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137 21 Let Enterprises Swim by Themselves in the Markets1 July 11, 1988 We must carefully consider how to invigorate the 1,700-plus large and medium enterprises in Shanghai. At the moment, people are trying to create very tight-knit enterprise groups, but to tell you the truth, no one has succeeded in this approach. If you form a group of large numbers of people, it will collect money and materials [from its subsidiaries] and make enterprises even less dynamic. If you put several dozen enterprises together, will you have the ability to energize them? What’s more, colleagues who have retired or who are about to retire are often placed in charge of these enterprise groups, and then a lot of companies are created to oversee them. These individuals leave office in one place and take office in another—you can’t energize [enterprises] this way. We should train a group of factory directors who are capable and in their prime, let them take charge and energize their enterprises, then let them vigorously enter international and domestic markets. Currently enterprises give a percentage of their money to the conglomerate, which then distributes funds and materials—is this an efficient method? It’s nothing more than the old way of doing things! That’s why, as I see it, we must now revise the original rules governing enterprise groups, because those rules don’t necessarily meet the needs of the new situation. As just mentioned, Shanghai has a very high concentration of large and medium enterprises, many of them quite large: 17 units each pay a profits tax of over RMB 100 million. You still want to create conglomerates out of such large enterprises? How great are your capabilities? Can you manage them? Wouldn’t it be better to let them act on their own? Which of their problems can be solved through administrative means? The Shanghai Electronic Computer Factory has said that it could develop even faster without such a group. As for this talk about horizontal links, go through the markets! Everyone can form links through the markets—this isn’t something only a conglomerate 1. Zhu Rongji made these remarks at the 10th mayor’s administrative meeting of the Shanghai municipal government. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 137 12/26/17 12:00 PM 138 Let Enterprises Swim by Themselves in the Markets can do. As soon as the Shanghai Hengshan Group Co. Ltd. was recently formed, it immediately asked to increase staff. I said, why do you need to add people? These hotels are bursting with energy and are operating very well. If you insist on managing them through a large conglomerate, these hotels will lose their motivation—what good would come of that? It will be enough if you just form a very streamlined small team to supervise operations at the macro level. What is the point of setting up this division and that division? The hotels below then would have no motivation. And if you were to run them, you wouldn’t be able to run then well. There’s currently a fad for forming corporate groups—it’s become a fever. One group today, another one tomorrow. To tell the truth, this is just adding some people who’ll need to be fed. We have 37,000 companies in the country —since when did we need so many? The key now is to energize the large and medium enterprises, including trying out methods introduced by Lanxi in Zhejiang Province. Lü Dong2 recently made a special study trip to Lanxi, which has four state-owned enterprises (SOEs) that are completely decontrolled in six operational aspects. The government is no longer involved—the enterprises no longer have any “affiliations” and manage operations entirely on their own. When I later telephoned Lü Dong about his study, he said this is one way to liberate enterprises: once you devolve powers, it becomes much easier to solve the problems of large and medium enterprises. I think we need to try this method, and I’ve obtained the documentation. Now that the “father” has left the scene, a “grandfather” has arrived. He is called an “economic entity” who in fact manages even more rigidly. That’s why in several talks I’ve repeatedly emphasized that Shanghai shouldn’t be in a rush to form groups just now. We should first ease up and not increase the burden on enterprises; we should devolve powers to them and let...


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