A look back at Deng Xiaoping's speech in southern China two decades ago

By He Qinglian on January 19, 2012
(translated by kRiZcPEc)

This January 18 marked the 20th anniversary of Deng Xiaoping's tour around southern China (Southern tour). When the younger generations talk about the economic reform that Deng initiated, they have completely no idea that it almost went dead at the turn of 1980s and 1990s, and came back to life only after Deng went to the south and gave a speech in January 1992.

The healing effect of the “Deng's Speech in his Southern tour (Speech in the South)”

Because of the impacts of the “June-4th incident”, all across China, from north to south, people were all fearful of politics and the economy was lackluster at the beginning of 1990s. When Deng traveled around southern China in Spring 1992, the atmosphere of dullness, disorientation, and anxiety did indeed get swept away.

To this date I could still recall the various news circulated both through public and private channels in Shenzhen. At that time in China, the places most fearful of the return of “birdcage economy (opening of economy with restrictions)” were special economic zones (SEZ) like Shenzhen and Zhuhai. The remarks of a top official that “households with savings of 10,000 or more would be 'fixed' to bankruptcy” got widely circulated even though it wasn't made in public. It was against this backdrop that Deng Xiaoping, an octogenarian, traveled far and wide to such cities as Wuchang, Shenzhen, Zhuhai and Shanghai in the space of thirty-odd days from January 18 to February 21, 1992 and delivered the “Speech in the South” to reassure the people that “economic reform would speed up”, that SEZ would be here to stay and that reform would be carried out in the inland regions as well. Tian Jiyuan, then Vice Premier of State Council, made an internal speech specifically on that topic. The message he conveyed was: “Some insist that the country sticks to planned economy. Fair enough, I suggest that we establish a planned SEZ, where coupons for food and clothes are issued, and rationing is practiced, and let those advocates of planned economy go there–let's see if they would want to be there or not.”

After that, all across China, trading emerged as a trend among the people, the intellectuals hurriedly jumped on that bandwagon and became businesspeople themselves. At that time, there was a catchphrase that everyone knew: “Of the one billion population, nine in every ten people engage in business, and the remainders are moving to that direction.” It was after Deng's Southern tour in 1990s that the improvement in the people's lives and an influx of huge amount of foreign investments took place. After that trip, the reform and opening policy that Deng personally started didn't just get adhered to for a decade without interruption, it also laid a sound and solid foundation for the apparent economic boom under the leaderships of Jiang Zemin and Hu Jintao.

Without doubt, of his contemporaries, Deng Xiaoping was the communist revolution leader who went furthest. In comparison with Fidel Castro, a revolution leader who is still alive, Deng's vision was all the broader and more insightful. But all great persons had their own historical limitations, apart from this, Deng Xiaoping, the actual head of the Communist Party of China of the time, set out to do anything with mainly the core interests and the ruling rights of the party in mind. This made it certain that his "reform and opening" policies were laden with flaws, the deadliest of which was, in order that the interests of CPC could be guaranteed, he left behind various channels which led to corruption and the difficult issues of political reform that must be dealt with today.

Merger of Planned and Market Economy: the channel for the government to control the economy

For Deng Xiaoping, the merger of planned and market economy was an expedient measure of “Crossing the River by Feeling the Stones”. The consequences of this, however, were it left behind institutional channels through which the government and officials could plunder wealth and gave rise to the conflicts between the people and the government that led to high tension in society.

The so-called “planned economy” , in short meant that the government would retain the power of resource allocation. According to the institution designed by the CPC government, all resources on the Chinese soil—in particular those of farming villages, be they land, minerals, rivers, or monuments—were, and still are, owned by the state, the government had total control of the revenues generated from all this public property. The way the government control resources at the beginning of economic reform did not differ in essence from Mao's era, yet there emerged a market that did not previously exist. Through the market “power” could be cashed for money—the phenomenon “marketization of power” that I mentioned in my book the Pitfalls of Modernization. Beginning since the economic reform, the advance of marketization was precisely what enabled the government (officials) to cash through the market their right of public resources allocation. This state of semi-administrative control and semi-marketization made it possible that individuals inside the bureaucracy and those dependent on it became upstarts, big or small.

With this institutional channel of public resources control, anything from land to mineral would be expropriated in the name of state without exception, so long as the local governments realized their values. Since this involved the living resources of the people, time and again across the country incidents of forcible demolition, eviction, and land requisition instigated by the governments occurred, leaving many villages with no land, giving rise to over 100 million landless, jobless peasants who had no place to go; numerous urban dwellers, too, had lost their homes. These victims became the main body of 'mass incidents' in today's China, and the tension between officials and the people has been extremely heightened.

Social Progress hindered by Politics

Another main point of the “Speech in South” was about politics. Deng said, “[We] adhere to the principle of "doing two jobs at once and attach equal importance to each. Stick with the four cardinal principles and oppose bourgeois liberalization...The key is to uphold the party's basic line of "one center and two basic points" for a hundred years without wavering.”
The two leaderships succeeding Deng Xiaoping adhered to this stance vigorously, they even lifted it to the height of “core interests of the state” and demanded the international community to respect it. Yet it was precisely this doctrine that allowed the government to steadily strengthen its intervention in the economy, the doctrine even brought forth the trend of local governments turning into interest groups. Over a decade ago, I said that to reduce corruption government power must exit from the economy. More than ten years had gone by, as the government's presence in economy grew by the day, corruption became ever more serious. Many flawed systems hadn't been abolished; on the contrary, they appeared to be rooted even more deeply. The reason for this, as my research indicated, was that the so-called government organization necessarily comprised many officials, whose “homo economicus” nature dictated that they had their own interests needs. In the Chinese society where power is above the law, and where supervision system is non-existent, officials could easily present the interests of their own group as “public interests” as the government has control over areas like politics, economy and public opinion. The reality in China has proven that once a local government became a self-serving political group catering for its own interests, the officials would cease paying attention to public interests and the future of the country. Instead, they would focus only on how to gain through certain kind of channels; they may even seek to cater for their own special benefits at the expanse of public interests and the long term good of the country. This is the root cause that many areas of the economy remain in the state of semi-administrative control despite market reform has been carried out for more than thirty years.

For China's political interest group, it is most ideal that the state of semi-free market, semi-administrative intervention is maintained. To go a step further and start a democratic reform, or to move backward to Mao's era would not suit their needs. To let the Chinese market become one that has “total competition” in place, the government's regulatory power over the economy would either be weakened or have to exit from certain areas, and this means the capability the bureaucracy has in “rent-making” and rent-seeking would diminish or disappear, their “trading capital” would be gone. And if the country regresses to Mao's era, the government would have the power to control the economy, but there would be no market, and therefore the officials could not cash what they have gained through rent-seeking with the power in their hands. In sum, the current murky state of semi-market and semi-administrative intervention makes it most convenient for officials to fish in troubled waters.

In the history of the CPC, only two persons had created grand political landscape. Mao Zedong was one and Deng Xiaoping was the other. Mao Zedong's accomplishment of “founding a republic” is still cherished by generations inside the party, some even have a fond memory of the Cultural Revolution, which the world sees as anti-civilization. Deng Xiaoping had two merits. First, he emancipated the Chinese people from hunger and destitution of Mao's era; second, he ended the seclusion state the country was in and opened up its door. However, these merits of his were largely compromised because of the “storm” more than two decades ago, of corruption, of too wide a wealth gap, and of miscarriage of justice. Yet I think the institutional flaws Deng Xiaoping left behind were a result of his own limitations, he could not have foreseen how those flaws would be played out today.

It often takes time for objective evaluation of historical figures and events to come about. Perhaps what people of our time should do most would be to faithfully and accurately record the genuine perception of the people in this era.