Chinese Province Meets the 20th Century : Canton Area Booms, Typifying Country’s Liberalization Trend

Motorcycles stacked with caged chickens for market, tourist vans, tractors, trucks, peasants’ bicycles and officials’ cars jam the highway stretching south and east from this booming commercial city.

The jumble of traffic continues across 100 miles of the countryside in the Pearl River delta area, reflecting the new prosperity that cash crops, rural industries and foreign investment have brought to a region that until recently was mired in poverty.

In 1979, Canton, the capital of Guangdong province, which includes the delta, was still a sleepy and unsophisticated town where groups of tourists drew gawking crowds. Now its streets bustle with activity, and it is the place in China where citizens and visitors from abroad can mix most freely.

For these past eight years, partly on instructions from Beijing and partly through its own initiative, Guangdong has been in the forefront of China’s new policies of economic reform and openness to the outside world.

The results have been dramatic and have important implications for China’s future.

As conservative and reformist leaders in Beijing jockey for position in preparation for a key Communist Party congress to be held in October, Guangdong’s experience provides China’s economic reformers with an important weapon in their battle for more market-oriented change.

The province’s record “is a force pushing for the reforms to go further and deeper,” said Gong Zhijin, director of the economic news department of the Yangcheng Evening News, a major Canton daily.

Guangdong exported $4.3 billion of goods last year, up 41% over the previous year, surpassing Shanghai to become the No. 1 exporter among all China’s provinces and cities with provincial status.

During the first half of 1987, while a conservative nationwide ideological campaign against “bourgeois liberalization” raised fears that China’s economic reforms might be crippled, Guangdong boosted its exports 56% over the same period of 1986.

One symbol of the province’s international economic success is that it is pushing its products at trade talks this week in New York and at an exports exhibition in Boston at the end of the month. Guangdong’s Commission of Foreign Economic Relations and Trade took out a full-page advertisement in the New York Times last week to promote the two events.

The new prosperity has penetrated much of the countryside, where many peasants are branching out into small businesses. Former peasants have established 968,000 rural enterprises employing 5 million people, according to the official New China News Agency. The province’s total population is 63.5 million.

In June, Lin Ruo, head of the Communist Party in Guangdong, wrote an article in People’s Daily, the Communist Party newspaper, praising the reforms and attacking orthodox critics who “are suspicious that our reforms constitute engaging in capitalism.”

“Some comrades still cannot see the facts that the economy has been enlivened and productive forces have been developed, and they still question whether reform is right or wrong,” Lin wrote.

In Guangdong, Lin said, “continuing with reform and the open policy has become the desire and demand of the masses of people and cadres and cannot be reversed.”

Seeks More Changes

Chao Zhenwei, secretary general of the Canton city government, said in a recent interview that his city’s experience “proves that the . . . policy of opening to the outside world, reform and invigoration of the economy is correct.”

“The experience in Canton and Guangdong is very significant to the hinterland,” Chao said.

The province continues to press forward with additional changes.

City officials in Shenzhen, a “special economic zone” that borders the British colony of Hong Kong, announced plans late last month for new market-oriented reforms in state-owned enterprises, land use, housing and insurance.

Some state enterprises “will be transformed into share-control companies in which the state is the principal shareholder,” the New China News Agency reported. Some land will be rented out to individuals or work units through public bidding, and housing rents will be raised with “the ultimate aim” of “the commercialization of residential dwellings,” according to the agency.

“Shenzhen Vice Mayor Zhou Xiwu said that, in completing these reforms, Shenzhen will play its role as ‘a testing ground’ for the urban economic reform of the whole country,” the agency reported.

Nora Sun, the commercial consul at the U.S. consulate in Canton, commented recently that China still needs to “loosen the shackles of a centrally directed country and, with all the layers of bureaucrats ingrained in the system, it’s not easy.”

“They can’t just jump into a total market system from a centrally planned system,” she said. “But Guangdong is in the lead. . . . And with Guangdong bringing in all this precious foreign exchange, it’s very difficult for the central government to say, ‘You’re doing something wrong.’ ”

Took Advantage of Strengths

Gong, the Canton journalist, listed four factors contributing to the province’s development:

“Guangdong’s natural conditions are good; its geographical location is convenient; overseas Chinese have their roots here, and the government has given it special policies,” Gong said. “This has created exceptionally favorable conditions for economic development. It should be able to go at the front of the whole country.”

Jian Guanchou, the ebullient vice mayor of Zhongshan city in the delta, conceded that Guangdong has some special advantages but said this does not detract from the significance of what it has done.

“We have close relations with overseas Chinese and with Hong Kong,” he said. “But every area has its own strong points. We don’t have natural resources. Other areas do. Why have we developed faster? Because we’ve taken advantage of our strong points. We have gone faster and better than others because we’ve carried out the policies of openness and reform more resolutely than other areas.”

In Zhongshan city, which has a population of about 1 million but is 80% rural, per-capita annual income has grown from 260 yuan in 1978 (about $155 at the time) to 1,170 yuan last year (then about $340), Jian said.

Inflation in China over this period was about 40%, according to Chinese statistics, so the income growth in Zhongshan represents roughly a tripling of purchasing power. The province’s per-capita income is also about double the nationwide average for last year.

Development in Guangdong has been spurred in part by foreign investment, often in the form of joint ventures with ethnic Chinese business people from Hong Kong or overseas whose ancestral roots are in the province. The vast majority of people in Hong Kong and two-thirds of the overseas Chinese scattered throughout the world have their roots in Guangdong.

Bridge for Modernization

“These people have done well abroad,” said Sun, the U.S. commercial consul, who is the granddaughter of China’s national hero Sun Yat-sen, leader of the 1911 revolution against the Qing Dynasty. “They all somehow have a love for their ancestral homeland, and they’re happy to see it opening up. Millions of dollars have poured in from abroad.”

About half of China’s 9,000 domestic-foreign joint ventures are located in Guangdong, as are three of the country’s four special economic zones, which were set up in 1979 to encourage foreign investment and trade.

“Guangdong has been a bridge for the modernization of China’s technology,” Guangdong Vice Governor Yu Fei said in a recent interview with the official magazine China Reconstructs. “The state has been able to make use of Guangdong’s advantages to absorb foreign investment and advanced technology, and to gain management experience, all of which can then be transferred to the interior regions.”

While China is especially interested in importing high technology, it also values ordinary joint ventures. Typical of these is Guangmei Foods, which was formed by Beatrice Cos. of Chicago, Canton Foodstuffs Industry and China International Trust & Investment.

Discussions to establish Guangmei Foods began in 1980, when China was just beginning to launch joint ventures, Hector Veloso, president and general manager, said recently.

“When everybody else was kind of tentative, people down here were quite receptive to the idea of a joint venture,” Veloso said. He added that Guangmei, which has specialized in ice cream, soft drinks and snack foods, competes directly with a Chinese firm, Asia Softdrinks, run by Canton’s light industry bureau.

Learning Foreign Technology

“We’re No. 2,” Veloso said. “It’s a no-holds-barred competition. We don’t get our wrists slapped for outperforming Asia in certain markets or taking some business away from Asia. In that sense, there’s some enlightenment. They know Asia can sharpen their skills by competing.”

Li Xianzhong, Guangmei’s manager for administrative affairs, said, “the biggest advantage for the Chinese side” in the joint venture “is to absorb foreign capital, technology and advanced management.

“I myself, working in this joint venture, have learned a lot of new things. We also receive a lot of delegations from enterprises in other areas of China, and we introduce our experiences to them. Our manager (Veloso) is a good teacher. He shows us how to use computers, how to improve hygiene, how to have product quality control.”

Chao, the Canton official, said foreign investment “has played a very important role in promoting development.” In Canton, 75% of this investment has come from Hong Kong, from the nearby Portuguese colony of Macao or from overseas Chinese, he said.

Joint ventures, however, account for only about 3% of the city’s industrial production, Chao added. State-owned factories produce 65% of all goods, and collective factories nearly 30%, he said.

Management reforms aimed at increasing production incentives for these enterprises thus have been central to the city’s economic growth, he said.

The reforms began with introduction of a worker bonus system and have reached the point where 60% of the city’s factories work under a “factory director responsibility system” by which financial rewards to management and workers are directly linked to profitability, he said.

Influx of Rural Workers

Small private businesses, which were banned before the economic reforms began, now handle 14% of the retail sales in the city, Chao added.

“So far there are 110,000 registered private businesses and over 160,000 people engaged in this area,” he said. “These private businesses play a very important role in supplementing the state economy, promoting commodity circulation, making people’s daily lives more convenient and creating opportunities for employment.”

The registered population of the Canton municipality, which extends far into the countryside, is 7.2 million, of which 2.6 million live in the city itself. In addition, Chao said, there is a floating population of about 800,000 in the urban area, including many temporary laborers as well as tourists and other visitors.

The New China News Agency reported last December that, during the previous two years, 200,000 rural laborers poured into Canton to fill labor shortages in “construction, textile and other trades that call for hard work but (where) the working conditions are comparatively poor.”

Flexible residential regulations, the proliferation of private businesses, the large number of visitors from Hong Kong and overseas, the great distance from Beijing and the traditional open-mindedness of the Cantonese people combine to give Guangdong residents greater social freedom in their personal lives than people generally have in other parts of China.

In most of China, ordinary citizens face restricted access to first-class hotels and “friendship stores” aimed at foreigners, but not in Canton and other parts of Guangdong.

“All stores, hotels and other businesses (in Canton) are open to everyone, Chinese or foreigner,” China Reconstructs reported with pride in an article accompanying its interview with Vice Governor Yu. “This policy is helping to erase old feudal concepts from people’s minds and replacing these ideas with new attitudes about good service, efficiency and honest competition.”

The relatively large degree of personal freedom in Guangdong and its proximity to capitalist Hong Kong have, however, brought problems that sharpen conservative critics’ barbs.

Exclude Bad Influences

The province has experienced a resurgence of prostitution exceeding any other place in China. There also has been trouble with pornography, black-market transactions, bribery and other forms of corruption.

But Guangdong officials say these problems are under control.

“There are some evil phenomena handed down from the old society, and some capitalist influences come from opening to the outside world,” Chao said. “But you can’t say these are necessary results of opening to the outside. Our principle is to introduce advantageous things from abroad but exclude bad influences.”

Although the campaign against bourgeois liberalization led to the closure of several small free-thinking publications, it has had no visible effect on the province’s economy.

“Opposing bourgeois liberalization is confined to the intraparty and ideological areas,” Chao said. “We oppose those who go against the Communist Party’s leadership, and oppose ideology which goes against socialism. . . . There is no contradiction. It is to ensure a stable political situation under which we can smoothly promote economic development.”

Guangdong officials expressing such views believe that they are in tune with the dominant sentiment in Beijing as the country’s leaders prepare for October’s party congress.

“This spring some people were worried,” admitted Jian, the Zhongshan vice mayor, “but then the state council (China’s Cabinet) and Deng Xiaoping (the country’s top leader) repeatedly stressed that the open policy won’t change. Deng Xiaoping said we have to quicken the pace of reform.”

The party congress “will unquestionably push forward the policy of openness and reform,” Jian said. “We feel relieved. We are completely confident of this.”