It is inevitable, perhaps, that we focus on leaders when we examine grand political and economic transitions. But they are not the only actors in these dramas. Deng Xiaoping and his colleagues triumphed precisely because they unleashed the creativity and the entrepreneurial urges of millions of Chinese. Many of them—shocking though it might be to think—were not even members of the Chinese Communist Party.
In January 1979, about the time that Deng was preparing for his trip to the United States, a young man named Rong Zhiren returned to his hometown of Guangzhou (Canton), the largest city in Guangdong Province, up the river from Hong Kong. Rong had just turned thirty, but he had relatively little in the way of concrete achievements to show for someone his age. The reason was the Great Proletarian Cultural Revolution. A central part of the Cultural Revolution was Mao’s campaign against intellectualism, book learning, and the “Four Olds” (old habits, old ideas, old customs, and old culture). In 1966 he had ordered the closure of China’s institutions of higher education. Over the ensuing years, 17 million students were dispatched to the countryside to learn the virtues of the simple life from the peasantry. University entrance examinations did not resume in China until the autumn of 1977. By early 1979 only 7 million students had made it back to the cities.
As the Cultural Revolution played out, the overwhelming majority of students stayed in the places where they were assigned, which usually meant wasting their best years tilling the land in remote agricultural communes. Rong did not. Sent out to the countryside in 1969, he sneaked away as soon as he had the chance. He spent the next ten years dodging the police and doing odd jobs, like drawing and tutoring. He lived with friends, moving from place to place. In December 1978, back in Guangzhou but still on the run, he heard the results of the historic Third Plenum in Beijing on the local radio. Like millions of other Chinese, he understood that something fundamentally transformative was under way—and that included an opening for entrepreneurship. “I knew this policy would last because Chinese people would want to get rich,” as he later put it. In January 1979, he decided that he would be one of the first to take a chance. He applied for a business license. The bureaucratic obstacles sounded daunting: one of the requirements was a complete physical checkup to ensure that he had no infectious diseases. But it turned out to be a cinch. When Rong went through the procedure in early 1979, everything was done in just a few days. (Nowadays it takes nearly three weeks.) The Guangdong government, eager to get things going, was already trying to encourage business creation.
Rong started his business on March 18—an auspicious date because the number 18 sounds like the phrase “You’ll definitely get rich” in Mandarin. Following the advice of people in the neighborhood where he had been working, he decided to open a small restaurant specializing in breakfast. The main dish he offered was classic Guangdong comfort food: congee (rice porridge) with peanuts and spareribs. He set up his restaurant—really a glorified tent on a wood frame he put together himself—at an intersection close to two high schools, assuming that he could market his cheap breakfasts to hungry students. His start-up capital was one hundred yuan (roughly sixty-five US dollars at the official highly inflated exchange rate), sixty of which he had borrowed from his girlfriend. The furniture and a big cooking pot were loaned from friends. He was nervous at first. The idea of running one’s own business was frowned upon by many educated people, who regarded such things as beneath their dignity. But those worries began to fade away as he immersed himself in the daily routine of his business and the money started rolling in. Almost immediately, the restaurant was an enormous success.1
Some small private businesses—known as getihu—had existed since the Communist takeover in 1949. But they belonged to a small but beleaguered minority, continuously battered by the whims of officialdom and the ebb and flow of political campaigns. The policy that took effect in 1979 embodied an entirely different philosophy. The communiqué of the Third Plenum had specifically, if cautiously, embraced the principle of private commerce. Perhaps even more important than the party’s official statements were its actions. Would-be entrepreneurs were especially heartened when the official media announced, later in 1979, that the government had asked a man named Rong Yiren (no relation to the founder of the restaurant in Guangzhou) to found a new company that was expressly designed to experiment with foreign trade and investment. He called it CITIC, the China International Trust & Investment Corporation. Rong was the scion of one of China’s most famous business families, who had built their wealth on a series of textile mills in the early twentieth century. After the Communists took power in 1949, most of them fled. But Rong decided to stay, giving controlling stakes in his companies to the party and taking a job, for a time, as a vice mayor in Shanghai. During the Cultural Revolution, he had suffered the predictable persecution—including torture and public humiliation—but he had bounced back after the fall of the Gang of Four. His establishment of CITIC was specifically designed to serve as an official signal that China was open for business. Deng himself encouraged Rong to be “boldly creative.”2
Another signal came with the officially sanctioned revival of a long-prohibited aspect of business. Advertising was one of those quirks of capitalism regarded with particular contempt by the ideological purists of Chinese Communism. Right up until the end of 1978, foreign businesspeople noted how the notion of advertising elicited conflicting emotions of disgust and curiosity among their Chinese interlocutors. Then, suddenly, in the spring of 1979, representatives of a new state-owned company called the Shanghai Advertising Company showed up at the Canton Trade Fair.3 Foreign investors were shocked, but perhaps not completely. They had already been casting about for ways to promote their products in the Chinese media, and on March 15 the well-established Western advertising giant Ogilvy & Mather succeeded in publishing its first ad in a Shanghai newspaper (for watches from the Swiss company Rado).4
The message that commercial success now counted more than ideological purity quickly percolated down to officials at the lower level—and nowhere more than in Guangdong Province, home to the famous Canton trade fair. The remarkable degree of bureaucratic openness that Rong Zhiren encountered when he opened his new restaurant in Guangzhou, then Guangdong’s biggest city, reflected an eagerness among the province’s party elite to unleash private initiative. Already under Hua Guofeng, leading party members had begun pushing the central government to grant them wide-ranging powers over the province’s economic affairs. Their eagerness to gain some vital administrative flexibility was fanned not only by their relative economic backwardness but also by proximity to Hong Kong and its turbocharged entrepreneurial culture. Despite the tightly sealed border, Guangdong and Hong Kong remained linked in a surprising number of ways. Many of the people in Hong Kong had fled there from Guangdong after the Communist takeover, and often they maintained their ties with the family members they had left behind on the mainland. A certain degree of trade between both sides continued even after 1949, both officially approved and illegal. The people on both sides of the border spoke Cantonese, the dialect ubiquitous in this part of China, rather than the lingua franca of Mandarin. Many in Guangdong could pick up radio broadcasts from the British colony. In the wake of the Third Plenum, they were less shy about listening in—and even about discussing what they heard.
Media coverage of Deng’s visits overseas—not only to the United States but also to Japan and Southeast Asia—had opened up a view of the larger world, as well as driving home the painful awareness of China’s own backward state. More shocks were on the way. As 1979 dawned, British diplomat Roger Garside was startled to see a New Year’s Eve TV broadcast featuring a singer from the “renegade province” of Taiwan. American stars like the pop musician John Denver and comedian Bob Hope trekked to China in the course of the year. Foreign classical music orchestras also put on performances. During the Cultural Revolution, book publishing had dwindled away to a minimum, and foreign works of literature disappeared. But then, one day in 1979, literature lovers awoke to find a new edition of Hamlet in the bookshops. The Quran and other religious works reappeared as well.
Such changes had a monumental impact. This was a China where road maps and telephone books were still regarded as state secrets, so the act of sharing them with foreigners was a crime. The same restrictions applied to weather forecasts and the location of gasoline stations; a foreigner who managed to hail a taxi could find herself in a tricky predicament if the car’s gas tank turned out to be empty. (Of course, taxis were extremely hard to find. Bicycles still predominated on the streets of Beijing.)5 Consumer products were scarce. Cloth was rationed.
There were ways to take advantage of the new atmosphere of comparative openness, but manufacturing new products took time. So some of the first obvious changes—like opening private restaurants—came in the realm of services. Hair salons quickly widened their menu of services: suddenly, every woman seemed to be getting a permanent.
As is typical of situations where an all-powerful state begins to relax its grip, a market for the illicit emerged with startling speed. The American journalist and China scholar Orville Schell recorded his adventures in a seedy Beijing café in the company of Wang Zaomin (“Benefit-the-People Wang”), whom he described as “a soldier in the People’s Liberation Army and a procurer of women.” Wang styled himself a petty gangster and dressed accordingly in a fedora, a Western-style trench coat, and army pants. The girls who worked for him yearned for the precious hard currency that would give them access to Western cigarettes and magazines and dreamed of one day owning the same kind of beautiful clothes they saw in foreign fashion spreads. Wang and his charges had zero interest in politics, and they displayed little of the idealism of the intellectuals who were provoking the authorities with their writings on issues of the day. But Schell rightly refused to dismiss the denizens of Wang’s back alley, noting that they were, in their way, “every bit as rebellious and subversive to the geist of the old Chinese Communist Party as their dissident compatriots.” What drove them was the vague yearning for the lifestyle that the West seemed to exemplify—a world of variety and stimulation: “‘Why is our life so boring when Western life is so rich?’ one young woman asked me in the Peace Café, confessing that she was transfixed by what she had seen on Chinese TV when Deng Xiaoping visited the United States.”6
Schell had visited China during the waning years of the Cultural Revolution and recalled how hard ordinary people were prepared to work to ward off even the most glancing contact (much less conversation) with visiting foreigners. Returning to China on a short trip in 1978, however, “was like entering a different country,” he later wrote. The impression was intensified when he came back for a longer visit in 1979. In a Beijing mental hospital he ran into a doctor who spoke unabashedly of the teachings of Freud (a taboo topic in the days of Mao) and defied long-standing party doctrine by refusing to regard the cause of mental illness as “class oppression.” A young judge’s assistant interrogated him about how to find jobs and housing in the United States and then openly declared his desire to emigrate.7
For many Chinese, though, even remote contact with the West sufficed. TVs were still few and far between in 1979, and anyone who owned a set could count on a persistent audience of friends and neighbors. But that scarcity quickly eroded in the course of 1979 and 1980. Relaxation of the rules allowed mainlanders to order sets in Hong Kong and take delivery in the People’s Republic. An even more accessible technology was the cassette-tape player—the same affordable device that had such a transformative effect on political discourse in Iran. Characteristically enough, however, the Chinese did not use their tapes to record incendiary texts or to distribute political messages. They were listening to bootleg music recordings.
They were particularly enamored of a Taiwanese pop star named Teresa Teng, a young beauty who specialized in songs of tenderness and yearning. The spirit of her music was diametrically opposed to the strident revolutionary operas held high by Jiang Qing in the Cultural Revolution years. And, indeed, befitting the hesitations of the early reform period, Teng’s songs were officially banned in the People’s Republic until well into the 1980s because of her associations with the renegade province. But that stopped almost no one from listening. (Some of her biggest fans were in the People’s Liberation Army.)8 Teng’s new fans on the mainland knew her by her Mandarin name, Deng Li Jun—and since she had the same surname as the man who was leading China into its new era, she was soon dubbed “Little Deng.”9 Though on the face of things it might seem frivolous to compare the two of them, there was actually a deeper logic to the association. Her music, and the world of bourgeois pleasures it evoked, was one of the first everyday manifestations of Big Deng’s policy of “reform and opening” (gaige kaifang).
What initially escaped the notice of many of her mainland listeners was the point that Teresa Teng was far from a purely Chinese phenomenon. In fact, she was a perfect exemplar of the accelerating trend of globalization, one that was having a particularly notable impact on the countries of East Asia. She was a household name not only in her Taiwanese homeland and Hong Kong, but also in Japan, South Korea, Malaysia, and Singapore. Her popularity throughout Southeast Asia undoubtedly had something to do with the regional presence of ethnic Chinese—many of whom would take advantage of Deng’s plans to open the doors to outside investors. So Teng’s gentle ballads also made a fitting, if unintentional, symbol of China’s return to the global information circuit from which it had cut itself off for so long.
Popular culture produced inside the People’s Republic was not really in a position to compete. Movies and music still labored under the stifling legacy of the long years in which Gang of Four leader Jiang Qing had dominated the cultural scene with her bizarrely stylized “revolutionary operas” and proletarian anthems. There was, however, one notable exception in 1979—a film called Xiao Zi Bei, a musical comedy known in English as Bus Number Three. Viewed from today’s perspective, Bus Number Three is a bit of an oddity, the suitably awkward crystallization of a transitional moment. It tells the story of a group of young Shanghainese—a bus driver, a conductor, and various passengers, all of them bearing stylized names like “Young Green” or “Young Blue”—who are trying to find their way in the new age of Deng’s Four Modernizations. It is, in part, a typically didactic bit of political propaganda (including oblique references to the pernicious influence of “remaining forces,” meaning adherents of the Gang of Four) that nonetheless manages to point the way forward to a less ideological age, manifested in cheery songs that capture the comparative optimism of the moment.
The foreigners who witnessed all of this wondered whether they were watching the start of a new era or yet another of those transient phases that China had experienced so often in the past—like the Hundred Flowers campaign in the 1950s, when Mao solicited public criticism of the party’s reign by calling upon society to “Let a Hundred Flowers Bloom,” only to crack down violently on the critics as soon as he deemed that they had overstepped their bounds. The implications of all these 1979 experiments were radical, but it was impossible to tell how far they might go. One American businessman recalls asking his Chinese interlocutors, “Do you want capitalism?” “No,” they told him, and cited models like Yugoslavia, Hungary—and East Germany, at that time regarded as one of the East bloc’s most successful economies.10 These countries, which only a tiny handful of Chinese knew firsthand, stood for the vague promise of liberalization. At this stage, it was still almost impossible to imagine a China that would tolerate a full-scale restoration of private business.
The biggest test of all, many people suspected, was to be found in the countryside, where the overwhelming majority of the Chinese lived. Under Mao’s leadership, the Communists had marched to victory in 1949 precisely because they had identified their struggle with that of the peasants. The party had promised them freedom from want and corruption, the ills that have always plagued China’s rural dwellers. But the transformation of private farms into “communes,” collectively owned and operated, had plunged the countryside into a maelstrom of famine and suffering during the chaos of the Great Leap Forward. In the late 1970s, the ghosts of that colossal disaster still haunted the land. Reviving farming seemed an almost impossible task. Or was it?
It was early in 1979, and Production Team No. 12 was getting ready for work. The team, which called a small village in Guangdong Province home, consisted of forty-nine families who farmed forty acres of fish ponds and fields.
As recounted by American anthropologist Steven Mosher in his book Broken Earth: The Rural Chinese, the team had its headquarters in what had once been the village’s ancestral temple, a building adorned with carvings of tigers and dragons that had been constructed seventy years earlier as the spiritual center of the community. Now, more prosaically, it combined the functions of a warehouse, meeting area, and repair shop. One wall was taken up by a long storage shed—“as out of place in the high-ceilinged hall as a chicken coop in a church,” Mosher writes—containing all the team’s tools (hoes, baskets, buckets, carrying poles). Tubs of dried corn stood near the door; crates and boxes lay jumbled in a corner. All the property in the building belonged to the village People’s Commune, of which the team was a part. In the office space at one end of the hall hung a blackboard adorned with hooks. On the hooks hung no tags—one for each member of the team. Through the course of the day, the team head moved the tags around the board depending on the tasks assigned to each group of workers.11
At seven, well after dawn, the team leader arrived to unlock the door. By this time farmers in most parts of the world would have already been out in their fields. But the members of Production Team No. 12 saw no reason to hurry. They wandered in as the morning wore on. “Now everyone is waiting for the last stragglers to arrive,” said the team leader. “And no one wants to be the first to leave for the fields. They’re all afraid that that the others will sneak a few minutes more of leisure.” It was around a quarter past eight by the time the farmers shouldered tools and headed slowly off to their jobs. The team head later explained why the impression of stasis was deceptive. “People aren’t lazy all the time, just when they do collective labor. When they work on their private plots, they work hard. There is a saying: ‘Energetic as dragons on the private plot, sluggish as worms on the public fields.’”
When Mosher asked the team leader whether it had always been like this, the man replied that “before collectivization people worked hard.” He explained to the American that it now took fourteen days of work to hoe the same piece of land that once took six. “Everyone works at the same slow pace. People have learned from collectivization to do just enough to get by.”12
And this was in Guangdong, one of China’s most fertile regions. As we now know, however, not every place in the Chinese countryside was in the grip of the same stagnation witnessed by Mosher. There were a few communities where both farmers and officials were quietly testing the limits of the possible. One of the most intriguing was the village of Xiaogang, in a part of Anhui Province that had been hit especially hard by Great Leap starvation. Fengyang County had lost ninety thousand people—a quarter of its population—between 1958 and 1960.13 In the 1950s, Xiaogang village had thirty-four households; by 1979, migration and starvation had reduced the number to eighteen.14 In bad years, due to drought or mismanagement from above, the villagers had to sell possessions for food or borrow money for seed. The year 1978 was a bad one. Some of the families in the village were boiling poplar leaves and eating them with salt; others roasted tree bark and ground it to make flour15
The peasants of Xiaogang were locked into the commune system, which forced them to cultivate collectively owned farmland. In return for their efforts, they received “work points” that could be exchanged for food.16 One night in December 1978, the villagers decided that they could not go on. The heads of the households met after dark in the village’s biggest house and made a secret deal. They drew up a contract that divided up the land of the village commune among the eighteen families and stipulated that each family would have the responsibility for tending the fields assigned to it. The villagers had vivid memories of what had happened to other families who had acted against state policy, so they also agreed that they would raise the children (until the age of eighteen) of any village leaders who were arrested or shot as a result of the agreement.
The Xiaogang villagers had no way of knowing that farmers all around China were trying to get away with similar plans. But Anhui Province was a bit different. The food situation there was so dire that some officials were willing to turn a blind eye to what the farmers were doing17—even while others persisted with obstruction, denying fertilizers to the experimenters.18 The new party chief in Anhui, another victim of the Cultural Revolution, had his own ideas. Wan Li had assumed the leadership of the province in 1977, just before Deng’s comeback, and he soon realized that the comeback of household contracting was the only way to make sure that people avoided starvation. He gave his official blessing to the Xiaogang experiment, as well as allowing other places to try out similar measures (always under the proviso that the peasants involved were in particularly desperate straits). Farmers were allowed to divide up the land of the commune into household plots. They were required to provide a set quota of grain to the state. The rest could be sold off in private markets.
The effects were dramatic. Grain output in Xiaogang rose sixfold in the course of the year. The per capita income of the villages went from twenty-two yuan to four hundred.19 This was a trend that would be exceedingly hard to stop. “Baochan daohu [“contracting by the household”] is like a chicken pest,” one peasant said. “When one family’s chicken catches the disease, the whole village catches it. When one village has it, the whole country will be infected.”20 In 1979, by one estimate, 10 percent of Anhui Province was practicing the household-responsibility system. In June 1979, after paying a visit to Fengyang County to see the results for himself, Wan Li approved the expansion of the program to the entire province.21 In the countryside, at least, the party was beginning to release its grip.
Zhao Ziyang, Wan’s counterpart in Sichuan Province, took note. He had already been conducting experiments of his own, allowing state-owned enterprises to produce some goods in response to market demand and to use the resulting profits as they saw fit. Many of his own farmers still labored under threat of starvation, so he, too, began to allow them to deviate from the collective pattern. In 1978 he had begun allowing the communes to subdivide their production teams into smaller groups. He justified what he was doing as a way of “bringing individual initiative into full play.” He may have actually regarded the measure as an intermediate step on the way toward full-scale revival of the household-responsibility system. In 1979 he then allowed some production teams in the province to break work groups down into individual families. The measures sparked political resistance from conservatives. (The Maoists had not vanished completely, after all.) “But Mr. Zhao is ready to risk it,” wrote a group of visiting British journalists. “He endorsed setting family quotas for certain tasks such as raising silkworms, pigs and fish, on condition that the animal remain the property of the collective.” That was his way of ensuring that the radicals couldn’t accuse him of completely betraying the principle of collective ownership.22
Private interest, as it emerged, was about to prove a more powerful force than the Maoists’ invocations of revolutionary purity. In August 1979, encouraged by Zhao’s permissiveness, farmers in Sichuan decided to take an even more daring step. They set about dismantling Xiangyang People’s Commune in Guanghan, a town about forty miles from the provincial capital of Chengdu. This effectively rejected the collectivization policies behind the Great Leap Forward, a dramatic rejection of one of Mao’s signature policies. The move was so sensitive that they kept it secret, and it became publicly known only the following year.23 Zhao Ziyang and other Sichuan officials provided them with discreet political cover.
The dissolution of the first commune was a step of far-reaching implications. The Guanghan farmers divided the assets of the commune into subunits, some of them economic (having to do with agricultural production), some of them purely administrative. This set an important precedent for a nationwide abolition of communes that would change the face of China in the next few years. In the same year that the commune in Guanghan was abolished, a Sichuan newspaper declared that the “unity of economics and politics” that lay at the heart of the People’s Communes was not good and that “all unfavorable situations must be changed.”24 Decades later, the former head of the commune explained to an interviewer why the communes had become untenable. They were bureaucratically inflexible, with higher-ranking planners often ordering the commune to plant crops that were contrary to local conditions. They promoted excessive egalitarianism. And they suppressed initiative by giving the same amount of reward to each member of the commune regardless of the amount worked—what the locals referred to as “eating from one rice bowl.”25
The success of the experiments conducted by Zhao and Wan propelled them both to the top of the career pyramid. Having won Deng’s favor with his reforming zeal, Zhao became prime minister, and he played a crucial role in directing the economy during the early reform period. As for Wan Li, the peasants of Anhui immortalized him with a saying: “If you want to eat rice, look for Wan Li.” Wan had the extra advantage of sharing Deng’s favorite pastime. When he arrived in Beijing upon his promotion to the Politburo, Wan soon became a regular participant in Deng’s biweekly bridge parties, held at his house every Wednesday and Saturday evening. The power of bridge in Deng’s life was not to be underestimated. It was a game that played to his personal strengths: patience, strategic focus, and a prodigious memory.
The transformation of agriculture in 1978 and 1979 proceeded with little instigation from the top. The peasants sensed the opportunities provided by the loosening of the party’s political control and pushed ahead. It was a process marked by wide regional variation; there seem to have been as many different names for agricultural reform experiments during this period as there are counties in China. It was also very much a matter of trial and error. When the politicians learned what the peasants were up to, they usually waited for evidence of success before they committed themselves unambiguously. Wan Li and Zhao Ziyang could claim credit for letting the farmers do what came naturally. When the experiments of the peasants bore fruit, Deng publicized their success, recognizing a good thing when he saw it. But he certainly could not take credit for giving farmers the idea.
The irony, as American anthropologist Stephen Mosher realized, was that Western scholars at the time regarded the Chinese as incorrigible collectivists. “Group thinking” was considered an indelible part of traditional culture that predisposed the Chinese to Communist ways. As a result, Mosher had come to the countryside expecting to discover evidence that the peasants were fundamentally satisfied with the stability and predictability furnished by the regime. According to scholarly reasoning, the Communist Party had taken power in 1949 largely due to the support of the country dwellers. It had promised to improve the lot of the peasantry, and in this it had surely succeeded. After all, hadn’t the Communists brought schools and basic health care to even some of the most remote villages? Hadn’t they eliminated the corruption and tyranny of the old landlords? Upon his arrival, Mosher carefully noted all the characteristics of a traditional society that skewed visibly to collective ways of doing things.
The rampant cynicism and apathy that he encountered in China’s real-existing countryside thus came as something of a shock, and his account provides a fascinating chronicle of how a preconceived view can disintegrate upon contact with reality. But amid the ruins of Mao’s utopian edifice, Mosher also discovered intriguing evidence of a powerful source of transformative energy: individual initiative. Though they were far from the places where the most important experiments were under way, the people in Mosher’s remote Guangdong village had already picked up on the spread of the household-responsibility system, and he succeeded in capturing a nice snapshot of the spirit that, once unleashed, would soon lift hundreds of millions of people out of poverty. The old entrepreneurial mind-set of the Chinese “flared anew once opportunity presented itself,” Mosher noted. When one woman heard that the party might soon allow a return to household farming, she immediately began making plans to start cultivating her own mulberry patch, planting the bushes between the rows of trees on the farm. “You can’t do that now because people are careless when they work,” she explained to the American. “They would step on them when they are spreading mud [as fertilizer] or picking mulberry leaves. But I’ll be careful because they’ll be mine.”26
In May 1979, Tom Gorman, a Hong Kong-based American businessman, set off on another one of his trips to the Canton Trade Fair. As part of his job with a Hong Kong publisher of trade magazines, he had already made the trip to the fair several times, so he knew the routine. In the 1970s, foreigners who wanted to do business with the world’s most populous country had to follow a peculiar procedure. They could enter the People’s Republic only at one point, from Hong Kong. There they boarded a train at Tsim Sha Tsui Station in Kowloon, across the harbor from Hong Kong Island, marked by its splendid colonial clock tower, and headed north through lush, green, semitropical countryside to the border crossing at Lo Wu. There they disembarked and walked across the ironically named Friendship Bridge, a rudimentary wooden structure that spanned the slow-flowing Shumchun River, carrying their baggage with them. On the other side, the visitors were greeted by scowling border guards wearing uniforms adorned with the emblems of the People’s Republic of China, who examined the proffered visas and granted the privilege of entry.
And so it went in that spring of 1979. Just as every time before, the guards directed Gorman to a customs waiting room where he filled out an enormous number of forms documenting every item in his possession. Officials checked the vaccination records he had brought with him. (If you didn’t have all the shots required, they would administer them on the spot, so it was good to be prepared.) By now it was midday, and the next stop for Gorman and his fellow travelers was the special border-crossing restaurant, which offered a remarkably sumptuous lunch, supplemented with Qingdao beer. Lunch was followed by an obligatory nap period, in a waiting room equipped with spittoons and armchairs adorned with antimacassars. There was little alternative. Southern China is sweltering in the summers, and there was no air-conditioning in the People’s Republic. And the train from Shumchun Station to Guangzhou departed only at infrequent intervals. Looking back years later, Gorman would compare the move from frenetic Hong Kong to the sleepy post-Mao mainland “like the transition from snorkeling to wearing a diving bell.” You were no longer your own master. The powers that be would let you know when you were needed.
Gorman arrived at his hotel in Guangzhou to find the familiar routine in place. At that time, the only way to do business in China was to establish contacts with one of the fourteen ministries that controlled each of the country’s industrial sectors (chemicals, steel, light industry, and so on). This was easier said than done. Chinese officials were still strikingly stingy with information, another legacy of the Cultural Revolution, when association with foreigners could cost you a stint in a labor camp or worse. You could always go to the trade-fair building and seek out the people you wanted to meet (assuming that you already knew who they were), but that was no guarantee of success. Still, there was little choice. You certainly couldn’t expect them to come to you.
All this explains why Gorman and the handful of other Americans at the fair sat up and took notice when the Chinese approached them with an offer: Would the Americans be interested in taking a look at an investment opportunity? It was not too far away from Guangzhou; it would require an overnight trip. The Americans said yes.
On the appointed day, they set off from Guangzhou in a van that jolted down hideous dirt roads for hours. At one point it broke down, and everyone had to get out and walk to a spot where the Chinese hosts were able to arrange for another ride. The walk was not a total loss; the little group passed by a rural private market where local farmers were hawking all manner of produce, something that none of the Americans in the group could ever remember having seen before.
Finally, after a full day’s journey in the intense heat, they arrived at their destination. It turned out to be just across the border from Hong Kong—not far from the Lo Wu crossing where all foreigners made their entry into mainland China. The bewildered Americans followed their hosts to the top of a dike, where the Chinese hosts gestured at the vista spread before them. It was not clear what they were meant to look at. All that the Americans could see was the usual South China landscape: there were rice paddies, worked by peasants and their water buffalo in the time-honored manner, and duck ponds. There were few trees and here and there a modest peasant dwelling. What the Chinese were describing seemed to bear no relationship to the observable reality. This, they told the Americans, was the location of something called the Baoan Foreign Trade Base. The party had designated it as a special location for foreign investment. According to the plans under consideration, it would soon be the site of chemical factories and textile mills and manufacturing plants. And, oh yes, there would also be plenty of hotels for the foreign businessmen. It was going to be a wonderful chance to make money.
The Americans thought that the Chinese were crazy. “It stretched everybody’s imagination,” Gorman said. “I don’t think there was one of us who listened to the briefing and thought, ‘Yeah that sounds feasible.’ It was, emphatically, ‘Come on, what are you smoking?’”
The next day, after an uncomfortable night spent in the only existing local hotel (which had no electricity or running water), the Americans attended a briefing where the Chinese unrolled blueprints that depicted acres of factories, warehouses, and other facilities. The plans betrayed an ambition that was startling. “It was really hard to believe,” Gorman recalled. “Nothing in China at that point happened quickly—except politics. Business and construction didn’t happen on those kinds of timelines.”27
The Baoan Foreign Trade Base was located in a village that was named, like the nearby river, Shumchun. It later became known under a different version of the name: Shenzhen. It was a place that had attracted Deng’s attention at least as early as the Work Conference, when he had floated the idea that the party should “enable some regions to perform better and become more prosperous.” Deng had calculated that if only 5 percent of the counties and 5 percent of the citizenry became “relatively prosperous,” this would translate into one hundred counties and 40 million residents—the equivalent of a medium-sized country and presumably a powerful catalyst for change. Shenzhen was the first on his list of nineteen places that he targeted for early prosperity. “Obviously, he had taken notice of this place at a very early date,” writes former aide Yu Guangyuan. “In his view, a major factor in Shenzhen’s quest to become prosperous sooner than others was its capacity to conduct foreign trade.” During the Work Conference, in fact, Yu himself had told party officials from Guangdong of his own idea—inspired by an ad a friend had brought from Hong Kong—to construct office buildings in Shenzhen under the auspices of the Chinese Academy of Sciences (Yu’s home institution) and rent them to people from Kowloon, just over the border, where soaring land prices were already driving rents into the stratosphere. Yu even envisioned simplifying border-control procedures for visitors from Hong Kong.28
Gorman and his compatriots, who had all experienced firsthand the xenophobic legacy of the Cultural Revolution years during their visits to China, could hardly be blamed for feeling skeptical. What they were not yet able to appreciate was the fact that the Chinese were deadly serious about their plans to invite overseas investors into new “special districts” that were already in planning.
Lower-level officials—especially in Guangdong—were undoubtedly keen on the idea. But this was one case where Deng could claim full credit for driving the initiative forward. He had spent his years in exile brooding over how to stimulate the Chinese economy, and he had concluded, after his return to power in the early 1970s, that his country had to tap into the global marketplace for technology, know-how, and management expertise was an indispensable precondition. His 1974 trip to United Nations headquarters in New York City had been the first to jolt him into an understanding of just how far behind China had fallen.
After his third return from political oblivion in 1977, he took a series of trips around the region that reinforced this view. His itinerary included a visit to Japan, where he witnessed firsthand the evidence of that country’s extraordinary postwar rise to the pinnacle of the global economy, as well as one to Singapore, which, though far smaller in absolute terms, was also demonstrating just how powerful the East Asian formula of single-party rule and market economics could be. Just how influential these experiences were becomes clear from Deng’s private comments to his speechwriting team during the 1978 Work Conference and the Third Plenum—the ones in which he gushed about the Japanese and Singaporean workers who could use their bonuses to buy houses and cars.29
Nor was that all. Deng and his colleagues—at least those who wanted to pay attention to the outside world—were also acutely aware of the extraordinary rise in living standards already engineered by Hong Kong and Taiwan, which (like Japan, Singapore, and South Korea) had also made strategic decisions to reject “self-sufficiency” and to actively participate in global trade. Taiwan, in particular, had reaped a variety of benefits from its “Export Processing Zones,” areas with special commercial, legal, and tax regimes that were designed to entice foreign investors to take advantage of a well-trained but low-wage labor force. The Taiwanese were gambling that the shortfalls in tax and customs revenues would be balanced out by the know-how that they would acquire in management and production techniques (not to mention the extra employment). By the late 1970s their gamble was paying off to spectacular effect, and the example was not lost on their compatriots on the mainland.
But the impetus for a creative approach to foreign investment did not come only from the top. There was also some intense lobbying going on at the regional level—particularly in one of the areas that stood to gain the most from trade with the outside world. That was Guangdong Province, directly adjacent to Hong Kong. Guangzhou (or Canton) was the home of the traditional trade fair because it had a long history, dating back to imperial history, as one of the few places where foreigners were allowed to do business with Chinese. The direct proximity of Hong Kong, whose population included many Cantonese-speaking refugees from Guangdong, meant that the province still had access to an extensive web of contacts with the outside world, including the huge network of overseas Chinese. All this meant that a certain amount of illegal trade had continued even during the darkest days of Maoism. (Indeed, considering the huge and intricate possibilities for smuggling offered by the Pearl River delta, the gateway to Guangdong, it could have hardly been otherwise.) Many Guangdong residents received remittances from their relatives in Hong Kong or places more distant, and these funds were a major source of revenue for a region that had otherwise been severed from its natural trading hinterland after 1949.
Guangdong party officials knew all of this very well, and they were eager to seize upon the new talk in Beijing of opening up the country to investment. They had prevailed upon the party bureaucracy to let them open a few modest channels for trade with Hong Kong, but they were already thinking big. Their plans received a major boost in 1978, when a set of high-ranking party officials, including several from Guangdong, set off on a fact-finding trip to Western Europe that affected them in much the same way as Deng’s journeys had changed him. They were impressed not only by the modern air-traffic control systems at Charles de Gaulle Airport in Paris and a modern container terminal in a German port, but also by the willingness of their hosts to expose them to new insights and by the eagerness of European businesspeople to marshal funds for investment in production facilities in China.30
In January 1979, just two weeks after the end of the Third Plenum, the new party boss in Guangdong, Xi Zhongxun, got approval from Beijing to start drawing up plans for “special zones” that would be opened up to foreign investment. The first zone opened shortly after that in Shekou, a corner of Shenzhen. The Chinese Merchant Steamship Company, a Hong Kong firm set up and owned by the government in Beijing, had been lobbying for a place where old ships could be taken apart for scrap, which could be sold at high profits to the resource-hungry capitalists in Hong Kong. The fact that the company in question was technically “foreign” but actually controlled by the People’s Republic made the experiment that much easier to implement. “Shekou thus became the first place in China to allow foreign direct investment and the first area where decisions about a company inside China could be made by people located outside the country.”31
Economic trends in the outside world gave the officials in Guangdong an additional incentive to open up their province to the outside world. Neighboring Hong Kong was experiencing one of the characteristic disadvantages of a surge in economic growth: a sharp rise in wages. This was rapidly eroding the colony’s international competitiveness, and Hong Kong businesspeople were casting desperately around for new sources of labor. The most obvious place was just over the border.
C. K. Feng was a junior executive with Eltrinic, a small Hong Kong firm that made small electrical devices: a bug zapper, an electric can opener, snow-melting equipment for the US market. Eltrinic’s production was fairly labor intensive, and the rising wages were hitting it hard. So when one of the company’s bosses heard from a contact on the mainland that the Communist Party was soon going to start inviting in foreign manufacturers, Feng took notice. “I volunteered to go the mainland to open up and find workers there,” he said later. “I was so concerned about the workers’ shortage in Hong Kong.” He first traveled to Baoan—the same spot that Gorman visited a few months later—in late 1978 and soon began plans to construct a small factory building and to transport machinery there from Hong Kong. The mainland authorities gave Feng a special Hong Kong travel permit, actually a thick book used to record a variety of data. This presumably privileged access did not seem to reduce the number of papers that had to be filled out at each crossing, however. Each time he entered China, Feng said, “It was like crossing into a different world.”
In the spring of 1979, after jumping through countless bureaucratic hoops, the first Eltrinic factory opened in Shenzhen. It employed twenty local workers. (Its total workforce at the time was around seven hundred.) The first year was spent training them. The factory’s intended production—heating elements for blow dryers—required a certain amount of skill, and the mainland workers were starting from scratch. None of them had ever seen a blow dryer. But they weren’t fussy. “The workers produced whatever you wanted them to produce,” Feng recalls. “They didn’t care.” Maintaining communications between the factory and headquarters in Hong Kong was no easy task. The only local telephone was located in the village administration office, and placing calls was hair-raisingly frustrating business. The villagers, however, were extremely happy. When the production line was inaugurated, they killed a dog—a much-valued local delicacy—for a banquet to celebrate the occasion. The somewhat more fastidious Hong Kongers were bemused.32
The founding of Feng’s factory preceded the formal establishment of the Special Economic Zones (SEZ) on August 26, 1979—and that, in itself, says quite a lot about how development in China was progressing at this time. Even as Guangdong was pressing Beijing for formal latitude to manage its own affairs and attract foreign investors, the first contacts between the province and foreign investors were already being made.33
These areas were granted exceptional conditions to attract foreign investment, but they could also be easily quarantined from society as a whole. The latter point conveniently placated party conservatives, who worried that the populace might succumb to the corrosive effects of capitalism. Ironically, potential foreign investors shared their appreciation; to them, Deng’s enclave strategy offered a vital degree of protection against political backlash from the Maoists. To be sure, the SEZs needed time to show results, but that was not a problem. Reform in China was supposed to be slow; the country had experienced tumult enough. The main thing was that the keystones of a new economy—one driven by efficiency rather than ideological correctness—had been laid. The new revolution—in its own cautious way—could begin.
No one embodied that revolution better than Rong Zhiren. The restaurant that he opened in that spring of 1979 proved a big success. Three years later, by now an affluent Guangzhou entrepreneur, he received the privilege of meeting Deng Xiaoping at a social event for Guangdong Province luminaries. The fact that a local businessman was deemed worthy of such a gathering said a great deal in itself; a few years earlier, Rong would have been imprisoned for the same activities that now gave him privileged status. Deng, he says, always remained an example. “I took heart from his three-time rise and fall,” Rong says. “Deng’s return [in 1977] sent me an important message.” If you persevered, you had the chance to do more than survive. You might even prosper.34