentrated instead on low-tech, labor-intensive factories and service-sector development. Officials were very eager for China to move quickly into higher technology. To put pressure on the new areas to upgrade their technology, and to get around the moratorium on new SEZs that had been initiated in January 1982 by Chen Yun, Document No. 13 of 1984 authorized that the new zones be called Economic and Technological Development Zones and that foreign firms located there should bring in more high-tech industries.
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The truth is that Guangdong then lacked the technical and managerial personnel to introduce high-technology immediately, and foreign companies had invested in China to take advantage of its comparative advantage: its low labor costs. Nonetheless, to pacify the critics, the fourteen coastal Economic and Technological Development Zones were given instructions on how to set up and administer their areas, including guidelines in the “Decision on the Reform of the Economic Structure,” which Deng issued at the Third Plenum of the 12th Party Congress in October of 1984. Although these documents were written in formal language, they were not taken by local officials as precise binding legal documents; instead they believed, correctly, that the instructions reflected Beijing's willingness to support a high degree of openness and flexibility in attracting and working with foreign enterprises.

Although Guangdong and Fujian officials felt relieved at the decision to open up fourteen coastal areas and took this as a vindication and affirmation of their policies, the expansion of the privileges to other areas created new problems for them—namely, increased competition. Foreigners and ethnic Chinese abroad who had been investing mostly in Guangdong and Fujian
now increased investments elsewhere. As it turned out, however, there was enough foreign investment to go around. In the late 1980s, not only did the counties around the SEZs in Guangdong and Fujian flourish (albeit at a slightly lower rate of growth), but also the buildup of the SEZs within Guangdong—Shenzhen, Zhuhai, and Shantou—continued. The Shantou SEZ was expanded to include the entire island on which the SEZ was located. With the opening of Taiwan in the late 1980s, investment funds from Taiwan, Southeast Asia, and the United States increased; the Xiamen SEZ, near Taiwan, began to prosper.