Businessweek Archives

For China's Free Marketeers, A String Of Small Victories


International Outlook

FOR CHINA'S FREE-MARKETEERS, A STRING OF SMALL VICTORIES

Two years after the Tiananmen crisis, hardliners and liberals in Beijing continue to clash over control of the Communist Party apparatus and government policies. But while the heavies in Beijing do battle, China's army of technocrats and managers is engaged in a quieter struggle. Driven by China's vast need to raise capital and to overhaul clunky state companies, they are pushing ahead with piecemeal economic reforms. Their ad hoc measures fall short of the broad, pro-market vision of Zhao Ziyang, the reformist Prime Minister and Communist Party chief who was deposed after Tiananmen. Still, "their cumulative effect is toward a more market-oriented economy," says Diane Yowell, research director at HongkongBank China Services Ltd. in Hong Kong.

In Shanghai, for example, Citibank, Bank of America, and four other foreign banks will soon open branches. Shanghai's business-minded leaders are bringing them in to get wider access to foreign capital and lure more companies to a foreign investment zone across the Huangpu River.

In Beijing, meanwhile, China VentureTech, a venture capital company with ties to the Finance Ministry and key financial institutions, recently joined with Britain's Standard Chartered Bank and stockbrokers James Capel & Co. to set up a new investment company. It aims to tap new sources of capital to buy shares in unlisted Chinese companies and eventually list them on stock markets in China or Hong Kong. And Chinese interest in Western-style management continues unabated. "Public rhetoric reflects the ideology after Tiananmen," says John M. Thomas, associate dean of the business school at New York State University in Buffalo, which sends professors to conduct seminars sponsored by U. S. companies in China. But among enterprise managers, he adds, "there's a tremendous interest in economic reform."

China's aging leaders show no sign that they will bend to threats by the U. S. Congress to curb trade if Beijing doesn't ease its political repression. But they recognize that there's an urgent need to improve economic performance. Although the economy is expected to grow 5% to 6% this year, China is still hobbled by huge subsidies, a crippling budget deficit, unproductive state industries, and a renewed inflation threat.

LAST GASP. Leader Deng Xiaoping is wary of political reform since Tiananmen, but he favors economic reforms--provided they don't risk social upheaval. So he continues to oppose moves that could worsen unemployment or stir unrest, such as shutting down inefficient state industries. But for the first time in 25 years, Beijing recently raised grain prices for urban consumers--by 67%--to shrink farm subsidies. And housing subsidy cuts have boosted rents by as much as 60%.

Nevertheless, a political battle is heating up between Deng followers and last-gasp Marxist ideologues. Deng was believed to be behind the promotion of Zhu Rongji, Shanghai's liberal former mayor, to vice-premier early this year, and the recent appointments of three Zhao Ziyang associates as vice-ministers. But hard-liners struck back in recent weeks by sacking the head of a liberal economic institute and shutting down a reformist newsweekly.

The seemingly endless struggle will culminate in the 14th Party Congress in June, 1992--unless the political balance is tilted before then by the death of Deng, 86, or other Long March veterans. Promotions such as Zhu's are part of the old guard's efforts to position younger candidates for the succession. Until then, piecemeal reforms are at least steps in the right direction on the long road back from Tiananmen.EDITED BY JOHN PEARSON Lynne Curry in Beijing and Dinah Lee in Hong Kong


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus