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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Newsmakers 1998

Despite the odds, new premier Zhu Rongji has shown himself a determined reformer and Crisis-fighter

Reflections Out with the old, in with the new

Suharto Three decades of rule end in chaos and ignominy

Mahathir and Anwar The premier and his chosen deputy battle

A.B. Vajpayee and Nawaz Sharif blast their way into the nuclear club

The Internet Governments don't have to love it, but can no longer ignore it

THE GOALS THAT ZHU RONGJI SET for his administration when he became China's premier in March would have sorely taxed, if not submerged, any leader. In a year when most East Asian economies were contracting, many sharply, he set out to spur his country to 8% growth. He promised to cut China's bloated state bureaucracy by half, reform taxation, overhaul the grain-marketing system and privatize housing. Zhu pledged to rescue a banking system mired in bad debt. Even more daunting, he planned to start turning hundreds of money-losing state-owned enterprises into world-beating corporations, all within a space of three years. And during his first ten months in office, Zhu, 70, has tackled this awesome agenda with enormous energy and decisiveness, even if circumstances occasionally obliged him to backpedal.

Sometimes it seemed as though Zhu, nicknamed "Iron Face" for his austere rectitude, was the only one holding the line against the spread of Asia's "financial contagion" to China. Since taking power, Zhu has striven mightily to make good his promise, often repeated, not to devalue the renminbi, China's non-convertible currency. Among other things, such a move could have broken the Hong Kong dollar's link with its U.S. counterpart, triggering fresh currency depreciations throughout Asia. Even when the yen plunged to 147 at mid-year and the pressure to devalue seemed irresistible, Zhu's team stood firm (with a little help from his friend and admirer, U.S. Treasury Secretary Robert Rubin, who sold about two billion dollars for yen). During the year, the premier acted decisively to shut down weak financial institutions, most notably the Guangdong International Trust and Investment Corporation in October.

To maintain high growth in China amid a regionwide recession, Zhu chose a Keynesian path involving heavy public-works spending. At his very first cabinet meeting in late March, he decided to stimulate consumer spending and pump-prime the economy. That meant injecting some $12 billion into infrastructure development. To critics who called him a madman, Zhu responded with his characteristic panache: "Don't put a dunce cap on me. I'm immune to it." The premier earmarked $3.3 billion to help prop up China's state "commercial" banks, which are insolvent by international standards. The one-off infusion of capital erased about a sixth of their debts.

Some economists believe that Zhu is charting a risky course by targeting growth of about 8%, especially in such tough times. Why not ease up a little to 6% or 7%, which would still put China far ahead of its neighbors, they argue. The danger, as has been repeatedly demonstrated in recent decades, is that once such a goal has become politicized, people down the line will begin cooking the numbers in order to please their bosses, especially those in Beijing. Prominent economist Wu Jinglian says that such efforts are not worth the trouble. "It's not difficult to achieve an 8% growth rate," he argues. "The difficulty lies in attaining 8% without the fluff."

If Zhu strikes some of his detractors as crazy, there is method to his madness. China must maintain 8% expansion, or something close to it, Zhu reasons, if the economy is to generate the jobs necessary to absorb the millions of people who will be cut loose by his plans to streamline the civil service and dismantle the state-owned corporate enterprise. Of the two goals, the consolidation of redundant government offices seems to be progressing better. Since Zhu took office, 40 ministries and state commissions were eliminated or combined into 29 entities, forcing the retirement of several hundred ministers and vice ministers as well as thousands of bureau and department chiefs. However, the going will get tougher next year as the job cuts filter down to provincial and prefectural levels.

On the overhaul of state corporations, Zhu has had to stage a partial retreat. He had drawn up a program that could have put 11 million people out of work - on top of the 12 million former state-enterprise employees now trying to scratch out a living in the bigger cities. With gaping holes still in the social-welfare network and unemployment insurance meager or non-existent, the dangers of moving too fast are obvious. Chief among them is social upheaval, a longstanding nightmare in China this century. The projections are stark. The country needs to re-employ 23 million workers in the next three years - but may be capable of generating only 6.7 million replacement jobs. Zhu also must be concerned that rising unemployment would give more ammunition to leftist opponents, who have long been unhappy about Beijing's retreat from orthodox socialism. Some of them still hold influential positions in the media and propaganda bureaus, and may be gaining sympathizers in the top leadership.

Zhu Rongji is no miracle worker. But by almost any reasonable yardstick, he justifies the mandate and high hopes his colleagues conferred upon him last March by approving his nomination with a rare 98% vote at a new session of the National People's Congress. The coming year, however, could be crunch time, especially in the crucial state-enterprise sector. Some of Zhu's reforms are likely to come under further, in fact unprecedented, pressure. Still, for all his detractors' complaints, the premier was a winner in 1998. And he managed to capture the imaginations of both China and the world.

- By Todd Crowell and David Hsieh / Beijing

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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