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Special> 35 Years of Reform and Opening Up (1978-2013)> Cover Archive
UPDATED: December 26, 2013
Factory Directors' Worries
By Jin Qi

At a recent forum organized by the China Enterprise Management Association to discuss improvements to the economic environment, directors and managers called for the elimination of "the three pests" - officials who resold goods in short supply at high prices (the "official racketeers"), indiscriminate and arbitrary charges, and administrative interference with enterprises' decision-making powers. The directors said "official racketeering" poses the greatest threat. For example, the price of aluminium ingots and silicon steel plates has doubled since the beginning of this year, forcing enterprises dependent on these materials to limit production. At present, enterprises get about 40 percent of their capital goods through commercial channels, with 60 percent directly allocated according to the state plan.

According to the State Administration for Industry and Commerce, between 1987 and June 1988, investigations into 317 confirmed cases of speculation revealed 95 where capital goods had been resold, of which 58 involved departments handling the supply of materials and equipment. Abusing their powers, they purchased capital goods in short supply at a fair price and resold them at far higher rates for enormous profits, seriously disrupting the market order.

The State Council has ordered the banning of "official racketeering" and public opinion strongly demands punishment of those involved, calling for them to be treated like "rats crossing the street with everybody yelling kill them! Kill them!"

But why has it proved so difficult to handle cases that have been investigated and confirmed? A commentary published in Renmin Ribao (People's Daily) on September 16 analysed a case that occurred in Shangyu County, Zhejiang Province, pointing out that it could not be effectively dealt with because higher officials pleaded on behalf of the speculators. The commentary refuted the argument that speculation can develop production as the profits obtained do not line private pockets but go to work units.

It added that the Shangyu case was only a small one, and asked whether there would be greater difficulties in handling larger instances of speculation where high-ranking officials are given unprincipled protection by their superiors.

In recent years, with the development of economic reform and production, enterprises have increasingly accumulated funds. This has led to many requests for "financial aid" and "support" from local administrations. These charges, however, are often barely disguised extortion. For instance, one instrument factory emitted white smoke, but the department responsible for checking pollution asserted it was black. The factory had no choice but to give a banquet to treat these officials. Having been feasted, they changed their minds and declared the smoke was "white."

Enterprises also face many charges from grass-roots administrative organizations. It has been disclosed that a director of the Balizhuang neighbourhood committee in Beijing's Chaoyang District openly reprimanded factory directors: "As long as your factories are located on our street, no matter how large they are, we have our own way to rule over them."

Clearly the stipulations of 1984 that government administrations should not interfere with enterprises' decision-making powers (which were written into the Enterprise Law last year) have not been fully implemented. As reform has granted enterprises more rights, some administrative bureaus have attempted to retain their power by forming "administrative companies" and then establishing "operational companies."

By and large, they have been successful, for as the signs in front of their buildings change over and over again, their power to interfere with enterprises' autonomy has not weakened. The argument used to defend these actions runs simply that a socialist enterprise cannot be without its superior.

There are also complaints that state-owned companies abuse their privileged buying rights. A director of a cotton yarn factory has said that under the system where the state had monopoly on the purchase and marketing of capital goods, individual firms just passed all their goods onto the state-owned companies. Now, however, these companies only take products enjoying a ready market - they will do nothing about other products.

Invigorating enterprises has always been the core and hope of China's economic reform. Therefore, the problems uppermost in the minds of factory directors and managers are major issues that must be tackled to consolidate the reform programme at its present crucial stage. This means: In accordance with the requirements for developing a socialist commodity economy, it is simultaneously necessary to adjust nationwide power structures rationally, establish an appropriate economic order, and ensure the existence of effective regulatory mechanisms. This involves both economic and political restructuring and truly effective legal support - where "everyone is equal before the law." If this cannot be guaranteed, then illegal encroachments upon the powers and interests of the state, the public, enterprises, and so on cannot be checked.

In October, a nationwide campaign will be launched to combat tax evasion, financial irregularities and speculatory price hikes. It will concentrate on violations of discipline and the law by large enterprises and economic management departments. It goes without saying that the public hope this will effectively resolve problems and bring to justice those people who have taken advantage of reform to abuse their power for personal gain.

(No. 40, 1988)

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