A dreamer

It was 1992. An old man in a private ward in Beijing's China-Japan Friendship Hospital knew he was dying. Jiang Yiwei was diagnosed with lung cancer the previous year, when the doctors told him it would spread and render him bed-ridden.

But China's slow economic growth, mounting losses of State-owned enterprises (SOEs) and the collapse of communism in Eastern Europe pushed him on despite the failing health.

He was among the pioneering economists and theorists supporting the country's leadership to steer the economy toward an open market. His views, as his colleagues and students recall, even preceded late leader Deng Xiaoping's inspection tour of the southern coastal provinces in January 1992, when he pronounced that the use of market tools was compatible with socialism.

Partly reflecting the ailing theorist's views, Deng warned the continued rule of the Party was linked to its ability to generate high economic performance, and that required more major economic reforms.

Deng's tour was later followed by resumption of market reforms that culminated in the Party's decision in 1997 to use the shareholding system to restructure the State sector, a turning point in China's long march to a market economy.

And now the shareholding system has been introduced to all of China's SOEs, which have shaken off images of profit losers in recent years to become big contributors to the government's financial coffer.

Nicknamed by his wife, whom he met in the 1930s, the "workaholic man", Jiang sensed the urgency to "seek consensus" on market reforms among economists, theorists and journalists even as his condition deteriorated rapidly in mid-1992. Responding to his call, more than 100 of China's leading think-tank economists gathered in November that year in Beijing for one of the most important "intellectual discussions" in the last three decades. The two-day debate, which he finally could not attend because of ill health, was based on his contributions to China's market reform drive.

In a 20-minute recorded speech, Jiang repeatedly emphasized the importance of unleashing the dynamics of enterprise in China. His view was essentially simple: enterprises should be the driving force helping China shake off poverty and accumulate wealth.

His paper, titled "Enterprise-based Economy", was widely circulated for brainstorming among senior Chinese leaders and decision makers in 1978, when the milestone Third Plenary Session of the 11th Central Committee of the CPC, which kicked off China's reforms and opening up, took place.

The two central pillars of the visionary economist's theory were decentralizing the government's power to enterprises and measuring every work unit in factories and workers' pay by their workload and performance. Though totally at odds with the model of a planned economy, Deng Xiaoping saw in these views the key to promote "economic democracy".

The ailing theorist shared many similarities with Deng: he was not a slave to dogma, his 73-year life had seen many ups and downs, and most of all, he believed market economy was living science even though he held no academic degree in economics and knew nothing about complex computer-generated econometric models.

The old man died on January 25, 1993 of respiratory failure. The then vice-premiers, Zhu Rongji and Li Lanqing, attended his funeral.

"Zhu and Li's attendance was a great honor for my mentor," says Liao Yuanhe, vice-president of Chongqing Technology and Business University. "He deserved the honor because Jiang was one of the fathers of China's economic research and a devoted and creative educator since the very beginning of one of the most breathtaking economic transformations in history."

Liao obtained his doctorate degree under Jiang's guidance, when the latter was working as deputy president of the Institute of Industrial Economics of the Chinese Academy of Social Sciences. In 1978, when Jiang was invited by the vice-president of the academy to work at the position, Zhu Rongji, who subsequently became the premier in 1998, worked with him as a team leader.

During the planned economy China accumulated a vast range of State property. Policy makers had for decades followed the logic that "the larger the State economy, the more advantageous for China." Born in the planned economy, the management and operations of State enterprises were not suitable as China became increasingly market oriented.

In the 1990s private and foreign enterprises thrived as China's State-controlled economy remained stagnant. Jiang said the inefficiency of the State sector mainly resulted from chaotic management - SOEs, a large part of State assets, were administered by an array of organizations, including the Ministry of Finance, the Ministry of Personnel, the State Development Planning Commission and the State Economic and Trade Commission. Often, they offered more interference than help and were unwilling to meet the consequences if enterprises performed badly.

Zhu Rongji himself firmly restructured China's SOEs when he was premier during 1998-2003 by trimming the number of redundant employees and improving efficiency. As an extension of two decades of reform, the country was considering a revolutionary strategy in 2002 to plug loopholes in property management policies and ensure the efficient use and protection of China's 10 trillion yuan worth of State assets.

As Jiang had planned earlier, the reform established that ownership rights were divided among central and local governments, while management of resulting State-owned assets would be assumed by specialized entities replacing various ministries.

At the central government level, the State-owned Assets Supervision and Administration Commission (SASAC) was formed in 2003 to unify responsibility for finance, personnel and other decisions in a single organization.

Provincial, municipal and prefectural governments later gradually established their own State property management organizations. Governments at all levels were tasked to act as investors on behalf of the State and were prescribed from involvement in managing that property.

The central government has acted as an investor in only large State-owned enterprises, infrastructure and important natural resources that have a vital bearing on the national economy and State security. Local governments represented the State by performing the functions of investors in other property.

Total sales by the 157 largest SOEs under SASAC jumped 146 percent and profits increased two-fold from 2003 to 2006.

The SOE's global strategy also followed Jiang's visionary blueprint - overseas partners can become shareholders in Chinese enterprises and vice versa.

The government has now begun to encourage companies to expand overseas. With its energy and financial sectors playing an influential role in the global market, the Chinese government is bolstering 30 to 50 competitive companies in their bid to be multinationals.

"Jiang should feel at peace as the scenarios have been in line with his visionary thoughts," says Liao.

(China Daily 01/05/2008 page3)