Deng Xiaoping and the Transformation of China (76 page)

The rural migrants who went to work in the factories and stores in Guangdong quickly learned to be on time and to coordinate their work with that of others. Those who were paid by the piece also learned to be more efficient as they stuffed sponges into dolls or added other parts to various consumer products. They became more careful about hand-washing and other hygienic practices. They also became more cosmopolitan as, in some cases for the first time in their lives, they met and worked with fellow workers from other regions. They learned about modern technology and current fashions, in good part from the electronic goods and clothing they produced, first for export and then for the local market. As they began to be able to afford more than just food and housing, they learned how to use televisions, washing machines, refrigerators, microwaves, and air conditioners. Young women, following fashions in Hong Kong, learned how to use cosmetics and style their hair in new ways.
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And when these workers wrote letters home or returned to their villages, either for visits or for the long term, they became models for others who also wished to be modern.
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As Akio Morita, a cofounder of Sony, noted as he built factories around the world, countries without modern industry tend to preserve inefficient bureaucracies—but once modern industry introduces new standards of efficiency, those standards begin to spill over into governments. By global standards, government offices in China were still inefficient and vastly overstaffed, but once Chinese businesses became more efficient, some party leaders, including Deng, began to demand that party and government officials follow the same standards of efficiency.

Guangdong's progress cannot be explained simply by “opening markets,”
for many countries with open markets did not achieve the progress that Guangdong made. Instead, in Guangdong, a Communist organization that less than a decade earlier had engaged in class warfare became an effective vehicle to promote modernization. The party provided overall discipline and encouraged study and competition, and Hong Kong and Japanese enterprises were quick to offer assistance. The special policy for Guangdong and Fujian and the unique leeway given to the SEZs made these areas into incubators for developing people who would be able to function well in modern factories, stores, and offices in cosmopolitan settings. Many of the lessons learned from these enterprises spread quickly from Guangdong to other places.

Pioneers Face Conservative Political Winds

Once the experiments in Guangdong and Fujian began, officials in both areas felt under constant political pressure from Beijing. Although they had been given the responsibility for moving ahead, the vague and uncharted situation required them to be imaginative and to engage in broken field running to get their jobs done, which left them vulnerable to criticism from conservatives worried about change. Directive after directive issued from various ministries in Beijing ended with the phrase that Guangdong and Fujian were
bu liwai
(no exception). Officials in Guangdong and Fujian, then, struggled to strike the delicate and dangerous balance between doing what was needed to attract foreign investments and doing what was required to avoid being accused of selling out to foreign imperialists. How much in the way of tax incentives could they allow to persuade a foreign company to establish a factory? If a joint venture with a foreign company was allowed to make certain products, should it be allowed to make other products outside the mandate? Could some goods intended for export be sold locally?

Since there were no sharp lines between official and personal interests, it was also tempting for local officials—then still very poor—to use their official positions for personal benefit. Could they accept invitations from foreign businesspeople for free dinners? Were they allowed to accept New Year's presents of cash in little red envelopes? Could they use a company van to drive to and from work or to drop children off at school? When foreign companies, including companies in Hong Kong, were given incentives to set up plants in Guangdong, who was to know if some Guangdong people secretly set up a “fake foreign devil” (
jia yang guizi
) company in Hong Kong that could receive those tax benefits back in China? Conservative officials, always alert to opportunities to slow the rush away from planning and to calm the reformers'
zeal for working with foreign businesses, had little difficulty finding activities to criticize.

Envious officials elsewhere also found opportunities to complain about what Guangdong officials were doing. Some complained to Beijing about the supplies they had to send to Guangdong and Fujian even though they were urgently needed in their home provinces. Other envious officials managed to slow down the flow of supplies needed in Guangdong: to make sure that all of the coal officially allocated to Guangdong made it there, Guangdong dispatched hundreds of officials to transshipment centers to ensure that its assigned coal was actually put on the appropriate coal cars.

Some high-level Beijing officials, aware of the collapse of party discipline during the Cultural Revolution, were deeply concerned that opportunities for making money were eroding party discipline even further. What better way to draw sharp lines than by criticizing some of the pioneers in Guangdong and Fujian? Because Chen Yun was deeply concerned about keeping the planning system functioning effectively and maintaining party discipline, other officials with similar worries went to him as their champion. In the meantime, Guangdong officials regarded him as a constant thorn in their side. All high officials except Chen Yun and Li Xiannian made at least one visit to the SEZs and praised their achievements. Chen Yun went south every winter, to Hangzhou, Shanghai, and elsewhere, but he explained that his health did not permit him to visit Guangdong.

Chen Yun, in a talk on December 12, 1981, acknowledged that it was “important to look at the positive sides of the SEZs. But, he said, “it was also necessary to look at the side-effects.”
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Ten days later, at a meeting of provincial first party secretaries, Chen Yun declared, “Four special economic zones are sufficient. We should not establish any more.”
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A month later, he said, “Now every province wants to set up special economic zones. If they are allowed to do so, foreign capitalists as well as domestic speculators at home will come out boldly and engage in speculation and profiteering. Therefore, we should not do things this way.”
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Chen Yun was also concerned by the added complexities of creating borders around zones and was particularly opposed to creating a separate SEZ currency that he feared might be more attractive to investors, thereby weakening the power of the Chinese yuan.

Chen Yun could be determined but he rarely displayed anger; one of the few times he became visibly angry was when he heard about a huge scandal that had occurred in Guangdong.
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As chairman of the party's Central Commission for Discipline Inspection, Chen Yun vigorously pursued cases where
Guangdong officials had violated party discipline. With hundreds of thousands of party members involved in bringing in foreign goods and helping to set up factories and sell their products, smuggling, bribery, and corruption became serious problems, and Chen Yun criticized higher-level leaders in Guangdong and Fujian for not doing more to stop them.

Deng Xiaoping stayed above the fray and did not defend the officials under scrutiny, but Hu Yaobang, as general secretary of the party, kept in close touch with the regional officials responsible for promoting reform. In January 1980, when local officials came under pressure because of smuggling, Hu Yaobang went to the Zhuhai SEZ to offer support to local officials accused of not stopping it. When he received a report several months later from officials in Shekou indicating that the system of giving rewards to workers for surpassing production targets was being blocked by Beijing officials, he sent a note to Gu Mu telling him to make certain that Shekou had the freedom to carry out its work. And when Hu received a report that Beijing bureaucrats were blocking road-building in Shekou, he again wrote a note to Gu Mu telling him to clear the bureaucratic interference. Guangdong officials reported that Hu Yaobang was a fully committed supporter who tried to help in whatever way he could.

With reports of corruption in the SEZs mounting, tensions between Chen Yun and the defenders of the SEZs mounted. As disciplined party members, Chen Yun and Hu Yaobang avoided taking their disagreements public. On January 14, 1982, however, when the party Secretariat held its first lengthy discussion about the SEZs, Chen Yun attacked the widespread corruption. Without directly disagreeing with Chen Yun, Hu Yaobang concluded the discussion by saying, “The SEZs must advance, not retreat.”
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Higher-level provincial officials serving on the Guangdong Provincial Party Committee, the Guangdong Economic Commission, and the Guangdong Discipline Inspection Commission were appointed by Beijing, but second-level provincial officials were appointed by provincial leaders. Beijing officials, concerned that the lower levels might unite and withhold information, asked that all reports about provincial colleagues, even if negative, be reported to the center. Guangdong officials who complied, however, were referred to by their local colleagues as “informers.”

Two officials in Guangdong, Wang Quanguo and Xue Guangjun, had personal and professional reasons for keeping cautious planners in Beijing well informed about Guangdong's problems. Vice Governor Wang Quanguo, who was head of the Guangdong Planning Commission and who originally
came from Hubei, had been passed over in the selection for governor. Ordinarily, the person chosen as governor was a member of the party's Central Committee as Wang was. But Ren Zhongyi, hoping to gain the wholehearted cooperation of the many local officials, had instead chosen as governor Vice Governor Liu Tianfu, a former member of local guerrilla forces who was not a member of the Central Committee. In 1981, when Guangdong held a meeting to promote Chen Yun's readjustment policy, Wang, in a letter to Beijing, noted that Ren Zhongyi at the meeting emphasized Deng's statements about reform and opening more than Chen Yun's remarks about retrenchment.
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Xue Guangjun, a member of the Guangdong Provincial Party Committee, reported to Beijing on corruption problems in Guangdong. Xue had served under Chen Yun both in the party Organization Department in Yan'an and in the Northeast during the civil war. Xue contacted Chen Yun directly and complained that Guangdong was pursuing capitalism; that problems of smuggling, bribery, and corruption were becoming increasingly serious; and that Guangdong officials were not doing enough to control the situation.
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Work on constructing new factories had begun, but in the meantime the province was suffering from budget shortfalls and shortages of foreign currency. Beijing complained that Guangdong was lax in managing foreign exchange and in collecting and passing on to Beijing the customs fees. Guangdong, meanwhile, was complaining that it was not receiving enough coal and that Beijing had not built adequate transport facilities to meet its growing demand after the Third Plenum.
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When Ren Zhongyi arrived in Guangdong in October 1980, Chen Yun was vigorously promoting his readjustment policy, trying to restrain new construction so as to lessen inflationary pressures. Guangdong's efforts to expand infrastructure to attract foreign capital and investment did inevitably strain the supply of materials, leading to inflationary pressures. But Ren Zhongyi, who personally respected Chen Yun, under whom he had served in the Northeast during the civil war, saw his primary missions in Guangdong to be attracting foreign investment and contributing to Guangdong's rapid development.

“Two Summons to the Palace” (
er jingong
)

By late 1981, among Beijing officials, the furor over the economic crimes in Guangdong and Fujian was reaching a fever pitch. In December, Deng
Xiaoping, responding to Chen Yun's complaints about smuggling and profiteering in Guangdong, played defense. He wrote a note to Hu Yaobang saying that Beijing should send a small delegation to Guangdong both to investigate and to warn all party members about the problem. In response to Chen Yun's hard-hitting January 5, 1982 report on Guangdong smuggling, issued by the Central Discipline Inspection Commission that Chen headed, Deng wrote in the margins of the report, “With the power of a thunderbolt and the speed of lightning, grab the issue and don't let go” (
leili fengxing zhuazhu bufang
).
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With his experiments now under pressure, Deng chose to spend his winter vacation, from January 20 to February 9, 1982, in Guangdong.
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He announced that he was going to Guangdong for a rest and that he was not going to listen to official reports or talk about work. In fact, for an hour and a half he did listen intently to Ren Zhongyi, who told him exactly what was happening in Guangdong, especially in Shenzhen and Zhuhai. Deng told Ren that he believed Beijing's policy of opening to these areas was correct and “if you in Guangdong believe it to be correct, you should carry it out.”
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Deng's visit to Guangdong and his meeting with Ren showed that he cared deeply about the experiment, but Deng did not put himself on the line by publicly supporting Ren.
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While Deng was in Guangdong, Chen Yun in Beijing called in Yao Yilin and other planners on January 25, 1982, and reminded them of what had happened during the Great Leap Forward when China set its goals too high. Chen complained that all the provinces wanted to establish SEZs and that if they were allowed to do so, foreign capitalists and speculators would get out from their cages.
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At the same time, Deng Liqun was stoking further criticism of the SEZs by saying the SEZs were becoming like the pre-1949 foreign settlements in the treaty port cities, which had been dominated by imperialists.