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By Root 1297 0

had been 5.7 to 1, so this was an immediate devaluation of 33%. In 1978, the renminbi to US dollar rate was 1.7 to 1; in 1991 it was 4 to 1, and at the beginning of 1992, it was 5.7 to 1. This devaluation suddenly made Chinese products cheaper in the world market. Even more importantly, it made China a more attractive place to foreign investors. In Germany, the Handelsblatt newspaper reported that the devaluation meant that the four “Little Dragons” of Southeast and East Asia would now be losing their advantage of cheap labor. China would definitely become the manufacturing center of the entire globe, and indeed, that is what happened.

Zhu Rong-ji’s third battle was aimed at the state-owned enterprises. All previous reforms had focused on increasing the autonomy of the enterprises, but results were meager. If any industry had privately-operated enterprises involved in it, then the performance of the state-owned enterprise was poor.

One place drew Zhu Rong-ji’s attention for being different. A small county seat in Shandong called Zhucheng went further than any others in terms of state-owned enterprise reform, and the experience of the local government could be summed up in one word, “sell.” The logic was very simple with regard to small and medium-sized state-owned enterprises with poor results: Lighten the load. Cast it off by complying with the directive of the central government, which stipulated, “Some state-owned small enterprises can be leased out or sold to collectives or to individuals for managing.” The head of the county seat declared, “After ten years of reforming back and forth, enterprises were still resting in the same old embrace of the government. From today onward, we are changing that relationship. From now on, it is, ‘You register, and I record. You make money, and I levy taxes. You get rich, and I am happy. You break the law, and I punish. You go bankrupt, and I commiserate.’” As a result, through some seven different means, including the share-ownership system, the share cooperative system, the transfer of ownership for no compensation, and bankruptcy, this county sold 272 stateowned or collectively owned enterprises to individuals.

As Zhu Rong-ji saw it, the courageous action of this place deserved corroboration as the government could not deal with all state-owned enterprises. This was because at the beginning of reform and opening up, the state-owned enterprises were the only force in the economy. If they were not roused to act, there was no hope of reviving the country. However, at that time, when township and village enterprises were springing up everywhere and privately operated enterprises were also growing, foreign-invested enterprises had also swarmed into the fray. They formed an alternative commercial force that could be utilized.

There was also a new toolforinfusingbloodinto the state-owned enterprises—namely, the two stock exchanges. Public listing could serve as an alternative to simple “allocations” bythetreasury.ZhuRongji recognized that under these new conditions, the reform of state-owned enterprises would have to stop circling around the same old issues of operating systems. If state-owned enterprises were to be listed on the stock exchanges, the central government would have to put considerableeffortintotheirtotalrestructuring.Thismeantfinallyaddressing the problem of who owned what.

“Labor wanted.” Photographed in 1996, in Pingyuan County, Guangdong Province.

Economists now came forward with a concept that was new to China. They argued that, “An ownership system should not be thought of merely in ideological terms, but rather as a means to developing the productive forces.” Scholars buttressed this by saying that one should not grasp all enterprises to one’s bosom forever, that it was not only unnecessary but also impossible. The country just needed to hold on to those most important, perhaps five hundred to a thousand large enterprises. This would allow more breathing space for the small and medium-sized enterprises, while those that were not competitive or not necessary to