Strange Rebels: 1979 and the Birth of the 21st Century (47 page)

The next day, after an uncomfortable night spent in the only existing local hotel (which had no electricity or running water), the Americans attended a briefing where the Chinese unrolled blueprints that depicted acres of factories, warehouses, and other facilities. The plans betrayed an ambition that was startling. “It was really hard to believe,” Gorman recalled. “Nothing in China at that point happened quickly—except politics. Business and construction didn’t happen on those kinds of timelines.”
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The Baoan Foreign Trade Base was located in a village that was named, like the nearby river, Shumchun. It later became known under a different version of the name: Shenzhen. It was a place that had attracted Deng’s attention at least as early as the Work Conference, when he had floated the idea that the party should “enable some regions to perform better and become more prosperous.” Deng had calculated that if only 5 percent of the counties and 5 percent of the citizenry became “relatively prosperous,” this would translate into one hundred counties and 40 million residents—the equivalent of a medium-sized country and presumably a powerful catalyst for change. Shenzhen was the first on his list of nineteen places that he targeted for early prosperity. “Obviously, he had taken notice of this place at a very early date,” writes former aide Yu Guangyuan. “In his view, a major factor in Shenzhen’s quest to become prosperous sooner than others was its capacity to conduct foreign trade.” During the Work Conference, in fact, Yu himself had told party officials from Guangdong of his own idea—inspired by an ad a friend had brought from Hong Kong—to construct office buildings in Shenzhen under the auspices of the Chinese Academy of Sciences (Yu’s home institution) and rent them to people from Kowloon, just over the border, where soaring land prices were already driving rents into the stratosphere. Yu even envisioned simplifying border-control procedures for visitors from Hong Kong.
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Gorman and his compatriots, who had all experienced firsthand the xenophobic legacy of the Cultural Revolution years during their visits to China, could hardly be
blamed for feeling skeptical. What they were not yet able to appreciate was the fact that the Chinese were deadly serious about their plans to invite overseas investors into new “special districts” that were already in planning.

Lower-level officials—especially in Guangdong—were undoubtedly keen on the idea. But this was one case where Deng could claim full credit for driving the initiative forward. He had spent his years in exile brooding over how to stimulate the Chinese economy, and he had concluded, after his return to power in the early 1970s, that his country had to tap into the global marketplace for technology, know-how, and management expertise was an indispensable precondition. His 1974 trip to United Nations headquarters in New York City had been the first to jolt him into an understanding of just how far behind China had fallen.

After his third return from political oblivion in 1977, he took a series of trips around the region that reinforced this view. His itinerary included a visit to Japan, where he witnessed firsthand the evidence of that country’s extraordinary postwar rise to the pinnacle of the global economy, as well as one to Singapore, which, though far smaller in absolute terms, was also demonstrating just how powerful the East Asian formula of single-party rule and market economics could be. Just how influential these experiences were becomes clear from Deng’s private comments to his speechwriting team during the 1978 Work Conference and the Third Plenum—the ones in which he gushed about the Japanese and Singaporean workers who could use their bonuses to buy houses and cars.
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Nor was that all. Deng and his colleagues—at least those who wanted to pay attention to the outside world—were also acutely aware of the extraordinary rise in living standards already engineered by Hong Kong and Taiwan, which (like Japan, Singapore, and South Korea) had also made strategic decisions to reject “self-sufficiency” and to actively participate in global trade. Taiwan, in particular, had reaped a variety of benefits from its “Export Processing Zones,” areas with special commercial, legal, and tax regimes that were designed to entice foreign investors to take advantage of a well-trained but low-wage labor force. The Taiwanese were gambling that the shortfalls in tax and customs revenues would be balanced out by the know-how that they would acquire in management and production techniques (not to mention the extra employment). By the late 1970s their gamble was paying off to spectacular effect, and the example was not lost on their compatriots on the mainland.

But the impetus for a creative approach to foreign investment did not come only from the top. There was also some intense lobbying going on at the regional level—particularly in one of the areas that stood to gain the most from trade with the
outside world. That was Guangdong Province, directly adjacent to Hong Kong. Guangzhou (or Canton) was the home of the traditional trade fair because it had a long history, dating back to imperial history, as one of the few places where foreigners were allowed to do business with Chinese. The direct proximity of Hong Kong, whose population included many Cantonese-speaking refugees from Guangdong, meant that the province still had access to an extensive web of contacts with the outside world, including the huge network of overseas Chinese. All this meant that a certain amount of illegal trade had continued even during the darkest days of Maoism. (Indeed, considering the huge and intricate possibilities for smuggling offered by the Pearl River delta, the gateway to Guangdong, it could have hardly been otherwise.) Many Guangdong residents received remittances from their relatives in Hong Kong or places more distant, and these funds were a major source of revenue for a region that had otherwise been severed from its natural trading hinterland after 1949.

Guangdong party officials knew all of this very well, and they were eager to seize upon the new talk in Beijing of opening up the country to investment. They had prevailed upon the party bureaucracy to let them open a few modest channels for trade with Hong Kong, but they were already thinking big. Their plans received a major boost in 1978, when a set of high-ranking party officials, including several from Guangdong, set off on a fact-finding trip to Western Europe that affected them in much the same way as Deng’s journeys had changed him. They were impressed not only by the modern air-traffic control systems at Charles de Gaulle Airport in Paris and a modern container terminal in a German port, but also by the willingness of their hosts to expose them to new insights and by the eagerness of European businesspeople to marshal funds for investment in production facilities in China.
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In January 1979, just two weeks after the end of the Third Plenum, the new party boss in Guangdong, Xi Zhongxun, got approval from Beijing to start drawing up plans for “special zones” that would be opened up to foreign investment. The first zone opened shortly after that in Shekou, a corner of Shenzhen. The Chinese Merchant Steamship Company, a Hong Kong firm set up and owned by the government in Beijing, had been lobbying for a place where old ships could be taken apart for scrap, which could be sold at high profits to the resource-hungry capitalists in Hong Kong. The fact that the company in question was technically “foreign” but actually controlled by the People’s Republic made the experiment that much easier to implement. “Shekou thus became the first place in China to allow foreign direct
investment and the first area where decisions about a company inside China could be made by people located outside the country.”
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Economic trends in the outside world gave the officials in Guangdong an additional incentive to open up their province to the outside world. Neighboring Hong Kong was experiencing one of the characteristic disadvantages of a surge in economic growth: a sharp rise in wages. This was rapidly eroding the colony’s international competitiveness, and Hong Kong businesspeople were casting desperately around for new sources of labor. The most obvious place was just over the border.

C. K. Feng was a junior executive with Eltrinic, a small Hong Kong firm that made small electrical devices: a bug zapper, an electric can opener, snow-melting equipment for the US market. Eltrinic’s production was fairly labor intensive, and the rising wages were hitting it hard. So when one of the company’s bosses heard from a contact on the mainland that the Communist Party was soon going to start inviting in foreign manufacturers, Feng took notice. “I volunteered to go the mainland to open up and find workers there,” he said later. “I was so concerned about the workers’ shortage in Hong Kong.” He first traveled to Baoan—the same spot that Gorman visited a few months later—in late 1978 and soon began plans to construct a small factory building and to transport machinery there from Hong Kong. The mainland authorities gave Feng a special Hong Kong travel permit, actually a thick book used to record a variety of data. This presumably privileged access did not seem to reduce the number of papers that had to be filled out at each crossing, however. Each time he entered China, Feng said, “It was like crossing into a different world.”

In the spring of 1979, after jumping through countless bureaucratic hoops, the first Eltrinic factory opened in Shenzhen. It employed twenty local workers. (Its total workforce at the time was around seven hundred.) The first year was spent training them. The factory’s intended production—heating elements for blow dryers—required a certain amount of skill, and the mainland workers were starting from scratch. None of them had ever seen a blow dryer. But they weren’t fussy. “The workers produced whatever you wanted them to produce,” Feng recalls. “They didn’t care.” Maintaining communications between the factory and headquarters in Hong Kong was no easy task. The only local telephone was located in the village administration office, and placing calls was hair-raisingly frustrating business. The villagers, however, were extremely happy. When the production line was inaugurated, they killed a dog—a much-valued local delicacy—for a banquet to celebrate the occasion. The somewhat more fastidious Hong Kongers were bemused.
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The founding of Feng’s factory preceded the formal establishment of the Special Economic Zones (SEZ) on August 26, 1979—and that, in itself, says quite a lot about how development in China was progressing at this time. Even as Guangdong was pressing Beijing for formal latitude to manage its own affairs and attract foreign investors, the first contacts between the province and foreign investors were already being made.
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These areas were granted exceptional conditions to attract foreign investment, but they could also be easily quarantined from society as a whole. The latter point conveniently placated party conservatives, who worried that the populace might succumb to the corrosive effects of capitalism. Ironically, potential foreign investors shared their appreciation; to them, Deng’s enclave strategy offered a vital degree of protection against political backlash from the Maoists. To be sure, the SEZs needed time to show results, but that was not a problem. Reform in China was supposed to be slow; the country had experienced tumult enough. The main thing was that the keystones of a new economy—one driven by efficiency rather than ideological correctness—had been laid. The new revolution—in its own cautious way—could begin.

No one embodied that revolution better than Rong Zhiren. The restaurant that he opened in that spring of 1979 proved a big success. Three years later, by now an affluent Guangzhou entrepreneur, he received the privilege of meeting Deng Xiaoping at a social event for Guangdong Province luminaries. The fact that a local businessman was deemed worthy of such a gathering said a great deal in itself; a few years earlier, Rong would have been imprisoned for the same activities that now gave him privileged status. Deng, he says, always remained an example. “I took heart from his three-time rise and fall,” Rong says. “Deng’s return [in 1977] sent me an important message.” If you persevered, you had the chance to do more than survive. You might even prosper.
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A
Communist takeover in Afghanistan would have faced formidable challenges even under the best of circumstances. In the event, when the Communists finally seized power in the coup of April 1978, they did so as a group that was riven by bitter internal divisions. The enmity between the radical Khalq (“Masses”) faction and the moderate Parcham (“Banner”) group did not improve after the party took control of the Afghan government. If anything, the seizure of power made matters worse. Almost from the first moment of Communist rule in Afghanistan, the fragile unity of the People’s Democratic Party of Afghanistan began to splinter.

At first, Babrak Karmal, the Parcham leader, received a position as deputy prime minister in the government of the new Democratic Republic of Afghanistan. This was a grudging concession from the Khalqis, who actually held the reins of power in the administration—above all the ambitious Hafizullah Amin, the man who had orchestrated the coup while ostensibly under house arrest. Amin and his friends remembered all too well how Karmal and his Parcham colleagues had dithered over the idea of launching the coup.
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This lack of revolutionary conviction was something that the Khalqis would never let them forget. Amin secretly ordered his network of supporters in the military, and especially in the rapidly expanding secret police, to identify all the Parcham members who carried guns. Within a few months of the April coup, Amin was busily purging the army and air force of hundreds of officers whose loyalties he deemed suspect.

In early July 1978 came the announcement that Karmal and four of his most prominent Parcham comrades (including his brother and his presumed mistress) were being sent abroad as ambassadors; Karmal was dispatched to Czechoslovakia. In August Amin dramatically upped the stakes by giving the order for the arrest of Abdul Qadir, the minister of defense, and several other leading Parchamis. They were accused of conspiracy to overthrow the government in league with an unnamed foreign power.
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This was a remarkable turn of events. Back in 1973, Qadir had lent his military expertise to Daoud’s effort to seize power, and in the April Revolution he had commanded the air forces that bombed Daoud’s presidential palace. Now he had become a victim of his own success.