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5 White Paper on the Business Environment in China
1.4 Rede ning Reform (in 2015)
ECONOMIC REFORM IN China had begun slowly in down trade barriers, cut runaway in ation, rescued China
the 1980s but radical reforms only took place after Deng from the Asian economic crisis in 1997, sold o state enter-
Xiaoping’s southern tour in early 1992. According to a 2007 prises, broke up monopolies, ended state planning, introduced
report by the China Policy Institute, it was “heavily debated competition and deregulation, streamlined the bureaucracy
whether China should adopt a market economy approach, and secured China’s membership to the World Trade Organi-
until 1992 when the 14th National Congress of the Chinese zation. Mr. Zhu’s tough-minded policies included driving the
Communist Party (CCP) clearly stated that China’s economic military out of many of its commercial enterprises, reducing
reform intention was to establish a socialist market economy. the number of easy loans and credits to money-losing state-
owned enterprises, introducing a value added tax and divert-
e clari cation of “market economy” status provided the ing tax revenues to the central government. To create jobs, he
necessary conditions for China to begin large-scale economic launched Keynesian public works programs.
decentralisation.”20
In 1997, the Chinese government set a three-year phased
In the decade succeeding Deng Xiaoping’s rule, Chinese goal for the SOEs to turn around their loss-making condi-
President Jiang Zemin and his Premier Zhu Rongji oversaw the tion. In September 1999, during the Fourth Plenary Session
handover of Hong Kong in 1997 and led their country until of the Fifteenth Congress, the government adopted the policy
2002, by which time it had propelled millions out of poverty of diversifying SOEs’ share ownership to establish a modern
and become one of the world’s most powerful economies. corporate system. 20
ey guided China into the World Trade Organization and In a 2009 special report published by FIRST Magazine to
“ presided over a series of wrenching reforms that saw much commemorate the 60th anniversary of the founding of the
of the state-sector dismantled and the welcoming into the People’s Republic of China, James McGregor, China expert
[Chinese Communist] Party of “advanced productive forces,” and former journalist for the Wall Street Journal, paints a
i.e. businessmen.” 18 colorful description of China during the early Jiang years,
“China is simultaneously experiencing the raw capitalism
Zhu Rongji was appointed Vice Premier in charge of of the robber baron era of the late 1800s; the speculative
China’s economic reform in 1991. As Deng’s economic czar,
Mr. Zhu drew many admirers as he tamed in ation without nancial mania of the 1920s; the rural-to-urban migrations
snu ing out growth by devaluing the yuan in 1994 by 33 of the 1930s; the emergence of the rst-car, rst-home, rst
percent. He also laid the foundation for a banking system and fashionable-clothes, rst college-education, rst-family-
was even considered as a possible recipient of the Nobel Prize vacation, middle class consumer boom of the 1950s; and even
for economics.20In the mid-1990s, Zhu Rongji formulated aspects of the social upheaval similar to the 1960s.”23
a new strategy for SOE reform, which was called “grasping
the big and letting go the small” (zhua da fang xiao). It was At the Sixteenth National Congress of the CCP in 2002,
o cially established as China’s new economic reform strategy when Hu Jintao and Wen Jiabao came to power, the direc-
at the Fifteenth National Congress of the CCP in 1997, when tion of SOE reform was further readjusted. e government
Zhu Rongji became the Premier-elect. is strategy gave the continued to make e orts to restructure the state-owned
SOE reform a clear direction, especially in the case of large economy and reform the state assets management system. In
SOEs. After Mr. Zhu became the Premier in 1998, this the rst half of 2003, the Stateowned Assets Supervision and
strategy was implemented to its fullest extent. 20 “Grasping the Administration Council (SASAC) of the State Council was
big” meant making e orts to cultivate strong and competitive established “to guide the reform and restructuring” of state
large enterprises and enterprise groups and develop them assets.20 However, most pundits observe that China during
into cross-regional, cross-sectional, multi-ownership and the decade of rule under Hu Jintao and Wen Jiabao, while
multinational rms. “Letting go the small” implied that the marked by breakneck economic growth and seeming to re-
government allow the small and medium-sized SOEs to face main stable despite an overseas nancial crisis in 2007-2008,
market forces. e ultimate goal of this strategy was that the was generally characterised by a lack of action on reform.
government would be able to privatize most of the SMEs and
would only control a limited number of large central and local Much of the credit for that economic boom must go
SOEs. 20 to Mr. Hu’s predecessor Jiang Zemin and his Premier Zhu
Rongji, who had spearheaded far-reaching reforms that laid
Mr. Zhu is regarded as the architect of the economic poli- the foundations of the decade’s growth. Under Mr. Hu’s
cies that ushered in China’s second wave of growth. He broke administration, some of those gains have been reversed, as
38
1.4 Rede ning Reform (in 2015)
ECONOMIC REFORM IN China had begun slowly in down trade barriers, cut runaway in ation, rescued China
the 1980s but radical reforms only took place after Deng from the Asian economic crisis in 1997, sold o state enter-
Xiaoping’s southern tour in early 1992. According to a 2007 prises, broke up monopolies, ended state planning, introduced
report by the China Policy Institute, it was “heavily debated competition and deregulation, streamlined the bureaucracy
whether China should adopt a market economy approach, and secured China’s membership to the World Trade Organi-
until 1992 when the 14th National Congress of the Chinese zation. Mr. Zhu’s tough-minded policies included driving the
Communist Party (CCP) clearly stated that China’s economic military out of many of its commercial enterprises, reducing
reform intention was to establish a socialist market economy. the number of easy loans and credits to money-losing state-
owned enterprises, introducing a value added tax and divert-
e clari cation of “market economy” status provided the ing tax revenues to the central government. To create jobs, he
necessary conditions for China to begin large-scale economic launched Keynesian public works programs.
decentralisation.”20
In 1997, the Chinese government set a three-year phased
In the decade succeeding Deng Xiaoping’s rule, Chinese goal for the SOEs to turn around their loss-making condi-
President Jiang Zemin and his Premier Zhu Rongji oversaw the tion. In September 1999, during the Fourth Plenary Session
handover of Hong Kong in 1997 and led their country until of the Fifteenth Congress, the government adopted the policy
2002, by which time it had propelled millions out of poverty of diversifying SOEs’ share ownership to establish a modern
and become one of the world’s most powerful economies. corporate system. 20
ey guided China into the World Trade Organization and In a 2009 special report published by FIRST Magazine to
“ presided over a series of wrenching reforms that saw much commemorate the 60th anniversary of the founding of the
of the state-sector dismantled and the welcoming into the People’s Republic of China, James McGregor, China expert
[Chinese Communist] Party of “advanced productive forces,” and former journalist for the Wall Street Journal, paints a
i.e. businessmen.” 18 colorful description of China during the early Jiang years,
“China is simultaneously experiencing the raw capitalism
Zhu Rongji was appointed Vice Premier in charge of of the robber baron era of the late 1800s; the speculative
China’s economic reform in 1991. As Deng’s economic czar,
Mr. Zhu drew many admirers as he tamed in ation without nancial mania of the 1920s; the rural-to-urban migrations
snu ing out growth by devaluing the yuan in 1994 by 33 of the 1930s; the emergence of the rst-car, rst-home, rst
percent. He also laid the foundation for a banking system and fashionable-clothes, rst college-education, rst-family-
was even considered as a possible recipient of the Nobel Prize vacation, middle class consumer boom of the 1950s; and even
for economics.20In the mid-1990s, Zhu Rongji formulated aspects of the social upheaval similar to the 1960s.”23
a new strategy for SOE reform, which was called “grasping
the big and letting go the small” (zhua da fang xiao). It was At the Sixteenth National Congress of the CCP in 2002,
o cially established as China’s new economic reform strategy when Hu Jintao and Wen Jiabao came to power, the direc-
at the Fifteenth National Congress of the CCP in 1997, when tion of SOE reform was further readjusted. e government
Zhu Rongji became the Premier-elect. is strategy gave the continued to make e orts to restructure the state-owned
SOE reform a clear direction, especially in the case of large economy and reform the state assets management system. In
SOEs. After Mr. Zhu became the Premier in 1998, this the rst half of 2003, the Stateowned Assets Supervision and
strategy was implemented to its fullest extent. 20 “Grasping the Administration Council (SASAC) of the State Council was
big” meant making e orts to cultivate strong and competitive established “to guide the reform and restructuring” of state
large enterprises and enterprise groups and develop them assets.20 However, most pundits observe that China during
into cross-regional, cross-sectional, multi-ownership and the decade of rule under Hu Jintao and Wen Jiabao, while
multinational rms. “Letting go the small” implied that the marked by breakneck economic growth and seeming to re-
government allow the small and medium-sized SOEs to face main stable despite an overseas nancial crisis in 2007-2008,
market forces. e ultimate goal of this strategy was that the was generally characterised by a lack of action on reform.
government would be able to privatize most of the SMEs and
would only control a limited number of large central and local Much of the credit for that economic boom must go
SOEs. 20 to Mr. Hu’s predecessor Jiang Zemin and his Premier Zhu
Rongji, who had spearheaded far-reaching reforms that laid
Mr. Zhu is regarded as the architect of the economic poli- the foundations of the decade’s growth. Under Mr. Hu’s
cies that ushered in China’s second wave of growth. He broke administration, some of those gains have been reversed, as
38
