EXPLAIN DIFFICULTIES CLEARLY AND ENERGIZE OURSELVES1
SEPTEMBER 18, 1989
The current economic situation has been quite grim since the national industrial growth rate started to decline in August. From January to August, it was 10%, but in August it fell to only 6.1%, and the drop was very severe at the township and village enterprises (TVEs) in some provinces. In Shanghai, the rate was 7.2% from January to August and 3.2% in August owing to the centrally owned state-owned enterprises (SOEs), which have a high growth rate; TVEs also showed some growth, but locally owned SOEs were already showing negative growth. The overall industrial growth rate for September, including TVEs, might be negative. Fiscal revenues and tax revenues will decline, and I don’t see any end to this yet. Will we bottom out in September? Not necessarily. That’s why this is a very serious problem.
This year’s agricultural situation isn’t very good either. The weather keeps making trouble for us: Shanghai has not been directly hit by any typhoons, but it has been struck by a tornado. Vegetables have become very expensive because of the weather, so we need to see that these price increases are turned around as quickly as possible. We also have to manage the farmers’ markets and impose price caps there so that they can’t take this opportunity to raise prices. Since nothing is available through the main channels, we’ll have to bring in some vegetables from outside, although local vegetables should also be brought to market at the same time.
That’s why we must take a more negative view of the economic situation, and of TVEs in particular—a batch of them have already halted production. As for SOEs, Santana production halted 10 days ago. With 2,000 or more vehicles unsold, we can’t keep producing them. “Shanghai”-brand cars sell even more poorly, and we have over 1,000 unsold ones. There are unsold refrigerators all over the country and 120,000 unsold color TVs, and few people are buying home appliances and durables. We really must think of ways to deal with this situation.
On a study tour of Hohhot, Inner Mongolia Autonomous Region, and presenting an honor banner to the Hohhot Railway Bureau to thank it for supporting Shanghai, September 12, 1989.
The immediate problem is that nothing is selling. Meanwhile we have to pay for raw materials and energy but aren’t being reimbursed for the processed goods we sell, so capital is in very short supply and doesn’t circulate. We at the Municipal Party Committee and government got together yesterday and asked [Vice Mayor Gu] Chuanxun to carefully draw up some plans and think of measures to address this.
Go Out to Sell as Soon as Possible
On a recent visit to Inner Mongolia and Shanxi, I saw a few things that are doing relatively well. Provinces and regions that sell energy appear to be doing fairly well, whereas those without energy, like Liaoning, are having difficulties much like ours. Guangdong and Fujian retain somewhat more of their fiscal revenues and forex, so their capital can circulate. Provinces in the interior such as Shaanxi and Shanxi are all doing relatively well. They have energy and we should sell our products to them.
Shanghai products still enjoy a good reputation, and under no circumstances should our industry’s own salespeople or our financial and trade departments think “Shanghai is like the emperor who sits high above all others.” That won’t do. We must go out, and as I explained to Zhang Guangsheng,2 you should organize the Number One Textile Bureau and the large companies to hurry up and sell their products in Shanxi and Inner Mongolia. After all, they still want Shanghai products.
Pei Jingzhi,3 I read your essay and felt your ideas were quite good, along with your proposed measures. You should get this piece published quickly—the eight measures you propose are on the correct path. Things like big sales, big auctions, “big loss-makers”—ultimately none of these will work. Hurry up and sell, settle accounts, and use time differences to unravel triangular debt; use various measures to reduce inventory and speed up the circulation of capital. The entire city should now concentrate on freeing up money and easing our current difficulties. After all, “when it’s not bright in the east, it’s bright in the west.”
Export on a Large Scale
While industry and agriculture are both going downhill, exports seem to be holding steadfast. We had US$433 million worth of exports in August, but can we earn US$5 billion for the whole year, which is 10% more than last year? That’s a very tall order. To get there, we’ll have to export an average of US$477 million every month for the next four months. We must focus hard on this. I do believe that Shen Beizhang4 and his department will be able to achieve this, provided we give him the money and also a supply of goods. We can’t sell everything domestically, but since there are still export markets, we will have to concentrate our efforts on exports. We must make it clear that no matter what, we must export, and the supply of goods has to be focused on increasing exports.
Yesterday, I told Lu Ji’an5 to go to the Shanghai Auto Factory and have them stop production of “Shanghai” brand cars. If they make a few thousand more, these will lie idle for half a year and then become useless. People aren’t even buying Santanas. Tractors are selling well now, so make tractor parts instead. You have to find rice if you want to cook—make things that people want!
Adjust Our Industrial Structure and Product Mix
Isn’t this a perfect time for restructuring? However, it’s important not to get so panicky about the rapid decline in the growth of TVEs, because they’ve been making poor products at high prices and consuming large amounts of energy and raw materials, and should have stopped production all along. For example, 90% of beverages in Shanghai are substandard. In addition, food safety is a major problem, which we must deal with resolutely by ordering places that don’t meet food safety standards to halt production—fines alone are useless. Take this opportunity to adjust our industrial structure and product mix. Of course a related question here concerns resulting worker unemployment or reduced income, and we must be fully prepared for this. The Municipal Economic Commission, Labor Bureau, Agricultural Machinery Bureau, as well as the Agricultural Commission—you all have to study this problem.
Shanghai must also develop higher grades of products. Those that consume relatively large amounts of energy and raw materials should be replaced by newer versions—we must force enterprises to do more in the way of upgrading technology. They’ll have to put up with short-term pain, and we’ll also take some appropriate steps to make arrangements for them.
Another step would be to reduce investments in fixed assets. Ye Qing6 has come [to Shanghai] now, and the State Economic Commission has decided to give us an increase of RMB 1 billion in investment funds. Instead of shrinking, infrastructure construction in Shanghai during the first half of this year actually grew. The State Council is very critical of us, which is to say that they’re very critical of me; they say that Zhu Rongji seems to want people to speak well of him so he’s rushing things and doing them on too large a scale. But in fact, the “Jiushi Projects”7 from the past hadn’t started up yet. The money for implementing these projects was still being put in place and hadn’t been finalized until last year, so work on them just started this year. This wasn’t originally part of the plan, but now it’s suddenly been put inside the “cage” of the plan, so how could our scale [of construction] not have grown? [Yao] Yilin8 is very understanding of our difficulties and has allowed us the additional RMB 1 billion in scale. Although this is still very far from our actual needs, we have no choice. We can’t go any higher, and I wouldn’t be able to cope if we did go any higher—they’d say I was totally lacking in organizational loyalty and in discipline. That’s why no matter what, we have to stay below RMB 10.28 billion, and we’ll have to have a meeting to notify everyone.
On an inspection visit to the 300,000-ton vinyl chloride factory of the Shanghai Chlor-Alkali Company, March 7, 1990. On the left, Huang Ju, vice mayor and deputy secretary of the Municipal Party Committee, and Hu Lijiao, former chair of the Standing Committee of the Shanghai People’s Congress.
There are several things that our leaders at all levels, from mayors to bureau chiefs, must focus very hard on no matter what. These include starting production of color TV tubes, starting production of the 300,000-ton ethylene project, and finishing the groundwork for the cold-rolled steel plates by this year, as well as some other key projects. There’s also the Huangpu River Bridge, which under no circumstances may be postponed. We would rather cut the Metro than the Huangpu River Bridge. We must show results quickly—this plan isn’t going to change. We should try to have both ends [of the bridge] meet in the first half of 1991 and finish the bridge in the second half of the year. No matter what, we have to concentrate all our forces on the key projects. Except in cases where contracts have already been signed, all other projects should be halted unless doing so would violate a contract.
Last but not least, in order to stabilize sentiments at enterprises and to brace their spirits, we will convene a conference on ideological work for all of the city’s industrial enterprises. We squeezed in a conference for our city’s rural cadres before I left on a business trip. I asked for two things then: stability and enthusiasm. These are also the two topics to discuss with enterprises. Because production is continually declining, and what’s more, declining rapidly, a very dangerous downward trend is emerging. We must boost the spirits of the factory directors, factory Party secretaries, and employees, explain the difficulties to them clearly, and rouse their enthusiasm so that everyone works together. We can’t let morale drop precipitously or it will be very difficult to move forward—we must raise spirits and cannot let them fall. In short, don’t demoralize the factory directors or the Party secretaries—that would spell trouble. We must fully utilize the initiatives of both the leaders and the people, recognize that we’re all in the same boat, and get past our current difficulties.
1. This is the main part of Zhu Rongji’s speech at the 49th mayor’s administrative meeting of Shanghai’s municipal government.
2. Zhang Guangsheng was then vice director of the Finance and Trade Office of Shanghai’s municipal government.
3. Pei Jingzhi was then vice chairperson of the Shanghai Planning Commission and also director of the Bureau of Prices.
7. The Shanghai Jiushi Company was established in December 1987 by Shanghai’s municipal government in line with the spirit of the State Council’s 1986 Document No. 94, “Directive on Increasing the Scale of Shanghai’s Use of Foreign Investment.” It was a specialized economic entity created to reinforce urban infrastructure construction, speed up technical upgrading of industries, strengthen the capacity for exporting and earning forex, and develop tertiary industries and tourism. (This project was known as the “94 Special Project.”)