John Gittings

China through the Sliding Door; Chapter XI
Peace writings
Journal articles
Newspaper articles
Family links
1992 - 1995
Launch of an 'Economic Miracle'

(a) Mr Deng's new expedition

(b) China's wild Southern frontier

(c) Market fever and rural unrest

(d) Doing good business in Sichuan 

(e) The curse of corruption

They called it Deng Xiaoping's Southern Expedition - the term once used to describe the travels of a Chinese emperor through his domain. Yet it had a very modern purpose: to lift China out of its post-1989 gloom, and kick-start the economic revolution into a higher gear. Deng did not hide his aim: economic development, he said, guaranteed political stability. He also sought to make sure that China did not fall behind the other `Asian tigers', and that it participated fully in the new global economy.

Deng was physically shaky and had to be steered in the right direction by one of his daughters, but he summoned up - for the last time - a reserve of mental strength. He did so in the Special Economic Zones of Shenzhen and Zhuhai, away from conservative Beijing. Deng jettisoned the old labels. It doesn't matter, he said, whether a way of doing things is labelled socialist or capitalist. The whole of China should follow the Zones in developing the market mechanism and seeking foreign investment. Within months a new `development fever' had swept the land. Deng himself - Tiananmen Square forgotten - would be hailed in several Western newspapers as Man of the Year.

Shenzhen had the highest incomes in Guangdong province, and Guangdong in the country. Thousands of officials from all over China came on `investigation tours' to see how it was done. They studied the modern factories, the highways and department stores - and the four-star hotels and the night-clubs. Millions of peasants from the interior migrated to the coast seeking work. They sent money home to support families left in poverty, but thousands were forced into prostitution and hundreds died in factory fires.

Over the next three years I travelled widely to see the effects of Deng's new revolution. I began in 1992 on Hainan Island, the wild southern frontier where Guangdong's Red Guards had once been exiled to open up new rubber plantations (with disastrous effects on the sub-tropical environment). Hainan was now a favoured area for would-be entrepreneurs seeking to make their fortune, by legal or other means. In 1993 I returned to Zhengzhou, capital of Henan province in the northern heartland of Chinese civilization. When I first visited in 1971, the famous museum was closed because of the Cultural Revolution. Now the galleries were closed because of the economic revolution: one whole wing was rented out as a furniture salesroom. Two hours by bus from Zhengzhou life was still very different. I visited a village where the peasants had protested against illegal taxation, and met one brave peasant who had been jailed - and his brave son who campaigned for his release.

In 1995 I decided to test the success of the new policies in the most obvious place of all - Deng Xiaoping's home town deep in Sichuan province. Guangan was a painfully long bus journey from the provincial capital of Chengdu: I found it booming with not one but two new industrial zones. The association with Mr Deng had given it a special advantage: the rural counties on either side were much less favoured. As elsewhere in China, development was patchy and uneven. Progress depended partly on natural resources and communications, but also upon having good `guanxi' - or connections with the right people. A speech by President Jiang Zemin was a reminder that corruption, in spite of a decade and a half of official campaigns against it, was more widespread than ever. Deng Xiaoping had successfully flung the economic revolution into higher gear - but there was a price to be paid.


August 1992, Shenzhen

To follow in the footsteps of Deng Xiaoping has become the best way of studying China's Special Economic Zones. It only needs a copy of Deng's `spring tour' itinerary, and a walletful of Hong Kong dollars. To recognize his calligraphic style also helps. The giant red characters on the marble front of Shenzhen railway station, the newest and cleanest in China, were penned by him. It is as if John Major were to write the sign for the new Channel Tunnel terminus.

Here, just yards from the Hong Kong border, 87-year-old Deng Xiaoping alighted from a train last January, supported by his watchful daughter and a few doctors,and made a little speech: If China does not `open up' and improve the living standards of the people, he said, it will head up a blind alley. Though speaking in the South, he meant his words to be heard by the conservatives in Beijing.

A new Shangri-La hotel is rising next to the station. Across the square, prowling minibuses compete for fares to Shenzhen City, to other parts of the economic zone, and beyond the zone's internal frontier with the rest of Guangdong province. Deng recalled how eight years ago, on his last visit, Shenzhen was still a town with ponds, mudpaths and old cottages. Now he surveyed the `wide boulevards and high-rises' from a revolving restaurant at the International Trade Centre.

My taxi driver had his own perspective. `Land is gold here. Any local person who owned land then now has his own house and car.' The local paper invites investment in the Blessed Commercial Centre, a new development which looks like a Chinese John Lewis. `Immediate returns; safer than shares!', it appeals to the property speculators who have flocked from all over China.

I wanted to find the Xianhu Botanical Garden where Deng planted a tree - an alpine banyan - which his grandson then watered from a red pail. (No detail of the visit was too small for the Shenzhen Special Zone Daily to report). Shenzhen has Hong Kong's shopping malls and karaoke clubs (admission six pounds), but not its traffic discipline. Outside the Trade Centre, battered taxis interrogate prospective clients on their currency holdings. Motorcyclists with strapless helmets offer a dubious pillion alternative. I was lucky to escape alive from my first ride in a taxi when its bald tyre exploded after fifty yards.

The Botanical Garden is in a wooded valley just short of the Hong Kong border at Shataukok. Deng's alpine banyan is surrounded by a messy heap of stones and turf. Until it has been turned into a proper shrine it remains anonymous. Children with bright plastic satchels on their backs play tag around it and another tree planted by the Chinese president. Yes, they both looked very healthy, said the souvenir stall manager, and then we walked along the lake to see the boats shaped like swans.

Shenzhen is all about making goods and money with the benefit of Special Zone tax reductions and looser financial controls. The roads are dense with lorries and minibuses - few bicycles and no handtrucks in this part of China. The petrol stations are Mobil and Esso. There are factories, science parks, curved wall apartment blocks and clusters of villas behind marble-faced walls. There are also construction sheds with matting on the roof for the temporary workers, often in the zone illegally, who provide cheap labour.

Deng Xiaoping stopped at the Folk Culture Village and Tiny China, both owned by the Splendid China Development Co Ltd. He rode in a golf buggy and was photographed by foreign tourists - a subtle way of leaking the news of his Southern Expedition to the world at large and wrong-footing the conservatives in Beijing. It is China's most famous theme park. Here are the Potala Palace and the Great Wall in miniature, replicas of non-Chinese `minority' villages to be compulsively photographed, and at night a stunning show of stilt-walkers, acrobats with kids on their shoulders, and a wedding procession with gongs and other ethnic attractions. The show ends in approved Western theme park spectacular style with multi-coloured lasers playing rhythmically on the pulsating waters of a computer-controlled fountain. It would do very well at Alton Towers, but the entry ticket for a British theme park would avoid Splendid China's warning: `Obey instructions given by the inspector. Whoever violates rules and regulations will be subject to proper disposal.'

Later, Deng bumped across the great scar of earth where the new Shenzhen-Canton-Macao motorway is being built, on his way to Shekou port at the end of the zone. A 14,000 ton liner berthed there carries his calligraphy. He named it Sea World, but it was once called Ancerville and was launched long ago by General De Gaulle. Sold to China, it paid friendship visits to Tanzania and Japan for many years before being turned into a rather scruffy hotel with gift shops selling jewellery and pots of Ponds Cream.

Deng had some parting advice for the Shenzhen leadership as they drove to the port: `First, do not be afraid to make mistakes; second, correct them as soon as they are discovered.' He then crossed to Zhuhai, the next Special Zone, where from another revolving restaurant he surveyed the view of Portuguese Macao. It would be nice to have a copy of the speech he gave there about `Marx, the Three Kingdoms, Slave and Feudal Society'. He then spent a comparatively quiet week in Zhuhai. He was reported to have visited several `typical enterprises' in Bus No. 2. But Hong Kong's China watchers believe he also held a series of crucial meetings with military commanders from all over southern China. Just like Chairman Mao before the Cultural Revolution, he needed to get the army on his side before launching his new economic revolution.

My visit to Zhuhai ran into problems of which Deng Xiaoping is unaware, but I had only myself to blame. In the spirit of `opening wide', the Special Economic Zones allow foreigners to buy a visa on the spot. One can arrive in Shenzhen and buy a visa for eighty-five Hong Kong dollars with no fuss. One can arrive in Zhuhai from Hong Kong and do the same. But the visitor who buys a visa for Shenzhen, then crosses to Zhuhai and seeks to buy another one, is in trouble. I had my own crucial meeting with the border police as I attempted to leave for Macao. In the end I wrote a one-line letter saying that I had an appointment with a high Portuguese official in one hour's time. I then paid a fine, properly receipted, for 400 Hong Kong dollars.

It was all done in a spirit of friendly enterprise. As Deng said, `You should open wider to the outside world, repeat, wider!'



May 1992, Hainan province

The `chickens' are drinking lemon tea at the Haikou Hotel before their evening business begins. The grand piano on its green baize platform is still covered with bright crimson cloth. More spectators than customers are sitting on pink-cushioned chairs, viewing the chickens - girls from Guizhou, Guangxi and Shanghai. This is Hainan island, China's new frontier. The girls' features are almond-shaped as those of Chinese opera singers, though the clothes range from shimmery blouses to jeans. The whole cafe, raised on a dais in the hotel lobby, is a piece of theatre the Haikou police do not bother to interfere with. In Shenzhen, next to Hong Kong, the authorities at least go through the motions, but Hainan is a `more special' Special Economic Zone.

Hainan island was known for a very different sort of performance in the Cultural Revolution 20 years ago. Young Red Guards all over China sang the tunes from the famous ballet, The Red Detachment of Women. Personally supervized by Jiang Qing (Madame Mao) - who used to winter by the beach at Sanya in the south of the island - it was a work of revolutionary feminism. Women fighters leapt through the air flourishing pistols against a background of Hainan's tropical vegetation, in a tale of triumphant struggle against the wicked Kuomintang. `Forward march, forward march,' they sang. Hainan is now engaged upon a very different kind of forward march. It is either China's frontier zone of opportunity which will become (Deng Xiaoping hopes) the first of `ten new Hong Kongs' or - his conservative opponents complain - a sink of exploitation and spiritual pollution.

Plans for China's first free port, at Yangpu on the island's western coast, have burst back to life after Mr Deng kick-started the new reform movement earlier this year by his visit to the Special Economic Zones near Hong Kong. `We hoped he would come here,' one ambitious economist in Hainan explained. `We even prepared a room for him at the Luhuitou hotel in Sanya, where Jiang Qing used to stay'. Mr Deng's protege, ex-mayor of Shanghai Zhu Rongji, did come and he is now personally in charge of Hainan's `second revolution'. The Hong Kong company Kumagai Gumi (in which the parent Japanese company has a 35 per cent share) has finally clinched a deal to lease thirty square kilometres of territory at Yangpu for seventy years.

The managing director, C. P. Yu, is touring Asia's little dragons - starting in Seoul and Taipei - to entice investors. He lists the advantages: no Chinese bureaucracy; companies will lease directly from Kumagai; there will be direct approval from Beijing - he does not have to wheedle with the Hainan authorities. There is a virtually tariff-free regime plus a five-year tax holiday on profits. An excellent natural deep water harbour has already had some port facilities developed. Vietnam is just ninety miles across the South China Sea and is already sending trade delegations to Hainan. Locating the sparse local fishing population will be cheap. Land is cheap and, above all, so is labour.

No one knows just how many mainlanders have slipped across the straits from Guangdong province illegally. Hainan's population has certainly risen by several hundred thousand in a year to just under six million, and contractors in Haikou's property boom know where to find cheap labour for dirty work. Young men with no tools but their hands sit under bridges or on street corners, waiting to be hired. Digging sand from the river may only earn a few Chinese dollars a cartload, but it can bring in 300 yuan (thirty pounds) a month - what a `chicken' gets from a single customer.

Like all frontier regions, Hainan carries the prevailing trend further. During the Maoist years it was a closed zone where the army and navy watched China's southern door. In the Cultural Revolution, ferry-loads of Red Guards sailed from Canton to hack down primeval forest in Hainan, plant rubber trees, and `learn from the peasants'. In the changed climate of the 1980s, the whole island was designated a Special Economic Zone, several hundred times larger than the small zones fringing Hong Kong. Then for two years after the Beijing masssacre, conservative censure prevailed. Now thanks to Mr Deng, the city of Haikou is awash not just with typhoon season flash storms but with hot speculative money. The property market is booming and the stock exchange opened in April. At least 400 property companies have been grabbing land earmarked for luxury housing, golf courses, hotels, or for development zones around Haikou.

Much of the money is from the mainland, although planeloads of eager Taiwanese are beginning to arrive. The get-ahead officials are mainlanders too. Some confess they too hope to dabble in property; others just do it. Hainan officially allows government cadres to move directly from public office into private business. It already has a reputation for colourful dealings and it lost two governors in the space of four years.

Ex-governor Lei Yu, sacked in 1985, is still a folk hero. He allowed the island to import 79,000 foreign cars and trucks in one year for irregular resale to the mainland, generating enormous profits. The young entrepreneurs recall those exhilarating months when anything went in Hainan. `He had the whole army, navy andairforce out delivering cars,' says a chauffeur with thousands of yuan in the bank. `Lei Yu didn't waste time talking. If you had a good idea, he just let you make money.' Lei Yu has just turned up in the nearby Guangxi province on the mainland, where he is in sole charge of its `opening up' plans, and no doubt will have many more good ideas.

Lei Yu's successor, Liang Xiang, sacked after the Beijing Massacre in 1989, was another economic innovator but with a very different reputation. The people he allowed to make money included his wife and son. But the Liang Xiang case also has a political aspect. He thought he had bought Beijing's backing for the Hainan boom by inviting the offspring of high-ranking officials to sit on the boards of Hainan-based state trading companies. But he backed the wrong side. One of those he brought in was Zhao Erjun, son of the Communist Party Secretary-general at the time, Zhao Ziyang, disciplined for opposing the army suppression of the Beijing students.

Property speculation drives the new stock market - four out of Hainan's first five quoted shares were for property companies - but it has had a stormy start. After a week in operation, Mr Zhu flew down from Beijing to warn his Hainan proteges that they were going too fast. For this little island to open a new exchange, with only Shanghai and Shenzhen already fully operating, would upset too many people.

When I visited, a compromise had been reached: the exchange was only trading in Shenzhen shares. But Hainan entrepreneurs are confident that full permission cannot be withheld for long. `You have to give a baby a ration-book even if the parents have exceeded the one-child policy', says one. `This baby has been born and they can't kill it off.' No one has yet been stabbed to death outside the Hainan stock exchange - unlike in Shenzhen where rival triad gangs fight to control places in the queue. No one has yet followed the unfortunate speculator in Shanghai who, unused to the law of the market, committed suicide when he lost a hundred pounds.

There is still enormous excitement on the pavement outside, where prospective customers jostle to squeeze through an iron grille, or copy down the latest figures from Shenzhen pasted up on the wall. My own informal visit added to the excitement. Did the foreigner know something they did not? But these are small potatoes. Anyone with connections had already bought the new Hainan stock through inside trading before the exchange even opened.

Hainan Island is not quite such a familiar location globally as, say, Taiwan or Cyprus or the Seychelles. It is, in the not entirely fortunate phrase of the Tourist Bureau, China's End of the Earth. In imperial days, out-of-favour officials were banished to it. Yet it is the size of Taiwan, warm, wet and tropical and deserves to be better known. Water buffaloes, straw-hatted peasants and deeply pregnant sows amble across Lei Yu's new straight roads. Roadside stalls sell coconuts, mangoes, wild birds and snake. The eastern route from Haikou to Sanya plunges through deep green paddy and plantations of half a million coconut palms. The western route crosses wilder flatlands where little but cactus grows. The most interesting road - through the centre - climbs into mountains where some virgin forest has survived the Red Guards. There are thatched Miao villages with yellow walls of adobe, and old Li women in black shovel hats. Touristically, it is still a blank on the western map, but Hainan is aiming high. The resort at Sanya has 100 miles of beaches, ten bays, coconut palms and plans for an airport able to take Boeing-747s.

The plan is to make Sanya an International Tourist Beach. City officials sit till late at night awarding contracts or handing out hotel concessions. Land prices have multiplied six times in the last two years. Mainland money is searching for investment opportunities. One hotel is owned by the Tourism Bureau of Nanjing in central China, another by the Cigarette Corporation of Yunnan province. `Tourism will be the motor for economic development.' Sanya's planners are too gripped by the concept to listen to any gentle suggestion that, in the Chinese phrase, `the conditions may be lacking'. Sanya's tourists are up from nearly 350,000 in 1988 to 435,000 last year, but the big increase has come in domestic tourism and in the arrival of more `compatriots' from Hong Kong and Macao.

The numbers of `real foreigners' have actually fallen in the same three year period from an already modest 13,000 to only 7,500. An international beach? In the main Sanya stretch the only hotel from which guests can walk to the sea with ease has stained carpets and surly clerks who try to evade tax by not writing out receipts. There is very little seaside atmosphere and excavation is taking place behind the best sands. With great enthusiasm, foreign travel firms are being invited to set up bureaux in Sanya and foreign supermarkets will also be welcomed. But no one seems to understand that the western travel market operates on tight margins and quality controls which Sanya will find it hard to meet.

Sun Yat-Sen, father of the first Chinese revolution, first dreamt of developing Hainan island. Much later, so did the far-sighted prime minister Zhou Enlai. Now the dream has become the test of Deng Xiaoping's doctrine that the new Special Economic Zones can `get rich first' by opening trading windows to the outside world, which will then trigger economic development throughout China. If some dirty capitalist flies get through the mesh, the price is worth paying. The zones bordering Hong Kong and facing Taiwan are indeed outward-opening windows, but Hainan is less certainly so. Its main success so far has been to offer speculative opportunities through which surplus profits from mainland companies can be soaked up. `Industry is slightly above zero,' Hong Kong reporters were recently told.

Mr Yu of Kumagai Gumi is a gleaming exception - at least for Hainan's future. He was guest of honour at the First International Coconut Festival in April, a new addition to China's rapidly expanding list of manufactured events. A prominent commercial rival of Mr Yu in Hong Kong, deeply involved in Guangdong, dimisses Hainan as a project for the 21st century which will take twenty years at best to begin. Certainly, Mr Yu's own optimism must depend upon remaining the `freest of free zones'.

Will some of the wealth sloshing around in Haikou wash through to the rural parts of Hainan? Less than twenty-five miles off the main central highway, villages growing tea and rubber still struggle on an average personal income of twelve pounds a month. State farm leaders search for new outlets for agricultural produce on an uncertain market where last year's boom in green pepper prices has been wiped out this year by cheap imports from Indonesia. They have the same enthusiasm as the planners in Haikou and Sanya, but they are still living at the end of the world.


March 1993, Henan province

The splendid museum in Zhengzhou, capital of one of China's largest inland provinces, is noted for its ancient bronzes and a giant statue of Chairman Mao. The statue is still there but the bronzes have disappeared. One wing of the museum has become a furniture salesroom instead. Armchairs and vanity tables occupy the space once reserved for the kings of Shang (circa 1200 BC). `Isn't it strange?' I cried out to the men heaving sofas past Chairman Mao. `A furniture shop in a museum!' No one seemed surprised. At last one of the salesmen paused briefly. `Ancient things are out of date,' he said. `Everyone's doing business now. That's all.'

The whole of China is gripped by what the papers call the Market Fever. Deng Xiaoping's famous Southern Expedition a year ago gave the signal that the economic revolution which had begun in the Special Economic Zones along the coast should now apply nationwide. Communist Party restraints on the free market were to be swept aside, and every province, even every county, could have its own special zone. Middle China, the vast intermediate region between the coast and the inner frontier regions, is the test of Deng's reforms. This heartland includes fertile plains and barren mountains, drab industrial towns and still-tranquil hillside hamlets, modern industry and ancient remains. Its central provinces contain a third of the Chinese population, with Zhengzhou, capital of Henan (population 78 million) as its northern gateway.

This week the National People's Congress in Beijing formally endorsed the `socialist market economy'. How is it working in Middle China? The chaotic vigour of the new economic drive is visible everywhere, from Zhengzhou's High Technology Zone to the 1,000 private shops in Shaoshan, Mao Zedong's home village in the south, now cashing in on the 100th anniversary of his birth. Hong Kong-style shops and restaurants stay open late with showers of fairy lights outside. There are businessmen everywhere. Dark-suited dealers in real estate and transportation carve out their own empires in what is still nominally state enterprise. Leather-jacketed entrepreneurs with mobile telephones make more dubious deals, exploiting the margin between state-controlled and free market prices.

The sleeping mounds of job-hungry peasants at every big railway junction tell another part of the story. So do the scavengers running up the track to retrieve plastic lunch boxes thrown out of passing trains. No one denies that the gap between rich and poor is widening. Zhengzhou's High and New Technology Industrial Development Zone, now spreading over five square miles of farmland, is one of twenty-seven hi-tech zones approved nationally by the state council in Beijing. It sits on the new east-west rail link from the East China Sea to Kazakhstan which will carry freight right through to Europe. China's new north-south motorway will skirt the zone. An international airport is under construction.

There is a development zone fever too in China. Two thousand new zones have sprung up in the provinces, occupying 3.7 million acres of scarce land. Thousands more have been set up by local counties, often no more than an office, a banner across the road, and the occasion for another banquet. The zones offer valuable tax breaks for foreign investors - two tax-free years in Zhengzhou followed by a 50 per cent rebate until the sixth year. There are tales of `phoney joint ventures' where the rebate is shared with a shell company abroad. Although the zones still `belong to the state', they are run by autonomous development companies under local Communist Party patronage. The larger ones will provide schools, hospitals and high-standard housing for their employees. Some economists complain that scarce investment funds and farmland are being squandered. But the zones offer a tempting route out of politics into business for China's newly emerging managerial class.

An hour out of Zhengzhou the peasants are taking another way out. The flight of millions from the land (one million from southern Hunan province alone) has been widely reported but not so well understood. It is much more than a seasonal migration of surplus labour from deprived areas. Many peasants are driven off fertile land permanently by high taxation and low prices for farm produce. And although they disrupt transport and are blamed for increased crime in the cities, their cheap labour is fuelling the urban economic boom.

In an ordinary village a half-mile off the national highway, I listen to a string of ordinary complaints. The peasants smoke, and drink hot water: tea leaves are reserved for their guest. `The taxes are too high: we can't bear the burden. But if you don't pay up, they'll seize your furniture or smash your roof in.' I am shown a tax demand for last year. One third of the family's wheat crop goes to pay the agriculture, education and irrigation taxes. Another third is deducted for village-level `administration and services'. Most of the rest goes to the local xiang (township), supposedly to subsidize schools, army dependants, local militia and roads. The peasants complain that xiang officials buy new cars and consume fine banquets with public money. With wheat selling at only seventy yuan (eight pounds) per 220lbs, this family is left with a net income from the land of thirty yuan for the year. For the people it is cheaper to grow a few vegetables and seek work in the nearest town.

The peasant Hu Hai is famous in these parts. He was jailed for three years after leading a tax protest. The local police paraded him first through the villages, hands bound behind his back. His fearless son, Hu Desheng, who escaped rural poverty to graduate from law school, continues to petition Beijing. Hu Hai (whose case was adopted by Amnesty International) has now returned home on parole, still insisting that he acted in defence of `truth and justice'. Other peasants appeal instead to the gods: the village has two new Buddhist temples.

Beijing has issued new instructions but provincial leaders have a vested interest in defending rural exploitation. Peasant migration, some argue, is a necessary form of `social mobility' through which new urban skills can eventually be transferred back to the countryside. The truth is that most work available is dirty and unskilled, but cheap peasant labour has become a structural part of the urban economy. The Zhengzhou zone is being built by cheaper peasant gangs from another province who have undercut local Henan labour.

China's scholars and intellectuals, victims in the past of Communist persecution but also protected from economic extinction, are also obliged to worship new gods. The writer Zhang Xianliang, famous at home and abroad for his prison novels, now chairs an advertising company in remote north-western Ningxia. A senior cultural official in Mao's home province runs a children's magazine, against the day when his state subsidy will be withdrawn. An assistant is organizing the export of peasant labour to prosperous Guangdong.

In Zhengzhou. the elegant Liu Xinxin, who used to sing in revolutionary operas, now runs her own private bookshop, the best, perhaps, in all of North China. The windows are clean, with bright advertisements, the shelves are well-dusted and there is a lively (but safe) selection of books. Ms Liu's husband is the famous calligrapher Pang Zhonghua, a member of the non-Party National Consultative Conference. She had no difficulty in obtaining the permits to start the business.

Some delegates at the National People's Congress in Beijing have complained that regional economic policy was barely mentioned in the report by the prime minister, Li Peng. The lack of a clear regional plan is not really so surprising in the new age of market economics. The socialist market economy, Chinese economists explain, is intended to `place the market mechanism in a key position to distribute all social resources' and to reduce government `interference' to `macro-control of the economy'. Government investment is promised in energy, communications and river control, but the state's efforts are likely to be limited in coming years by its budgetary deficit and a declining share of national revenue.

Schemes for regional development are familiar from the past. None has lasted more than a few years. There is talk today of forming seven `economic regions', or linking provinces in Middle China with a partner on the coast. But Beijing's ability to impose any supra-provincial economic structure, never very strong, is becoming weaker. Plans will depend on provincial leaders who must listen to their own emerging business communities. And they in turn will be guided by their balance sheets.

Lei Feng, the soldier hero of the 1960s who `served the people', is still tediously offered up on television as a national model. In Middle China, the Communist Party is more likely to hand out medals to those who have `made money'. In Yueyang on the Yangzi river, the local newspaper carried profiles of two dozen model entrepreneurs. Their average income was 40,000 yuan (5,000 pounds), about eighty times the national average for peasants. `Chairman Mao used to say that Marxism was our magic weapon,' comments one Chinese economist. `Now it is the market.' The fever is raging in urban Middle China. Only the peasants, on their pathetic bundles outside the railway station, shiver at night.



March 1995, Guangan

Ms Wang's entrepreneurial efforts in Guangan, hometown of Deng Xiaoping, would win the approval of the old man himself. Her Elegant Restaurant, just a few tables in the open ground floor of an old wooden building, is packed with customers eating chicken with red hot chillies. There is a queue for her Elegant Hair Salon across the road when it opens each morning. The tag is hard to resist: here in the provincial heartland of Deng's new revolution is the Good Businesswoman of Sichuan.

Wang dresses in eye-catching clothes for a small county town in the middle of China: high heels and a fur-lined outfit one night, a denim suit the next. But the elderly man in an old raincoat, helping out with the bills, is the real key to the operation. He is her father, and also the Communist Party Secretary (or boss) of a large factory, a crucial position from which to get the permits for opening a shop. Party officials are debarred from going into business but there is nothing to stop their family members from fronting the operation.

In Guangan's `get rich first' atmosphere, Ms Wang has some serious competition. Outside the Elegant Salon last week, a leaflet was being distributed for International Women's Day. But the text was not so internationalist: `To celebrate this important day, the Flying Geese Restaurant invites you to join a banquet on favourable terms. It costs 237 yuan for six starters, seven main dishes, soup and fruit (drinks not included). See you tonight!'

Guangan is a traditional market town of the kind which has driven the Chinese rural economy since the development of urban commerce a thousand years ago. On the pavements are mounds of vegetables, the intense colours attributed to the fertile Sichuan earth, hanks of suspended meat dripping into the dust, piles of beans and pyramids of sugar cane. The shops sell tools, twine, spare parts, all the peasants need. But Guangan has also embarked on a new Leap Forward which transcends the traditional economy. There are stores stocked with electronic goods, eighty new private taxis hooting through the streets and two new Economic Development Zones.

The economic reforms of the past fifteen years mainly benefited coastal China and the big cities. But Deng's strategy since 1992 has been to inspire a fresh wave of entrepreneurial activity across the country by extending the tax and other concessions the coast had. What better place than his hometown to study this phenomenon of economic boom and its uncertain effects on society.

Guangan still has a sense of civic responsibility which has been weakened in other towns where the economic revolution has gone further. Army officers sweep the road in support of a new health campaign - even if some look unused to handling a broom. The Women's League of the Guangan Electrical Company hands out essential information on `What the Peasant Should Know about Electricity'. Don't explode fireworks near cables or dig ditches next to pylons. Don't confuse washing lines with electric lines. Don't divert power for private use to deter thieves, stun fish or kill rats.

The start in Beijing last week of the National People's Congress - China's mainly advisory parliament - did not cause much of a stir on the streets of Guangan. I found only one friendly policeman who had heard the opening speech by Premier Li Peng. But Sichuan's delegation to Beijing boasted of Guangan's connection with Deng and claimed that the lives of the peasants in his home village of Xie Xing, five kilometres away, had been transformed.

That was not the view of one angry farmer in the Guangan marketplace who displayed his heavily worn hands to me as credentials. `Deng Xiaoping's birthplace is all for show. You don't know what we peasants really live like: not enough food, poor housing, while the officials get rich. I know what I'm talking about. I fought for Deng in Vietnam. The problem is: he's a good man but we are cheated by the people beneath him.' A couple of young men in cheap suits, come from the big city to check out business opportunities in Guangan, told me to ignore him. `He's an old fool.'

Conflicts of evidence between official statistics and popular perceptions are frequent; so is the mutual contempt between many city-dwellers and peasants. In 1993, serious peasant riots broke out over excessive taxation in Renshou, an impoverished county only sixty kilometres from the provincial capital of Chengdu. Yet people in Chengdu today barely know what happened and insist that peasants everywhere are doing well. A 400-mile journey across the Red Basin of Sichuan - from Chengdu via Guangan to Chongqing (the wartime capital known to Westerners as Chungking) - suggests that this is far from being the case. At an average speed of thirty kilometres an hour, long-distance bus travel offers a close-up view of the parts of China other methods rarely reach. Sometimes these journeys pass through areas technically `closed' to foreigners. That is no problem if one has a convincing destination. The real disincentive is the bone-bruising ride and knowledge that most road fatalities in China are caused by overloaded buses.

Cutting across country proves the obvious but overlooked point. Even if the gross statistics are correct (and China's own Statistical Bureau has warned they are often boosted by local officials eager to claim success), the effects of the economic boom away from the coast and big cities are localized and patchy. I travelled across eight counties with a population of as many millions. Away from Chengdu and Chongqing, the only sign of economic take-off was in Deng's home county - a remarkable coincidence, or is it more than that?

Elsewhere life seemed much the same as ten years ago after the first post-Mao Zedong reforms had restored peasant markets and led to some new building of peasant homes. The broad-bladed hoe is still the most common tool. Farmers work barefoot in the paddy with red mud stains up to their knees. There are no roadside advertisements, only one or two cars, and the main form of transport is still the bicycle or a bamboo shoulder-basket. The county towns are dusty and bare: one or two karaoke bars with tattered curtains give a whiff of modern life. Hairdressing is much less elegant than in Guangan. I saw one customer having her hair hosed down on a pavement stool. Here the pressure of population growth has swelled the flow of peasant migrants to the south with special force. Slogans put up by the local governments stress the point. `Warning to all citizens: the Chinese population has reached 1.2 billion.'

Other slogans hint at a rural lifestyle which has been lowered, not raised, in recent years and appeal in dated language for a return to socialist values. In one short stretch of road I noted down the following:

`Everyone get organized and smash down the criminals.'

`Politics in command is the key to the socialist road.'

`Those who refuse to pay taxes will be punished according to law.'

`Unite to abolish all illegal religious activity' (probably a reference to the Protestant `house churches' which flourish in parts of Sichuan and other deprived provinces).

What on earth was going on here? These glimpses through bus windows more often black than grey with dust can only lift a tiny corner of a rural reality even harder to gauge further away from what counts for the main road. Guangan's building boom is all the more startling by contrast. Hilltops have been tipped into valleys to form two new `Economic Development Zones' to the north and south of the city. Clusters of shacks with matting for roofs have sprung up to provide shelter and food for the peasant contract workers. The red dust blows in everywhere.

Pursuing my historical research into Deng's early life, I was greeted with simple kindness. One encounter led gently to another. Some old folk chivvied a group of teenagers to practise their English on me. Two of the boldest invited me to their school. I gave an impromptu lesson to a class of 100 - I had to count to believe my eyes (the average across the school is seventy!). I was hijacked by an English teacher, struggling amazingly well with a language she had learnt only from fellow-Chinese and tapes. The headmaster told me, proudly, that here they were able to pay the teachers' salaries on time. Elsewhere educational funds are diverted for prestige development projects and teachers - like peasants - may get paid with IOUs.

Will the next generation of Guangan teenagers aspire instead to work for a joint venture or run a nightclub? My friends took me to see the new South Guangan Economic Zone. One of the roads, I was told with pride, is forty metres wide. First to be finished are a set of eighteen five-storey apartment blocks, nicely faced with tiles. Some are maisonettes of the kind built for foreigners on the outskirts of Chengdu and Chongqing. Lavish substitute housing, perhaps, for the inhabitants of old Guangan's wooden houses, with their attractive balustrades but no sanitation? No, these are new apartments for the cadres of the Guangan Prefecture. Once again, the Party connection. It begins to make better sense.

Guangan recently had a crucial promotion from the status of county (xian) to the much larger prefecture (diqu). This favoured and highly unusual treatment also explains a great deal. To do this it has sliced off a great chunk of the neighbouring prefecture to which it used to belong. With that territory, plus the immeasurable factor of Deng's connection, comes investment funds both from the three counties now absorbed into Guangan and from Beijing.

A special edition of the Guangan News offers tax incentives for foreign investors and a list of projects ranging from a paper factory to new classrooms at the local technical college. But Guangan has bigger plans than an assortment of light and medium industry. It aspires to build `the biggest power station in south-western China' - a coal-fired plant generating nearly 2.5 million kilowatts at a price of Dollars 350 million - if it can get Beijing's go-ahead. The story is long and involved. Guangan's main backer in Beijing, a close friend of Deng, has died. New pledges are being sought. They will have to hurry up: the Deng connection may not outlive the man. Deng does not seem to have personally championed the cause.

Mao went back home twice in his later life, seeking inspiration at crisis moments of the Great Leap Forward (1959) and the Cultural Revolution (1966). Deng left home in 1920 to study in France, and never returned to Guangan. The road to the Deng family farmhouse climbs high above the Qu River - one of many tributaries to the Yangzi - into a hilly but intensively cultivated terrain. The land is sculpted in man-made fields shaped to make the best use of water run-off. Rape seed and wheat are intermixed, with fruit trees on the margins and patches of vegetables sown between the other crops like embroidery.

Several dozen peasants were rehoused when the farmhouse was turned into a museum less than ten years ago. It is a substantial tiled building with three wings - a landlord's home. One of Deng's brothers was an opium smoker whom Deng failed to save from being `persecuted to death' during the Cultural Revolution. There are canopied wooden beds. A room of photographs disconcertingly includes Margaret Thatcher - twice. Monty is also there, being told by Mao that Deng (this was before the Cultural Revolution) is second in line for the succession. Outside, parties of schoolchildren and small groups of Chinese on vacation pose for the obligatory picture under the signboard saying: `Deng Xiaoping's old home.' There are exactly two souvenir stalls selling postcards, note-lets and medallions in praise of `our great architect of reform'. Mao's birthplace in Hunan province has several hundred shops, hustling restaurant owners and its own railway access.

A 500-character poem, displayed on either side of the door to Deng's bedroom, celebrates in classical Chinese the modern concept of `importing European capital and American technology'. Not far away, Deng's mother and grandmother are buried in an auspicious site overlooking the valley. Children play while their mothers hoe the vegetables. Mist floats up. There is a shimmer of fruit blossom. The loudest noise comes from above: a sandstone bluff, known as the Buddha's Hand, is losing its fingers to hammers and crowbars. The appetite for stone of an expanding Guangan must be satisfied.

What does Guangan tell us about the big `after Deng' question? Poised for economic take-off, at first sight it seems to confirm the argument that there should be no big problem. The good businessmen and women of Sichuan and elsewhere will carry on regardless of whatever arcane struggles take place in Beijing. Yet there must be a limit to the number of Guangans that China can support, sucking investment from elsewhere. There is a limit, too, to the amount of land which can be swallowed up for construction. If the Party is to survive, it must somehow also limit the appetite of officials aspiring to maisonettes and the profits of indirect commerce.

The biggest question remains in those villages off the road which itself is already off the beaten track. Migrant workers send back funds to keep their families alive, and provide cheap labour for the urban boom. No one really knows whether this will prove to be a satisfactory new social contract between town and countryside or the cause of more lethal friction when the boom subsides. Guangan is still a place where one is woken by the cockcrow and there are fields through the back window. But not for long. In its headlong rush to modernize, it is like everywhere else in China which seizes the hour in a cloud of frenetic dust - even if it means smashing Buddha's fingers.



March 1995, Chengdu

China's top Communist Party leader has sounded the alarm against the growth of corruption and abuse of power, in a speech which even tells Party officials not to frequent red light districts. The lengthy warning by the Secretary-general, Jiang Zemin, was published nationally yesterday on the front pages of every newspaper. Delivered in January, its release is timed in advance of the National People's Congress, when popular concerns about corruption will be widely expressed.

In a passage which may be unique in Party history, Mr Jiang rebukes officials who have been `intoxicated by wine, women and power, and give themselves up to all forms of pleasure'. He then warns these `comrades' not to be seduced by `white wine and red lanterns' - a transparent reference to the nightclub and brothels appearing in many parts of provincial China.

The main thrust of Mr Jiang's speech is to urge the Party to return to the by now semi-mythical standards of hard work and self-sacrifice, and to reject the `unclean' aspects of capitalism, imported along with China's economic reforms. He denounces the ideological influence of capitalist corruption in terms usually used by old-guard critics of the reforms. He suggests, also unusually, that the influence of China's former `exploiting classes' has survived to take advantage of new opportunities for corruption.

This is a loaded formula which may worry some Chinese entrepreneurs in high places who come from families which wielded power before 1949. But Mr Jiang insists that the general aim of the economic opening up under the veteran leader Deng Xiaoping is entirely correct. He claims that it amounts to a new revolution which should strengthen rather than weaken socialism. This may be a difficult concept for many Chinese today - including Party members - who welcome the reforms but are much less sure what socialism means.

In his speech, delivered to the Party's disciplinary commission, Mr Jiang demands that local officials should not cover up crimes committed by their colleagues, nor frustrate legal action when it is taken against them. This is regarded by many people as the nub of the problem. The ability of officials to protect officials has caused widespread cynicism. Mr Jiang also warns against government cadres who `swallow up state property' - a common device by which officials profit from enterprises still technically in public ownership.

Mr Jiang's warning on sexual morals reflects alarm at the appearance of an organized sex industry in areas where economic reforms have created a class of new rich with money to burn. Country towns in the hinterland of booming cities such as Chengdu, capital of Sichuan province, have begun to invest heavily in nightclubs, which then attract a surrounding district of sleazy karaoke bars where prostitutes work. While the metropolis will ban such blatant activities within its own boundaries, they appear to be tolerated at a safe distance.

Mr Jiang's speech is far more than a routine denunciation of Party malpractices. Though it follows a long line of similar complaints, its much more urgent note reflects the worsening situation despite successive anti-corruption campaigns. Corruption, crime and inflation are now the main popular concerns in China, according to a poll by the Chinese Academy of Social Sciences.

In political terms, Mr Jiang's speech will to some extent tilt the balance against the more radical reformers who tend to regard corruption as an unavoidable price to pay while China is in the midst of disorderly but necessary change.

Many Chinese intellectuals are sceptical about the chances of yet another appeal for a return to traditional moral standards. They say that Mr Jiang will need to tighten discipline so that top officials can no longer protect their subordinates in return for favours: that has never been achieved in the past fifteen years of official efforts to stamp out corruption.