Zhu Rongji’s tenure in Shanghai coincided with the critical period when the focus of China’s economic reforms shifted from rural areas to the cities, and when the economic system itself was in transition. For various domestic and international reasons, reform, development, and stability encountered great difficulties and daunting challenges. In Shanghai, China’s largest industrial city, old problems left over from the past overlapped with and were intertwined with new ones that emerged during the economic transition. The city was confronted with severe and complex issues due to two major problems: a sharp drop in fiscal revenues and excessive debts incurred for urban construction. Led by then Municipal Party Secretary Jiang Zemin, Zhu, together with the leading members of the Municipal Party Committee and municipal government, organized the city’s administrators and populace to forcefully promote reforms, improve livelihoods, and stabilize and develop the economy. Within a relatively short time, major socioeconomic changes took place that laid a solid foundation for Shanghai’s subsequent reforms and development.
The Shanghai Years is an important record of this unique period. It clearly traces the course of the city’s reforms and offers the reader a more comprehensive look at this phase of China’s reform and modernization, as well as a deeper understanding of the theory and practice of socialism with Chinese characteristics.
Improving People’s Livelihoods
As soon as he became mayor, Zhu Rongji encountered a hepatitis-A epidemic in Shanghai, ongoing inflation, and poor morale among the city’s residents. Under the planned economy, 80% of Shanghai’s fiscal revenues had to be turned over to the central government, public facilities were heavily indebted, and there were many complaints about snarled traffic, housing shortages, and environmental pollution, none of which could be addressed within a short time. Following in-depth research, Zhu decided to make a breakthrough in the supply of non-staple foods by formulating a master plan for end-to-end reforms of their production and marketing systems. After several years of effort, a modern production and marketing system for non-staples began to take shape in Shanghai; product variety gradually improved and prices stabilized.
Zhu also worked hard on Shanghai’s urban infrastructure, with a focus on transportation. He pointed out that priority should be given to city planning, especially to transportation planning. To tackle a funding shortfall, he urged that hard choices be made to ensure that the limited funds available would be used for infrastructure construction. He obtained preferential loans from international agencies like the World Bank and from some developed countries, thereby making breakthroughs possible in the rebuilding of the Hongqiao Airport terminal, the expansion of programmable telephone capacity, the first phase in reconstruction of the Suzhou Creek wastewater treatment plant, Metro Line 1, and the Nanpu Bridge. Completion of Shanghai’s elevated roads also greatly improved city traffic.
After starting work in Shanghai, Zhu perceived that one of the biggest issues in the lives of the city’s populace was the housing shortage. Despite an average per capita living area of only 6 square meters, the city’s needs could not possibly be met through city-financed housing construction alone. Therefore by extensive studying and borrowing from the experiences of places like Hong Kong and Singapore, Zhu proposed a formula whereby the state, enterprises, and individuals would work together to build housing in Shanghai. He was first in the country to establish a housing provident fund and to issue bonds for housing construction.
During the drafting of the “Implementation Program for Reform of the Housing System in Shanghai,” he repeatedly drew on the advice of Chinese and foreign experts and presented the program to all the city’s residents for discussion. As a result, the draft was refined to the greatest possible extent and a consensus on this major reform was reached by all sectors of society. Zhu, who felt that the rebuilding of dilapidated urban areas had to discard the old approach of demolition and reconstruction in situ, also proposed an overall plan for the rebuilding of Shanghai’s old urban areas and shantytowns. This line of thinking was the basis for Shanghai’s reforms on commodity housing and for better government housing guarantees; it also provided valuable experience for national housing reforms.
Deepening Industrial Reforms and Developing Shanghai’s Economy
Faced with the lower production and declining performance of Shanghai’s state-owned enterprises (SOEs), Zhu Rongji pointed out that they had developed a dependent mentality due to decades of a planned economy, and that they lacked a sense of competitiveness in the transition to a commodity economy. He felt that this mindset was the first thing that had to change, that there had to be a shift from a product economy mentality to a commodity economy mentality, and from an internally oriented operating mentality to an externally oriented operating mentality. Therefore he advocated the introduction of competitive mechanisms and the deepening of enterprise reforms, and he worked to improve the internal and external operating environments of enterprises. Internally, systems for contractual operational responsibilities and for hiring factory directors were adopted; externally, administrative agencies were streamlined and their powers devolved, with the powers of various municipal agencies devolved to districts, counties, and enterprises. After factory directors were hired through open recruitment, enterprises would have to reform their internal competitive mechanisms, as he felt this was the only way to motivate their employees, make them truly responsible for their own profits and losses, and improve their economic performance.
Zhu Rongji repeatedly stressed that quality determined an enterprise’s survival and its performance, and that if quality could not be ensured, all targets should be rejected no matter how high they were. He asked for advice from a German expert and invited him to lecture to over 1,200 managers of large and medium Shanghai enterprises on quality management. During the presentation, Zhu said that “a person who does not recognize that quality is Shanghai’s lifeblood, who does not have such a high awareness of quality, cannot be a factory director.”
To cope with Shanghai’s shortage of industrial raw materials and their price increases, Zhu focused both on developing raw materials industries and on making adjustments in traditional industries like textiles and metallurgy. At the same time, he built up new technology-intensive industries that involved hi-tech, complete systems and advanced and precision processing. He summed up adjustments to the industrial structure and technical upgrading with two phrases: the “molting of the golden cicada,” which meant that industries in Puxi could not continue to expand but had to bite the bullet, “slim down” suitably, resolve to shut down some unprofitable enterprises, and, after technical upgrades, relocate some to Pudong;1 and “rejuvenating the old,” which meant that traditional industries had to be gradually renovated. Zhu’s ideas and measures on industrial restructuring enabled Shanghai to take a major step forward in its transition.
He attached great importance to the role of finance in economic development. As soon as he arrived in Shanghai, he pointed out that “without the collaboration and support of the banks, it is hard to get anything done. The trend in the future will be less funding from the fiscal budget and more from the banks.” He invited Chinese and foreign finance experts to discuss the development and opening up of Shanghai’s financial industry; Shanghai actively brought in foreign banks and insurance companies, further opened up its financial sector, and established the Shanghai Stock Exchange in December 1990. Zhu believed the development of Shanghai’s tertiary industries had to be well planned: the city had first to become a commercial center, next a foreign trade center, and then a financial center. These ideas later became important components of Shanghai’s master plan for development.
Establishing a Clean and Efficient Government, and Improving the Investment Environment
In introducing his administrative plan as mayor during the First Plenary Session of the Ninth Shanghai People’s Congress, Zhu vowed, “If I am elected mayor, I will be determined to make the next administration one that serves the people wholeheartedly, an administration that is clean and very efficient.” Taking aim at a common problem, he insisted on halting the prevalent customs of wining, dining, and accepting gifts. The first executive meeting of the new municipal administration drew up the “Rules of the Shanghai Municipal People’s Government Regarding Stringent Frugality among Leading Government Agency Cadres Who Are Bureau Directors and Above.” He declared: “I should start with myself and start with the city government. When we in the city government go down to the grass roots and the factories, we have to adhere to ‘one dish and one soup,’ no matter what,” and above all leading cadres had to take the lead if an atmosphere of integrity was to take shape in Shanghai. He also warned cadres of all levels that if they thought of nothing all day except houses, cars, and foreign travel instead of work, there would be no hope for Shanghai.
Zhu said the key to making the government efficient was to devolve its powers: “We must first transform government functions and be less involved in things beyond our control. After this step, we trim staff and increase their efficiency.” Agencies of city government were to focus their energies on macroeconomic management and oversight. He made great efforts to devolve powers and responsibilities down to districts, counties, and enterprises, noting that district and county governments also had to change their mindsets: they had to use their newly devolved powers well and dynamically. At the time, such devolution played an important role in motivating districts, counties, and enterprises to focus on production, construction, and development.
Zhu Rongji established “one-chop” service for foreign investors. On a report listing the hundred-odd approvals needed for a foreigner to invest in Shanghai, he wrote, “Alas, Shanghai! If you don’t reform, you’re done.… Why do we always make things hard for ourselves?” What Shanghai needed was speed, efficiency, decisiveness, and forceful action, he said; once decisions were made, they had to be carried out. Empty talk and impractical talk harmed the country. To improve the investment environment in Shanghai, he proposed the formation of the city’s Foreign Investment Commission, serving personally as its chairman. The commission became the “only agency, only window, and only chop” foreign investors needed, thus providing them with “one-stop” service. The original 126 chops required to approve a foreign-invested project were reduced to a single chop, greatly improving efficiency. Hence “Shanghai speed” became known throughout China.
Zhu Rongji repeatedly stressed that to improve Shanghai’s investment environment, the management standards of every level of city government had to be raised, and that the problems of dirt and disorder in particular had to be solved. He personally looked into the issues of urban traffic and order on the streets, along with services on taxis and public transit as well as in hotels and stores. He frequently went to the grass roots and frontlines to solve problems and advocated improving Shanghai’s image as an international city by offering quality services and improving its investment environment. He felt that “many problems cannot be resolved through preferential policies alone—solutions depend on our ability to work efficiently. In that sense, each of us embodies an investment environment.” After implementing numerous reforms, government work at all levels in Shanghai became much more efficient. This proved very effective in attracting foreign investment and in foreign trade; it also facilitated infrastructure construction and the development of Pudong.
Promoting the Development of Pudong and Broadening the Opening Up of Shanghai
The concept of developing Pudong was first brought up in the 1980s. At a meeting of the Municipal Party Committee chaired by Jiang Zemin in June 1987, a decision was made to form a joint Sino-foreign advisory committee on developing Pudong, and the overall line of thought on this began to take shape. In July 1988 Zhu Rongji stated, “It means building Pudong into the most modernized part of Shanghai. By developing Pudong, we will make the whole of Shanghai the largest economic, trade, finance, and scientific and technical center in the country.” Proceeding from the groundwork laid by the previous administration, he actively promoted Pudong’s development and opening up and stepped up feasibility studies on this subject.
After April 1990 the Shanghai municipal government drew up a series of specific policies to develop and open up Pudong. On September 10, 1990, it released three State Council regulatory documents on this matter and also issued six regulations of its own. These formed the framework for Pudong’s development, which then made substantive progress.
Remaining Close to the People and Changing Government Working Style
Zhu Rongji noted that “to serve the people well, we must learn about their hardships and needs. At the same time, we must learn about the achievements and shortcomings in our own work, particularly the drawbacks of various systems and the corruption in our ranks.” He paid great attention to learning about people’s lives and hearing their voices through their letters, petitions, and other channels: “Through letters and petitions, we can not only establish an information connection with the public, but can also build flesh-and-blood ties with them.”
Zhu detested all types of bureaucratic behavior. He frequently went to listen to the views of cadres and ordinary people at the grass roots, insisting that all work be based on actual circumstances and that care be taken to review practical experiences. He called on everyone to speak the truth, do substantive work, dare to assume responsibility, live up to their words, and act effectively. He declared, “If they can’t solve the problems, if they can’t arrive at opinions, they shouldn’t hold meetings.” Not satisfied with some agencies that only collected information, he wanted mechanisms for following up, getting feedback, and overseeing the way information was handled. He explicitly said, “A considerable number of assigned tasks are dragged out for long periods and not completed. One reason is that agencies overlap: they tie each other down and buck-passing has become the norm. Another reason is that the main people responsible do not inquire into things and let them slide.” Because of his demands, the general office of the Shanghai municipal government established a supervision system to ensure that important directives from leading officials were carried out thoroughly.
Zhu emphasized that “when you report, you mustn’t just report good news; you must especially report bad news. It’s easier to report good news and harder to report bad news. What’s hard about it is that you must disregard relationships and face-saving considerations.” In Shanghai, he became well known for his impartiality and refusal to consider appearances, and for often criticizing cadres severely to their face. But self-criticisms were frequent as well. He once said, “Many colleagues are very solicitous of me. They say I have too much of a temper, that I criticize people too harshly, that I often criticize people in front of others, putting them in a very awkward position.… I must pay attention to how I criticize people, I must pay attention to effectiveness, I should recognize achievements, and have more one-on-one talks. But without criticizing publicly, it’s often hard to make everyone learn a lesson.”
The training of cadres mattered greatly to Zhu Rongji: “The key to doing faster, better, and bolder work lies in our cadres—cadres are the decisive factor,” he said, and “those who produce results and do solid work should be elevated to leadership positions, and those who keep speaking empty words and occupy their positions without doing anything should be removed.” He made three demands of cadres at the bureau level and above: that they be “reformers who are liberated in their thinking, have the courage to take action, and dare to take risks,” and that they be “clean, work efficiently, and honestly endeavor to be servants of the people.” He also paid a great deal of attention to cultivating entrepreneurs, describing three basic traits that socialist entrepreneurs should have and asking all enterprises to select some high-caliber cadres in their prime for training abroad. He advocated “addition” training for cadres who had not been chosen to be factory directors through a competitive process so that conditions could be created for them to learn their lessons, review their experiences, and make a comeback. By identifying outstanding young cadres and giving them important responsibilities, he effectively ensured the progress of Shanghai’s reforms.
The Shanghai Years also includes speeches Zhu made on a variety of subjects during his tenure in that city, including environmental protection, wastewater treatment, sci-tech matters, education, culture, and journalism. He frequently made impromptu speeches at universities, TV stations, and meetings of the Municipal People’s Congress. The wide range of subjects and venues covered in this volume presents a vivid picture of Zhu’s governing style.
(Abridged from an article originally published on August 16, 2013, in the People’s Daily. All quotations are from Zhu Rongji on the Record: The Shanghai Years.)
1. “Pudong” refers to the part of Shanghai east of the Huangpu River; “Puxi” refers to the part of Shanghai west of the Huangpu River. Historically, the urban core of the city was in Puxi.