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355 63 Technical Upgrading at Enterprises Must Follow a New Path1 August 11, 1989 The country’s current large-scale technical upgrading of enterprises started after the Third Plenary Session of the 11th Party Central Committee. At that time, Deng Xiaoping pointed out that we had to use foreign capital, import technology, and rebuild small and medium enterprises by the thousands or tens of thousands. Before this, the State Economic Commission had also focused on technology upgrading, mainly through “exploiting potential, innovation, and remaking,” but not on a large scale. Deng Xiaoping’s directive raised our understanding of the technical upgrading of existing enterprises to a new level. In January 1982, the State Council issued its “Decision on Technical Upgrading of Existing Enterprises in a Focused and Orderly Way.” It adopted a series of practical measures and greatly strengthened technical upgrading. Every year since 1983, the State Economic Commission and the People’s Bank of China have jointly convened a national working conference on the progress of technical upgrading at enterprises and put upgrading projects and funding in place—which brought some improvement in upgrading during those years. A very important measure also adopted at the time was the use of pilot programs for expanding authority to import technology. These pilot programs were conducted mainly in Tianjin and Shanghai. For three consecutive years, Shanghai was given US$300 million annually for technology imports. We can now see that this played a significant role—what little momentum Shanghai’s industries have now came mainly from spending US$1 billion to import technology and upgrade enterprises during those three years. At present, 60% of newly added value comes from technical upgrades—this achievement should be fully recognized. As an old industrial city, Shanghai must in the future continue to give very high priority to upgrading existing enterprises. In reviewing our experiences of a decade of upgrading, we must also recognize the new issues surrounding the current upgrading—which are far greater 1. This is a speech Zhu Rongji delivered at a symposium to review a decade of technical upgrading in Shanghai. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 355 12/26/17 12:01 PM 356 Technical Upgrading at Enterprises Must Follow a New Path than those of the past. First of all, supplies of energy and raw materials are getting tighter and tighter. The proportion allocated by the system is decreasing year by year, profits are declining, and funding for technical upgrading is increasingly hard to come by. Second, given the current emphasis on rectification , infrastructure construction is being scaled down, and the extent of technical upgrading must also be reduced. Third, forex has become especially difficult to acquire. We can no longer obtain cheap forex and matching low-interest renminbi loans for importing technology. What should we do in the face of these difficulties? We must exploit our own potential. First of all, we must further improve our understanding of technical upgrading. It’s not as if enterprises are penniless right now, but they must overcome difficulties and eke out some money to spend on production and technical upgrades. Although I’m in favor of the industrial sector using some money to build public housing and improve living conditions for its employees, this is costing as much as RMB 2.2 billion this year, which seems rather high. Even when you’re doing good, you must work within your means. Another concern is that enterprises are paying too much in bonuses. They don’t care whether their production and operations are good or bad; they just pay out wages and bonuses as usual, and what’s more, these are increasing at 20–30% annually. At this rate, they’ll quickly run out of money. Henceforth, when prices are stable, wages and bonuses should basically remain stable or increase slightly. Bonus payments should play a role in rewarding diligence or penalizing laziness. Profitable enterprises may pay somewhat more in bonuses, whereas loss-making ones should pay smaller bonuses or not pay them at all. Factory directors must have strategic vision on this matter and keep bonuses at appropriate levels. Furthermore, directors must lead by example and not be so keen on decorating their homes, getting newer cars, traveling abroad, or developing “horizontal linkages.” They won’t be able to do a good job of technical upgrading and improving enterprise performance unless they can walk straight, sit firm, maintain a spirit of hard struggle, and get in the trenches with the workers. Bureau...


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