China Boom CMS

<p>I think the fundamental key to understanding Deng Xiaoping&rsquo;s role is, that I don&rsquo;t think Deng Xiaoping feels confident with economics. He doesn&rsquo;t see himself as an economist. &nbsp;He&rsquo;s definitely a reformer and some people think that Deng Xiaoping is the most radical reform. &nbsp;I don&rsquo;t know. I don&rsquo;t have any personal knowledge about that. But it&rsquo;s quite clear that Deng Xiaoping accepts that Chen Yun among the elders knows more about economics than he does. &nbsp;And he accepts early on that Zhao Ziyang will be in charge of economic policy. That doesn&rsquo;t mean that Deng washes his hands of it. He still wants Zhao to come and report to him and clear key decisions with him, but that&rsquo;s just because he wants to be kept in the loop. And there is this version which I don&rsquo;t think we absolutely have confirmed but has been reported in the Hong Kong press, that when Zhao became first party secretary in 1988, he agreed to approve all crucial political decisions with Deng Xiaoping and all crucial economic decisions with Chen Yun. So again we don&rsquo;t know 100 percent that&rsquo;s factual, but it has been reported by pretty good sources. &nbsp;And I think it shows that Deng Xiaoping accepted that there were limits to his expertise.&nbsp;And when we see where Deng is really outstanding, he&rsquo;s really outstanding in the design of personnel systems. Waht Deng really understands is the Communist Party system. &nbsp;He understands how people are chosen, how they&rsquo;re promoted, what the incentives are within the system. In that sense, he goes well beyond most other people. And of course Cheng Li, last night, described the current political system as one that was designed by Deng Xiaoping. Now I don&rsquo;t know enough to say that that&rsquo;s true, but I think it&rsquo;s fair to say that Deng Xiaoping from very early on, from the mid-1970s, was thinking about restructuring the political system with a clarity and a depth and an insight that we never see in terms of Deng Xiaoping thinking about the economic system.&nbsp;So, was Zhao Ziyang pushing Deng economically? &nbsp;Yeah, absolutely, no question about it. I mean if you have to give personal credit to somebody for the economic innovation that took place during the 1980s, in my mind there&rsquo;s no question: Zhao Ziyang is the person who deserves the credit.</p>

<p>I went to college in 1997. I remember the handover of Hong Kong right before my college entrance exam. I also had my first encounter with the Internet in the same year. I learned a little bit about the Internet in Chongqing, Sichuan. Then I became really interested in it after I came to Beijing. At the time, we had to wait in line to get on the Internet at the computer lab. The computers were all really old, with those black and white screens. And all we could do was to use Telnet to log on some BBS. All of a sudden, I discovered: hey, I could chat with people! This is interesting! I was among the first group of netizens in my school. I remember the lab was at Building Two, on the second floor. It only had about 40 computers. And everyone had to go there to get on the Internet. Then again, most students at the time weren't aware of the Internet. But I was interested. Some people had to use the internet for their assignments, perhaps they were majoring in related fields. To me, it was purely a curiosity. I found it interesting and wanted to learn more about it. I like unusual things. So I waited in line and wanted to find what I could do on the Internet. At the time there wasn't much one could do on the Internet. There weren't' many websites in China, just one or two with some scale. Like Stone Rich Sight, with perhaps just a thousand visitors in total. It's nothing like today's websites. The only websites with more visitors were college bulletin board systems (BBS). My first BBS experience was at the Tsinghua University BBS. It was the most famous BBS among college students.</p> <p>&nbsp;</p> <p>A BBS in essence is a forum. You would use Telnet to log on, and you would be greeted by a black and white interface. No color or pictures, it would be text only. Then you could select to go to different boards, each board would have many topics. Under each topic, you could read different posts. You could reply to a post. You could also send instant messages to another online user. He or she could reply your messages. It's a very simple community. But since it is a college BBS, people could meet and get to know each other offline. So I got to know a lot of people through the BBS.</p> <p>&nbsp;</p> <p>I think the biggest difference between Chinese and Western Internet users is that Chinese people use the Internet mainly for entertainment purposes. Only a small portion of Chinese Internet users get online to find information, or for some work-related purposes. Most Chinese people use the Internet for entertainment, to kill some time. Whether through watching movies, listening to music, playing games, or visiting social network websites, it's all entertainment. In the past, Chinese people only had very limited ways of entertainment. People would just go out to watch a movie or go shopping. Then suddenly, they have the Internet, something with a very low fixed cost. It's easy and cheap whether you go to Internet Bars or stay at home. But you can have access to so many ways of entertainment. So people are willing toget online. At the same time, you can interact with so many people.</p>

<p>So these thirty years were thirty years of growth. How should I put it? In the first few years, the country suddenly opened up, reform and opening presented us a great opportunity. We just came back to the stage after the Cultural Revolution, after ten years' suppression, our artistic energy erupted at once. That was an extremely flourishing period. So looking back at the thirty years since reform and opening, this thirty year road is like the career of a dancer. Like I said before, a thirty-year-old dancer is one who begins to know how to dance. A young dancer is pretty, with a long neck, a precious face, and elongated arms posing like this, but I'm already putting my feelings into the pose, the pose looks beautiful. But there's no personality or substance. It is only when you reach a certain age, when you have some life experience, can you transform every movement beyond&nbsp; standard poses that others taught you. Now you are mastering the art. You are mature now. So one starts to know how to dance when one reaches thirty.<br /> <br /> So I think of this thirty-years of reform and opening as a process. It started with an eruption of energy, and there was some confusion along the way. Sometimes we were sidetracked, for example, thinking too much about money and forgetting about art, and the market was not regulated, or the market was not regulated, and other problems, all affected our creations. Later, people realized the problems and started to reflect on them. They began to look back, and returned to the path of finding true art, true self, true artistic style, true individual expression. In the end, what is dance? In this process of searching, one becoming a mature dancer. I think this thirty years is really worth going through.<br /> <br /> As to the next thirty years, I think because we have the past thirty years, now we matured into adults. Chinese people have a saying, at 30 I know where I stand, at 40 I have no more doubts, at 50 I know life&rsquo;s purpose. So for Chinese people, after this thirty years we've just learned to stand on our feet. It is only a beginning. Our 40s, 50s and 60s should be our golden age. Of course, when people mature, they do wonderful things.</p>

<p>It began with allowing people to be self-employed business owners. Once a self-employed business reached a bigger scale, hiring employees was allowed. Back then, the phrase &quot;hiring employees&quot; in Communist doctrine meant exploitation. Our Party leaders at the time were quite wise, they didn't use the phrase &quot;hiring employees.&quot; They used other phrases instead,&nbsp; for example: &quot;ask for helpers,&quot; or &quot;train apprentices.&quot; One could ask for one or two helpers, or train three to five apprentices. The total number should not exceed seven. What happens when there are more than seven? In that situation, for example, in Wuhu, Nian Guangjiu, who sells sunflower seeds, hired more than 100 employees. Local authorities arrested him. When Deng Xiaoping learned about this, he said: &quot;We can't have him arrested. The impact would be too big. Let's wait and see.&quot; So from 1982 to 1987, the self-employed business model experiment had been observed for 5 years. <br /> <br /> During this five years, self-employed business boomed in urban areas, so did private business. This is the situation in urban area. In rural area, since 1979, peasants started to think creatively by themselves. The People's commune system was holding back every peasant's productivity. That is why with the same labor and land condition, the People's commune system could not make crops grow in the fields. So the development of agriculture was very slow. People were starving in a lot of places. At this point, a peasant in Xiaogang Village of Fengyang County, Anhui Province, secretly organized &ldquo;household responsibility system.&quot; 18 families secretly agreed to allocate the land and each take individual responsibility to cultivate. After this had been established, just the second year, the local Grain Administration became rich because villagers began paying agriculture tax. Before that, every year the villagers had to go out of town to beg for food. Wan Li, then Party Secretary of Anhui province, firmly supported the peasants when he learned about the experiment. So did Deng Xiaoping. So this is when reforms in rural area began, with a change from the People's commune system to the household responsibility system. Later, Zhao Ziyang, introduced this practice to Sichuan province, gradually and naturally dismantled the People's commune system.</p>

<p>If you look at the major cities &mdash; and this is one of the areas that one has to be very careful about when talking about China today &mdash; China has may faces. And the face that most foreigners see is the face that you see in Beijing, Shanghai, Guangzhou, Tianjin, where you see this incredible change, incredible development and urbanization. And that certainly has been explosive in the last 32 years. On the other hand, you can go maybe 50 miles outside of Beijing, you can go to Shanxi, Gansu, Ningxia, Jiangxi, Guizhou, these places, where things haven&rsquo;t changed much at all. And I think that&rsquo;s part of the challenge that still faces the Chinese. That&rsquo;s one thing, clearly the physical, material changes in some places have been incredible.<br /> <br /> I think the most important thing or change that I&rsquo;ve seen though is the withdrawal of the state from the lives of the average Chinese people. And I think anytime you look at China, especially as a foreigner, it&rsquo;s important to make a great effort to look at China through the eyes of the Chinese people, not through the eyes of foreigners. I&rsquo;m irrelevant; here today gone tomorrow. I think, more profound are the changes that have occurred in the lives of the Chinese people, and I think that the role of the state in the life of the average Chinese person has been reduced drastically. I used to say, when I came in 1979, when the standing committee of the Politburo sneezed, the entire country caught cold. Today, when they sneeze, nobody is even aware of it, because people, I think, have so much more freedom to run their lives than they did 30 years ago.<br /> <br /> And I think this has been as much about necessity as choice for the Communist Party. I don&rsquo;t think people got together and said, &ldquo;Gee, we need to make our people more free.&rdquo; But, I think they realized that if they wanted to develop a dynamic economy, that certain restrictions had to be eased. People had to have more freedom of movement, people had to have more freedom of information, they had to develop a system of law and that sort of thing, which I think has all redounded to the benefit of the Chinese people. So that is, to me, if people ask me, &ldquo;What&rsquo;s the largest change you see?&rdquo; I think that&rsquo;s the largest change.</p>

<p>In 1979, when I came to China, China accounted for roughly 22% of global population and less than 1% of global GDP. 32 years later, they account, still, for about 19% of global population and, depending how you count GDP, maybe 7 or 8% of global GDP. So, on the one hand, that&rsquo;s a tremendous achievement, to go from 1% to 7% in 32 years, at a time when the global economy wasn&rsquo;t exactly stagnating. Alright? So incredible achievement.<br /> <br /> But, then you look at the other side of that and you say, &ldquo;Wow, still only 7 or 8%. They still account for 19% of the global population.&rdquo; So, they&rsquo;ve gone from 1 to 7% with a model that&rsquo;s created all of these negative externalities. You&rsquo;ve got GINI coefficients that are at or above US levels, they&rsquo;ve got these incredible greenhouse emissions, they&rsquo;ve got a social safety net. By 2030, China will be as gray as Japan is today with 1/3 of Japan&rsquo;s per capita income. China will be the first gray developing country. That train has left the station. There is nothing the Chinese can do today to alter that fundamental. They have corruption issues, they have incredible environmental issues, there&rsquo;s not enough affordable housing. Ok? All of these things are, in part, the results of their economic model. So, the question is, can they rely on the same model that got them to 7% of global GDP to then go to 19, 20% of global GDP? The answer is clearly no. The answer is clearly no. They&rsquo;ve topped out environmentally, they&rsquo;ve topped out in terms of income distribution, they&rsquo;ve topped out in terms of the social safety net, so clearly, clearly, a new model is required. Now, the question is, do the powers that be know what model it should be and are they capable of transitioning to that model? Because there are a lot of vested interests in the current model. And one of the problems with going to the consumer driven model is, look, this place... China says it&rsquo;s a market economy. China&rsquo;s always been a market economy, for thousands of years, China&rsquo;s been a market economy. The issue here is one of ownership and power. And China, since 1949 has always been a planned economy and still is, very much, a planned economy. The whole basis of a planned economy is you tilt the economic playing field so that surplus collects where the state can get to it. Because if the state can&rsquo;t get the surplus, it can&rsquo;t plan anything. You can plan all day, but if you don&rsquo;t have the money to spend, your planned economy is nothing. So, China has had, all planned economies, not just China, they have an economic mindset that says, &ldquo;We have to tilt the playing field so money flows where we can collect it.&rdquo; That means you don&rsquo;t let it collect in households. You let it collect in state owned enterprises and government bureaucracies, whatever.<br /> <br /> In order for you to develop a consumer driven economy, you have to completely change that mindset. If you want individuals to spend money, you have to give them money, which goes very much against the grain of the traditional planning mindset in this country. Money, at the end of the day, is power. So, if you really want to get rich and empower the common people, I think it&rsquo;s a challenge, I think it&rsquo;s a huge challenge. You&rsquo;re basically saying, &ldquo;We&rsquo;re going to take money from the people who have it now, all of these vested interests, the state owned enterprises and whoever, and we&rsquo;re going to redistribute that money.&rdquo; And it gets back to the issue that we talked about earlier in this interview, which is basically, is this going to continue, is this trend going to continue? And I said, well, it can continue in a peaceful, evolutionary way, or it can continue in a less peaceful, less evolutionary way. And this is part of the issue. How do we redistribute resources and put them in the hands of the people when you have these vested interests saying, &ldquo;Wait a minute, I like having those resources.&rdquo;<br /> <br /> It&rsquo;s a huge challenge. It&rsquo;s not an economic challenge. China, economically, can grow for the rest of your and my lifetime. And you are a lot younger than I am. It can grow at 6, 7, 8%. That&rsquo;s not the issue. China&rsquo;s issue is dealing with the externalities, non-economic externalities, that are generated by this rapid growth, political, social, that kind of thing. And so, the question is: Does China have what I could call the institutional capacity to deal with these problems in an effective way? I think that&rsquo;s where the key is, going forward. It&rsquo;s not money, China&rsquo;s got money. It&rsquo;s not technology; China will either develop it, buy it, steal it. Whatever. It&rsquo;s not people; they have lots of smart Chinese people running around. It&rsquo;s not natural resources; they have lots of natural resources they can trade for what they don&rsquo;t have. What China needs and lacks is the institutional capacity to deal effectively with all of these issues that come about as a result of this rapid economic growth of a country that has 1.3, 1.4, or 1.5 billion people.<br /> <br /> A lot of people encourage them to allow civil society to develop, because civil society is a tremendous aid to states in collecting data and making sure that policies get implemented. It can also be a tremendous threat to states that aren&rsquo;t legitimate and therefore the Chinese Communist Party has a very schizophrenic view of civil society. They see how it could help and they also see how it could be a threat. In the absence of civil society, how do you develop this institutional capacity? Strictly within the communist party? Well, I think there are those out there who might question whether the communist party is in the position to develop that kind of sophisticated institutional capacity, especially at the local levels.<br /> <br /> So, I think that&rsquo;s the challenge for China going forward, it&rsquo;s not purely economic. One of the problems with the people who talk about the new China model, economic model, is that&rsquo;s all they do, they focus on economics. They say, &ldquo;China- look how successful they have been growing the last 30 years&rdquo; and, yeah, they could probably be very successful growing 8 or 9% for the next 30 years purely at an economic level. The trouble is, society is more than economics. A lot of things are involved besides economics and I think we&rsquo;re seeing a lot of those issues coming to the fore now with strikes, housing issues, with the environment, and it&rsquo;s a real challenge for China going forward.</p>