As China's new leadership team emerges, the world's attention has focused on President Jiang Zemin's successor. But this is misguided, for perhaps the most significant moment in China's recent history of boom and transformation was the 1998 appointment of Zhu Rongji (pronounced "Joo Rong-jee") as premier of the State Council, a position once held by Deng Xiaoping. Given the obvious importance of the post in recent years, the choice of Mr. Zhu's replacement may be of even more significance than President Jiang's departure from center stage.
Even before he became premier, Mr. Zhu, as the president of China's central bank, was known as the architect of China's 8% annual economic growth in the 1990s and the mastermind of its successful fight against inflation. Mr. Zhu has been China's Jack Welch, the tough-minded, longtime CEO of the American conglomerate General Electric--a man celebrated for his candor, his global sophistication, and his insistence on performance. Indeed, Mr. Zhu was renowned for punishing those who fell short of his expectations. As mayor of Shanghai, he once disciplined his tourist bureau officials by making them scrub the city's public toilets themselves.
A few months after his appointment as premier, Mr. Zhu delivered his "three promises" speech, in which he pledged to make three bold moves to secure a more vibrant, self-sustaining economy. First, he would overhaul the 300,000 state-run national corporations that still conducted an overwhelming amount of China's business and accounted for the bulk of its economic activity. More than 70% of such companies were unprofitable and were propped up by government subsidy.
Just as Mr. Welch promised to "fix, close, or sell" nonperforming divisions of General Electric when he took over the company, Mr. Zhu threatened to fire chief executives of Chinese firms that lost money for more than two consecutive years, and then either to shut them down or sell them. This forced national corporations to be privatized and go public or to be overseen by provincial governments, a change that proved to be a major impetus for a sudden decentralization of China's governance structure--another key legacy of Mr. Zhu's tenure.