Page 32 - 2017 White Paper
P. 32
7 White Paper on the Business Environment in China
1.3 Redefining Reform
Introduction making efforts to cultivate strong and competitive large
enterprises and enterprise groups and develop them
Economic reform in China had begun into cross-regional, cross-sectional, multi-ownership and
slowly in the 1980s but radical multinational firms. “Letting go the small” implied that
reforms only took place after Deng Xiaoping’s southern tour in the government allow the small and medium-sized SOEs
early 1992. According to a 2007 report by the China Policy to face market forces. The ultimate goal of this strategy
Institute, it was “heavily debated whether China should adopt a was that the government would be able to privatize most
market economy approach, until 1992 when the 14th National of the SMEs and would only control a limited number of
Congress of the Chinese Communist Party (CCP) clearly stated large central and local SOEs (Ibid.).
that China’s economic reform intention was to establish a socialist
market economy. The clarification of “market economy” status Mr. Zhu is regarded as the architect of the economic
provided the necessary conditions for China to begin large-scale policies that ushered in China’s second wave of growth. He
economic decentralisation” (Zheng and Chen 2007). broke down trade barriers, cut runaway inflation, rescued
China from the Asian economic crisis in 1997, sold off state
In the decade succeeding Deng Xiaoping’s rule, enterprises, broke up monopolies, ended state planning,
Chinese President Jiang Zemin and his Premier Zhu introduced competition and deregulation, streamlined
Rongji oversaw the handover of Hong Kong in 1997 the bureaucracy and secured China’s membership to
and led their country until 2002, by which time it had the World Trade Organization. Mr. Zhu’s tough-minded
propelled millions out of poverty and become one of the policies included driving the military out of many of
world’s most powerful economies. They guided China its commercial enterprises, reducing the number of
into the World Trade Organization and “presided over a easy loans and credits to money-losing state-owned
series of wrenching reforms that saw much of the state- enterprises, introducing a value added tax and diverting
sector dismantled and the welcoming into the [Chinese tax revenues to the central government. To create jobs,
Communist] Party of ‘advanced productive forces’, i.e. he launched Keynesian public works programs.
businessmen” (Moses 2013).
In 1997, the Chinese government set a three-year
Zhu Rongji was appointed Vice Premier in charge of phased goal for the SOEs to turn around their loss-making
China’s economic reform in 1991. As Deng’s economic condition. In September 1999, during the Fourth Plenary
czar, Mr. Zhu drew many admirers as he tamed inflation Session of the Fifteenth Congress, the government
without snuffling out growth by devaluing the yuan adopted the policy of diversifying SOEs’ share ownership
in 1994 by 33 percent. He also laid the foundation for a to establish a modern corporate system (Zheng and Chen
banking system and was even considered as a possible 2007).
recipient of the Nobel Prize for economics (Zheng and
Chen 2007). In the mid-1990s, Zhu Rongji formulated a In a 2009 special report published by FIRST Magazine
new strategy for SOE reform, which was called “grasping to commemorate the 60th anniversary of the founding
the big and letting go the small” (zhua da fang xiao). of the People’s Republic of China, James McGregor,
It was officially established as China’s new economic China expert and former journalist for the Wall Street
reform strategy at the Fifteenth National Congress of Journal, paints a colorful description of China during the
the CCP in 1997, when Zhu Rongji became the Premier- early Jiang years, “China is simultaneously experiencing
elect. This strategy gave the SOE reform a clear direction, the raw capitalism of the robber baron era of the late
especially in the case of large SOEs. After Mr. Zhu became 1800s; the speculative financial mania of the 1920s; the
the Premier in 1998, this strategy was implemented rural-to-urban migrations of the 1930s; the emergence
to its fullest extent (Ibid.). “Grasping the big” meant of the first-car, first-home, first fashionable-clothes, first
32
1.3 Redefining Reform
Introduction making efforts to cultivate strong and competitive large
enterprises and enterprise groups and develop them
Economic reform in China had begun into cross-regional, cross-sectional, multi-ownership and
slowly in the 1980s but radical multinational firms. “Letting go the small” implied that
reforms only took place after Deng Xiaoping’s southern tour in the government allow the small and medium-sized SOEs
early 1992. According to a 2007 report by the China Policy to face market forces. The ultimate goal of this strategy
Institute, it was “heavily debated whether China should adopt a was that the government would be able to privatize most
market economy approach, until 1992 when the 14th National of the SMEs and would only control a limited number of
Congress of the Chinese Communist Party (CCP) clearly stated large central and local SOEs (Ibid.).
that China’s economic reform intention was to establish a socialist
market economy. The clarification of “market economy” status Mr. Zhu is regarded as the architect of the economic
provided the necessary conditions for China to begin large-scale policies that ushered in China’s second wave of growth. He
economic decentralisation” (Zheng and Chen 2007). broke down trade barriers, cut runaway inflation, rescued
China from the Asian economic crisis in 1997, sold off state
In the decade succeeding Deng Xiaoping’s rule, enterprises, broke up monopolies, ended state planning,
Chinese President Jiang Zemin and his Premier Zhu introduced competition and deregulation, streamlined
Rongji oversaw the handover of Hong Kong in 1997 the bureaucracy and secured China’s membership to
and led their country until 2002, by which time it had the World Trade Organization. Mr. Zhu’s tough-minded
propelled millions out of poverty and become one of the policies included driving the military out of many of
world’s most powerful economies. They guided China its commercial enterprises, reducing the number of
into the World Trade Organization and “presided over a easy loans and credits to money-losing state-owned
series of wrenching reforms that saw much of the state- enterprises, introducing a value added tax and diverting
sector dismantled and the welcoming into the [Chinese tax revenues to the central government. To create jobs,
Communist] Party of ‘advanced productive forces’, i.e. he launched Keynesian public works programs.
businessmen” (Moses 2013).
In 1997, the Chinese government set a three-year
Zhu Rongji was appointed Vice Premier in charge of phased goal for the SOEs to turn around their loss-making
China’s economic reform in 1991. As Deng’s economic condition. In September 1999, during the Fourth Plenary
czar, Mr. Zhu drew many admirers as he tamed inflation Session of the Fifteenth Congress, the government
without snuffling out growth by devaluing the yuan adopted the policy of diversifying SOEs’ share ownership
in 1994 by 33 percent. He also laid the foundation for a to establish a modern corporate system (Zheng and Chen
banking system and was even considered as a possible 2007).
recipient of the Nobel Prize for economics (Zheng and
Chen 2007). In the mid-1990s, Zhu Rongji formulated a In a 2009 special report published by FIRST Magazine
new strategy for SOE reform, which was called “grasping to commemorate the 60th anniversary of the founding
the big and letting go the small” (zhua da fang xiao). of the People’s Republic of China, James McGregor,
It was officially established as China’s new economic China expert and former journalist for the Wall Street
reform strategy at the Fifteenth National Congress of Journal, paints a colorful description of China during the
the CCP in 1997, when Zhu Rongji became the Premier- early Jiang years, “China is simultaneously experiencing
elect. This strategy gave the SOE reform a clear direction, the raw capitalism of the robber baron era of the late
especially in the case of large SOEs. After Mr. Zhu became 1800s; the speculative financial mania of the 1920s; the
the Premier in 1998, this strategy was implemented rural-to-urban migrations of the 1930s; the emergence
to its fullest extent (Ibid.). “Grasping the big” meant of the first-car, first-home, first fashionable-clothes, first
32
