Capitalism overtakes China icon

September 25, 1994|By Ian Johnson | Ian Johnson,Beijing Bureau of The Sun

ZUNYI, China -- For about 10 years in the late 1960s and early 1970s, this seemed the luckiest of cities in Communist China.

A pilgrimage site for the party faithful, it also was part of the world's largest -- and most bizarre -- military industrialization programs, the little-known "Third Front" project. For a few happy years, its streets overflowed with tourists and well-paid workers.

But about 15 years ago, Zunyi's luck changed. The tourists began to favor scenic spots in other parts of the country over a tour of the house where a young Mao Tse-tung took control of the Chinese Communist Party. And the Third Front factories, built in a rush to survive nuclear war with the United States, began to seem more like white elephants than strategically important assets.

Now the city is suffering its bitterest blow. Industrial reform, which threatens to put up to half the city's labor force out of work, is slowly taking hold here. For decades the symbol of Chinese Communism's strident opposition to the capitalist West, Zunyi is being crushed by market forces.

The reforms are especially painful here in China's mountainous western provinces.

Unlike in China's booming coastal regions, few inland workers are employed by private enterprise, meaning that virtually all are working for companies ill-equipped to survive in the free market.

History has left these areas with huge industrial behemoths; in Zunyi, for example, virtually all the city's work force is employed by state enterprises -- only 1 percent work for private companies.

"The Third Front era left us with an industrial base that we'd never have had otherwise, but our industrial structure is also too much weighted toward heavy industry. This is a big challenge for us now," said Zhao Futian, deputy head of the Zunyi Prefecture.

Zunyi wasn't supposed to end up as a poster child for bankrupt economic policies.

Last stand for war

Back when Beijing's rulers decided to bestow their largesse on this city and the rest of inland China, the idea was to survive an invasion of China's vulnerable coast by the United States and its allies on Taiwan. Officials realized that they probably couldn't defend the coast, or even the fertile flatlands a few hundred miles inland.

Instead, Chinese soldiers supported by a new military-industrial complex would make a last stand against capitalism by fighting on a "Third Front" in China's rugged interior -- back where the communists honed their guerrilla skills in the 1930s and '40s, when they were fighting China's Nationalist government and, later, Japanese invaders in World War II.

Places like Zunyi fit this new strategy perfectly. Not only was the city located in one of China's most mountainous provinces, Guizhou, but it also was the site of the historic Zunyi Conference in 1935, where Mao wrested control of the Communist Party away from opponents who favored traditional military tactics over guerrilla warfare.

Like in the good old days, Mao's vision in the early 1960s called for his forces -- in this case steel mills, truck factories and missile plants -- to be tucked away in mountains or holed up in caves. No one had the guts to tell him that it made no economic sense.

Staggering costs

The costs of the Third Front were staggering, especially to a poor country like China. Between 1965 and 1975, more than $70 billion was invested in 13 provinces, especially southwestern China's Guizhou, Yunnan and Sichuan provinces.

To put it another way, China was pumping almost half its fixed capital investment into just this one project.

The results were not totally useless, notes Barry Naughton, a researcher at the University of California at San Diego, who wrote the first reliable history of the Third Front. A rail system was built that linked remote cities, such as Zunyi and Guiyang, with the rest of China. And these parts of China, which previously had almost no industry, were suddenly brimming with skilled workers imported from other parts of China.

Even today, most economic planners in this region think of the Third Front as a good thing. For a few years, at least, they were the center of economic attention and flooded with state planning money. It may have cost the rest of the country a lot -- Mr. Naughton, for example, has estimated that China's industrial fTC output would be roughly 10 to 15 percent higher if the Third Front money had been invested in more sane economic projects -- but at least these inland provinces got their share of the pie for a while.

Massive layoffs possible

Now, however, even that small comfort seems to be evaporating.

As the central government tries to jettison these loss-making state enterprises, the Third Front era has left these poor inland areas with a disproportionately high number of state firms.

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