SHANGHAI’S INDUSTRIAL RESTRUCTURING MUST BLAZE NEW PATHS1
MARCH 14, 1989
This is the first part of our conference on industrial restructuring. We’ve met for a day and a half, and many people have yet to speak—they will do so in the second part. Because of time constraints today, I’ll recapitulate this part and make a few comments.
The Urgency of Industrial Restructuring
For the past several decades, our industrial structure did not develop in a planned and proportionate way. The growth rate seemed very high, but because the industrial structure wasn’t logical, it didn’t deliver the benefits it should have—this is the main reason for our current difficulties.
Shanghai’s previous economic model relied mainly on a planned economy and on allocations by the state. The situation today is different: everyone is developing for themselves, and the original foundations for growth have been greatly weakened. If Shanghai still doesn’t speed up its industrial restructuring to keep up with the current environment, the situation will no longer just be “quite challenging.” Wang Daohan calls it “quite tense,” but I would put it even more strongly and call it “quite serious.”
To facilitate this industrial restructuring, the city government’s research office first compiled very good background materials through interviews with many retired veterans of the Municipal People’s Congress and the Political Consultative Conference, including the members of the Advisory Group on Urban Administration.2 Those at the People’s Congress and the Political Consultative Conference unanimously agreed that the decisions of the Municipal Party Committee and municipal government on industrial restructuring were extremely timely and extremely necessary. The current supply of raw materials is so tight that without restructuring, we will have no way out—this is being forced up Mt. Liang.3 The sooner we restructure, the sooner we will have the initiative; if we restructure later, we will lose the initiative; and if we don’t restructure, we won’t survive. I can sum this up in two phrases: “being forced up Mt. Liang,” and “blazing a new path.” We can’t survive unless we blaze a new path.
Of course in restructuring industries the issue is how to take into account both the long term and the short term. In a talk with me yesterday, Jiang Zemin asked me to also focus on long-term industrial restructuring—this is a particularly sound suggestion. We are only able to think about this year and the next at this point, but when it comes to truly changing Shanghai’s industrial structure—by developing industries that produce raw materials, for example—it can’t be done in just one or two years. The process will take three to five years or even longer, so we must continue to study this matter. At present, we are mostly studying this matter, putting out fires, and not thinking much about the long term.
For the near term, we mainly want this year’s targets to be specific and the measures to be workable. If we start a project, it must yield results; otherwise we’ll have a hard time. That’s why the near-term goal should be to make conserving energy and raw materials our breakthrough point. Since we can’t overcome the problems with energy and raw materials right now, we have no choice but to conserve. However, this won’t work if we don’t close, halt, merge, or transfer some enterprises and just let everyone keep on consuming these materials. We therefore have to stress the key points, especially energy conservation. I recognize the many difficulties energy conservation poses, but we still have to put that slogan out there, still have to propose targets, and should emphasize that conservation applies to both energy and raw materials.
Having specific targets and workable measures and yielding quick results—that’s near-term work. Please convey its urgency to every industrial bureau and head office, and to all cadres at the various bureau-level departments. Treat this as a very pressing task.
A Tentative Program for Industrial Restructuring
After several months of work, three groups led by the Municipal Economic Commission have formulated a tentative program for industrial restructuring—this is a very great achievement. Those of you at the various industrial bureaus should implement the programs you have already drawn up. Hurry up and restructure, no need to keep waiting—that is everyone’s consensus. This tentative program still lacks depth and detail and doesn’t meet our original demands, namely, to use 8% less energy and raw materials this year, to get 12 months’ worth of results out of 11 months’ worth of energy and raw materials. This isn’t a command, it isn’t a target—it’s a goal to fight for. Each bureau should fight for this goal and use every means possible to reach it; otherwise you’ll have a hard time.
I hope you’ll revise your programs in accordance with the ideas raised at this conference and at the same time do further studies in preparation for drawing up a second program. I think some of the programs you have now are very good, but overall their key points aren’t given sufficient prominence: for a bureau or a head office, you must make clear what products and projects you will focus on this year, what strong and effective measures you will take, and what goals you plan to concentrate your efforts on. I hope the key points of your programs will be clear and that you will truly make an effort to focus on results so that we can use 8% less energy and raw materials.
Policy Issues in Industrial Restructuring
We haven’t made any decisions yet on policy issues involving industrial restructuring. This is an extremely important subject because under current economic conditions, it’s impossible to achieve this goal by relying on administrative commands, or rather, we won’t be able to completely achieve this goal. We will have to rely mainly on economic means and policies.
We must now compile policies proposed here by the industrial bureaus along with your original policies. Each and every one has to be very specific—it shouldn’t consist of principles that can’t be implemented. The departments concerned must be involved, particularly the fiscal agencies and banks. If they’re not asked to participate, your policies will be useless. Use these policies to conduct a comprehensive study and produce a program.
Observing the Priorities of Industrial Restructuring
We have to ensure that power supplies accord with the priorities of industrial restructuring and make a major effort to adjust load factors. In adjusting load factors for electricity, don’t just generalize along the lines of “operate for five days and halt production for two,” or “operate for four days and halt production for three.” Rather, base these adjustments on the priorities of industrial restructuring: each [industrial] bureau will receive so much electricity. You decide for yourselves what to guarantee and what to cut. With this list of priorities, the Municipal Power Bureau will ensure a corresponding load.
We must also reduce cutting power beyond what is in the plan. The key is to adjust load factors—if everyone were to use power in excess of the plan, it would be disrupted. Of course there are also problems with the East China power grid, but we have to adjust power-usage patterns ourselves. Perhaps the various bureaus should use this opportunity to adjust [operating] hours so as to ease the strain on public transit and ask the Municipal Construction Commission to participate; the finance and trade departments might also adjust store operating hours. We have to overcome difficulties together and think of measures to make things more convenient for our residents.
Follow-up Work
Follow-up work is essential after enterprises shut down, halt production, or are merged or transferred. The current round of these actions was actually a small move: we only closed, halted, merged, or transferred 82 enterprises, whereas Shanghai has at least 1,700 large and medium state-owned enterprises. Of these 82 enterprises, 2 were shut down and 2 halted production—the rest were merged or transferred. This is in line with the idea of having fewer closures and halts and more mergers and transfers. It won’t be very hard to absorb the 33,000 people who were affected, but we mustn’t take this lightly and must still do good follow-up work to turn negative factors into positive ones. We must explain the reasoning clearly to the employees, especially the need to optimize across the board—in combinations, the industrial structure, enterprise structures, and technology structures—and to improve economic performance. If our products are low in quality but high in price, Shanghai won’t be able to do better if we keep making them.
Strict Oversight
Review and approval procedures must keep strict oversight on everything. During industrial restructuring, some things will stay and some things will go in order to maintain an overall balance. This time, colleagues from the Municipal People’s Congress and the Political Consultative Conference all made this point: [projects] are eliminated out of necessity, and new ones must only be started up with caution, which is why review and approval procedures must keep a strict check on everything. Perhaps our policy measures should now stipulate that new projects must be subject to review and approval before starting up. Policies that devolved powers in the past, especially for externally oriented projects and those that use foreign investment, should still be implemented. Otherwise we would be setting up many roadblocks again just when the investment environment started to improve a little.
People now say that the investment environment is best in the Liaodong Peninsula, and while the leaders of Shanghai say all the right things, those below them are so-so. That’s why we mustn’t stop halfway, and why Ye Longfei4 must still continue to focus on this. We won’t take back those powers but can’t be lax about strengthening oversight. We particularly must not restrict “3+1” industries5—let them invigorate themselves quickly and stimulate the growth of TVEs. Other than these, we will have to take back some of the powers to review and approve new projects. You should study this when making new policies: I think you should be a bit tighter and not approve any construction to start on new projects.
The Importance of Management
Although we are emphasizing adjustments, we must not overlook management. Our current poor performance is not entirely the fault of an unreasonable industrial structure. Industrial restructuring can’t solve all problems—management is still more important. We mustn’t let management fall by the wayside just because we are putting industrial restructuring at the top of the list. We must manage enterprises strictly and run factories strictly—this isn’t something that industrial restructuring can solve.
On-site investigations by colleagues from the Municipal People’s Congress and the Political Consultative Conference find many people in the factory shops playing poker and mahjong—many are slack and no one is in charge. The Wusong Petrochemical Plant used to produce one burner of acetylene per hour, whereas now it takes two hours; it used to consume 3,000 kilowatt hours but now this has increased to 3,400 kilowatt hours. Some factory directors spend most of their time elsewhere trying to develop horizontal collaborations while Party committees and unions don’t play a role in ensuring or overseeing—if we go on like this, we won’t be able to restructure industries well either, which is why we must keep emphasizing management. There are two parts to this year’s “Two Increases and Two Decreases”6 campaign: one is adjustment, the other is management. In management, we should stress ideological work, which will require the Party, government, unions, and Youth League to knit everyone together in order to do this well.
Ever since it was formed, the Advisory Group on Urban Administration has been very helpful to the work of the Municipal Party Committee and government, especially in two respects. For one thing, these retired veterans are “old horses who know the road,” and often a single sentence, a single note, or a single letter from them will give me great insights. Because I don’t know much about Shanghai’s historical circumstances, it’s useful to remind us mayors and vice mayors about them. For another thing, we are in fact treating some of these veterans as active staff. They are helping us handle many specific tasks, helping us come up with ideas and methods, being very helpful to us. This way of integrating the old, the middle-aged, and the young is particularly well suited to Shanghai’s realities.
1. This is the main part of a speech by Zhu Rongji at the 32nd mayor’s administrative meeting of the Shanghai municipal government, during which questions of industrial restructuring were examined.
2. From August 1988 until February 1992, the Shanghai municipal government engaged almost 20 retired veterans, including Wang Daohan, Li Chuwen, Pei Xianbai, and others, to form the Advisory Group on Urban Administration. Members of this group offered policy advice to the city government on the key areas of its work and on some major issues in Shanghai’s socioeconomic development.
3. Translator’s note: this expression is based on an episode in the classic Chinese novel Outlaws of the Marsh, where Lin Chong and other characters were forced by officials to go to Mt. Liang and become rebels. This has become a metaphor for being forced to resist or being compelled to take certain actions.
5. The “3+1” industries are the ones that process imported materials and imported samples, assemble imported parts, and engage in compensation trade.
6. The “Two Increases and Two Decreases” campaign referred to increasing production and decreasing waste, and increasing revenues and decreasing expenditures.