ON SHANGHAI’S 10-YEAR PLAN AND THE EIGHTH 5-YEAR PLAN1
NOVEMBER 3, 1990
Today I mainly want to share some thoughts with you and offer some comments on several aspects of Shanghai’s plans for development in the next 5 to 10 years for you to consider.
1. The Planning Commission’s Report on the Eighth Five-Year Plan Period
When you report to the Municipal Party Committee on your plans for the Eighth Five-Year Plan period, you should primarily discuss your perspectives, ideas, and policies—no need to give too many numbers. In reporting on planning, you should dwell more on long-term issues; it will be sufficient just to clearly describe [expected] developments for the next 5 to 10 years. You should also look up Shanghai’s previous development strategies and plans and examine them carefully. Don’t toss out the useful things, because our planning is based on the work of previous administrations, and it should demonstrate the continuity in such work. But we must also see that the situation has evolved and we cannot just completely copy the plans of the past. Our planning must be integrated with realities and connect the past with the future.
The goals of plans must be very clear if they are to arouse enthusiasm. It would be best if they could be put into a few clear and simple words that anyone can understand. You must vividly describe what future development will bring; otherwise you won’t be able to generate any enthusiasm. At the same time, overall balancing must make sense. In other words, the framework of the plan must be clear, but it doesn’t have to be too detailed. There may be different views regarding the details, and you can continue to discuss these.
The decade of the 1990s is a historic period of the utmost importance. We will be at the mercy of circumstances if we are still unable to find a path that combines a planned economy with market regulation and grows our economy. Now that the two Germanys have reunited, Europe will grow powerful very quickly; Japan is becoming increasingly formidable, and the Southeast Asian countries are also developing rapidly—even Vietnam is trying to catch up. China is the mainstay of socialist countries. If we still can’t grow our economy, how will we demonstrate the superiority of socialism? This is a question of life or death for socialism and for communism.
Shanghai is China’s economic center. If we still can’t resolve our dilemma in the next 5 to 10 years, we will have run out of time and will let down those who come after us—we must have [such] a sense of crisis and such a sense of responsibility. Given this situation, I’ve come to think that Shanghai’s development strategy for the 1990s should be to “revitalize Shanghai, develop Pudong, serve the nation, and project to the world.”
3. Setting Goals
Our goal should be to concentrate our forces on accomplishing several things within five years, in order to instill confidence in our people and make them feel that their lives are indeed getting better. Shanghai should change day by day, the appearance of the city should change, and it should undergo comprehensive socioeconomic development. More specifically, during the period of the Eighth Five-Year Plan, we need to complete 3 major practical tasks and 10 major infrastructure projects.
Your report listed 10 major projects in Pudong—these should be reprioritized and shouldn’t all be in Pudong. The purpose of developing Pudong is to revitalize Shanghai. To revitalize Shanghai, we have to mainly rely on Puxi—for at least 5 years we won’t be able to rely on Pudong, and even after that, we’ll only be able to partly rely on Pudong. It will only be after 10 years that Pudong can truly rise up. We should therefore use Pudong to make a breakthrough in Puxi, and not talk about “making the development of Pudong the key issue.” To develop Pudong, we must first do a good job in Puxi, further improve the performance of enterprises, and unlock their potential, then use them as a base for developing Pudong.
Three major practical tasks—or you could call them the three main goals—must be completed:
—Improve inner city transportation. Within five years, we must finish the two bridges, a high-speed elevated ring road, and several overpasses in the downtown area. Together with the Metro (and plans should consider joining the Metro with the light rail system and extending it to Pudong), these will basically solve Shanghai’s traffic problems.
—Expand housing and gas. Within five years, the city must basically have converted to gas. By next year, we will have built 4.5 million square meters of housing. In 10 years, we will have built 50 million square meters, an average of 5 million square meters annually. Comprehensive plans for ancillary facilities must be made and uniformly implemented, and in this way the housing problem will basically be solved.
—Revamp the supply of non-staples. This should be based on local markets and be steady, reliable, and convenient.
Overall, these goals mean that for five years, we will be working mainly on infrastructure construction. By putting the emphasis on transportation and housing, we will increase benefits to society, improve the external environment, start up the markets, and lower enterprise costs. We will also use reforms to promote and achieve these goals.
4. Reforms
We must think carefully about how to deepen reforms. Besides employing the central government’s measures for fiscal and foreign trade reforms, Shanghai should focus strongly on five major reforms. For the ones that have already been explicitly instituted—pertaining to housing, pricing, the purchasing and marketing of non-staples, and the social security system—we should do further assessments and studies to see which concrete systems and measures are needed. In addition, we should focus on two more major reforms. The first encompasses the enterprise system, and includes many innovations, such as enterprise groups and supervisory boards at key enterprises. Central to this reform is an effort to improve the economic returns of enterprises. The second is financial reform, which mainly includes measures to establish a securities market and attract foreign banks.
5. Basic Guidelines for Planning
We should study how to draw up basic guidelines [for four essential endeavors during the next plan period].
Infrastructure Construction. We should concentrate our forces for “a war of annihilation” in doing good urban infrastructure construction. Urban infrastructure construction consists mainly of the 10 major projects, with the key being to improve transportation. Once this happens, all of Shanghai will come alive. The city will prosper, benefits will improve, the people will be happy, and the entire look of the city will change significantly. The main components of the 10 major projects are the two bridges, the high-speed elevated ring road, and the Waigaoqiao port; others include the Metro and the combined sewer wastewater treatment project.
On an inspection tour of the Meishan Iron Mine of the Shanghai Meishan Metallurgy Company, March 4, 1989.
Should Shanghai’s water-channeling project be included among these? It appears that this project will have to be completed during the period of the Ninth Five-Year Plan period, but it would be best finished within five years. As to whether the water should come from the upper reaches of the Huangpu River or from the Yangtze River, the locations should be carefully compared and debated. For gas, the issue is whether or not to build the Shidongkou Gas Factory—this must be debated quickly.
How should the 10 major projects be prioritized? You should study this, but you must list expected rates of progress for all, including for the three major practical tasks. When work will start, when it will be completed—all these must be made clear. During the period of the Eighth Five-Year Plan, we must concentrate our forces for a war of annihilation and do a good job with this infrastructure construction. We must focus on it day and night with no letup.
Technical Upgrading of Shanghai’s Industries. Steady technical upgrading at existing enterprises is essential. It should have key priorities and proceed in an orderly way. This restructuring and technical upgrading can be summed up in two phrases: “the molting of the golden cicada” and “rejuvenating the old.”
“The molting of the golden cicada” refers to constraints that need to be imposed on the size of Puxi industries: they must downsize and “slim down,” as appropriate. We must also be determined to shut down a batch of enterprises that are incurring losses, and to move some to Pudong after undergoing technical upgrading.
“Rejuvenating the old” refers to traditional industries that must be gradually renovated, and some old ways that must be discarded so that the industrial sector becomes more up to date. At the same time, we must develop emerging industries, primarily those that are technology-intensive and high-tech, that involve deep processing or fine processing, or that make complete sets of equipment. We won’t start any capital- or labor-intensive projects, or ones that consume a lot of energy or raw materials, let alone increase our scale of operations.
At the moment, opinions differ as to how to approach the metallurgical industries. I think we must proceed from realities: Shanghai’s 5 million tons of steel account for 70% of the product types found in the entire country. None of our former mayors reduced steel production because steel is not yet a twilight industry in China. Therefore don’t talk lightly about reducing our production capacity. As for how much we should produce, that should be based on market demand at any given time. We might produce a little less, or offer more varieties, but we shouldn’t touch the 5-million-ton capacity. From now on, Shanghai’s steel industry should develop at both ends: on the upstream end, making up any deficiencies; on the downstream end, working on high quality, wide variety, and small-batch production. After we build cold-rolling facilities, we should start immediately on hot-rolling facilities.
Pig iron [capacity] should keep up as much as possible. Let’s first operate the existing 750-cubic-meter blast furnace and see—if its pollution, costs, and returns are acceptable, then we can build another during the period of the Eighth Five-Year Plan, and yet another during the Ninth Five-Year plan. This way the three blast furnaces will be able to produce 2 million tons of pig iron; add to that the 1.5 million tons from Meishan, plus some scrap steel, and we will basically have enough to meet our needs.
Using these estimates, you should carefully calculate how much everything will cost. If it takes a bit of foreign investment, we can afford that, and in 10 years this problem will have been resolved. If we keep going like this, Shanghai’s steel industry might even become a source for accumulating capital. It’s not making money right now in part because pig iron is being shipped in from outside and its cost is constantly rising, and because some steel is being supplied to the electrical machinery sector at low mandated prices to ensure its competitiveness. Without steel, Shanghai’s electrical machinery industry cannot develop. Therefore when we have steel, we have to think about the consequences of not having it. As for how the steel industry should develop, what needs arguing can still be argued, and what needs doing must still be done. If we don’t proceed this way, we won’t be able to protect Shanghai’s steel industry.
In our metallurgical industries, we plan to form three enterprise groups organized around Shanghai Steel Mills No. 1, No. 3, and No. 5 and will divide up the contractual obligations among these three groups. We won’t necessarily assign all the factories under the Municipal Bureau of Metallurgical Industries to the three groups—those in the groups will be close-knit, so some enterprises can stay outside, and their Party and government ties will remain with the bureau. In reshaping these three groups, we must lay out tasks and goals. The focus should be on fixing Steel Mill No. 1, further improving No. 3 and No. 5, improving quality, and increasing product variety.
For the textile industry, we have to somewhat reduce the number of spindles. This industry needs a major reorganization and it must form enterprise groups. Its current method of management is basically outdated, as it relies on arrangements made through the state plan and features unified purchasing and allocation of cotton. Administrative companies have been abolished, so the Municipal Textile Bureau has no way to manage its 550 enterprises and their 800,000 workers. The relationships between their powers, responsibilities, and interests are unclear—this won’t do. The textile industry needs to do more deep processing, develop its knitting and spinning machinery, and gradually become a profit-making sector.
Its sources of raw materials must be more diversified and more numerous; it must arrive at a number as to just how much imported cotton it can use each year, and [determine] whether it can sign an agreement with Australia for a long-term supply of cotton. At the same time, this activity must be integrated with reform of the foreign trade system, and studies must be done on how to increase exports. The representative agency system didn’t work because it was monopolistic. We don’t want to go back to the purchasing system now; rather, we want to examine how to move forward. Besides using more imported cotton, we could also grow a bit more cotton in the municipality’s rural areas. I think there should be no problem in expanding such areas to 400,000–500,000 mu2 during the period of the Eighth Five-Year Plan—we can’t just keep it steady at 200,000 mu. The current policy on growing cotton can still motivate farmers, and besides, homegrown cotton is always cheaper than imported cotton.
We can consider growing somewhat less grain—it could be just enough to ensure farmers’ rations in the rural areas, and of course there’s also the issue of the rice supply for urban residents. The rural areas should develop more cash crops, and we should have textile enterprise groups establish direct links with townships and villages. This is using economic means to motivate farmers to plant cotton, and it also increases the incomes of farmers.
As for the instrumentation industry, the city’s Instrumentation Bureau recently started a major discussion on this subject—this is very good. The Shanghai instrumentation industry made a historic mistake, nationwide in nature, when everyone rushed in at once to make color TVs and tape recorders. As a result, we suffered losses. Instrumentation is an emerging industry in Shanghai, and it is the direction we should develop in. Besides making electronic meters to be installed in equipment, we must do careful market studies and find out which products we can be most competitive in. For example, should we make 21-inch color TV tubes or 25-inch tubes? I say we should win by using the element of surprise—everyone is now making 21-inch tubes, so we’ll make 25-inch tubes. We’ll make what others don’t make.
When it comes to the electrical machinery sector, I don’t like the slogan “The focus of Shanghai’s industry is tilted toward electrical machinery.” Our industries can’t only produce electrical machinery, but we can point out which specific projects need key support and should be given priority in development. The electrical machinery sector must compete for projects from the ministry, and it will mainly be developing industries with special features and a good foundation, such as equipment for automobiles and power generation. We don’t necessarily have to develop general-purpose products. I think Shanghai should still develop light industries such as foodstuffs, watches and clocks, bicycles, and so on, and recover our former position in leading the nation. Shanghai’s light industries should become a major accumulator of capital.
My overall thinking is that during the period of the Eighth Five-Year Plan, we can’t spend more money to overhaul our industries. We can only maintain them at the current scale and rely mainly on enterprises to accumulate savings to do the job themselves. Of the development funds we receive from the central government, we mustn’t touch the RMB 300 million for technical upgrading. All the additional fiscal resources remaining should be concentrated on infrastructure construction, and the money for revamping Steel Mill No. 1 should come from the technical upgrading funds. My own background in industry makes it clear that working on industry is very risky. Investments often yield no benefits, so technical upgrading projects must be very clear-eyed and should not be undertaken unless they can yield benefits. We still have to study the kinds of policies needed for industrial technical upgrades. For example, some upgrade projects might take place in the early stages of construction; we might support them through some soft loans. We can hold onto the RMB 1.4 billion fund for special projects—the next few years must be primarily spent on infrastructure construction.
Tertiary Industries. Exactly which tertiary industries should Shanghai develop? I think the first should be commerce—make Shanghai a commercial center. The commercial facilities in Puxi should be expanded. Nanjing Road and Huaihai Road were prosperous to begin with. We should relocate the residents living behind the storefronts along those streets and disperse them to Pudong. This way the stores can be further enlarged. Shanghai should next become a foreign trade center, then a financial center, and a center for tourism—this is very important. We should consider establishing a Shanghai Tourism Commission to unify the management of tourism and transportation, strengthen coordination, and provide end-to-end services from air travel to cars for hire, from hotels and stores to scenic spots. In particular, it should organize foreigners from Shanghai’s sister cities to do sightseeing in Shanghai, and it could also organize tours from Shanghai to Suzhou, Hangzhou, Nanjing, or even Xi’an. A theme park like Disneyland would offer the liveliest sort of science education. We could provide the land for such a project and a foreign party the funding; most of the ticket revenue would be used for repayments, but we would make money from tourist spending, which would help the market to flourish. Of course we don’t yet have the conditions for doing this—there must first be negotiations and contacts, but land should be set aside in plans. In short, tertiary industries must be well planned.
Work in Science, Education, Culture, and Health. Shanghai’s facilities for science, education, culture, and health are too backward, and we have to think about suitably increasing investments in these sectors over the next 5 to 10 years. We must definitely spend on education, the most fundamental of all. We should build a university or perhaps a vocational school in Pudong; we might move one over from Puxi or build a new one. We can suitably cut back a little on local universities and develop more vocational education and training. Given the needs of large-scale infrastructure construction in Shanghai over the next decade, we could have more technical schools with civil engineering specialties. However, the main focus of education in Shanghai should be its primary schools. Upon arriving in Shanghai in 1988, I already noted that the city had long had a good foundation in its primary and secondary schools, which should enable us to recover our leading position in the country’s primary and secondary education.
There is at present no all-round planning for the development of cultural endeavors—this should be carefully studied. Every district should build some cultural facilities. The districts and counties have money now, so the city’s Planning Commission can give them some targets and have them pay for some cultural and sports facilities themselves.
6. Overall Balancing
The Municipal Planning Commission must work on achieving several major balances in finances, credit, forex, and labor, but the most important is balancing capital. How much must be spent for the 10 major projects? That must be calculated. Assume a tentative rough estimate of RMB 20 billion; then take into account investment savings through land and relocation reforms and deduct those projects that have already been implemented, and the estimated remaining balance would be about RMB 15 billion, or an average of RMB 3 billion a year. The central government is giving us part of this—apart from the RMB 300 million loan for upgrading technology, there’s RMB 1 billion in development funding, which will all be used for infrastructure construction—and we also have to come up with part of that. Provided we do good work, we should be able to keep our RMB 1.4 billion special projects fund. A little money can be raised from the people for gas and housing; add to that some foreign investment, and we will basically be able to solve the funding problem.
The three development zones in Pudong envisioned by the commission, including that for a science park, must be built through fundraising. The land will be the government’s investment. It will be appropriated by the government for the lowest required premium and turned over to the development company, which will build on it on a rollover basis and may also charge infrastructure fees to make repayments—the government cannot spend any more on these development zones. The key is to reform the system and borrow from the methods used in Singapore and Hong Kong.
Ten companies should be formed for the 10 major projects; each should be a qualified legal entity that combines responsibilities, powers, and interests. The companies will first build, then manage; that is, each will develop and operate. At the same time, they should form 10 supervisory boards composed of representatives of the government, the Municipal People’s Congress, and people from the economic sector. The boards should meet at least twice a year, once to hear about planning goals and once for auditing and inspection. If they discover problems, they can correct them in a timely way, even if it means firing the company’s general manager. This is the only way to ensure the smooth progress of development construction.
Furthermore, we must strengthen training of the labor force, as well as pay attention to balancing it. Can we shift some labor from secondary industries to tertiary industries, and from industry to construction? In the future, construction of the Metro, the bridges, and housing will all require the training of professional construction teams, which should therefore continually improve their technical levels and quality.
The 10 major projects require very large investments, so we must reform our current methods of investment. In Wuhan, it cost only RMB 500 million to build a bridge across the Yangtze River and only RMB 200 million for the Yangtze River Bridge at Jiujiang, yet our Huangpu River Bridge will cost RMB 800 million to 1 billion, half of which is for relocation. We can’t afford to do things this way and should therefore change our method of relocation. Everything should be done according to housing reform policies—although relocated families will receive priority in the assignment of housing, they will still have to buy bonds, and every unit will have to contribute to Pudong’s development and Shanghai’s revitalization. The Municipal Planning Commission should take charge of all funds and revenues; it should also inspect and supervise the use of the funds to prevent losses. At the moment, we don’t have enough funds and must think of ways to raise a bit more.
1. This is the main part of a speech by Zhu Rongji after listening to a report by the Shanghai Planning Commission on its 10-year plan for Shanghai and its preparations for the Eighth Five-Year Plan.
2. One mu is equal to 666.7 square meters.