Prisoner of the State: The Secret Journal of Premier Zhao Ziyang

by Adi Ignatius

  10

  Freedom on the Farm

  To lift living standards in some of China’s poorest areas, the government reintroduced the rural household land contract scheme* in the early years of reform, which brought back economic incentives, a vital step in China’s reforms. With all land owned by the government, the basic premise of the scheme was to contract land to individual farming families to allow them a degree of freedom and incentive to work the land.

  Party veteran Liu Shaoqi had once supported the idea to counter the effect of Mao’s radical policy of creating people’s communes. Since Liu ultimately lost in a political showdown with Mao, the rural household contract scheme remained a sensitive policy issue. Many Party cadres knew from experience that it had lifted agricultural output, but few dared to openly support it.

  The result of the scheme for the rural economy was the complete dismantling of Mao’s people’s communes, which freed more than 800 million farmers. Zhao’s early support helps open the door to his promotion to central positions overseeing reform.

  No one had foreseen how good the results would be or that the changes would be so dramatic. No one had planned on implementing the rural household land contract (RHLC) scheme nationwide or even spreading it to most of the rural areas. It was a step-by-step process by which we continuously deepened our understanding.

  In the revised Working Rules of People’s Communes passed by the Third Plenum of the 11th Central Committee [in 1978], called the “Sixty-Item Regulation,” the item about management and operations clearly stated that no household land contracts were permitted, that is, land would not be divided up by households.

  In September 1979, the Fourth Plenum’s “Decision on Accelerating Rural Development” similarly stated, “Division of land by household or household land contracts are not allowed except when special conditions are required for certain industrial crops, or when an individual household is located in a remote mountain region without convenient transportation.” At my suggestion, the original text “are not allowed” was changed to “are not encouraged.” In general, we still believed that household land contracts should not be pursued, though the tone was not as rigid.

  Contracting land to groups of households and to individual households was first initiated by the farmers themselves, in poor rural regions. It started in Anhui and Sichuan provinces. At the time, allowing such contracts in poor regions did not cause much controversy.

  In 1960, when the economy was suffering, [Anhui Party chief] Zeng Xisheng applied the “designated land responsibility system” in Anhui. I applied a “payment proportional to production responsibility system” in Guangdong [where Zhao was then a senior official]. Henan Province had applied a “land borrowing scheme”; Zhangjiakou in Hebei Province had applied a “group land contract scheme,” and other places had used various forms of the idea. All of these places were able to increase production and ease the acute food shortages of that time. Therefore, the schemes were recognized by many officials for having increased production and improved a difficult situation. Since the Cultural Revolution was over and our policy had shifted toward economic development and promoted the ideas of “emancipating the mind” and “practice is the sole criterion of truth,” people were less fearful and able to think more realistically.

  At that time, I envisioned that the nation’s rural regions could be divided into three categories: first, the areas where public ownership was relatively stable, production levels and living standards were high, and the scale of public property was big or collective enterprises had been developed; second, the middle group; and third, the areas where productive forces were seriously damaged and people were on the verge of starvation.

  I believed that people in the third category most urgently needed the household land contract scheme, which was the fastest and most effective way to change things. In 1980, after I started working in the central government, I suggested in a meeting that the household land contract scheme be started in the poorest rural communes, which altogether included about 100 million people. This was a major policy decision, meant to stabilize rural regions and allow farmers to recuperate. It even gained support from [Director of the State Planning Commission] Yao Yilin. As for the second category, I believed we could wait and see whether or not to proceed with the scheme. As for the first category, I didn’t think there would be any demand for it.

  The intraparty dispute over the household land contract scheme became public when it was about to be expanded from the third to the second category of rural regions. Those who were opposed took issue with the basic principle.

  [Politburo member] Hu Qiaomu asked me to be cautious. He said, “The household land contract scheme of Anhui has already spread from north of the Huai River to the south. Even Wuhu County, a bountiful land, has implemented the household land contract scheme.” He was clearly opposed. [Party elder] Li Xiannian came back from a trip to Jiangsu Province complaining about the RHLC scheme of Anhui under the pretext of reporting the opinions of the Jiangsu provincial party committee. [Vice Premier] Wang Renzhong also opposed the RHLC scheme. He was former chief of the State Agricultural Commission, and as early as 1979 had asked the People’s Daily to publish a letter, purportedly from Luoyang [a city in Henan], criticizing individual household and group household land contracts. Shanxi Province had opposed the relaxation of rural policies and criticized the reforms of Anhui and Sichuan provinces even earlier. In 1978 and 1979, they flooded the newspapers with critical articles.

  At that time, [Mao’s short-lived successor] Hua Guofeng did not support RHLC schemes, either. He believed that the rural areas, especially in the south, required collective operations in order to carry out everything: from harvesting the crops in the fields to threshing, drying, and transportation.

  Chen Yun had not directly expressed whether he supported or opposed it. Once, he sent some people to ask me: there were often rains during the harvest season in the south, so if the drying process was not fast enough, the grain would grow moldy—had this problem occurred since the start of the household land contract scheme? After looking into it, I replied to him that after the introduction of the contracts, the process was running even smoother than before. He did not make any further comments.

  The first secretary of Heilongjiang Province also opposed the household land contracts. At a rural administration meeting held by the Central Committee at which many provincial leaders expressed their support for the scheme, he famously said, “You go ahead and walk on your broad highway; I will continue to walk on my single-plank bridge.” He meant that even if all the other provinces carried out the household land contract scheme, Heilongjiang Province would not follow suit.

  The first secretary of Fujian Province also opposed the scheme, resulting in a major rift with the other standing secretaries in his province. Shaanxi’s first secretary prohibited the scheme from being used in the province’s Guanzhong area. Both the first secretary and the governor of Hebei Province opposed the scheme. The governor of Hebei was the former standing secretary of Shaanxi Province. When this comrade was working in Shaanxi and other regions were starting to relax rural policies, he, on the contrary, moved accounting management from the production team level up to the division level.

  Implementing the household land contract scheme nationwide would not have been possible without Deng Xiaoping’s support. The fact that it did not meet much resistance from central leaders had a lot to do with Deng’s attitude. Though he did not comment much on this issue, he always showed support for views held by me, [Hu] Yaobang, and Wan Li. He said he was pleased with the changes that had taken place after the implementation of the household land contracts. In 1981, some of the farmers in the disaster area of Dongming County in Shandong Province jointly wrote a letter to Deng Xiaoping to express their gratitude, saying they now had food to eat, thanks to household land contracts. He forwarded this letter to all central leaders.

  In early January 1981, I traveled to Lankao in Henan Province,
Dongming in Shandong Province, and other poor rural areas. I saw with my own eyes the changes that had taken place as a result of the household land contracts in these regions and experienced the warm support of the local cadres and the people. It made an extremely deep impression on me. When the cadres expressed the people’s wishes to renew the household land contracts for another three years, I immediately replied, “Yes.” Even though I had not instantly changed my opinion that the household land contract scheme was to be only a temporary solution, I was moved to believe that this issue needed reevaluation.

  Upon returning to Beijing, I briefed Deng Xiaoping, Hu Yaobang, and other central leaders on what I had seen. There was no doubt that the household land contract scheme had helped increase production and raised farmers’ living standards.

  However, it was impossible not to wonder whether family-run small-scale operations could sustain the continued development of agriculture. The key issue was how to integrate the enthusiasm of individual contract holders with the need for developing commercial and large-scale production operations, to avoid having agriculture turn into a small-scale farming economy. I thought the household enterprise contract held promise as a solution to this. This scheme grew out of the practical experience of cadres and citizens and was later called “individual contracts combined with joint operations.”

  Another issue was the emergence of rural household enterprises. When I visited Western Europe in 1988, I noticed that many of the agricultural operations there were not very big. Many were small farms. Whatever issues they couldn’t tackle by themselves, they did through cooperative associations. The results could be as good as any large-scale operation. Switzerland, especially, left me with a deep impression. My previous belief that high agricultural productivity required large-scale operations had started to change. I no longer saw the implementation of household land contracts in joint productions in the rural regions as implying a return to the past to a small-scale agricultural economy.

  As far back as when I was in Sichuan, I had promoted contracting out planting, and the farming of fish, flowers, and herbs to people with special expertise and management skills. I later visited many chicken, pig, and dairy farms as well as agricultural produce processing facilities and rural sewing businesses. In 1981, when I visited Shanxi on an inspection tour, I commented that the emergence of private rural household enterprises marked the beginning of a rural merchandise economy.

  The transformation of the nationwide system of a three-tiered ownership of people’s communes into the RHLC schemes was a major policy change and a profound revolution. It took less than three years to accomplish this smoothly. I believe it was the healthiest major policy shift in our nation’s history. It was conducted even while most of the leaders and cadres remained skeptical. However, not one person was punished, nor any senior leader openly criticized. Of course, two years later, some provinces still sent people out to prevent the implementation of household land contracts, and at that point we issued administrative orders to stop them.

  As the implementation of the RHLC scheme expanded, starting from the grassroots and spreading upward, its superiority as a system became increasingly obvious. The vast majority of leaders and cadres gradually came around from their original opposition. This was a significant development, and an experience worth learning from.

  During this major policy change, the central government did not apply uniform standards and issue unified directives. Local governments were free to choose whether to implement and how. Both the “broad highway” and the “single-plank bridge” were permitted. Local leaders were told not to intervene when people initiated household land contracts themselves. Meanwhile, the central government made an effort to study the overall situation and learn from its achievements before providing guidance.

  The adaptation of this method yielded great benefits and did not slow the speed at which changes were taking place. Since the power to choose was given to local leaders and cadres, and they were given time to make their choice (time enough to shift from unwilling to willing), the shifts occurred voluntarily. This reduced the possibility of conflicts and negative effects. It gave local authorities enough time to make a choice, to realize the superiority of the schemes and to figure out how to adopt them to their own development conditions. As it moved from the poorest regions to average and wealthier ones, the policy was gradually perfected.

  I mentioned above that I was enthusiastic about the system of rural household enterprise contracts. My views on this were fully expressed in the documentation of a meeting of provincial and municipal first secretaries on the household land contract scheme, held in September 1980. The summary was distributed nationwide on September 29, 1980, by the Central Committee.

  The summary indicated, “The Specialized Household Contracts System is one in which, under the management of the production team, those with expertise in agricultural production will be assigned land contracts; those with expertise in planting, animal husbandry, fishing, and mercantile operations will be assigned specialized contracts for their group or household.” The guiding principle was to utilize the incentive of individual contracts while avoiding the paltry returns of the small-scale agricultural economy where one family does everything.

  However, this idea [introducing incentives for large-scale and specialized agricultural operations] was not realized because it failed to recognize the fact that the rural merchant economy had not been fully developed. The diversification of operations, industries, and commerce had just begun. There was not much specialization of expertise while people were stuck in their old ways of thinking. So besides a few specialists and a few major wheat production contracts, most rural land was contracted out according to household head count.

  What actually happened matched the level of rural economic development and productivity that existed at the time. The results showed that it did not act as an obstacle to the development of rural productivity, but on the contrary, greatly stimulated the rural economy.

  Certainly, the scheme of dividing the land up equally and contracting to households could not change the root problem of low rural labor efficiency. As rural commerce grows, so will the development of specialized operations and rural industries. The issues of specialization of expertise, labor migration, and large-scale farming will eventually have to be dealt with again. Of course, it will no longer take the form of the collectivization that existed in the 1950s. It is very possible that a more suitable form is the family farm operation. In order to adapt to this kind of demand, the ability to freely trade, rent, and inherit land should be permitted and the most important rural productive resource, the land, should be made freely available on the market and given legal protection. This is an issue that must be confronted.

  11

  The Coastal Regions Take Off

  The early success of the reform program inspires Zhao to formulate a bolder strategy for developing the coast. The idea is to develop an entirely export-oriented economy in that area. To an extent this has already begun with the opening of several special economic zones along the coast, but Zhao believes a more comprehensive policy would lead to rapid development and link China to the global economy. It’s clear he would have liked to pursue this idea further if he had been given the time.

  In the winter of 1987, I went on inspection tours of the coastal regions, after which, in January 1988, I proposed strategies for developing the coast.

  During those tours, I came to believe that the international market provides the right conditions for our coastal regions to accelerate their development, because labor-intensive production will always shift to places where labor is abundant and cheap. Some developed countries have moved their own output toward more knowledge-, technology-, or capital-intensive products, which offers developing countries an opportunity. It’s kind of a law of nature. Japan went down this road, as did the four Asian Tigers of Taiwan, Singapore, Hong Kong, and South Korea. That’s how the four Tigers took off.

  Ou
r coastal regions possessed great advantages. They had a rich supply of high-quality labor, better than that in other developing countries. Transportation was convenient, information was available, and people were becoming more aware of the international market and competition and could respond more quickly than the inner provinces. Also, the infrastructure was better and the area had a greater capacity for producing light and textile industries. Our coastal regions had all the conditions necessary to go through what the Asian Tigers had gone through.

  This approach would greatly speed the development of the coastal regions. The proposed strategy called for developing an export-oriented economy, which would mean 100 million to 200 million people joining the global market and participating in international exchange and competition. It would foster “two ends extending abroad,” meaning finished products would feed into the international market, while raw materials and other resources would be imported from the international market. If the production of all export commodities relied instead on just internal resources, it could lead to domestic shortages. A competition for raw materials between the eastern and the central and western regions could destabilize the nation’s economy.

  When the strategy was proposed, Comrade Xiaoping was supportive and praised it highly. He said we should seize the opportunity by taking bold and decisive actions so as not to lose any opportunities. Some of the coastal regions were also supportive and enthusiastic. They saw how bright their futures could be.