China’s New Premier Zhu Lays Out Economic Plans

In his first public appearance as China’s new premier, economic reformer Zhu Rongji today outlined a program for the country to avoid Asia’s ongoing financial crisis by slashing government waste, increasing spending on infrastructure projects and developing a private housing market.

“China faces formidable challenges due to financial problems in Southeast Asia,” Zhu said during a lively news conference at the Great Hall of the People. The best way out of the crisis, he said, is to stimulate the economy by increasing domestic demand.

In free-ranging comments punctuated by self-deprecating humor, Zhu pledged to complete his ambitious plans for government reforms--including cutting the country’s hulking bureaucracy in half, reorganizing the banking system and restructuring troubled state-owned industries--within three years.

“A lot of money has been squandered,” Zhu said, because of an oversized government payroll, “indiscriminate and duplicative” construction projects and an inefficient tax system.

“What China needs now is restructuring of its economy through infrastructure projects, development of its vast rural market and developing a housing market,” Zhu said. Under his program, Zhu said, China should be able to maintain 8% annual growth while keeping annual inflation below 3%.

The new head of government said that the much publicized woes of the country’s state enterprises have been exaggerated in the foreign press. Of the country’s 500 largest industrial firms, he said, only 50 are operating at a loss.

In perhaps his boldest pronouncement, Zhu said his new Cabinet, heavily stocked with technocrats and trained economists, will “stop all allocation of welfare housing. All housing will be commercialized.”

If realized, the move could have enormous impact in a country where most people still live in apartments supplied and subsidized by their government work units.

Sounding at times like a disciple of the late British economist John Maynard Keynes, Zhu said China can spend its way out of the Asian economic crisis through well-planned infrastructure projects focusing on highways, railways, water projects and environmental facilities. “We need to increase the demand of the domestic economy,” he said.

At the same time, he was severely critical of government mismanagement that he said has “eaten up” all the money designated for a pet program of President Jiang Zemin to develop science and education. “Most of that money has gone to paying the salaries of functionaries,” he said.

Zhu, 69, is only the fifth premier since the People’s Republic of China was founded in 1949. He replaces Li Peng, also 69, who this week was named chairman of the national legislature, the National People’s Congress. However, in a power arrangement that could cause Zhu problems down the line, Li will retain his No. 2 ranking in the Communist Party hierarchy, one notch above Zhu.

But Li’s 10-year tenure as head of government was tainted by his hard-line role during the 1989 democracy movement in Beijing’s Tiananmen Square, when he denounced peaceful student demonstrators as “counterrevolutionary rioters” and declared martial law in the capital.

As mayor of Shanghai in 1989, by contrast, Zhu deftly avoided bloodshed in the country’s largest city, promising students there that “history will show who was right or wrong” after hundreds, perhaps thousands, of civilians were killed by army troops in Beijing.

At today’s news conference, Zhu dodged a question about Tiananmen, saying that the “whole party is of one mind on that issue.”