A Country Changes Course

By James Kelly

SICHUAN

The sight startled visitors. There, in the center of Longzhao, a prospering village on the outskirts of the city of Chengdu, were the crumbling remains of a mud-brick house, its thatched roof scattered around it like straw dandruff. The hut, obviously abandoned, was surrounded by freshly constructed brick-and-concrete apartments. The eyesore was cleared away a few weeks ago, but why had it remained so long? "We kept it there so that people would remember what it was like five years ago," explains Ru Furong, director of Longzhao's garment factory. "We used it to educate the young as to how bad things used to be."

Adults like Ru do not need to be educated about what life in Sichuan was like before the province became a testing lab for Deng's agricultural reforms in the late 1970s. The country's most populous province, Sichuan is also its rice bowl, a jade-green paradise whose fertile valleys have fed China for centuries. Yet Mao Tse-tung's policies proved so debilitating that by 1976 Sichuan was importing food for the first time in memory. Deng had visited his home province the previous year and had been shocked by the destitution he found.

Today, Sichuan is a national showplace for the policies of its homegrown boy. In a field where dozens of commune workers once listlessly toiled, a family now energetically tills the land. Villages whose fortunes once depended entirely upon crops now boast small plants that make products such as shoes, radios and billiard balls. Free markets enliven every town's main street, attracting peddlers from all around who bring their wares by bicycle. (What can be tied up and carried on two wheels would have amazed even Ripley: live pigs and goats and 20-ft.-long bamboo poles.)

Much of the credit for Sichuan's transformation belongs to Premier Zhao Ziyang, a Deng protege who served as the party's provincial secretary from 1975 to 1980. Zhao helped introduce the contract-responsibility system, the bedrock of rural reforms, in 1977. Families and individuals were assigned plots in return for promising to meet harvest quotas. Surplus crops could be sold to the state at higher prices. Eventually, peasants were also allowed to sell the extra grain at market. The experiment worked so well that it was adopted as a national policy in late 1978.

Industrial development in Sichuan came next, spurred partly by the fact that most towns did not have enough farmland to go around. The 133 villagers in Longzhao, for example, realized they could not profitably divide the town's meager l 1/2 acres. Looking for alternatives, several women banded together to mend clothing. Today that circle has grown into a 110-woman collective housed in a new, two-story concrete building. The clatter of 60 gleaming sewing machines plays syncopated rhythm to the strains of Chinese music from the stereo and the gossipy talk of the workers. Liao Zhureng, 30, who manages the workshop, rarely needs to exhort the women since they are paid by the piece.

Life has grown sweeter in Longzhao. Women who once made $10 a month can now take home $30 to $40, while their husbands earn similar paychecks building houses and factories, thanks to the construction boom, or working at jobs once limited to large collectives, like raising pigs and ducks. Liao's husband builds houses. With their combined income of $670 a year, they were able to buy a three-room duplex for $1,700. The collective chipped in about $300, and the couple will pay the balance over several years. Liao does not begrudge the debt, since it symbolizes better times. "We used to live under a straw roof," she says. Her next big purchase: a color TV to replace the black-and-white set.

Yet along with free enterprise come the whims of the customer. The garment factory's profits, normally about $30,000 a year, fell to $15,000 in 1984, when the collective overestimated the demand for army-style clothes. "We have to be much more responsive to the market," admits Director Ru, Liao's boss. After the relative freedom of laboring in the fields, some workers have trouble adjusting to the tyranny of the assembly line. "You can't just go out to the well whenever you want, but I am getting used to it," says Liao.

The full scope of the reforms can best be glimpsed in Sichuan's cities, especially in Chongqing and in Chengdu, the province's capital. Under a huge white statue of Mao, disparagingly called the "Old Man" by many Chinese, downtown Chengdu is alive with hundreds of peddlers hawking fruit, vegetables, meat, fabrics, pots, wicker furniture, even Brooke Shields calendars. The bargaining would shame an Arab bazaar. "What do you mean selling them at this price?" a woman asks a man hawking tangerines. "They're full of defects." The vendor yells back, "Defects? What do you mean defects? You can't get tangerines at a better price." Meanwhile, local government agents patrol the street, collecting a 2% sales tax on what the sellers have, brought to the market, setting off more arguments about the value of the wares.

Entrepreneurs in Chengdu dabble in many things, but few are as versatile as Zhang Wu, 36, who owns a construction firm, an appliance store, a beauty shop and a nightclub. The son of an officer in Chiang Kai-shek's army, Zhang was branded a counterrevolutionary and he languished behind bars for a dozen years before being freed in 1977. Though Zhang is so wealthy he can afford a car, the ultimate luxury, he still feels ostracized. "People look down on me because I was in jail for political reasons," he says, perhaps ignoring the fact that some may suffer from what the Chinese call "red-eyed disease," or jealousy.

If Sichuan is plump with signs of progress, there are also constant reminders of how primitive the province remains. The countryside is redolent of night soil, or human excrement, a time-honored method of fertilization. Carts are still pulled by men in harness. If a village is lucky enough to have a telephone, it is usually the hand-crank variety.

Prosperity has brought a wave of petty crime to the cities, mostly muggings and pickpocketing. Even among the poor, however, there is the exhilarating sense that money can be made if only a little entrepreneurial gumption is shown. The latest craze in Chengdu, for example, is billiards. For about $40 anyone can buy the equipment to go into business. The tables are warped, the felt ripped and the balls chipped, but at 30 a game they offer cheap recreation and an easy chance to gamble. If no storefront is available, the tables are set up outside under streetlights. The mania is an apt symbol both of China's love for things Western and of the new freedom to make money in imaginative ways. One evening a young man watched as several players began a game on his table. Leaning on a cue stick and nodding at the scene, he observed wryly, "This is the Fifth Modernization." SHENZHEN

Imagine a city being built from scratch. Imagine a marshy coastal strip filled with paddy fields and fishing villages transformed into a megalopolis within a few short years. Shenzhen is just that place, a 126-sq.-mi. serpentine swath opposite Hong Kong that still has the raw look of a city halfway between blueprint and reality. Apartment high-rises border unpaved roads, while open trenches pose a hazard to the unwary. In the shadow of the International Trade Center, at 54 stories China's tallest building, are mounds of dirt coughed up by the excavation. Construction cranes scratch the sky, the air is full of dust, and the noise is worthy of a Grateful Dead concert.

Shenzhen has been China's boomtown since 1980, when Peking designated it a so-called Special Economic Zone. Though three other border cities in south China--Zhuhai, Shantou and Xiamen--also received unprecedented freedom to attract foreign money and technology, none have grown so dramatically as Shenzhen. Its population has swelled from 30,000 to about 380,000 since 1980. Shenzhen has signed more than 150 foreign-investment agreements, worth over $700 million. Some 400 businesses call Shenzhen home, with another 300 on the way. Wages average $79 a month, nearly double the rate in China's other cities.

No wonder the younger generation looks upon Shenzhen as the land of opportunity. Take Chen Li and her husband Wu Nianxing. Until a few months ago, Chen, 25, taught at a language institute and Wu, 27, worked as an industrial designer in the Hunan city of Changsha. Unhappy with their prospects, they began taking seriously stories about Shenzhen, about the wealth of jobs, high salaries and ample living quarters. Wu traveled 450 miles by train to Shenzhen and quickly found a job in an electronics plant. His wife, fluent in English, was hired by the same company as an interpreter. This summer the pair moved to Shenzhen and a life of few regrets. "Prices are a bit higher, but so are our salaries," Chen Li says. "We have a comfortable flat and enjoy our jobs. We like it here."

For China's leaders, however, the instant city has not been an instant success. Shenzhen is still booming, to be sure, but not in the direction envisioned by Peking. Last summer, Deng Xiaoping expressed caution about the city's future. Instead of proclaiming Shenzhen's progress, as he usually did, Deng described the city as an "experiment" that "could fail." Said he: "We hope it will succeed. But if it fails, we can draw lessons from it."

The lessons are already evident. The zone's low tax rates were designed to lure U.S. and Japanese firms as well as Hong Kong and Overseas Chinese investors, but about 90% of the capital has come from businessmen in Hong Kong and Macao. A further disappointment is that instead of channeling the funds into new industries, foreign businessmen have spent most of their money constructing apartment and office buildings, resort hotels and recreation parks.

It has gradually dawned on Chinese officials that their Hong Kong cousins, preparing for the day in 1997 when Britain returns the colony to China, viewed Shenzhen as a sort of adjunct retirement home and playland. Many have bought apartments for their mainland relatives, who then obtain permission from Chinese authorities to move there. Some 270,000 people from Hong Kong stream in every week to visit and sight-see. Two of the most popular stops: Sea World and Honey Lake amusement park, which features a monorail, Ferris wheel and double-loop roller coaster. In 1984, tourism and retail sales accounted for one-third of the zone's $666 million revenues. Even the industry that has sprung up is unimpressive. Instead of attracting the high-tech companies that Peking hoped for, Shenzhen produces mostly clothes, plastics and assembly-line electronic wares. Observes a Hong Kong official: "What [Hong Kong businessmen] have created is more like a Disneyland than a seedbed for the technological development of China."

The economic freedoms allowed in Shenzhen have turned it into a go-go city where money is paramount. The police arrested more than 500 beggars last year, some of them adults who organized and dispatched children to panhandle at the city's railway station. The town's most popular pastime seems to be currency juggling, with the Hong Kong dollar selling up to double the official rate.

Some Hong Kong authorities believe Chinese officials intentionally built up Shenzhen, which borders Hong Kong's New Territories, to serve as a symbol of how freely things would be run in the colony after 1997 and thus reassure skittish investors there. To that extent, Shenzhen instills confidence. But Shenzhen also provides fresh ammunition for Deng's critics. They charge that Shenzhen is a brain drain on the rest of the country and aptly illustrates the "cultural pollution" they claim is emitted by the new reforms. To keep eager Chinese nonresidents out of the zone, the government has built a barbed-wire fence, complete with a patrol road and arc lamps, along Shenzhen's 53-mile border with Guangdong province.

Peking officials are taking steps to control Shenzhen's development. High-tech companies are being wooed with tax breaks, and in an effort to slow down construction, taxes have been levied on those who own apartments but do not live in them. The government will find it more difficult to cool the tremendous energies that have been released by the boom. In a country where patience is a hallowed virtue and time a bountiful commodity, the people of Shenzhen are in an uncharacteristic rush. "The ringing of a doorbell makes me shudder," confessed a recent letter writer to a Shenzhen youth newspaper. He went on to complain about how the visits of his friends cut into his day. If Shenzhen has faltered partly because the Chinese expected too much too fast, the city also owes its very existence to that same impulse to get things done now. Shenzhen proves that the vitality is there, waiting to be properly tapped. SHANGHAI

When Peking announced this summer that Jiang Zemin would replace the avuncular Wang Daohan as Shanghai's mayor, the choice seemed a bit odd. No one doubted that Jiang, 59, was a man of high accomplishment. A Soviet-trained electrical engineer fluent in four languages, Jiang distinguished himself in China's Administrative Commission of Import and Export Affairs for three years before becoming, and excelling as, the Minister of Electronics Industry. But Jiang, as he is the first to admit, had never run a municipality before, let alone his country's largest industrial city (pop. 12 million). "I'm inexperienced," he says with attractive modesty. "I'm a jack-of-all-trades and master of none."

The central government chose Jiang because it was deeply frustrated with Shanghai's sluggish response to Deng Xiaoping's economic dreams. Almost three years ago, at Deng's urging, the city was given extraordinary freedom to handle foreign trade and investment. No longer was prior approval from Peking necessary to launch export programs. The city could enter into joint ventures with foreign countries, raise international capital and invite bids for construction projects. If all went well, Shanghai, already responsible for one-sixth of China's foreign-exchange earnings and one-eighth of its industrial production, would emerge as a sort of hybrid Wall Street and Ruhr Valley.

But Shanghai, once considered China's most progressive and cosmopolitan city, has fallen behind Peking, Canton and even Chongqing and Shenzhen in embracing the reforms. Shenzhen has set up more joint ventures (150, in contrast to Shanghai's 90), while Canton, one-third Shanghai's size, has more private enterprises (100,000 vs. 90,000). At this rate, Shanghai is in danger of losing its traditional role as the commercial and industrial hub of China. "There is an evident lack of creativity and drive," complains a middle-level city official. "We may have been safe and steady, but the pace of reforms has just been too slow."

If skylines could talk, Shanghai's would echo that judgment. While Peking and Canton boast modern hotels and office towers, Shanghai looks frozen in time, a black-and-white photograph from the 1930s. The buildings along the Bund that housed the great British trading firms and banks before the 1949 Communist take-over still stand, but now they are sooty and decrepit, ghosts from another era.

Shanghai has failed to rise to Deng's challenge partly because so much of its energy is expended on the daily challenge of survival. The country's most congested city, it faces a severe housing shortage. More than a million families live in cramped, one-room flats without basic amenities. Consider the Chens, a family of five squeezed into a room that allows barely enough space for the beds. They share a kitchen with their neighbors next door and must use a communal toilet down the hall. "We're always in each other's way," complains the father. The Chens could easily afford a bigger place (the three children, ranging from 19 to 26, all work), but no apartments are available.

Traffic chokes the streets, and the Huangpu River is a fetid sewer. Even the progress of Shanghai's neighbors has claimed a price: suburban farmers, captivated by chemical fertilizers, are no longer as eager to cart off the city's human waste to use as manure.

Shanghai's haphazard growth reflects its history. Attracted by a wide harbor and easy access to the Chinese interior, British, French and American traders administered their own enclaves in the city for more than a century before the Communist Revolution. The colonial days inspired little central planning; the city has had to link up the three different sewage systems that served the foreign concessions. Shanghai suffered further during the 1950s when Mao emphasized the development of the countryside and neglected the cities.

To some degree, the city is also a victim of its manufacturing past. Unlike other Chinese cities, which can build new factories, Shanghai has hundreds of aging plants that are difficult to renovate. Its workers, accustomed for decades to old-style production systems, are reluctant to learn new and more efficient habits. "Shanghai is a hard nut to crack," says a city official. "It's big and bloated and old."

Those adjectives aptly describe the city's 6,000-member bureaucracy, which sometimes seems to strangle rather than foster reform. While other Chinese cities have succeeded in breaking up the powers of municipal agencies, Shanghai remains highly centralized. Alluding to the bulging government, a Western resident observes, "Shanghai has a smart head at the top, firm feet at the bottom, but a lumpy belly in the middle."

Managers complain that they are expected to meet higher quotas but have not been given the authority to enforce the reforms needed to meet those goals. "Power should be combined with responsibility," says Mou Deqing, director of a lamp factory. Yet the bureaucrats seem uncomfortable with the economic freedom Deng's reforms offer. "Employment levels are far too important to be in the hands of individual factory managers," says a top official of one of Shanghai's economic agencies. The real problem may be that Deng's reforms would weaken the city administrators' command. "If we let managers decide wages and bonuses, compensation will be out of our control," admits the economics expert.

As the birthplace of the Cultural Revolution, Shanghai has more than its share of diehard Maoists who view Deng's reforms as tantamount to treason. (Three members of the notorious Gang of Four began their careers in Shanghai.) Mao's influence can still be detected among the city officials who hew to Marxist orthodoxy and emphasize production at the expense of municipal services, thus aggravating the city's plight.

Mayor Jiang realizes that Shanghai cannot live up to Deng's dream without first tackling its urban problems. The priority, says Jiang, will be "the development and construction of our infrastructure." His task should be made easier by a complaint made by his predecessor, who governed Shanghai for five years. When Premier Zhao Ziyang visited the city in late 1984, he criticized its mediocre economic performance. Mayor Wang responded that Shanghai was forced to give almost all its revenues to Peking, retaining about 14%. Zhao allowed Shanghai to keep 23.5% in 1985, and in 1986 its share will rise to 25%.

Jiang also apparently believes that Shanghai cannot reach its economic potential by relying solely on its manufacturing strength. As factories multiply around China, Shanghai can no longer expect first choice of raw materials from distant provinces. A blueprint for Shanghai's future was drawn up in late 1984 by top economists and planning experts, emphasizing high-tech industries, banking and foreign shipping. Peking also approved in February a regional plan that places Shanghai at the center of a network for distributing goods and services among east China cities. Some Shanghainese interpret the decision as a vote of confidence that their city can meet Deng's ambitious expectations.

Jiang seems confident of succeeding. "When confronted with difficulties, an enterprising man must push ahead, not retreat," says Jiang, chopping the air with his hand. History supports Jiang's optimism: during the past 100 years, Shanghai has responded well to economic incentives. Though the city retains little of the sparkle that won it the nickname "Paris of the East" in the 1920s, some of the spirit that once drove Shanghai can be seen on bustling Nanking Road, the city's main shopping street. Shoppers dart in and out of stores famed for carrying the widest array of consumer goods in the country. Clothes, shoes and other local products are in plentiful supply, as are imports such as Sony cassette recorders and Casio calculators. Any city that so enjoys the fruits of the new prosperity has an ample stake in seeing Deng's reforms succeed. --By James Kelly. Reported by Jaime A. FlorCruz/Shanghai, Richard Hornik/Shenzhen and Luca Romano/Chengdu

With reporting by Reported by Jaime A. FlorCruz/Shanghai, Richard Hornik/Shenzhen, Luca Romano/Chengdu