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44 6 The Key to Controlling Redundant Construction Lies with the Banks1 October 29, 1991 Today everyone is trying to find out how our economic efforts can get on track in restructuring and improving results. It isn’t that easy to truly get on track. The current economic situation is good, but there are worrisome problems . The burden on enterprises is very heavy. Inventories exceed normal levels by RMB 70 billion to 80 billion, on which the enterprises have to pay the banks RMB 7 billion to 8 billion in interest, and on top of that they have to pay interest on RMB 300 billion in triangular debt. Enterprises are heavily burdened and the scope of loss-making is so broad that if this problem isn’t resolved, we won’t be able to get onto the track of improved efficiency. Looking at it now, we can see that a very important cause of this problem is redundant construction and redundant production, which have mounted over the years, and which remain unaddressed. This problem has built up over decades, not just over 10 years, and it’s related to macroeconomic controls. Although there have been achievements in structural adjustments, their impact isn’t very obvious. Infrastructure is still very backward; construction in power generation has risen, but the oil and coal industries are still far behind and falling farther and farther back. Despite major progress in the transportation infrastructure facilities of railways and highways, they’re still not suited to our economic development. If transportation construction could be speeded up a little, the economy would grow even better. That is to say, on the one hand there isn’t enough money now, yet on the other hand we’re spending a lot on redundant construction, mainly on an inordinate number of processing industries. I recently visited over a dozen provinces, and what I saw was a great push to build processing industries. What’s more, the enthusiasm for this is still growing , because processing industries make money. If there are no price adjustments , if the prices of cars and motorcycles aren’t lowered, with profits so high, the coastal cities as well as the inland ones will want to build them, and you won’t be able to control this no matter what. If we still fail to control redundant 1. These remarks were made by Zhu Rongji in response to a work report by the Industrial and Commercial Bank of China. The Key to Controlling Redundant Construction Lies with the Banks 45 construction, if we blindly develop processing industries, if each province builds its own—if we go on like this and can’t control the macroeconomy, then it will be impossible for the microeconomy to become sound and revitalized. We won’t be able to improve results, and money owed to banks can’t ever be repaid. That’s why we have to tackle this problem on two fronts: (1) we must strengthen macroeconomic controls and improve the external operating environment of enterprises , and (2) we must strengthen the internal management of enterprises. The State Council Production Office is preparing to convene a national working conference on enterprise technical improvement this December. This is a very important conference, one during a period that marks a turning point. Working from a foundation of prior work experience in enterprise technical improvement, we must overcome the shortcomings of the past and give full play to the strengths of our previous unified planning for technical remaking. We must also innovate, so that in three years or a little longer, we can truly adjust the excessive scale of processing industries. Of course this isn’t something that can be tackled by relying solely on technical remaking. At present there’s a one-third to one-half surplus for some of the main products of the processing capacities created by redundant construction. Without closing down, stopping, merging, and transferring some enterprises, counting on technical remaking alone won’t work. There are really only two issues in closing, stopping, merging, and transferring : the first is what happens to past debts, and the second is what happens to the staff? We must think of some policies to encourage closing, stopping, merging , and transferring. Recently, some veteran comrades have also said that “if a few don’t die, the many won’t live.” That means we should stop, close, merge, and transfer. Technical remaking is very important, and at the moment we really must support it in...


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