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48 7 Work Hard on the Internal Restructuring of Industries1 December 25, 1991 In accordance with the spirit of the Central Committee’s work meeting, the key to large and medium SOEs doing well is to focus on structural adjustment . Unless we adjust the structure, enterprises can’t be revitalized. I’m not talking about the structure of the entire national economy. We should recognize that our reforms and rectification have yielded great results—in particular, the ratios between agriculture and industry, and between agriculture, light industry , and heavy industry have greatly improved. I’m referring here to the internal structures of industries. Regarding these internal structures, we can all clearly see that infrastructure facilities are very poor, that railways, transportation, raw materials, energy, and mining aren’t able to meet our needs. The vast majority of products from processing industries exceed demand—I could draw up a very long list of them, and you’d be shocked by it. Yet there is continuing enthusiasm for redundant construction and redundant imports. The scary thing is that this problem remains unsolved; this is a historical lesson that must be seriously absorbed. The Problem of Overeagerness Another problem is overeagerness to do too much in too short a time. Such overeagerness leads to the loss of macroeconomic control, which causes structural imbalances and in turn an imbalance between supply and demand, which ultimately leads large and medium SOEs to lose money, thus creating a vicious circle. This problem should also attract a high degree of attention, and we should focus on resolving it. Some new“hot” projects have emerged now. For example, ethylene, polyester, polyester fibers, video recorders, and air conditioners are as hot as can be. China has over 2,600 auto factories, 550 of which assemble complete vehicles, while 1. The head office of Sinopec (China Petrochemical Corporation) convened the ninth meeting of its general managers and factory directors in Beijing on December 25–29, 1991. This is the main part of Zhu Rongji’s remarks at the opening ceremony. Work Hard on the Internal Restructuring of Industries 49 more than 2,000 produce parts and components. How can this go on? At the moment an Audi sells for RMB 270,000—what’s more you have to pay in cash. This is equal to US$50,000. This kind of car only sells for about US$10,000 in the international market. Can this kind of pricing be sustained for long in the domestic market? Why are so many cars being smuggled in now? Because smuggled cars are cheap. In the future, when our country resumes its status as a signatory of GATT [the General Agreement on Tariffs and Trade], such distorted prices will have to come down. You can’t undertake hot projects on the basis of such erroneous price information. Why is everyone so enthusiastic about ethylene and polyester? It’s because they can make money! Right now domestic oil prices are low. One ton of low-priced oil costs RMB 204, and a ton of highpriced oil upward of RMB 500. The international price equals more than RMB 800; moreover you need foreign exchange to buy it. Price reforms in our country must take place; we must move closer to international markets. Once we join GATT, cheaper foreign goods will be coming in—we can’t prevent them from coming in. In the future, we won’t be able to hold them off with customs duties, we won’t be able to hold them off with the approval process, and we won’t be able to hold them off with anything. The only way to hold them off will be through the competitiveness of our own products. If we go on the way we have, how can we be competitive? If your annual production is 115,000 tons of ethylene, how can you be competitive in the future? That’s why I had discussions with some comrades. Curbing Hot Projects In the spirit of the central government’s work meeting, we must curb these hot projects. How do we curb them? We should advocate joint investing and at the same time utilize macroeconomic control measures and strictly prohibit the starting up of hot projects. I’m afraid there aren’t too many other measures. Restricting Approvals. Restricting approvals isn’t very effective—you may refuse approvals, but they’ll still keep on building. Construction of an ethylene plant is supposed to go through the State Council...


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