SUN WUKONG
Regions won't dance to Beijing's tune
By Wu Zhong, China Editor
HONG KONG - Senior officials from the Chinese Communist Party may often have
differing views on major issues, but it is rare for them to openly talk about
their differences, and even rarer for regional officials to make public
comments in open defiance of the central party line.
This is why comments this month by Wang Yang, the party chief of Guangdong
province in south China, have made shockwaves. He rebutted Premier Wen Jiabao's
instructions on how to help small- and medium-sized enterprises (SMEs) overcome
difficulties as part of Beijing's efforts to ride out the global financial
crisis.
Wang Yang's outburst immediately sparked speculation about
possible power struggles in the party, but it is also a good, albeit rare,
example of the regional realities in China. Provinces have their own concerns
and interests quite different from those at the power center, and for a
provincial leader it is often more important to safeguard local interests than
to tow Beijing's line.
The economic success of Guangdong, which is now China's richest province in
terms of gross domestic product (GDP), has been in part due to the mushrooming
of SMEs in the past 30 years. Most of the SMEs are Hong Kong- and
Taiwan-invested labor-intensive, export-oriented manufacturers on the Pearl
River Delta.
In the past couple of years, the business environment in the Pearl River Delta
has become increasingly difficult for SMEs, due to the steady appreciation of
the Chinese currency; a sharp increase of production and labor costs;
government policy orientations in favor of environmental protection and
safeguarding labor interests; and scandals involving the safety and quality of
Chinese-made products.
Thousands of the SMEs in the region had gone out of business, even before China
began to feel the pinch of the global financial crisis.
The crisis has made it harder for even the larger SMEs on the Pearl River Delta
to survive. In October alone, several factories in the delta run by Hong
Kong-listed companies went bankrupt. For example, giant toy maker Smart Union
Group closed its two factories in Dongguan - a delta city - and home appliance
maker Bailingda Industrial closed its production line in Shenzhen, leaving
thousands of migrant workers jobless.
Even the Hong Kong government became concerned and appealed to the central
government for intervention to help Hong Kong-invested businesses in the Pearl
River Delta in particular ride out the financial crisis, to help the
semi-autonomous region stabilize its economy.
Yet Wang Yang, who was elected as a politburo member in October 2007 and
appointed as Guangdong party chief at the beginning of this year, seems happy
to see the demise of such labor-intensive SMEs. During an inspection trip to
Zhanjiang city in western Guangdong on November 12, Wang said the Guangdong
authorities would make no effort to save these "backward" enterprises.
"What are these enterprises which have gone under? Are any of them large
enterprises with a big name? No! My judgment is that, generally speaking, these
bankrupt enterprises belong to a backward productive force, which is bound to
be eliminated by the market."
No sooner had Wang said this than Premier Wen, Wang's one-time mentor, publicly
demanded Guangdong take "heavy-handed" measures to help SMEs. While making an
inspection tour in Guangdong on November 14, Wen said SMEs played a decisive
role in China's economic and social development. SMEs are very important in
boosting economic growth, in increasing fiscal income and employment and
safeguarding social stability, said Wen, with Wang seen on TV footage
enthusiastically nodding and saying "yes, yes!"
But a week later, on the sidelines of a conference, Wang insisted again that
Guangdong would not try to save its "backward productive forces", and would
continue with its own policy to upgrade its economy.
Wang justified his controversial comments with a quote from 13th-century
Italian poet Dante Alighieri, "In the past 30 years of reform and opening up,
Guangdong has 'followed its own course and let people talk'. Now the same can
be said. We'll follow our own course and let people talk. Whatever others say,
we'll adhere to our set policy of [upgrading Guangdong's economy]."
It is not clear whether Wen is included among the "others" mentioned by Wang.
Guangdong's economic policy was formalized by Wang this year. It includes plans
to move the low-tech, labor-intensive manufacturing industries in the Pearl
River Delta to relatively poorer western and northern Guangdong or even out of
the province. By doing this, the delta could concentrate on high value-added,
high-tech and services industries. In Wang's own words, this is "to empty the
bird cage for new birds to settle down".
To be fair, this policy is necessary if Guangdong's development is to be
sustainable, and it will also narrow the wealth gap among different areas of
the province. In normal times, its implementation may not have aroused so much
controversy, and may even have been welcomed. But to enforce such a policy amid
the current financial crisis certainly could cause serious problems as the
restructuring plan will take time.
The urgent problem for the labor-intensive SMEs in the delta is their struggle
for survival. If not helped, they may not live long enough for the plan's
implementation. Yet Wang has said the financial crisis is the perfect time for
Guangdong to accomplish its plans, "Without the current serious economic
situation, it would be much more difficult for Guangdong to accomplish the
economic restructuring."
Guangdong's persistence poses a big problem for the central government. To
offset the negative impact of the global financial crisis, Beijing announced a
4 trillion yuan (US$586 billion) stimulus package aimed at keeping annual GDP
growth above 9%, to keep unemployment at a "safe level".
It has been estimated that up to 20 million migrant workers are in Guangdong,
most of whom work in the Pearl River Delta. Many of them will surely lose their
jobs if Guangdong lets "backward" enterprises die. Having worked in cities for
a long time, most of the rural workers will have no land to farm when they
return to their home villages. If not well taken care of, they could pose a
threat to social stability.
Guangdong and the Yangtze River Delta, led by Shanghai, are considered two
crucial engines of the economy, and a massive closure of SMEs, a major driving
force in Guangdong's economy, will inevitably slow down Guangdong's growth.
This would in turn would jeopardize Beijing's efforts to boost the national
economy.
Given Guangdong's economic muscle today, it may be able to ride out a
significant economic slowdown, but the country as a whole cannot.
This is why Wen is so concerned about the survival of SMEs. After the Guangdong
trip, he made a tour to Zhejiang province on the Yangtze River Delta last week
to demand local authorities to help their privately-run SMEs.
Personally, Wang may see his success in Guangdong as crucial to his political
future. The outspoken Wang, 53, is widely seen as a rising political star. His
appointment to such an important province as Guangdong is seen as paving the
way for moving further up the hierarchical ladder. But to do this he must also
demonstrate his capability to lead by achieving something in Guangdong, and
this may explain his persistence, made even at the risk of offending Wen - who
will anyway retire in four years.
At this point, it may be too far-fetched to explain the controversy as a
manifestation of intensified power struggles in the party - it is more likely a
good example of the realities in today's China where it is an open secret that
regional authorities will often circumvent policies from Beijing deemed not to
be in the region's interests.
What is intriguing though is that Wang has dared to make the different policy
approaches between Guangdong and the power center public, particularly in the
face of the global financial crisis. It could be a unique case of Wang's
outspokenness, or possibly even a precedent that the Communist Party will now
allow different opinions to be publicly expressed.
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