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ASIA | March 16, 1998 VOL. 151 NO. 10 |
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Loyalty and performance-by 1992, the annual income of a Shanghainese had risen to more than three times the national average-returned him to the capital in April 1991, when Deng promoted him to Vice Premier. Events quickly thrust him into the spotlight. Deng's 1992 call to accelerate market reforms unleashed an economic frenzy the likes of which the world has rarely seen, where double-digit growth rates were matched by equally high inflation, out-of-control stock markets and, overnight, empty skyscrapers. When Premier Li Peng developed serious heart problems in April 1993, Zhu assumed day-to-day responsibility over this hurtling beast, even installing himself as governor of the People's Bank of China. "When Zhu took over the central bank, that got people's attention," says Wadsworth. "That was seen as a very high-risk decision." With high returns, it turned out: though he had to scale back ambitious plans to gut the state sector and bureaucracy, Zhu succeeded in cooling inflation to less than 1% and reining in spending in the more reckless provinces. In the Western press, his performance pegged him, rather than the underwhelming Jiang or the ailing Li, as the man to watch in post-Deng China. Zhu, however, quashed such expectations, lowering his political profile even as his economic star continued to rise. These days, the two go hand-in-hand. Last fall, as the region's financial crisis prompted Beijing officials to focus on the need for deeper economic reform, Zhu emerged as the third-ranking member of the Politburo (after Jiang and Li), and the obvious candidate to replace Li when his second five-year term ends next week. The China entrusted to the new Premier demands a man of his precise talents, and resolve. The country now runs a serious risk of deflation; in its teeming cities, prices have declined for three months in a row. Dozens of industries are plagued by overcapacity and rising inventories. Foreign direct investment looks set to fall by perhaps 25% this year. Although Zhu has forecast respectable gdp growth of 8% for the year, some Western economists predict the rate may approach half that. For a so-called "bicycle economy" like China's, which needs to pedal ever faster just to stay upright, such a plunge could spell disaster. "If China slides into a bad recession," warns Wenran Jiang, a professor of political science at the University of Alberta, "it means the collapse of Asia's central growth pole." Unfortunately, the problems that have long vexed Zhu and other top officials are only worsening. China's commercial banks carry a crushing $250 billion in bad loans, extended mainly to speculative real-estate projects and money-losing state enterprises. These moth-eaten firms eat up more than 70% of the available credit in China, while accounting for only 34% of gdp. At least 30% of their employees-109 million proletarian foot soldiers-show up largely to punch the clock. Since the mid-1980s Beijing's mandarins have periodically sworn to shed these albatrosses. But one thought has always stopped them short: the vision of enough unemployed citizens to populate a small nation. Last year 12 million jobs were lost in the restructuring of state enterprises; official estimates say an additional 11 million may vanish this year. The People's Republic still boasts only rudimentary programs to retrain and re-employ workers deprived of their "iron rice bowls," and it has only recently begun to thread together some semblance of a safety net. The grim picture has drawn attention to ugly scenes-like the soot-blackened frame of a public bus, shredded last month by a bomb in Wuhan that killed at least 16. Suspicion immediately fell on disgruntled workers, who have staged demonstrations in the industrial city for months. "To demand a rapid realignment of this economy and expect that it's going to be entirely tranquil is unrealistic," warns Johns Hopkins University economist David Michael Lampton. Yet neither China nor Zhu-who friends say wants this to be his last posting-can wait any longer. China's dire situation partly explains his promotion. But Beijing's Old Guard may find Zhu more than they bargained for. "Zhu is like a soldier on a Chinese chessboard," says an admiring official. "Once he sets himself to do something, there is no turning back." The incoming Premier is already taking a rough blade to Beijing's sprawling bureaucracy. On Friday, a plan was unveiled that would close 15 ministries and add four new ones. All told, the bloodbath could claim up to 4 million civil servants' jobs. "In the short run, what Zhu is doing is very risky," says academic Jiang. But if he succeeds, he will have gone a long way toward rationalizing one of the world's most arcane monoliths.
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