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OCTOBER 8, 1999 VOL. 25 NO. 40
Right Down the Middle
On the economy, Jiang Zemin wants it fast and slow
By TODD CROWELL and PAUL MOONEY Beijing
President Jiang Zemin and Premier Zhu Rongji chatted amiably, passed notes back and forth and laughed as they sat together last week at a meeting of the Chinese People's Political Consultative Conference. It was a picture of domestic harmony between China's paramount leader and his right-hand man. Premier Zhu had also been the first in the receiving line at Beijing airport to welcome the president on his return from the meeting of the Asia-Pacific Economic Cooperation forum in Auckland, New Zealand.
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Unquestionably, Jiang has been taking a higher profile of late on economic issues, which used to be the premier's personal bailiwick. Indeed, some claim that Jiang has become the number one economic policymaker - the new "economic czar." But if that is the case, then China, and the cause for economic reform, might be the worse for it. The hallmark of the Jiang style is caution, almost to the extreme. In contrast, Zhu has flair and a penchant for innovation.
The economic communiqué that emerged from the recent four-day annual meeting of the Communist Party Central Committee had Jiang's footprints all over it. Long and vaguely worded, it called for the reform of state-owned enterprises - "an important and urgent task" - while at the same time stressing the need for the government to retain its "dominant" control over important industries, especially in those areas relating to the development of high technology.
Anyone who might have been expecting some bold changes in policy or new initiatives was bound to be disappointed. "There is no big step here, but it is also hard to see any sign of retreat," said Song Guoqing, an economics professor at Peking University. Adds a political analyst at a Western embassy: "They [China's leaders] don't know which direction to take, but maybe in three or four months, when they can see which way the economy is going, they'll be able to be more active in some areas."
Complete privatization of state-owned assets is out. "We will by no means pursue it," intoned the People's Daily in an editorial that accompanied the 15,000-word economic blueprint. But the government will try to raise money by selling shares, so long as the state retains majority control. State companies will also be allowed to transfer land rights, plant and equipment to obtain cash for working capital or to pay down debts. And it may be that some smaller enterprises will be allowed either to pass into private hands entirely or go bankrupt.
A prime example of this new share-holding policy might be the Shanghai Pudong Development Bank, which recently announced it would become the first state-owned bank to sell shares. It is offering 16.6% equity to local investors through the domestic-denominated A shares. But the government would retain 65% and other Chinese institutions the remaining shares.
Speaking later at the Fortune Global Forum in Shanghai, Jiang struck a slightly more aggressive note, promising to push ahead with economic reforms. He said: "The Chinese people will firmly and unswervingly follow the path of reform and opening up." The three-day forum, from Sept. 27 to 29, had gathered together chief executives from more than 300 multinational corporations, and included such luminaries as former Singapore PM Lee Kuan Yew and former U.S. secretary of state Henry Kissinger.
The president also called on the assembled foreign businessmen to invest more capital in China. Contracted foreign direct investment fell by an alarming 20% during the first seven months of 1999. That has prompted Jiang to order an overhaul of China's investment regulations. But the country is in fact sending out mixed signals. Only two weeks ago Information Minister Wu Jichuan said all foreign investment in the Internet would be prohibited, only to reverse himself a week later.
While Zhu's true position remains a mystery, Jiang boosted the status of his protégé, vice president Hu Jintao. During the party conclave Hu was appointed to the powerful Central Military Commission, which supervises the military forces. The appointment of Hu, 56, only the second civilian on this body, was a strong signal that he is being groomed to become China's next leader. A Politburo member, Hu now sits on China's two most important institutions.
Jiang had campaigned to get Hu appointed to the post for two years, but faced stubborn opposition from the top brass. The president won over doubters on the general staff by promising to increase spending on the army. Whatever else, Jiang is proving he is in charge.
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