How did China turned low productivity as a highest one

 

    Frank  Feb. 8, 2016,  in Waterloo, Canada

 

Talking about the achievement that China developed as second large economy today with an incredible fast speed, people first thought is the magic of high productivity of market economy. However, as my view, that was not the essential reason; the essence was that motivates people’s working enthusiasm by meeting human inborn greed with work performance linked payment – who makes more work, who gets more payment.

It sounds simple, but practice is difficult, the biggest obstacle is from conservative ideology and it is difficult to be updated.

The process of China’s economic reform is a process of fighting against conservative ideology, especially those policy makers from social governing system.

Besides ideology, it involved well understanding human nature.

In this regard, we should thank Mr. Yuan Geng, the former executive vice chairman of China Merchants Group, the important explorer and pioneer for China's economic reform – who died, at 3:58 on Jan. 31, 2016 at his 99 years old.

It was just under his hard efforts, the extreme low productivity in China to be promoted as highest one world widely.

Mr. Yuan Geng and China Merchants Group

By stirring up Opium Wars in 1840, the Western powers forced the government of China to have signed with a series of unequal treaties, by which to have grabbed huge waterways rights in coastal and inland China. China’s traditional domestic shipping was rapidly defeated.

Dec. 16, 1872, under the effort of China’s Minister Li Hongzhang, to have established China Merchants Steam Navigation Company for developing modern navigation industry to compete with overseas ships with a fleet of ships and offers ocean freight shipping services, which was the first Limited Liability Joint-Stock Company in China. 

Due to Chinese Civil War, the company split into 3 branches. The one in Shanghai and in Taipei was merged or renamed; only the one in Hong Kong has been in existing and uprised as China’s state owned. Under planning economy, the company stayed in idle without any achievement.

In Oct. 1978, Mr. Yuan Geng was appointed as executive vice chairman of the company in Hong Kong, and later the company was developed as China Merchants Group.

January 31, 1979, the government of China approved the application of Mr. Yuan Geng to have established Shekou Industrial Zone in Shenzhen, China, and in March 1980, Mr. Yuan Geng was appointed as top director of the Zone.

The Shekou Industrial Zone is a prototype of special economic zones, firstly opened the door to foreign investors in China. It was foreshadowed of China's reform and open up in the background that planning economy has still occupied in a monopoly position. Since then, as a leader, Mr. Yuan Geng was to carry out comprehensive reform exploration.

Here, in particular, I must point out that, at that time China, the ideology of the whole society was dogmatically adhering to socialism, with strongly exclusion of any private economy of capitalism, and Mr. Yuan Geng’s reform exploration was just the practice of the way of Capitalism in managing the Industrial Zone by economic means, which was radically against main stream of social ideological.

In 1979, in the construction of Shekou Port firstly broke the egalitarianism payment to implement work performance linked reward system to have greatly promoted productivity, which caused trouble for himself and also trigged reform of wage system in china.

In order to overcome the decades phenomenon of high cost, poor quality and schedule delays in engineering construction, in 1980, the China-Swiss Mechanical Engineering Company firstly introduced the project bidding, since then, the infrastructure projects mostly by tender contract, thus, reached in low cost, high quality, and high construction speed. It played a role of pioneering and pathfinder in China’s infrastructure construction reform.

As an experimental field, in Shekou industrial zone, Mr. Yuan geng created a lot of management innovation, even free election. Only from 1979 to 1984, he created 24 national first innovations in social governance. As a successful model, those innovations has been playing an exemplary role, it greatly contributed and promoted the economic reform in whole China.

The deeds of Mr. Yuan geng made me sure that, an excellent, non conformist and innovative individual can affect the future of a country. The progress of a country can also serve as an example to promote the advancement of other countries. Of course, the excellent individual cannot be success without a booster effect of the favorable tide – the historical development trend.

The economic difficult Canada has formed such a favorable tide. I hope that the spirit of Yuan Geng would provide a inspiration for Canadians.

Here, I can only concentrate on a little regarding the productivity issue that Mr. Yuan geng had experienced and created.

 

Mr. Yuan Geng once shocked by low productivity in China

The documentary Agitation for 30 years ·1978-2008 tells a story of Mr. Yuan Geng’s shocking experience in Shanghai Shipyard.

In 1976, at the dawn of China carrying out reform and open up, Mr. Yuan Geng has visited Shanghai Shipyard that once located in the bank of Huangpu River, Shanghai, China.

He witnessed the shocking low productivity - the workers in the Shipyard were all in enjoying sunshine, there no one was in working.

Some people said that, the workers in Shanghai Shipyard, in winter, to look for warmer sun shining, and in summer, to look for cooler wind blowing.

Mr. Yuan Geng said bitterly, suppose in long run as this, if the people of China do not suffer poverty, it is the mistake of the Creator of human world.

The story shocked me to think of that, in this world, most people are in trance blindly following with crowd; there very few people are in awake considering how to change the status quo.

Two cents work-performance linked incentive determined China’s economy today

This section is excerpt translated from Hong Kong Phoenix Television’s documentary Reform and opening up - Shekou Chronicle (2) in Nov. 18, 2008.

In the early stage, the Shekou Industrial Zone was still a place with barren hills. For running industry and introduction of foreign capital, it must be up-front investment for land leveling, water supply, power supply, traffic facility, navigation facility, and telecommunication facility, a large number of construction materials have to be transported into the Zone. It is imperative to build 600 meters of Wharf.

The construction money was borrowed loans from Hong Kong. The construction team for the pier was China state-owned with low productivity. The managements of the Zone were anxious in construction schedule, but, the construction team was in no hurry in its easy way, due to in that time, China was implementing an egalitarian wage system, no matter people work more or less, the payments are the same.

The distance between the place of rocky soil that used for harbor reclamation to the place of building pier was only about 20 meters away, the transportation trucks only run 20 to 30 times per day, lazy enough. The construction company provided bonus in three levels of 5, 6, and 7 Yuan per person monthly, but, in fact, it was paid on an average of six Yuan per person equally. The bonus was no any effect for incenting work enthusiasm.

As a way of no way out, in 1980, Shekou Industrial Zone decided to provide bonus to the construction workers, which taking per truck transport 56 times daily as a standard, within 56 times, per driver get two cents Yuan bonus, for the excess part, drivers get another two cents Yuan. Thus, the truck runs 130 times per day. In original, every month, per driver can only get 6 Yuan from own company, and now, only in one day, per driver can get more than 4 Yuan from Industrial Zone. Thus, mobilized the work enthusiasm of the drivers, the work efficiency largely increased, and the project was constructed quickly. It was very happy in both sides.

However, such happy was not lasting long, those drivers began lazy again, sat down and chatting, constantly running to toilet, construction speed was slow down again. The reason was that State Administration of Labor issued a document and ordered that Industrial Zone incentive must be stopped.

The order directly impacted on the speed of construction, for the first time, there has been not complete construction schedule.

When preparing a report to the superior management, at the same time, Mr. Yuan Geng also called the reporters of Xinhua News Agency in Shenzhen. The reporters made an investigation and wrote an internal press proof directly to the central government. As a result, the General Secretary Hu Yaobang was very angry, he made a stern instructions: why the State Administration of Labor was even doing so, and the Ministry of Transportation was also so positive, it seems that some of departments do not engage in real economic reform, with the work still relying on the issue of provisions and orders. This is not engage in building modernization?

Soon, Shekou Industrial Zone continued to carry out work performance linked incentives, the 4 cents incentive took its magic again, the construction was speeded up, and construction site returned to busy again.

Shekou Industrial Zone has made a statistical, the work performance linked incentives helped to make output value in a total of more than 1.3 million Yuan, while the bonus paid to workers less than 2% of the output value.

The bonus in 2 cents and 4 cents took place a huge economic effect; but, the process of the practice has suffered a ridiculous twists and turns.

Mr. Yuan Geng often sighed with that, it is simply no way out, China is so big, and our Shekou is a place so small, for doing things so little, it even needs to disturb the General Secretary, and Prime Minister, how can make whole country go forward.

From above facts, we can learn the difficult that China carried out economic reform successfully.

In 1981, in Shekou Industrial Zone, the land leveling, industrial related facilities and construction of the pier were substantially completed. In June 16, the news paper of the People's Daily published the report of Xinhua News Agency – The Construction Speed of Shekou Industrial Zone is fast, and firstly proposed Shekou Model with affirmed the bonus system, project bidding system, and a series practices in according to market economy law. Since then Shekou Mode was fixed down and has been playing as a model for China's economic reform nationally.

This is the reason of I said that it was four cents work-performance linked incentive determined China’s economy today.

It is necessary to point out that any social change would inevitably touch the vital interests of some people, thus would cause a danger for the reformer.

Mr. Yuan Geng once said, he had seen that when antelopes were hunted by beast, the old antelope was firstly to jump into the mountain stream and stood there, then, frail little antelopes jumped to on and then skip over the mountain stream. The old antelope is protecting their race at the expense of their own life.

The economy being dragged down by low productivity and low oil prices, in Canada, we need the spirit of old antelope. We need someone willingly as old antelope.