THE future of the Middle Kingdom has never been brighter. Health matters aside, initial investment (albeit with cautiously-paced efforts) at liberating Chinas economy seems to have paid off and international organisations are realising what they have always suspected: that China is the place to do business.
With a population of 1.3 billion people that spells cheap labour and lower cost of production, China was the largest recipient of the foreign direct investment (FDI) among developing countries in 2000.
In Zhu Rongji and the Transformation of Modern China (John Wiley & Sons, Inc), Laurence J. Brahm tackles Chinas transformation from a closed economy to an open one and how Zhu did it all.
Brahm, chief executive officer of Naga Group, is a political economist and lawyer by profession. He is the author of 20 books on China, including Chinas Century: The Awakening of the Next Economic Powerhouse.
In the foreword, Dr Supachai Panitchpakdi, director-general of the World Trade Organisation (WTO), said: Under Premier Zhus 'managed marketisation' approach, economic and administrative reforms have been all-embracing ? Zhu understood very clearly that in order to keep all these reforms alive and moving forward, additional momentum from the external sector was vital.
This explains why in spite of erstwhile domestic opposition and initial lack of cooperation from Chinas major trading partners, Premier Zhu was committed to negotiating Chinas thorny road into the WTO. The final touch of the master strategist, when in November 1999, Zhu personally intervened to salvage the dying negotiations between the US and Chinese delegations, is again testimony to his blend of modern management acumen and Chinese pragmatism.
Ex-premier Zhu has long been the Wests favourite economic reformer within the Chinese leadership as well as the most powerful. In 1999 he became the first Chinese premier to pay an official visit to Washington in 15 years and the book's introduction sets the stage as it recalls Zhus background, including the time when he was kicked out of the Chinese Communist Party (CCP), to his gradual rise in the party.
The internal politics and power of the CCP have long been a mystery to many but revelations in this book will leave many stunned. Numero Uno: remember that the party is never forgiving. Having once criticised the economic policy in the 1950s, Zhu was accused of being a rightist and in April 1958, was sent to labour in rural areas as punishment, where he worked for five years feeding pigs and sheep, cleaning toilets and working in commune kitchens. Through such labour, Zhu injured his back, a problem that still plagues him today.
Zhus patience and determination are two values that have led him to what he has achieved. But this episode is probably one he isnt able to forget. When he was given the mandate to control the hyperinflation that was prevalent in China in the early 1990s by assuming the position of governor in the Peoples Bank of China, his stern efforts to rein in the economy and eliminate corruption were met with much resistance and hostility, especially from Great Wall boss Shen Taifa.
Defiant Shen threatened to sue the bank for interfering in his business operations. Soon, orders were given for a high-level investigation into Great Wall Corps shady operations, which revealed fraud on a massive scale. Shen was promptly executed and this served as a warning to the rest.
Zhus impossible and unrealistic deadlines were legendary but he believed that by setting such targets, it would create pressure on officials at every level to ensure that orders from the top were implemented. His signature 16 measures from the Opinion Concerning the Current Economic Situation and Strengthening of Macro Control aimed at controlling inflation are discussed in Part 1 of the book.
Using economic and political developments in the late 1980s as a source of inspiration for his macro-control economic policies, Zhu combined both monetary and fiscal interventions tools with high-handed administrative measures characteristic of the command economy in which he had been trained in the 1950s. Readers would learn that while Zhus economic management may not be the stuff of textbooks and theories, they are necessary for a hands-on approach at promoting growth.
Part 1 of the book illustrates key events during this difficult transition and tells the underlying politics involving difficult decisions, which have become the catalyst for and the substance of change. Part 2 focuses on the reforms, which Zhu introduced during his tenure as State Council premier. Chinas entry into the WTO is discussed in Chapter 10.
Overwhelming discussions of financial risk and monetary policies may be too detailed and academic for some while others may not be comfortable with the image of Zhu that Brahm admiringly paints in this book. Reading would be made more enjoyable had the author included bibliography or footnotes to document his sources of information and if he had examined how Zhus policies related to foreign investment.
Overall, the book has achieved its objective of presenting an economic history of China since 1990 with focus on Zhu. While he achieved some of his initial aims successfully, some, unfortunately, remained empty rhetoric, as his successors would continue fighting the endless battles of uneven development, inefficient state-owned enterprises and a banking system mired in bad loans. And the issues of human rights and press freedom continue to haunt China to this day.
This begs the questions: (a) how do you modernise a country without losing the CCP ideology, (b) to what extent can the CCP reform itself, and (c) how solutions to a & b be implemented without tipping the whole country into a revolt. Answers, unfortunately, only time will tell.