By Eva Cheng
At Chinese Communist Party congress in September — the first formal occasion since Deng Xiaoping's death on which China's state, military and CP chief Jiang Zemin could show the world that he was really in charge — Jiang announced that his priority was to push forward Deng's plan to privatise the economy through sweeping conversion of state firms into shareholding companies. However, this central theme, after being quietly dropped recently from the official media, was conspicuously ignored during the annual session of the National People's Congress (NPC), the Chinese parliament, which was closed on March 18.
Instead, the key emphasis of the two week meeting was that there would be more massive lay-offs, hitting more sectors. In addition to affecting ordinary workers, who have been the main victims of privatisation, half of the CP's 8 million cadres in Beijing would lose their jobs this year (to be followed by more sackings in other regions). One-sixth of the People's Liberation Army's 3 million positions would go by 2000.
In addition, labour minister Li Boyong told the NPC that state firms were likely to shed another 3.5 million workers this year, after last year's cuts of 11.5 million jobs. Of those sacked last year, 4.8 million still have not found a new job.
Currently, state firms employ 75 million people, but State Economic and Trade Commission vice-director Chen Qingtai said that in order for state firms to operate "normally", many of them need to shed a third, preferably a half, of their work force.
There are currently 15 million unemployed in the cities and 130 million in the countryside, according to Beijing's estimates.
Asian fallout
Hong Kong-based newspapers quoted sources as saying that delegates were warned not to comment on the possible devaluation of the currency, which was widely expected in the wake of the Asian economic crash. They were pressured to toe the official line that China would weather well the Asian storm.
However, most key measures unveiled during the NPC were clearly designed to counter the fallout from Asia.
They included: state investment of US$1 trillion over three years in infrastructural, industrial and agricultural projects to create jobs and boost economic growth; abolition of 15 ministerial bodies, cutting the central state apparatus from 40 units to 29, along with the related massive sackings; lowering the mandatory reserves of 18% of state banks' deposits with the central bank to 13%, so that they can lend more; new government borrowing of 281 billion yuan (US$34 billion) to augment banks' lending capacity and finance the increased budget deficit of 46 billion yuan; and reintroduction of rebates on export tariffs.
The move to throw some of the CP ranks off the gravy train was highly unlikely up until a few months ago. Despite internal conflicts of interest, the CP relies on its ranks to rule.
But since the Asian economic crisis, foreign capital's prospects of making a profit in China were seriously undermined because the currency collapses of other Asian countries significantly increased the competitiveness of their exports. Foreign enterprises produce 40% of China's exports.
In addition, China relies on Asia for 40% of its export markets, and the purchasing power of many Asian neighbours has been drastically reduced.
Limited options
Beijing has little alternative but to trim the bureaucracy, State Council general secretary Luo Gan told the NPC. He expected resistance to these cuts and a possible threat to social stability, an observation shared by several regional chiefs.
A central question is how to spread the pain across the different interest groups and factions in the CP, considering the critical impact of cadre sackings on their power base.
The NPC provided no answer to this. But indicative of the intense frictions that are coming, Beijing still hasn't finalised which firms will be included in the list of 1000 "super" state firms qualifying for special state support. That super list was among Jiang's proudest announcements last September.
Insulating China from the Asian crisis is important to Beijing's rule, but viable measures require resources. The move to reduce the bureaucracy, to reduce its financial burden, is indicative of the CP's desperation and resource constraints. If the fallout from the Asian crisis is not properly addressed, China's economic activities could suffer and its already enormous and socially explosive unemployment could get worse.
Added problems might come from the likely decline in direct foreign investment, which central bank governor Dai Xianglong forecast to drop by 33% this year. Shorter term capital inflow through the stock markets is likely to be hit as well, due to deteriorating export opportunities and the slowing of the conversion of state firms to shareholding structures.
These new measures are not indications of the CP drifting away from the restoration of capitalist production. Cadres have long taken advantages of their political positions to back their business interests, often conducted indirectly or under the names of families and friends.
For many of them, forgoing or losing a political position could mean a fuller devotion to their private businesses, which would still be backed by their mates in the CP.
Some bureaucrats could still be undermined, especially those of lower ranks and in the provinces, which was why some regional chiefs hinted that they might boycott the sacking of cadres in practice. Mu Suixin, the new mayor of Shenyang, China's depressed key industrial city, made the highly provocative statement that he was in no hurry to implement the plan, not before the central government finished its bit.
There were growing signs that the massive lay-offs of workers are an increasing problem. Party chiefs of six provinces named unemployment as their single biggest headache.
Those who still hold a job nominally could be only marginally better off. Delegates from Heilongjiang province reported that there were frequent petitions and collective actions by workers to protest against long delays in wage payments. Other workers were reported to be threatened with the sack unless they forked out thousands of yuan to become shareholders of their firm.
Though technically the highest organ in China, the parliament continues to be led by the nose by the CP. It does not have the power, for example, even to name a candidate for the key government positions which it was asked to "approve". There is only one candidate for all top positions.
But there have been more dissenting votes in recent years since balloting became, at least technically, secret. More than 10% of the nearly 3000 delegates abstained or voted against Li Peng as NPC chairperson; 35% refused to approve Han Zhubin as chief prosecutor; 2% refused to support Zhu Rongji as premier.