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China Perspectives
China"s New Intelligentsia (2)
17/10/2008 12:43:59    Author : Mark Leonard    Browse : 791

The new right was at the heart of China"s economic reforms in the 1980s and 1990s. Zhang Weiying has a favourite allegory to explain these reforms. He tells a story about a village that relied on horses to conduct its chores. Over time, the village elders realised that the neighbouring village, which relied on zebras, was doing better. So after years of hailing the virtues of the horse, they decided to embrace the zebra. The only obstacle was converting the villagers who had been brainwashed over decades into worshipping the horse. The elders developed an ingenious plan. Every night, while the villagers slept, they painted black stripes on the white horses. When the villagers awoke the leaders reassured them that the animals were not really zebras, just the same old horses adorned with a few harmless stripes. After a long interval the village leaders began to replace the painted horses with real zebras. These prodigious animals transformed the village"s fortunes, increasing productivity and creating wealth all around. Only many years later¡ªlong after all the horses had been replaced with zebras and the village had benefited from many years of prosperity¡ªdid the elders summon the citizenry to proclaim that their community was a village of zebras, and that zebras were good and horses bad.

Zhang Weiying"s story is one way of understanding his theory of "dual-track pricing," first put forward in 1984. He argued that "dual-track pricing" would allow the government to move from an economy where prices were set by officials to one where they were set by the market, without having to publicly abandon its commitment to socialism or run into the opposition of all those with a vested interest in central planning. Under this approach, some goods and services continued to be sold at state-controlled prices while others were sold at market prices. Over time, the proportion of goods sold at market prices was steadily increased until by the early 1990s, almost all products were sold at market prices. The "dual-track" approach embodies the combination of pragmatism and incrementalism that has allowed China"s reformers to work around obstacles rather than confront them.

The most famous village of zebras was Shenzhen. At the end of the 1970s, Shenzhen was an unremarkable fishing village, providing a meagre living for its few thousand inhabitants. But over the next three decades, it became an emblem of the Chinese capitalism that Zhang Weiying and his colleagues were building. Because of its proximity to Hong Kong, Deng Xiaoping chose Shenzhen in 1979 as the first "special economic zone," offering its leaders tax breaks, freedom from regulation and a licence to pioneer new market ideas. The architects of reform in Shenzhen wanted to build high-tech plants that could mass-produce value-added goods for sale in the west. Such experimental zones were financed by drawing on the country"s huge savings and the revenues from exports. The coastal regions sucked in a vast number of workers from the countryside, which held down urban wages. And the whole system was laissez-faire¡ªallowing wealth to trickle down from the rich to the poor organically rather than consciously redistributing it. Deng Xiaoping pointedly declared that "some must get rich first," arguing that the different regions should "eat in separate kitchens" rather than putting their resources into a "common pot." As a result, the reformers of the eastern provinces were allowed to cut free from the impoverished inland areas and steam ahead.

But life today is getting tougher for the economists behind this system, like Zhang Weiying. After 30 years of having the best of the argument with ideas imported from the west, China has turned against the new right. Opinion polls show that they are the least popular group in China. Public disquiet is growing over the costs of reform, with protests by laid-off workers and concern over illegal demolitions and unpaid wages. And the ideas of the market are being challenged by a new left, which advocates a gentler form of capitalism. A battle of ideas pits the state against market; coasts against inland provinces; towns against countryside; rich against poor.

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