Editing Zhu Rongji (section)

==Vice Premiership==

===Overview===
In 1991, largely due to his success in managing the development of Shanghai,<ref name="D&M" /> Zhu was promoted into the central government in Beijing, where he focused on planning and resolving economic projects and issues as the [[Vice Premier of China|vice premier]] of the [[State Council of the People's Republic of China|State Council]] under Premier [[Li Peng]] and the director of the State Council Production Office. He also served an overlapping term as the governor of the [[People's Bank of China]] from 1993 to 1995.<ref name=":3">{{Cite book |last=Liu |first=Zongyuan Zoe |title=Sovereign Funds: How the Communist Party of China Finances its Global Ambitions |publisher=The Belknap Press of [[Harvard University Press]] |year=2023 |isbn=9780674271913 |pages= |doi=10.2307/jj.2915805 |jstor=jj.2915805|s2cid=259402050 }}</ref>{{Rp|page=45}} His first issues after arriving in Beijing were to restructure the debts owed by [[state owned enterprise]]s, and to simplify and streamline the process by which farmers sold their grain to the government. Zhu was able to enact relatively far-reaching reforms largely via the broad support of Deng Xiaoping, who noted that Zhu "has his own views, dares to make decisions, and knows economics."<ref name="Song 429" /> In comparing Zhu to his peers when considering his appointment, Deng said, "The current leadership do not know economics... Zhu Rongji is the only one who understands economics."<ref name="LaMoshi">LaMoshi</ref>

When [[Early 1990s recession|a global recession occurred in 1992]], China was challenged with excessive investment in fixed assets, excessive monetary supply, and chaotic financial markets.<ref name="Weatherley" /> Inflation rates reached over 20%.<ref>Schmidt xiii</ref> As the director of the central bank and the vice-premier and head of the State Council Economic and Trade Office, Zhu resolved these issues by limiting monetary supply, eliminating duplicate low-tech industrial projects,<ref name="Song 429-430">Song 429–430</ref> devaluing the Chinese currency, cutting interest rates, reforming the tax system,<ref name="Weatherley" /> and investing state capital in the transportation, agricultural, and energy sectors.<ref name="Song 429-430"/> He attempted to reform the state banking sector by introducing greater oversight to discourage reckless lending, introducing "asset management companies" to manage the many large, non-performing loans that many of China's banks had accumulated, and privatizing large banks in order to expose them to free market competition.<ref name="Foley" /> Following Zhu's management, the Chinese economy was able to maintain stable growth and avoid dramatic price fluctuations. Zhu's ability to stabilize the economy led to his being named to the [[Politburo Standing Committee of the Chinese Communist Party|CCP Politburo Standing Committee]] at the [[14th National Congress of the Chinese Communist Party|14th Party Congress]] in 1992, after which he also retained his other posts.<ref name="Weatherley" /><ref name="Song 429-430"/>

In July 1993, at the first National Finance Work Conference, Zhu gave a speech in his capacity as governor of the People's Bank of China.<ref name=":3" />{{Rp|page=47}} Zhu explained his view of how China's financial system should be structured, stating that the state "must establish a system of financial institutions, under the supervision of the central bank, principally consisting of national policy banks and state-owned commercial banks, but that encompasses a variety of financial institutions[.]"<ref name=":3" />{{Rp|page=47}} His proposed institutions included an export-import bank, a national interbank lending system, a short-term paper market, and an renminbi exchange rate mechanism based on the market rate.<ref name=":3" />{{Rp|page=47}} As researcher Zongyuan Zoe Liu writes, "The Party's contemporary economic power and financial influence are based substantially upon the institutions that Zhu envisioned in 1993, Fifteen years later, in 2008, China's [[policy bank]]s and [[Sovereign funds of China|sovereign funds]] emerged on the global financial scene as some of the world's largest institutional investors, wielding significant influence over financial markets and projecting the Party's power abroad."<ref name=":3" />{{Rp|page=47}}

The most active opponent of Zhu's plans to reform the Chinese economy was Premier [[Li Peng]]. Li and Zhu clashed in the first two years following Zhu's appointment as vice-chairman; but, by the time that he suffered a heart attack in 1993, Li had lost influence within the government and was no longer able to block many of Zhu's reforms.<ref>Mackerras, McMillen, & Watson 137</ref> That Zhu's reforms had quickly gained wide support within the central government was made clear at Li's confirmation process during the Party's 1992 convention: although Li's appointment was already agreed upon by China's top leadership, Zhu received a relatively large and unusual protest vote by many of the Party delegates.<ref>CNN.com</ref> Throughout Zhu's term as both vice-premier and premier, Li was successful in blocking Zhu from introducing regulation or government oversight over China's power companies,<ref name="Chen" /> and they remained private monopolies essentially run by Li's family throughout Zhu's term of office.<ref>Lam 1</ref>

Zhu once used the term "patriotic organizations" in a speech in the mid-1990s to describe the [[Triad (organized crime)|triads]], citing their history as secret societies in resisting foreign invaders and playing a key role in Chinese history. This was interpreted by some observers as indicating a cultural connection between the triads and the Communist Party.<ref>Manthorpe 118</ref>

===Contributions to socialist market economy===
Zhu was an advocate for markets while also viewing the state's role in setting the strategic direction of markets as indispensable.<ref name=":3" />{{Rp|page=45}} Generally, he was skeptical of the efficacy of comprehensive state planning of the economy.<ref name=":42">{{Cite book |last=Heilmann |first=Sebastian |url= |title=Red Swan: How Unorthodox Policy-Making Facilitated China's Rise |date=2018 |publisher=[[The Chinese University of Hong Kong Press]] |isbn=978-962-996-827-4 |author-link=Sebastian Heilmann}}</ref>{{Rp|page=134}} Zhu frequently argued in favor of indirect economic instruments, for example at the June 1993 Dalian Conference, although he also viewed central government directives as a viable tool.<ref name=":05" />{{Rp|page=194}}

Zhu and Deng's vision of China's future was not simply one of rapid growth. It included a programme of continuous reforms, which they believed would be necessary to achieve this growth. There were two major goals Zhu believed were necessary to achieve this vision, which Zhu began while serving as China's vice-premier. His first goal was to rationalize and centralize the fiscal and financial system. The second goal was to streamline and strengthen the state sector.<ref>Schell & Delury 337</ref>

Zhu's first task was to regain central control over the country's burgeoning yet dangerously decentralized tax revenues. Before reforming China's tax system he went in person to each province in China to sell a new "tax sharing" idea modeled on the [[Taxation in the United States|U.S. federal tax system]]. Under this new policy, revenue from provinces would go first to Beijing, and then portions would be returned to the provinces. Following the introduction of this tax system, the central government's cut of total revenue increased by over 20% in a single year, balancing the central budget and putting Beijing's resources on track to reliably increase over time. In order to manage China's financial affairs he appointed himself governor of the People's Bank of China with jurisdiction over monetary policy and financial regulations, bringing the highly decentralized banking system more closely under Beijing's control.<ref>Schell & Delury 337–340</ref>

Zhu's next task was to deal with China's four colossal state-owned banks, which had accumulated billions of dollars in nonperforming loans due to profligate local lending to unprofitable [[Government-owned corporation|state-owned enterprises]] (SOEs). He quarantined these bad loans in newly created "asset-management companies", and recapitalized the banks through government bonds in a restructuring strategy. After his promotion to premier in 1998, Zhu saved the biggest SOEs and allowed thousands of other small and medium-sized firms and factories to go under, assuming that new growth in the private sector could alleviate any surge of unemployment. This strategy resulted in millions of workers losing their "[[iron rice bowl]]" guarantees of cradle-to-grave employment, health care benefits, and pensions. Zhu challenged managers to base salaries on performance and market competitiveness and made profitability and productivity determining factors in managerial and executive promotions within surviving SOEs.<ref>Schell & Delury 340–341</ref>

Zhu abolished [[Foreign exchange certificate|Foreign Exchange Certificates]] in 1994, which China had used as a parallel currency system for foreigners.<ref name=":05" />{{Rp|page=194}}

All these economic reform efforts by Zhu did not dismantle the state sector, but streamlined it with the goal of accomplishing Deng's new form of marketized socialism. Although many in the West were skeptical when Deng announced that he would pursue "socialism with Chinese characteristics," Zhu's reforms helped increase China's wealth and power while leaving it under the firm grip of the Communist Party.<ref>Schell & Delury 342–343</ref>

Zhu also had an important role in reducing inflation.<ref name=":05" />{{Rp|page=194}}