By Richard Baum, Ph.D., University of California, Los Angeles
The year 1984 was a watershed for China’s urban reforms. Fourteen new “open cities” were designated for the purpose of liberalizing the rules and requirements of foreign trade and investment. The “open cities” were to be empowered to contract directly with foreign investors for the import of industrial plant and equipment.
China’s State-owned Enterprises
Up until 1984, all major administrative and managerial decisions in China’s state-owned enterprises were imposed from above, as specified in the annual state plan. Specific planning targets included product selection and pricing, supply and marketing arrangements, staff wages, and promotions. However, it was a monumentally inefficient system. Much the same top-heavy planning process governed heavy industrial production.
It was a system that rewarded plodding conformity and discouraged innovation. Worse yet, because 100 percent of enterprise revenues had to be remitted back to the central government, there was absolutely no managerial incentive to improve operational efficiency or labor productivity.
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Empowering Factory Managers
Under Zhao Ziyang’s 1984 urban reforms, factory managers were, for the first time, granted a limited amount of discretion over functions such as product selection and pricing. And they were allowed to negotiate, for the first time, their own contracts for supply and marketing. They were also empowered to reward their most diligent workers with bonuses and performance-based pay raises. Finally, they were allowed to retain a certain portion of their total revenues as a reward for improved productivity and profitability.
These self-retained funds could then be used, at the managers’ discretion, for such things as awarding bonuses to employees, or purchasing more modern equipment, or even building new apartments for workers and staff members. To give managers a strong incentive to improve operational efficiency, their own pay, promotions, and bonuses were now pegged to increases in the profitability of the enterprise.
One thing that managers were not empowered to do, however, at least not in the mid-1980s, was to fire redundant, lazy, or unproductive workers.
Non-essential Employees and Inefficient State Enterprises
According to unofficial estimates, redundant or non-essential employees comprised, on average, 15 to 20 percent of an enterprise’s work force; this would mean, as a country as a whole, more than 25 million redundant state workers.
But the government had to be very careful about laying off these excess workers, lest this provoke an angry backlash from employees facing the sudden loss of guaranteed lifetime jobs and welfare benefits. For this reason, many old-time conservative party cadres opposed Zhao Ziyang’s proposal to “break the iron rice bowl”.
A related taboo facing China’s reformers in the 1980s was the strong opposition among party traditionalists to the idea of forcing inefficient state enterprises to shut down if they couldn’t turn a profit.
Even moderate reformers feared that China’s precious stability and unity would be endangered if widespread plant closures were mandated. So strong was this fear that it would take several more years before the government finally bit the bullet and forced chronically money-losing enterprises into bankruptcy.
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Special Economic Zones
While the introduction of market forces spawned an upsurge of domestic entrepreneurship and competition, Deng Xiaoping’s policy of “opening up” to the outside world also facilitated growing trade and investment ties with more advanced industrial societies.
Reversing two decades of Maoist insularity, the special economic zZones began to thrive in the 1980s, drawing first millions, then billions of foreign dollars into new manufacturing joint ventures. Along the Guangdong-Hong Kong border, the sleepy village of Shenzhen soon morphed into a nascent industrial megalopolis.
The opening of China’s domestic market to foreign manufactured goods in the 1980s provided added incentive for Chinese manufacturers to upgrade their product lines and improve their efficiency, for if they hoped to be competitive in an increasingly globalized marketplace, they would have to meet more stringent international quality standards.
Expansion in China’s Tourism Industry
China’s new policy of “opening up” led to a rapid expansion in China’s tourism industry. From just over 300,000 foreign visitors in 1979, tourism mushroomed to almost 1.5 million by 1986. Most foreigners passed through Beijing, where more than a dozen new four- and five-star hotels opened their doors in mid 1980s.
Elsewhere along China’s teeming eastern seaboard, equally dramatic changes were taking place. Shiny new hotels and office buildings, often developed as joint ventures with Hong Kong or Western partners, sprouted up in city after city. New trains with air-conditioned first-class coaches and soft sleeping compartments were added to existing railroad stock, and large fleets of air-conditioned Japanese tour buses and taxicabs were put into service.
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English Becomes Language of Choice
In the early 1980s, with China’s doors thrown open to the West, English replaced Russian as the foreign language of choice. Millions of young Chinese were now seeking to position themselves favorably in the linguistic marketplace, trying to anticipate the next big thing that might improve their chances for a successful career.
English was a virtual national obsession in China. Tourist hotels, public parks, and recreational venues catering to foreigners became linguistic magnets, attracting swarms of eager young Chinese looking to practice their English conversation skills.
But since the Chinese were still not permitted to enter hotels catering to foreigners without written authorization, they would often hover in clusters just outside the front gates of the hotel, waiting patiently for unsuspecting laowai—foreigner guests—to venture out. “Speak English?” was their universal mantra. They could be very persistent, and tourists often found themselves being trailed by a small phalanx of aspiring Anglophones whenever they left their hotel.
Common Questions about China’s Urban Reforms in the 1980s
Under Zhao Ziyang’s 1984 urban reforms, factory managers were granted a limited amount of discretion over functions such as product selection and pricing. They were allowed to negotiate their own contracts for supply and marketing. They could also reward their most diligent workers with bonuses and performance-based pay raises. Also, they were allowed to retain a certain portion of their total revenues as a reward for improved productivity and profitability.
China’s new policy of “opening up” led to a rapid expansion in China’s tourism industry. From just over 300,000 foreign visitors in 1979, tourism mushroomed to almost 1.5 million by 1986.
In the early 1980s, English replaced Russian as the foreign language of choice in China.