China Emerging_ 1978-2008 - Xiao-bo , Wu [47]
Kodak’s plan took shape as early as 1994. In the fall of that year, George Fisher, the CEO of the company met Zhu Rong-ji at the West Lake in Hangzhou. When Fisher raised the idea of buying China’s entire film industry, everyone present was amazed. It had not been discussed in advance, and even the senior Kodak employees accompanying the CEO were hearing it for the first time. Zhu Rong-ji was the only one who did not deny the possibility. He was calculating his next move on the weiqi (Go game) board in his mind.
Kodak’s proposal was tempting. The company would bring three things to the table that could have a positive impact on the reform of the stateowned enterprises involved: technology, world-class management, and at least US$1 billion. At the same time, Kodak demanded exclusivity. “We ask that no other foreign competitor be allowed to enter China,” the company explained. “We have to reorganize the existing enterprises while they are able to build new factories.” This thinking tallied exactly with what was needed in China. The reality was that the government could hardly deal with the problems. Zhu Rong-ji decided to take the risk at the earliest possible time.
Handing over an important industry into the hands of a multinational company was unheard of in China. For one thing, the purchase of an entire industry would rewrite its traditional “benefits” structure. For another thing, it would annihilate China’s national film industry. From start to end, Zhu Rong-ji was a supporter of merging and acquiring the industry. As a result, he was soon labeled a traitor to his country for “letting the wolf in the door.”
He faced these charges with great aplomb. “Some people ask me if decreasing the proportion of state-owned sectors of the economy and increasing that of private sectors will change the nature of socialism . . . The key point is maintaining the economic lifeline, the blood of the system. A few hamburgers, some rolls of film, some hairpins—if you bring in a little foreign investment with these, what difference does it make?” The reference was to Kodak.
The Kodak proposal went forward, signifying that China’s central government was taking another historic step with regard to the reform of state-owned enterprises. The year 1998 represented a major dividing line. Before this, the focus was on changing the “operating mechanisms.” After this, it was on restructuring and clarifying ownership. The results of the early reforms might have been modest, but government policy was always crystal clear. For the post-1998 reforms, the results were quite outstanding, but government policy remained vague. It was first expressed in the slogan, “Reform, reorganize, and transform.” After that, a rousing movement called “State out, People in” was promoted. As a result, a tremendous restructuring was completed within a few years. One important thing to note is that a group of large state-owned enterprises that had been failing were subsequently turned into a kind of invincible fleet.
The enterprises that were subjected to the “State out, People in” policy underwent a restructuring of ownership and ceased to be a part of the fleet. However, in this process, people who had been in charge of these enterprises were allowed to assume control over vast wealth. This has elicited unending debate in recent years. The process went forward at all levels of government—local, provincial, and national—and was known in colloquial parlance as the “last banquet.” The “State out, People in” policy was an “unspecified, generalized movement,” which is to say that it lacked precise legal parameters and regulatory oversight. How certain individuals assumed control over the assets during the course of changing ownership is rather unclear. Much