LAUNCH THE “TWO INCREASES AND TWO DECREASES” CAMPAIGN AND STABILIZE SHANGHAI’S ECONOMY1
MAY 19, 1989
Why are we holding this mobilization rally for the “Two Increases and Two Decreases” campaign at a time like this? Some say that with students demonstrating and holding sit-ins and hunger strikes, how can we keep our minds on this meeting? The Municipal Party Committee and government are holding this meeting because Shanghai’s economy and society are both facing a dire situation and great difficulties. We must explain this clearly to all government staff and residents of this city; we must ask everyone to stay at their production, construction, and work posts; and we must make great efforts and launch the “two increases and two decreases” in order to stabilize Shanghai’s economy and its situation.
Prominent Problems
At present, our economic work is faced with a number of serious problems.
Production at State-Owned Enterprises (SOEs) Is Very Unsatisfactory. From January to April, overall industrial growth in Shanghai was 10%, but for our main force—our local SOEs—it was only 0.6%. It even fell by 0.4% at the SOEs within the local budget, whereas the plan calls for local SOEs to grow by 2% this year. Almost five months have gone by, but the trend is still downward. Although the growth rate for the entire city doesn’t seem too bad, returns are very unsatisfactory. While fiscal revenues at districts and counties have increased, they are decreasing at the municipal level.
Foreign Trade Is Slipping. From January to April, Shanghai’s export forex earnings fell 9.5% from the same period last year. Textile exports in particular fell by 24.5%, and their situation is very precarious. Because of a severe shortage of domestically allocated raw materials, these couldn’t be obtained even at high prices, so we could only import more raw materials. The door for imports has now opened wide, causing us to spend more forex, but there is a great decrease in export forex earnings—how can this be?
Agricultural Production Has Been Affected by the Weather. This year’s weather, with its heavy rainfall, is forcing us to be on the alert. A storm such as the one on April 28, which seriously affected the summer harvest, has not occurred in 115 years. Despite many remedial measures by the leading cadres and the farmers in the outlying areas, the outcome is still hard to predict. At the flood-prevention mobilization meeting, I stressed that we must be prepared to “fight major natural disasters and prevent major floods.”
Workplace Attendance by Employees Is Low. In recent days, serious traffic jams on public transit affected commuting. In addition, morale has been poor and work attendance in quite a few sectors has been at roughly the same level as it was during last year’s hepatitis A epidemic, or even worse.
Rumors about Prices Have Become a Dangerous Trend. One rumor that’s been going around is, “Grain prices are going up, and prices for other goods will follow.” I am authoritatively stating here that grain prices will not rise, the prices of the 19 types of goods we have reported on to the Standing Committee of the Municipal People’s Congress will not rise, and losses incurred by enterprises will be subsidized by local finances. We must therefore do good ideological work with cadres and the people so that they won’t believe such rumors. If they were to believe the rumors and engage in panic buying, the market would be enveloped in chaos, savings would decrease, and production wouldn’t be able to continue.
This year, the state is tightening the money supply and there is a shortage of working capital. The foreign trade departments owe money to the enterprises and the enterprises owe money to each other, making it hard for many of them to keep producing. How are we to deal with this? By counting on the “patriotic savings” of all the people of the city. Keeping money in the banks is supporting Shanghai’s economic growth. Right now savings deposits in Shanghai are increasing, and for this, I want to thank all the people of this city! Without this rise in savings, banks wouldn’t be able to make loans and many enterprises would have to halt production. If we were to keep believing those rumors about price increases, withdraw savings, and engage in panic buying, the consequences would be unthinkable.
At the moment, the city is controlling prices very strictly; districts and counties must also strengthen management and strictly control prices. We know all too well that because of the rising price of raw materials and various costs, some enterprises and service industries find it very hard to carry on. We understand these difficulties but also expect everyone to do their best to overcome them, and to refrain from raising prices at will under any circumstances. I know that it’s very hard to sustain the production of many small commodities at this time, but no matter what, you must consider the big picture and put stability foremost.
The Current Situation Calls for Resolute Measures
To keep Shanghai’s economy stable, it is essential to clearly recognize the severity of the situation and take strong measures to turn things around. At the flood-prevention mobilization rally the day before yesterday, I told everyone from the districts, counties, and bureau-level agencies that under any and all circumstances, workers, farmers, and cadres must remain steadfast at their posts. I put it very simply: I will remain at my post even if it kills me. This is the peak season for production. If we drag things out and don’t work hard, we will miss an important opportunity and be unable to make up for it later. If production is disrupted, every resident of this city will suffer unexpected losses—this affects the personal interests of everyone. I am therefore again stressing that production must not stop; workers, farmers, and cadres may not participate in demonstrations; and primary and secondary school students may not participate in demonstrations.
As we launch the “Two Increases and Two Decreases” campaign in depth, we must follow three courses of action.
1. Use Every Conceivable Means to Earn More Export Forex. This is the most important measure for overcoming our serious difficulties. All the bureau-level departments, production enterprises, and foreign trade companies must be clear about this. If we focus on this critical move and increase exports, Shanghai’s economy will be revitalized. Last year we had US$4.5 billion of exports. The target this year is US$5 billion, and if we can reach this level, the whole economy will come alive.
The textile industry is key: textiles accounted for 40% of the city’s exports last year, while they are in large part responsible for the current decline in exports. The textile industry has already lost some time, which will be very hard to make up, so all industries and sectors must help it increase production and exports. To this end, the city government and 105 factory directors from the textile sector have already held two days of discussions. Yesterday, the Municipal Textile Bureau also came up with nine measures based on policies studied and decided on by the mayor’s office. Now we must hurry to implement them.
Shanghai’s textile workers are capable of fighting tough battles, and the management of textile enterprises has always been quite good: I hope this force will continue to fight tough battles. They’re determined to guarantee that they will complete the task the textile sector is undertaking, namely, to meet the target for their share of the city’s export forex earnings. Theirs is a very fine spirit, especially in view of the great difficulty their industry is experiencing right now. Earlier on, they didn’t have raw materials; now they have raw materials, but only a small percentage of the cotton is of an acceptable grade, and it’s very hard to work with. I hope all workers will overcome our present difficulties even though it might be more tiring than before to do so. If we didn’t produce and didn’t work, things would be even more difficult.
The city government has conducted many studies on how to increase textile production and exports and how to better implement “double contracting.”2 In the next few days we will formulate a rule clarifying certain policy measures, the means for rewarding and penalizing, and a responsibility system. The responsibility system will apply to leading cadres at all levels, and it will include rewards and penalties, as well as measures that link production and exports to the benefits received by workers.
2. The “Two Increases and Two Decreases” Campaign Must Emphasize Conservation. Conservation is vital to increasing production and improving performance in the face of our current shortfalls in energy and raw materials. Inventories of coal have fallen precipitously over just the past few days. To get past this year’s difficulties, we will have to obtain 12 months’ worth of benefits from 11 months’ worth of energy and raw materials. I therefore hope that all government staff and all residents of this city will conserve ferociously so that we can get by together. We will close, halt, merge, or transfer some enterprises—enterprises that consume exceptionally large amounts of raw materials and energy must halt production. This measure is already included in the program for industrial restructuring. Although workers will suffer some losses as a result, I hope you will be understanding about our present difficulties, and I hope we can together properly deal with some of the problems that will arise after the closures, halts, mergers, and transfers.
At a time like this, leading cadres at all levels and cadres in charge at enterprises must be role models, lead by example, start with themselves, and serve the people with integrity. Although we put a dent in extravagance last year, the situation is still very serious. Last year, the 100-odd TVEs in one rural county spent over RMB 2 million of their managers’ and factory directors’ funds just for hosting social functions. They didn’t just invite collaborating units to wine and dine—their own friends and family and their children also joined in, and all the expenses were paid for by their enterprises. When organizing celebrations, some factories will spend several hundred thousand renminbi in one go, and give each attendee over 100 yuan’s worth of gifts—that’s really treating money like [worthless] dirt! If we go on like this, our cadres will inevitably become detached from the people, and we won’t be able to motivate our staff. That’s why I hope that all enterprise cadres and staff will firmly grasp the key provided by conservation to energize the whole “Two Increases and Two Decreases” campaign.
3. We Must Bolster Our Spirits, Work Assiduously, and Go to the Front Lines of Production. Many problems, especially those of buck-passing and disjointed work, are not caused by a lack of energy, raw materials, or capital. They arise when cadres act irresponsibly, fail to mediate, or do not go to the front lines to solve problems. Some leading cadres don’t get personally involved; they are clueless when asked about anything and delay many matters. I ask leading cadres at all levels of city government as well as enterprise leaders, especially factory directors, to go to the front lines and get their hands dirty alongside the people. Empty talk is useless, and grousing even more so. What we need now is work—hard, assiduous work. At the flood-prevention mobilization rally two days ago, I noted that some units still haven’t dredged or excavated rivers in need of dredging or diverting. I said the work had to be done on schedule or punishments will be meted out. If difficulties arise, we can organize people to do volunteer work; if nothing is done and the waters rise, there will be a great loss of life and property.
Our factory directors must steadfastly implement the “Law on Publicly Owned Industrial Enterprises.” According to this law, enterprises must be run well by relying on the zeal and initiative of their employees; important issues should be discussed by representatives of the staff, whose opinions should be respected; unions and other mass organizations should play a full role; and the spirit of ownership by the workers should be promoted. This will enable the “Two Increases and Two Decreases” campaign along with the effort to increase production and expand exports to become joint endeavors of both cadres and workers. At the same time, cadres must care about the workers’ hardships, help them solve their actual problems, and protect their legitimate interests.
In agriculture, we must on no account become lax about the “vegetable basket” project. Although rainstorms led to losses a while ago, vegetable supplies remained steady thanks to the efforts of the cadres and people of the rural counties. I want to again express my thanks to the leaders and farmers of these counties. Vice Mayor Ni Hongfu and leading cadres at all levels of the municipal agricultural sector have been visiting the counties frequently to discuss with everyone ways to tackle many difficulties. This year’s bad weather is but one example: we absolutely must not become careless, we must make timely preparations against natural disasters and pests, and we must think more thoroughly about every type of problem. I’m confident that this year’s “vegetable basket” will absolutely not be worse than last year’s, nor will we allow it to be worse—we must strive to make it better than last year’s. All departments must give the green light to agriculture and help our colleagues at the rural counties do a good job with the “vegetable basket” project and this year’s agricultural production.
We’re placing great hope in this year’s “Two Increases and Two Decreases” campaign. Only if this campaign proceeds well can Shanghai complete this year’s tasks for production, exports, and fiscal revenues, and only then can Shanghai’s finances and overall situation be stabilized. We must therefore raise our spirits, combine our efforts, and do hard, down-to-earth work. Provided we carefully implement the programs and policies of the Party Central Committee and the State Council and fully motivate all parties, we will surely reach the anticipated goals of the “Two Increases and Two Decreases” campaign and complete all our tasks for this year.
1. Zhu Rongji gave this speech at the mobilization rally for the “Two Increases and Two Decreases” campaign. The “two increases and two decreases” referred to increasing production and decreasing waste, and increasing revenues and decreasing expenditures.
2. “Double contracting” was also known as “two-front contracting.” Under this system, industrial and foreign trade departments would jointly contract to meet forex earnings targets. This was a shift from the system in which the foreign trade entity purchased goods (from industry) to one in which it acted as an agent, and the contracting was done on this basis.