ObituaryZhu Rongji: reformer who led China’s economic transformation through ‘minefield or abyss’
China’s bold economic tsar who drove sweeping SOE reforms and secured WTO entry has died aged 97
“Regardless of what lies ahead – be it a minefield or a deep abyss – I will forge ahead unswervingly, dedicating my entire life and energy to the country until my dying day.”
His remarks at a press conference in 1998 came as China was undertaking sweeping state-owned enterprise (SOE) reforms that caused widespread job losses, even as it reeled from the 1997 Asian financial crisis.
Zhu, dubbed China’s economic tsar by the media, was known for his determination to steer the country through the rough waters of reforms and external shocks during his tenure as vice-premier and premier between 1991 and 2003.
He shook up the centrally planned economy, overhauled the state-owned business sector, fought corruption, revamped the tax system and secured China’s entry to the World Trade Organization – changes that some economists say brought about a historic transformation in China’s economic system, ushering in a modern state and making it an integral part of the world economy.
His straight-talking, no-nonsense style earned him a host of nicknames – including “iron-face Zhu”, “no-nonsense leader”, “problem solver”, “fire-brigade captain”, “crisis manager” and “troubleshooter”.
He was also the global face for China’s economic reform and opening up to the world. In April 1999, Zhu became the first Chinese premier to visit the United States in 15 years, travelling to Washington with a clear mission: negotiate China’s entry into the World Trade Organization.
The going was tough. Despite major concessions offered by Zhu on market access, US president Bill Clinton declined to finalise the agreement during the visit and it was not until November that the bilateral agreement was finally signed.
Backed by then president Jiang Zemin, Zhu pressed on despite strong criticism from within China about the concessions made to the foreign companies.
Zhu said in 2001, when China formally joined the WTO, that the 15 years of negotiations had caused his “black hair to turn grey”.
Looking back, China’s accession to the WTO overhauled its economy and turned the country into the world’s leading manufacturing powerhouse – a shift that drove its rise to global power status today.
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, said China’s accession to the WTO was a game-changer.
“Many vested interest groups in China were strongly against the accession, but [Zhu] stood firmly to support it. I think it’s fair to say that the WTO accession wouldn’t have happened without his strong endorsement.”
“This reform turned out to be a game changer for China and the global economy. His contribution to China’s economic miracle cannot be underestimated.”
Zhu was also crucial in laying the groundwork of China’s market economy, according to China watchers.
“Zhu Rongji was the indispensable architect and driver of China’s transition from a largely improvised reform economy into a more disciplined, internationally integrated market-oriented system,” said Denis Simon, former vice-chancellor of Duke Kunshan University and teacher at Schwarzman College.
“He stabilised the macroeconomy, restructured state industry, repaired the banking system and drove China into the WTO.”
According to Wang Dan, China director at Eurasia Group: “Zhu was the real founder of China’s socialist market economy … He has carried out the most important reforms during [his tenure] in the 1990s, such as the tax-sharing reform, stripping off non-performing debts from banks, resolving the triangular debts, restructuring the state enterprises, and unifying the dual exchange rate system.”
“The new policies rolled out afterwards are mainly reinforcements of his reforms,” Wang noted.
When Zhu became vice-premier in 1991, the economy was plagued by runaway fixed-asset investment, excess money supply, soaring inflation and financial market chaos. He successfully used measured but persistent macroeconomic controls to steer China out of a period of inflation.
Zhu’s frequent contact with foreign politicians and entrepreneurs and the straight-talking image he projected also helped to boost confidence about China’s ability to manage its economy.
Paul Triolo, partner at DGA-Albright Stonebridge Group, said: “I met Zhu Rongji during my time working in the US Embassy in Beijing in 1995-1997 … He generated a lot of confidence in the ability of the Chinese government to tackle the complex issues raised by reform and opening, particularly the reform of SOEs.”
Triolo referred to what he called “Zhu’s patient, almost scholarly approach to explaining the issues”, saying they “went a long way with his role as explainer-in-chief of China’s evolving economic policy … that was creating openings for Western businesses in sectors previously closed to such investment and participation.”
Bert Hofman, former World Bank country director for China, said Zhu was also open-minded and willing to seek advice from overseas experts to solve China’s economic problems.
“I first met Zhu in 1993 in Zhongnanhai along with the participants of the Dalian conference,” Hofman said, referring to the leadership compound in the Chinese capital.
“That conference was originally intended to focus on establishing the ‘socialist market economy’ but Zhu asked the participants to focus on his immediate headache – resurging inflation.
“The conference discussed many of the elements that got into the ‘decisions’ on establishing the socialist market economy, but for Zhu it was even more important that we delivered ideas for what was to become the ‘16 point programme’ of summer 1993.”
“To illustrate his unorthodox thinking: he asked the World Bank to invite experts from Taiwan [with] experience in fighting inflation,” added Hofman, who was a World Bank economist in Beijing in 1993.
Apart from pushing for market reform, Zhu is also well known for his determination to fight corruption and to crush vested interest groups.
In the same press conference in 1998, he famously said: “I’ll have 100 coffins prepared. Ninety-nine are for corrupt officials and the last one is for myself.”
“Chinese Premier Zhu Rongji was one of the bravest and most forward-looking Chinese leaders of his generation,” said Denis Wilder, senior fellow of the Initiative for US-China Dialogue on Global Issues.
“Zhu was the first leader to recognise and spotlight the massive corruption within the [People’s Liberation Army] that was distorting the Chinese economy; he insisted that general secretary Jiang Zemin take action.
“Going up against the incredibly powerful military, sometimes dubbed PLA Incorporated, was politically dangerous but necessary to keep the Chinese economic reforms moving forward.”
Triolo said he was also impressed with Zhu’s courage to stand up to entrenched interests that pushed back on reform and opening.
“He stressed that each round of reform generated further interests which would then oppose further reform, particularly in the SOE sector, which was one of his main points of focus. Hence policy had to continuously adjust to ensure that reform did not stall as it generated resistance to further progress.”
According to Shi Yinhong, distinguished professor at Beijing’s Renmin University, the bold and profound reforms undertaken by Zhu were made possible because of the leeway granted by party secretary Jiang.
“Zhu and [former premier] Wen Jiabao after him were strong premiers just because the party top leaders allowed them to do so, and the party leaders benefited from the sufficient space given to them to conduct the reforms in the areas entrusted to them. It is something memorable.”
At the 1998 press conference, Zhu had declared that Beijing would maintain Hong Kong’s pegged exchange rate system “at all costs”. He also made “three guarantees” – minimum gross domestic product growth of 8 per cent, keeping inflation under 3 per cent, and not devaluing the renminbi.
The strong stance helped to stabilise other Asian currencies that were then in free fall.
Zhu made four official visits to Hong Kong – in the capacity of Shanghai mayor, vice-premier and premier.
During his final visit to Hong Kong in 2002, Zhu reaffirmed Beijing’s backing at a time when the city was still reeling from the financial crisis and the local government under the first chief executive Tung Chee-hwa faced mounting political pressure.
“If Hong Kong is not managed well, not only do you bear responsibility, we also bear responsibility,” Zhu said at the time.
“Hong Kong has returned to the motherland; if it is ruined in our hands, wouldn’t we become the sinners of our nation? It will not happen.”
However, economists also point out that Zhu’s policies created many economic problems that took years to resolve, such as the widening rural-urban divide caused by the priority accorded to export-oriented industries starting in 1994 and the mass lay-offs in SOEs.
“Many of his policies also fomented or aggravated the imbalances and contradictions of the Chinese economy that underlined the current economic impasse,” said Ho-fung Hung, a professor at Johns Hopkins University.
“His reform of state enterprises led to the dismantling of social welfare and public goods, such as housing, that those enterprises had provided.
“All these policies led to the explosion of inequality and social insecurity and, hence, lagging domestic consumption, which is haunting the Chinese economy today.”
The tax-sharing system and the privatisation of home ownership introduced by Zhu also left local governments heavily reliant on the property market for revenue, a model that became a strong driver of the Chinese economy for years before a prolonged slump set in.
Born in 1928 in Changsha, capital of the central province of Hunan, not far from Mao Zedong’s hometown, Zhu joined the Communist Party in 1949, the same year Mao founded the People’s Republic.
After graduating from Beijing’s prestigious Tsinghua University with a degree in electrical engineering in 1951, Zhu began his career as a civil servant with a government agency.
He was branded a “rightist” in 1958 during Mao’s Anti-Rightist Movement after he criticised some of the projects in Mao’s Great Leap Forward as unrealistic. Zhu was expelled from the party and demoted.
During the Cultural Revolution, from 1966 to 1976, he worked in obscurity, either as a minor functionary or in labour camps. But his political career was slowly rehabilitated when Deng Xiaoping came to power in the late 1970s and he rejoined the party in 1978.
For most of the 1980s, Zhu worked at the State Economic Commission, a powerful central government agency in charge of managing the economy. He organised large-scale transfers of foreign technology, oversaw several big national projects and encouraged foreigners to invest in joint ventures.
Zhu’s ability won the appreciation of economic policy planners at the time and he may have been one of only a few senior officials backed by both Chen Yun, the late godfather of Chinese central planning, and reformist patriarch Deng.
As mayor of Shanghai – China’s most populous city and commercial hub – from 1988, Zhu cemented his reputation for efficiency and clean governance as he oversaw an ambitious programme to emulate the international standing of New York, London or Hong Kong, turning the city’s Pudong New Area, a Singapore-sized area across the Huangpu River from its famous Bund, into a Chinese Manhattan.
He served as vice-premier from 1991 to 1998, and premier from 1998 to 2003.
Zhu kept a low profile after retiring from premiership in March 2003, having declared that he would not write an autobiography or comment on government work after stepping down.
After an appearance in 2015, he was notably absent from military parades, events where retired state leaders traditionally appear. His rare public outings were mostly related to the Tsinghua University School of Economics and Management, where he served as the founding dean in 1984.
He also made rare recorded remarks in English. Once when a compilation of his replies to the press during his years as premier and vice-premier, Zhu Rongji Meets the Press, was published by Oxford University Press in 2011, and another time when the English version of the multi-volume Zhu Rongji on the Record: The Road to Reform 1991–1997 was published in 2013.
Former US secretary of state Dr Henry Kissinger and the former West German chancellor Helmut Schmidt wrote forewords for the latter.
Zhu is survived by his wife Lao An, daughter Zhu Yanlai and son Zhu Yunlai.
Additional reporting by Cary Huang, Frank Tang, Siqi Ji, Carol Yang and Holly Chik