Economic Pragmatist to Be China Premier
Washington Post Foreign Service
Thursday, March 5, 1998; Page A01
BEIJING, March 4When Zhu Rongji toured the United States in July 1990, many people called the then-Shanghai mayor "China's Gorbachev," an appellation that annoyed him.
"I'm not China's Gorbachev," he said. "I'm China's Zhu Rongji."
Today there is little doubt that the blunt-spoken Zhu is an original. During the annual session of the National People's Congress that starts Thursday, Zhu is slated to become premier and expand his already considerable power.
Since being handed the seemingly impossible task of managing China's chaotic economy in early 1993, Zhu has moved to remake the arthritic Communist system and bring it into the market-oriented modern age.
Moreover, he has done this while engineering a soft landing for the overheated economy and dodging the financial crisis that has beset almost every other country in Asia.
"He will go down in history as one of the great economic figures of the 20th century," said Robert Hormats, a top executive at Goldman Sachs & Co., who has met Zhu on several occasions. Hormats ranked Zhu with Ludwig Erhard, who engineered most of Germany's postwar economic miracle.
Zhu "has a long-term strategic vision of where to go and how to get there," said Nicholas Lardy, an economist at the Brookings Institution who has been a frequent critic of China's banking system.
Zhu's ascent marks a victory for economic pragmatism and a further step away from the ideologically driven days of the late Communist Party Chairman Mao Zedong.
Zhu, once condemned as a "rightist," purged from the Communist Party and banished to do menial rural labor, now is known as "boss Zhu." Already the number three person in the ruling Communist Party, he will become the top official in the day-to-day government apparatus.
"I'm very pragmatic and I'm very happy to have somebody very pragmatic become premier of China," said Tianjin Vice Mayor Ye Disheng. "He's a very intelligent guy and a great manager."
Despite widespread admiration for his ability among those who know him, Zhu remains largely unknown to most Chinese and is loathed by bureaucrats who have been targets of his rebukes. Zhu once said he wanted to buy 100 bullets, use 99 on corrupt bureaucrats and save one for himself.
In one meeting, an official showed off a fancy cigarette lighter. Zhu said the man couldn't have afforded it on his salary and dismissed him on the spot. He also summarily fired a senior provincial bank official whose performance didn't meet his standard.
Later, he threatened to "chop off the heads" of regional bank officials who defied his edicts.
"He knows his stuff, dares to say the stuff, and pretty much sticks to the stuff," said a Chinese lawyer with a major Western law firm.
For all his straight talk on economics, however, Zhu's politics remains something of a mystery. As vice premier, he has been dubbed China's "economic czar." As premier, his portfolio will be broader.
Most analysts say it is unlikely that he would initiate political reforms that might distract from or threaten pressing economic measures.
But many people hope Zhu will prove more liberal and open-minded than his predecessor, Li Peng, who is still associated with the martial law and the bloody army crackdown on June 4, 1989, that crushed student-led democracy demonstrations in Tiananmen Square.
Zhu was born in Hunan Province on Oct. 1, 1928. His father died before he was born, and his mother died when he was young. Zhu lived with an uncle.
In 1947, he went to study electrical engineering at Qinghua University, China's equivalent of MIT. There he joined the communist-backed New Democratic Youth League in 1947 and the Communist Party in October 1949, just after the Communist victory over the Nationalists.
By 1952, Zhu was working for the State Planning Commission, then China's most important economic institution, responsible for assigning prices, credit and output targets.
In 1957, however, during Mao's "Hundred Flowers" campaign to encourage criticism of the Communist Party, Zhu criticized a policy of "irrational" high-level growth.
When Mao abruptly ended the brief Hundred Flowers period and launched a campaign against the party's critics, Zhu was labeled a "rightist" and sent to the countryside to do menial labor.
Though many people branded as rightists were political liberals and democrats, there is no indication that Zhu fell into that category.
"If he couldn't get along well with people, that could have been enough of a reason," said Li Cheng, a professor at Hamilton College in Clinton, N.Y.
Zhu was proven right as Mao's Great Leap Forward soon plunged the country into famine. In 1962, Zhu's "rightist cap" was removed and he returned to the planning commission.
But in 1970, the fourth year of the Cultural Revolution, Zhu again was sent to the countryside.
Zhu wasn't rehabilitated until 1979, after the Cultural Revolution ended and senior leader Deng Xiaoping solidified his power. Zhu sped through government ranks, becoming Shanghai's mayor in 1988.
As mayor, he gained a reputation for efficiency, cutting through the layers of formal approvals and official seals needed to launch joint ventures.
His most severe test came in 1989, when student demonstrators demanded greater democracy and less corruption. In Beijing hundreds were killed in the crackdown, but in Shanghai, Zhu's televised plea persuaded protesters to withdraw relatively peacefully.
Four days after the Beijing massacre, Zhu published a speech in Shanghai's major newspapers. Shunning the official terms "turmoil" and "counterrevolution" to describe the protests, Zhu said: "The event that occurred recently in Beijing is a historical fact, and historical facts cannot be covered up by anybody. The truth will always come out."
The ambiguous statement angered Communist hard-liners who wanted a more vigorous denunciation of the protesters.
Zhu's handling of events in Shanghai later became an asset. During his 1990 U.S. tour with other Chinese mayors, Zhu could field criticisms of the 1989 crackdown without sounding defensive.
His style hasn't won over everyone.
"He is a creature of the state planning system and his instincts are regulation, not decontrol of the economy," said David Shambaugh, director of George Washington University's Sigur Center for Asian Studies. Still, business leaders like Zhu.
In 1991, Zhu went to Beijing as vice premier. When Li Peng had heart trouble in April 1993, Zhu took over the economic portfolio from him and never let it go.
The tasks have been formidable. In 1993, banks diverted cash to flimsy business ventures and paid farmers with worthless IOUs, igniting widespread peasant protests. Zhu banned that practice.
In 1994, he began to transform the People's Bank of China from a cash box for state enterprises into a genuine central bank. Dissatisfied with the bank president, he took over the job himself.
That same year, to improve lax collection of taxes, Zhu forced provinces to turn over tax revenue to the central government in return for a greater share of the receipts.
By 1995, China's economy was overheating and inflation hit about 25 percent. Brushing aside complaints by managers of state-owned enterprises, Zhu clamped down on bank-issued credits to subsidize the enterprises that were losing money. He also imposed price controls on staple foods. Today, inflation is zero and prices have been falling slightly for four months.
Zhu has moved cautiously to open financial markets. In 1993, recalls Tianjin's Ye, "we really wanted to open China wider to the outside world, but Zhu said, 'With only $20 billion in foreign reserves how could we open wider and make investors confident?' "
Given Asia's current economic meltdown, Ye adds, "He's been proven right."
Today, China has $140 billion in foreign exchange reserves, a fixed currency and $40 billion to $50 billion a year in foreign investment.
Daunting problems lie ahead: ailing banks, a porous social safety net and the specter of huge layoffs by unprofitable state-owned enterprises. Zhu says the enterprises will be fixed within three years, but the economy badly needs a new engine of growth and job creation for tens of millions of rural migrants and laid-off urban workers.
"The party recognizes that its strength depends on the economy, and this is a guy who can deliver," said Hormats, the Goldman Sachs executive.
© Copyright 1998 The Washington Post Company