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6 White Paper on the Business Environment in China
1.3 Redefining Reform
This section “Redefining Reform” is incorporated from our 2015 White Paper.
Economic reform in China had begun slowly in Mr. Zhu is regarded as the architect of the economic policies
the 1980s but radical reforms only took place after Deng that ushered in China’s second wave of growth. He broke down
Xiaoping’s southern tour in early 1992. According to a 2007 trade barriers, cut runaway inflation, rescued China from the
report by the China Policy Institute, it was “heavily debated Asian economic crisis in 1997, sold off state enterprises, broke
whether China should adopt a market economy approach, up monopolies, ended state planning, introduced competition
until 1992 when the 14th National Congress of the Chinese and deregulation, streamlined the bureaucracy and secured
Communist Party (CCP) clearly stated that China’s economic China’s membership to the World Trade Organization. Mr.
reform intention was to establish a socialist market economy. Zhu’s tough-minded policies included driving the military out
The clarification of “market economy” status provided the of many of its commercial enterprises, reducing the number of
necessary conditions for China to begin large-scale economic easy loans and credits to money-losing state-owned enterprises,
decentralisation.”20 introducing a value added tax and diverting tax revenues to the
central government. To create jobs, he launched Keynesian pub-
In the decade succeeding Deng Xiaoping’s rule, Chinese Pres- lic works programs.
ident Jiang Zemin and his Premier Zhu Rongji oversaw the han-
dover of Hong Kong in 1997 and led their country until 2002, In 1997, the Chinese government set a three-year phased
by which time it had propelled millions out of poverty and be- goal for the SOEs to turn around their loss-making condition.
come one of the world’s most powerful economies. They guided In September 1999, during the Fourth Plenary Session of the
China into the World Trade Organization and “ presided over Fifteenth Congress, the government adopted the policy of di-
a series of wrenching reforms that saw much of the state-sector versifying SOEs’ share ownership to establish a modern corpo-
dismantled and the welcoming into the [Chinese Communist] rate system. 20
Party of “advanced productive forces,” i.e. businessmen.” 18
In a 2009 special report published by FIRST Magazine
Zhu Rongji was appointed Vice Premier in charge of to commemorate the 60th anniversary of the founding of the
China’s economic reform in 1991. As Deng’s economic czar, People’s Republic of China, James McGregor, China expert and
Mr. Zhu drew many admirers as he tamed inflation without former journalist for the Wall Street Journal, paints a colorful
snuffling out growth by devaluing the yuan in 1994 by 33 description of China during the early Jiang years, “China is
percent. He also laid the foundation for a banking system and simultaneously experiencing the raw capitalism of the robber
was even considered as a possible recipient of the Nobel Prize baron era of the late 1800s; the speculative financial mania
for economics20. In the mid-1990s, Zhu Rongji formulated a of the 1920s; the rural-to-urban migrations of the 1930s; the
new strategy for SOE reform, which was called “grasping the emergence of the first-car, first-home, first fashionable-clothes,
big and letting go the small” (zhua da fang xiao). It was officially first college-education, first-family-vacation, middle class
established as China’s new economic reform strategy at the consumer boom of the 1950s; and even aspects of the social
Fifteenth National Congress of the CCP in 1997, when Zhu upheaval similar to the 1960s.”23
Rongji became the Premier-elect. This strategy gave the SOE
reform a clear direction, especially in the case of large SOEs. At the Sixteenth National Congress of the CCP in 2002,
After Mr. Zhu became the Premier in 1998, this strategy was when Hu Jintao and Wen Jiabao came to power, the direction
implemented to its fullest extent. 20 “Grasping the big” meant of SOE reform was further readjusted. The government con-
making efforts to cultivate strong and competitive large tinued to make efforts to restructure the state-owned economy
enterprises and enterprise groups and develop them into cross- and reform the state assets management system. In the first half
regional, cross-sectional, multi-ownership and multinational of 2003, the Stateowned Assets Supervision and Administra-
firms. “Letting go the small” implied that the government allow tion Council (SASAC) of the State Council was established “to
the small and medium-sized SOEs to face market forces. The guide the reform and restructuring” of state assets.20 However,
ultimate goal of this strategy was that the government would most pundits observe that China during the decade of rule un-
be able to privatize most of the SMEs and would only control a der Hu Jintao and Wen Jiabao, while marked by breakneck eco-
limited number of large central and local SOEs. 20 nomic growth and seeming to remain stable despite an overseas
financial crisis in 2007-2008, was generally characterised by a
20
1.3 Redefining Reform
This section “Redefining Reform” is incorporated from our 2015 White Paper.
Economic reform in China had begun slowly in Mr. Zhu is regarded as the architect of the economic policies
the 1980s but radical reforms only took place after Deng that ushered in China’s second wave of growth. He broke down
Xiaoping’s southern tour in early 1992. According to a 2007 trade barriers, cut runaway inflation, rescued China from the
report by the China Policy Institute, it was “heavily debated Asian economic crisis in 1997, sold off state enterprises, broke
whether China should adopt a market economy approach, up monopolies, ended state planning, introduced competition
until 1992 when the 14th National Congress of the Chinese and deregulation, streamlined the bureaucracy and secured
Communist Party (CCP) clearly stated that China’s economic China’s membership to the World Trade Organization. Mr.
reform intention was to establish a socialist market economy. Zhu’s tough-minded policies included driving the military out
The clarification of “market economy” status provided the of many of its commercial enterprises, reducing the number of
necessary conditions for China to begin large-scale economic easy loans and credits to money-losing state-owned enterprises,
decentralisation.”20 introducing a value added tax and diverting tax revenues to the
central government. To create jobs, he launched Keynesian pub-
In the decade succeeding Deng Xiaoping’s rule, Chinese Pres- lic works programs.
ident Jiang Zemin and his Premier Zhu Rongji oversaw the han-
dover of Hong Kong in 1997 and led their country until 2002, In 1997, the Chinese government set a three-year phased
by which time it had propelled millions out of poverty and be- goal for the SOEs to turn around their loss-making condition.
come one of the world’s most powerful economies. They guided In September 1999, during the Fourth Plenary Session of the
China into the World Trade Organization and “ presided over Fifteenth Congress, the government adopted the policy of di-
a series of wrenching reforms that saw much of the state-sector versifying SOEs’ share ownership to establish a modern corpo-
dismantled and the welcoming into the [Chinese Communist] rate system. 20
Party of “advanced productive forces,” i.e. businessmen.” 18
In a 2009 special report published by FIRST Magazine
Zhu Rongji was appointed Vice Premier in charge of to commemorate the 60th anniversary of the founding of the
China’s economic reform in 1991. As Deng’s economic czar, People’s Republic of China, James McGregor, China expert and
Mr. Zhu drew many admirers as he tamed inflation without former journalist for the Wall Street Journal, paints a colorful
snuffling out growth by devaluing the yuan in 1994 by 33 description of China during the early Jiang years, “China is
percent. He also laid the foundation for a banking system and simultaneously experiencing the raw capitalism of the robber
was even considered as a possible recipient of the Nobel Prize baron era of the late 1800s; the speculative financial mania
for economics20. In the mid-1990s, Zhu Rongji formulated a of the 1920s; the rural-to-urban migrations of the 1930s; the
new strategy for SOE reform, which was called “grasping the emergence of the first-car, first-home, first fashionable-clothes,
big and letting go the small” (zhua da fang xiao). It was officially first college-education, first-family-vacation, middle class
established as China’s new economic reform strategy at the consumer boom of the 1950s; and even aspects of the social
Fifteenth National Congress of the CCP in 1997, when Zhu upheaval similar to the 1960s.”23
Rongji became the Premier-elect. This strategy gave the SOE
reform a clear direction, especially in the case of large SOEs. At the Sixteenth National Congress of the CCP in 2002,
After Mr. Zhu became the Premier in 1998, this strategy was when Hu Jintao and Wen Jiabao came to power, the direction
implemented to its fullest extent. 20 “Grasping the big” meant of SOE reform was further readjusted. The government con-
making efforts to cultivate strong and competitive large tinued to make efforts to restructure the state-owned economy
enterprises and enterprise groups and develop them into cross- and reform the state assets management system. In the first half
regional, cross-sectional, multi-ownership and multinational of 2003, the Stateowned Assets Supervision and Administra-
firms. “Letting go the small” implied that the government allow tion Council (SASAC) of the State Council was established “to
the small and medium-sized SOEs to face market forces. The guide the reform and restructuring” of state assets.20 However,
ultimate goal of this strategy was that the government would most pundits observe that China during the decade of rule un-
be able to privatize most of the SMEs and would only control a der Hu Jintao and Wen Jiabao, while marked by breakneck eco-
limited number of large central and local SOEs. 20 nomic growth and seeming to remain stable despite an overseas
financial crisis in 2007-2008, was generally characterised by a
20
