By Elliot Wilson
Although he remains a bitterly divisive figure domestically, Zhu Rongji played a pivotal role in China’s economic transformation. As premier, he stepped up his assault on the country’s bloated state-run firms and turned many of them into catalysts for China’s industrial-economic change.
Zhu Rongji is a hugely polarizing figure in China. Although the gruff, intellectually domineering 79-year-old has rarely been seen in public since stepping down as country’s premier in 2003, his economic legacy will certainly endure for decades.
A native of the southern Hunan province (famous for its eye-wateringly hot chilli dishes and as the birthplace of Mao Zedong), Zhu is perhaps best known for restructuring China’s legion of moribund state-owned enterprises (SOEs) in the 1990s, and for cutting huge amounts of fat out of the country’s sclerotic bureaucracy. As premier for five years from 1998, Zhu cut the government and the military by nearly 1 million people, and forced thousands of SOEs to either merge, to be absorbed by better or larger rivals, or to be forcibly closed.
Millions of workers once guaranteed cradle-to-grave work found themselves unemployed and unemployable, many of them in the rust-belt provinces of the north-east. Little wonder many people view him as the Chinese version of former UK prime minister Margaret Thatcher, another hugely divisive figure, held responsible for forcing Britain’s ailing industries to enter the modern age in the early 1980s.
Breaking the rules
Like Thatcher, Zhu cared little for bureaucracy and procedure – normally a career-breaker in China, which remains built on a vast, constantly shifting network of vested interests. During his inexorable rise to power, Zhu constantly broke the chain of command, going over the heads of important, wizened old party hacks to demand favours of trusted friends and allies. Yet his ability to “dare to make decisions”, in the words of former paramount leader Deng Xiaoping, marked Zhu out in a positive way, and ensured that his brusque, often bullying ways were seen as a positive factor in the eyes of enough powerful party members.
“He got things done,” notes Ian Stones, a British-born, Beijing-based adviser to the Conference Board, who has lived in China’s capital for nearly three decades. “He just didn’t have the patience for bureaucracy.”
That decision-making ability allied to Zhu’s grasp of economics helped him tackle inflation while governor of the People’s Bank of China between 1993 and 1995. Zhu also impressed enough people to be named mayor of Shanghai in 1989. He left the post in 1991 to become vice-premier of the State Council – a position he held from 1991 to 1998.
After becoming premier in 1998, he wasted little time in tackling the country’s most pressing problems. Zhu saw these as the fault of China’s increasingly lethargic bureaucracy and its inability to restructure and list its leading state-run firms – powerful provincial-level institutions employing thousands of workers, and constantly teetering on the edge of bankruptcy.
Founding father
Zhu’s ability to recognize that these SOEs had to change, to become market-oriented vehicles capable of acting as the catalyst for China’s industrial-economic change, will probably prove his greatest legacy.
Indeed, many people abroad see the former premier as something resembling the father of China’s capital markets. Zhu is currently working, from his home in the Fragrant Hills a few miles west of Beijing, on a book that will portray him as exactly that – the man who made the country’s markets tick.
For many with close, personal, family connections to senior Communist Party members, that is a step too far. China’s stock markets may be red hot right now, but they are cluttered with state-run firms that still view corporate governance as an unwanted burden. China’s corporate bond market, which stalled under Zhu’s watch, before virtually disappearing, also dents his financial legacy.
One individual considered in Beijing circles to be a “princeling” – a direct descendant of one of the senior early members of the Communist Party of China – says Zhu “has no idea how markets work, and that’s why we ended up with our markets in such a mess. Yes, he reformed the SOEs, but he also paralyzed and destroyed the old social security system, and we haven’t been able to replace it. All the problems with social security now date back to [Zhu’s tenure as premier].”
“He often made decisions without enough information, and the result was that a lot of people suffered from his impatience,” the individual adds.
Zhu was also instrumental in convincing the US to support China’s efforts to join the World Trade Organization, overcoming many dissenting voices in Beijing sceptical about the trade body. Chief among the doubters was Zhu’s predecessor as premier, Li Peng, who resented the idea of foreign and domestic competition in the coal and hydroelectric power sectors – two industries controlled by Li’s family, including son Xiaopeng and daughter Xiaolin. While Zhu was enormously respected abroad, particularly in the United States and Europe, his popularity at home was mixed. Loathed by many party officials, who felt that while acting as a premier he had taken a sledgehammer to their beloved bureaucracy, he was nonetheless revered as a “clean” man, free of any possible stain of corruption (although the whiff of nepotism clings to his son, Levin, who has built CICC into the country’s leading investment bank). One former colleague remembers a moment in the late 1980s when Zhu toured his home province. The provincial head of the party boasted that he also owned a successful local distillery, to which Zhu retorted: “You can be the Hunan party secretary or an entrepreneur, but you can’t be both.”
“He wasn’t scared of upsetting people,” the former colleague adds. “In fact, he scared the hell out of a lot of officials, which sometimes actually works in China.” It certainly worked for premier Zhu Rongji.