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  Even for the Party, Talent Counts the Most

Fourth of five articles

By Steven Mufson
Washington Post Foreign Service
Wednesday, June 17, 1998; Page A1

ZHENNING, China -- On a drizzly morning in March, Lou Jiwei's chauffeured black Audi threaded its way past horse-drawn carts, rickety pickup trucks and peasants on foot. It wound through fields bursting with yellow flowers of rape plants until it came to the Red Star factory tucked behind one of the jagged limestone hillsides.

Lou, who was then vice governor of Guizhou province, surveyed the aging plant, sniffed the sulfur byproduct in the air and went over the chemical processes with the factory manager. Wearing gold wire-rimmed glasses, a jacket and tie, and an off-white trench coat, Lou also cross-examined the manager about international markets and delivery prices.

This wasn't your average meet-and-greet by a provincial politico or Communist Party hack. Lou wanted to talk about transportation costs, competing manufacturers, the relocation of laid-off workers and the fine points of the company's balance sheet. Over a cup of tea and cigarettes he smoked through a cigarette holder like Franklin D. Roosevelt, Lou spelled out stringent conditions the factory must meet before it can be allowed to sell shares to the public.

"If you make a mistake on my turf, don't come running to me to solve it," he told the factory manager. "But if something is wrong with the way my province is run, I'll fix it."

Lou represents the best hope for China's troubled Communist Party, the prototype for a generation of technocrats rising through the upper ranks of the government. A computer programmer turned economist, this 48-year-old protege of Premier Zhu Rongji has played a pivotal role in the overhaul of China's tax system and in drawing up plans for a domestic bond market. After a two-year stint as vice governor in Guizhou, one of China's poorest provinces, he was recently elevated to vice minister of finance. Many expect it to be just another steppingstone in his promising career.

When Lou was young, then-Communist Party chairman Mao Zedong said he wanted cadres who were "red and expert," although in reality Mao favored the former.

But as the party's devotion to Marxist and Maoist ideology has waned, talent in running China's increasingly sophisticated economy has become more important. Good educational background matters more than good class background. Increasingly the party that claimed to be the vanguard of the proletariat looks more like a national elite.

Born in 1950, Lou has no "revolutionary" experience, but he is educated, cosmopolitan and competent. He did his economics graduate thesis on general equilibrium theory. As Guizhou's vice governor, he could recite everything from the price of kiwi fruit to the price of electricity, and he knew how a state-owned company cooks its books as well as how the international economic crisis might affect a landlocked province.

"The Chinese Communist Party is facing a lot of pressure," Lou said. "With the reform and opening up, people know more about the outside world, and if the party doesn't produce economic results, people will rise up against it."

That's why Lou trekked here. Red Star, once one of the "third-line" military factories that Mao hid in remote areas, is on front line of economic overhaul. Aiming at international markets, the company now produces a powder used in the manufacture of television screens. The old military factory managers have surrendered control of Red Star, and the new managers want to raise money through a stock offering.

During his visit, Lou said that,During his visit, Lou said that, before selling shares, the company had to show a profit of $6 million a year and a profit margin of 30 percent. It had to bring manufacturing parts into Guizhou and pay its value-added taxes in Guizhou too, he said, wagging his finger. Finally, it had to disclose all its debts and its plans for dealing with the 1,200 laid-off workers.

The plant manager appeared to appreciate Lou's sophistication, though Lou didn't promise him the public listing he wants. "If you have a mother-in-law who doesn't understand you, you hate her instead of respect her," he said.

Respect, if not affection, is what most Chinese feel toward Premier Zhu and the members of his brain trust. Zhu has dispersed his trusted aides around the country and throughout the bureaucracy, giving them key posts in provinces, ministries and the central bank. The effect has been to broaden their experience and help them build their own political contacts.

When Lou was dispatched to Guizhou in October 1995, he had never set foot there before.

"In Beijing, you deal with hundreds of millions of yuan, here with a million," Lou said at the end of one 14-hour day. "There, if you do something right, you can save millions. Here, if you work hard, you can save a million. In Beijing, the work is mentally taxing, but here it's physically demanding."

Lou the econometrician-policy wonk normally wouldn't attend a benefit soccer game, as he did in Guiyang one afternoon. His name boomed out on the loudspeakers to the packed stadium as he stuffed the equivalent of $25 into the contribution box for Operation Hunger.

In a typical week in Guizhou, he also met with army detachments and county party members. He dined with Japanese environmentalists to win concessional loans for anti-pollution projects. He wooed some investors, while others he weeded out. One American aluminum company offered to invest if it received a one-third discount on energy costs for its smelter. Lou rejected the offer, noting that it would reduce incentives for private investors in future power projects.

"In Beijing, you set policy and the policy creates an environment," Lou said. "Here you're deciding on projects and paying attention to details."

After lunch at Red Star, Lou's next stop was an abandoned military plant where he heard a pitch by a private businessman who wanted to use the site to make gelatin.

The entrepreneur, who built a large beef jerky company, wanted the government to build a small reservoir so he'll have a water supply and a place to dispose of waste water. He also hoped Lou would help him get the endorsement of the provincial planning commission, which would make it possible for him to get bank loans. Lou gazed over the fields that would be covered by the reservoir, and asked whether the entrepreneur had any idea what he's doing in this new business.

The entrepreneur said he had recruited a French marketing expert and lined up second-hand German equipment. Because gelatin is made from cow bones, the entrepreneur said he has plenty of raw material. His beef jerky plants could supply 100 tons a day of cow bones.

"I would like to help them, because they've worked hard to get where they are and they're really producing something," Lou said later in his car. "Whether it's a private entrepreneur or a state-owned enterprise doesn't matter as long as it's adding value to what we have in Guizhou and making people's living standards better."

Life did not start in the back seat of a chauffeured Audi for Lou Jiwei. He was the child of middle level government officials, and when he was 16, the Great Proletarian Cultural Revolution broke out and all normal schooling ceased. Mao used groups of student Red Guards to overthrow his foes in the Communist Party, then in 1968 sent the city youths to the countryside to learn from the peasants.

"We didn't know anything. We didn't understand," Lou says now. "We were very happy not to go to school and stay at home and play."

Lou and his friends also took to the road, taking advantage of free rail travel for youths. He visited Shanghai, Guangzhou, Changsha and Mao's home town, Shaoshan, which he reached by walking the last 50 miles.

In 1968, he joined the army. "It was the best way out," he said. The army sent him to Hainan Island off the southern tip of China for a five-year stint. There was little to do there aside from light drills. So Lou obtained math books from home and taught himself high school math. When he returned to Beijing in 1973, he was put to work at Capital Iron and Steel Corp.'s giant computers, in that era still fed with yellow tape with holes punched in it.

"Now I think about what happened and I'm amazed by how few choices people had over their lives," he says. "It makes me feel I should work harder to prevent it from happening again."

For Lou and others of his generation, life changed after Mao's death when the rehabilitated leader Deng Xiaoping, previously denounced as a capitalist roader, reinstituted competitive university entrance examinations and education resumed in earnest. The competition was fierce.

With his math ability and computer experience, Lou was accepted in 1978 by Qinghua University -- China's closest equivalent to the Massachusetts Institute of Technology -- where he majored in computers. After graduating in 1982, he did postgraduate work in econometrics at the Chinese Academy of Social Sciences, an influential policymaking think tank under Deng.

In 1985, Lou went to work for the State Council, China's cabinet. There he joined a high-powered team working on public finance and monetary policy. In 1988, he became vice director of the State Commission for the Reform of the Economic System in Shanghai. Jiang Zemin, now president, was then Shanghai party secretary. Zhu, now premier, was then mayor.

Lou was in Shanghai in 1989 when student-led demonstrations broke out in Tiananmen Square in Beijing. Similar rallies were held in Shanghai's People's Park. Many officials joined the protests. After the June 4 crackdown, many careers were ruined. Some were jailed. The demonstrations were not visible from Lou's office a few blocks away, and he never went to look. "I didn't let my subordinates go, either," he said. "I didn't want them to get involved."

"Lou Jiwei is a good guy, but he's a technocrat," said a foreign foundation official working in China. "He thought 1989 got in the way and was getting things off the track. Unlike those people in [then-Communist Party chief] Zhao Ziyang's democratic think tanks, Lou Jiwei kept away from the movement and so kept on rising."

From Shanghai, Lou returned to Beijing in 1992, where he joined the State Commission for the Reform of the Economic System. He helped design China's value added tax, and. negotiated deals with provincial leaders that increased the central government's share of tax revenue to about 60 percent from 40 percent. "Doing that definitely hurt the vested interests of certain people," Lou said.

Lou's Guizhou experience shows that the Communist Party can no longer, if it ever could, be described as the party of peasants and proletarians. In a country of wide income gaps, high-tech districts and destitute villages, the party's mission looks more and more like that of a U.S. politician juggling different interest groups, dispensing patronage and regulating the less savory aspects of the free market.

But even a powerful politician like Lou can find himself frustrated by people with different agendas. On the way back to the provincial capital Guiyang, Lou stopped to look at a torn-up section of highway littered with carts, peddlers, and road workers. The highway was a key link in his plan to break Guizhou's transportation bottleneck and bring high-speed throughways to a province with just 61 miles of first class roads. Lou scolded the local officials, who half-heartedly promised to speed up their work to clear the way.

"I'm annoyed with that town," Lou said in his car later. "The people there whined and complained and kicked up a fuss that the highway wasn't going through their town. We wanted to bypass it. Now they've turned it into their main street."

One irony of Lou's duty in Guizhou was that he was given responsibility for furthering market-based economic reforms in the Zunyi area. Zunyi was the first place the Red Army stopped on the Long March. It was where Mao seized control of the party, and it was the first place where the Communist Party experimented with communes. All that is history now.

Soon that history will be not only overturned but forgotten.

"The country has had many disasters," Lou said. "That's why people like me appreciate the opportunities. The generation of my son doesn't know. All they want is brand names and new fashions and endless amounts of money."

During his two years in Guizhou, Lou's teenage son visited just once.

"I wanted him to visit the concentration camp on the way to Zunyi where Nationalist troops tortured people during the civil war," Lou said. "He should know what the past was about. But he went [white-water] rafting at the waterfalls instead."

© Copyright 1998 The Washington Post Company

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