True Story Behind Deng Xiaoping’s South Tour Through the Eyes of a Historical Witness

Commentary Recently, a series of articles have been published under the title “The 30th year of Deng Xiaoping’s South Tour” on DWNews, a Chinese Communist Party (CCP) propaganda mouthpiece that targets overseas Chinese-language readers. Deng traveled to Shenzhen, a southern Chinese city, in January 1992 in an effort to win back his power in China amid heavy political infighting between his opponents. Although revealing some important historical information, the articles nonetheless followed the CCP’s official history framework and made significant alterations to and omissions of the historical background. They are, in fact, CCP newly fabricated brainwashing pieces. As an aide to then premier Zhao Ziyang, I personally witnessed and participated in some of the events before Deng’s tour. I would like to clarify the facts behind that tour, and show how Deng messed up China’s domestic economic reform and lost his influence among the top echelons of the CCP. 1980s Infighting Between CCP Oligarchs In the early 1980s, not long after the Chinese Communist regime’s first-generation leader Mao Zedong’s died in 1976, two oligarchs forced Mao’s successor Hua Guofeng to step down and took over his power. The two oligarchs—Deng Xiaoping and Chen Yun—had different policies and strengths. Deng and his supporters had control of the Chinese military, which is what the CCP calls “the barrel of the gun,” and their policies focused more on economic reform. Chen and his faction were deeply rooted in the CCP’s human resources, propaganda, and various economic departments under the State Council, a top government body similar to cabinets in western countries. Chen and his people insisted that the CCP must not give up the planned economy. The two factions kept fighting and were the root cause of the CCP’s policy scales and political scales swinging widely during the 1980s. Zhao Ziyang, then premier, found it difficult to make a breakthrough in China’s economic policies without breaking the balance between the two factions. However, he managed to work some cases using good networking among the CCP top echelons. Former Chinese Communist Party chief Zhao Ziyang (C) addresses student hunger strikers on one of the buses at Tiananmen Square in Beijing on May 19, 1989. (Xinhua/AFP/Getty Images) The following is one example of how Zhao managed to get his plans approved by both of the oligarchs. Zhao launched an urban economic reform in Sept. 1984. To make it politically and ideologically legitimate in the regime, he had Ma Hong, the deputy Secretary-General of the State Council at that time, draft a report titled “Socialist Planned Economy Is a Planned Commodity Economy Based on Public Ownership,” which actually meant “planned economy is commodity economy” after deleting all the attributes. Zhao first obtained Deng’s support of his urban economic reform plans; then intended to use the report to test the attitude of Chen Yun about the plans, as Chen had been against the market economy. As Chen had established a personal relationship of trust and appreciation with Ma when they worked in Yan’an in the early years, Chen did not reject the urban economic reform suggestions in Ma’s report. Obtaining positive replies from both Deng and Chen, Zhao successfully had his plan passed at the third plenary session of the 12th Central Committee of the CCP. He seemed to have obtained some legitimacy for the economic reform he was rolling out in China. Deng Xiaoping Messed Up Zhao’s Urban Economic Reform Plan Zhao became General Secretary of the CCP in 1987. However, few knew that he, the top leader of the CCP, had great difficulty rolling out his plan for urban economic reform. First, Zhao could not expect any help from Li Peng, a premier who had no understanding of the macroeconomy. Also, Zhao faced covert resistance from planned economy bureaucrats represented by Chen Yun. Third, Deng, who was chairman of the CCP’s central military committee, wanted to influence and interfere in the economic work of the government. In May 1988, Deng interfered in the economic sector and asked the CCP’s Politburo to examine whether the planned price system could be changed to a market pricing system within three to five years. He told them “not to fear any risk” and to “solve the pricing issues once and for all.” His price reform changed Zhao’s overall economic reform, and his reckless practice was later known as “breaking through the pass of pricing.” The CCP had been implementing a planned economy since it stepped into power. The communist regime had tight control of all resources and their prices. Even the price of a box of matches had to be determined by the government. Zhao planned to reform the highly centralized pricing system in a gradual and systematic way, taking into consideration other reforms such as wages and state-owned companies, as part of a comprehensive economic reform. But Deng wanted to change the pricing system quickly, which

True Story Behind Deng Xiaoping’s South Tour Through the Eyes of a Historical Witness

Commentary

Recently, a series of articles have been published under the title “The 30th year of Deng Xiaoping’s South Tour” on DWNews, a Chinese Communist Party (CCP) propaganda mouthpiece that targets overseas Chinese-language readers.

Deng traveled to Shenzhen, a southern Chinese city, in January 1992 in an effort to win back his power in China amid heavy political infighting between his opponents.

Although revealing some important historical information, the articles nonetheless followed the CCP’s official history framework and made significant alterations to and omissions of the historical background. They are, in fact, CCP newly fabricated brainwashing pieces.

As an aide to then premier Zhao Ziyang, I personally witnessed and participated in some of the events before Deng’s tour. I would like to clarify the facts behind that tour, and show how Deng messed up China’s domestic economic reform and lost his influence among the top echelons of the CCP.

1980s Infighting Between CCP Oligarchs

In the early 1980s, not long after the Chinese Communist regime’s first-generation leader Mao Zedong’s died in 1976, two oligarchs forced Mao’s successor Hua Guofeng to step down and took over his power. The two oligarchs—Deng Xiaoping and Chen Yun—had different policies and strengths.

Deng and his supporters had control of the Chinese military, which is what the CCP calls “the barrel of the gun,” and their policies focused more on economic reform.

Chen and his faction were deeply rooted in the CCP’s human resources, propaganda, and various economic departments under the State Council, a top government body similar to cabinets in western countries. Chen and his people insisted that the CCP must not give up the planned economy.

The two factions kept fighting and were the root cause of the CCP’s policy scales and political scales swinging widely during the 1980s.

Zhao Ziyang, then premier, found it difficult to make a breakthrough in China’s economic policies without breaking the balance between the two factions. However, he managed to work some cases using good networking among the CCP top echelons.

Epoch Times Photo
Former Chinese Communist Party chief Zhao Ziyang (C) addresses student hunger strikers on one of the buses at Tiananmen Square in Beijing on May 19, 1989. (Xinhua/AFP/Getty Images)

The following is one example of how Zhao managed to get his plans approved by both of the oligarchs.

Zhao launched an urban economic reform in Sept. 1984. To make it politically and ideologically legitimate in the regime, he had Ma Hong, the deputy Secretary-General of the State Council at that time, draft a report titled “Socialist Planned Economy Is a Planned Commodity Economy Based on Public Ownership,” which actually meant “planned economy is commodity economy” after deleting all the attributes.

Zhao first obtained Deng’s support of his urban economic reform plans; then intended to use the report to test the attitude of Chen Yun about the plans, as Chen had been against the market economy. As Chen had established a personal relationship of trust and appreciation with Ma when they worked in Yan’an in the early years, Chen did not reject the urban economic reform suggestions in Ma’s report.

Obtaining positive replies from both Deng and Chen, Zhao successfully had his plan passed at the third plenary session of the 12th Central Committee of the CCP. He seemed to have obtained some legitimacy for the economic reform he was rolling out in China.

Deng Xiaoping Messed Up Zhao’s Urban Economic Reform Plan

Zhao became General Secretary of the CCP in 1987. However, few knew that he, the top leader of the CCP, had great difficulty rolling out his plan for urban economic reform.

First, Zhao could not expect any help from Li Peng, a premier who had no understanding of the macroeconomy.

Also, Zhao faced covert resistance from planned economy bureaucrats represented by Chen Yun.

Third, Deng, who was chairman of the CCP’s central military committee, wanted to influence and interfere in the economic work of the government.

In May 1988, Deng interfered in the economic sector and asked the CCP’s Politburo to examine whether the planned price system could be changed to a market pricing system within three to five years. He told them “not to fear any risk” and to “solve the pricing issues once and for all.” His price reform changed Zhao’s overall economic reform, and his reckless practice was later known as “breaking through the pass of pricing.”

The CCP had been implementing a planned economy since it stepped into power. The communist regime had tight control of all resources and their prices. Even the price of a box of matches had to be determined by the government.

Zhao planned to reform the highly centralized pricing system in a gradual and systematic way, taking into consideration other reforms such as wages and state-owned companies, as part of a comprehensive economic reform. But Deng wanted to change the pricing system quickly, which could lead to significant price increases, and cause possible panic buying and an unstable society.

Therefore, the CCP Politburo standing committee held a discussion on the issue and reached a consensus on eight points, which were basically opposite to Deng’s thinking, and supported limited adjustments to certain prices.

Had the opinion not been disclosed, it would not have triggered panic among the Chinese people.

Deng, however, turned to the outside world to exert pressure on Zhao and other Politburo members, forcing them to accept his thinking. In his meetings with foreign guests between May 19 and June 3 in 1988, he told his foreign guests that the Chinese government had decided to implement pricing reforms.

As chairman of the military, he was not in a position to talk about China’s economic policies. Nonetheless, he imitated his predecessor Mao Zedong, who used to pressure the CCP Politburo to follow his intentions by deliberately disclosing information to foreigners.

I was director of the research office of the Research Institute of China Economic System Reform at the time. The top state body overseeing China’s reform, the National Development and Reform Commission, was holding a panel discussion at Jingxin Hotel when Deng announced to foreign visitors that China was going to “break the pass of prices.”

My colleagues and I were against Deng’s radical and reckless pricing system reform, as we thought it was not a good idea. However, all the other panelists supported Deng’s pricing policies. The Jingxi Hotel panel deleted my suggestions from all the meeting materials.

The Chinese propaganda organs massively reported on Deng’s price reforms, triggering a psychological panic in the public, followed by a fierce nationwide bank run and panic buying. Prices rose rapidly, and the economic situation became very serious.

An advertising poster for the miniseries
A still of a poster advertising the miniseries ‘Deng Xiaoping At History’s Crossroads,’ produced for the 110th anniversary of his birth, taken on Aug. 12, 2014. (Screenshot from Sina.com via The Epoch Times)

Zhao did not believe Deng’s hasty pricing reform would work; but as a major leader of economic reform, he was not in a position to directly oppose Deng’s plans. Therefore, he made speeches at every opportunity saying that price reform could only be successful if it was accompanied by enterprise reform. He also invited Deng’s economists to his office for talks, hoping they would convince Deng to change his mind. But he did not get any support from his counterparts or the experts.

Chen’s Faction Contributed to the Failure of Deng’s Price Reform

Chen had a very helpful aide, Yao Yilin, who was a vice-premier in charge of economic work at that time. Though they both opposed Deng’s price reforms, they did not negate Deng openly. Instead, Chen and Yao created a lot of publicity with great fanfare—they held various sessions and panels on Deng’s price reform and solicited opinions from academics on the price-wage reform proposal. But these superficial measures were meant to fool Deng, who was known to not attend to details.

Nonetheless, their propaganda incited panic among the people, and in the summer of 1988, high inflation added to “a nationwide spending spree and the biggest flood of bank runs in Chinese history.”

When Chen was certain of Deng’s failure, he stepped in to say that the price reforms must be stopped immediately. He also asked for rectification of the reform, and had the planned economic governance authorities take back control of China’s economic activities.

Deng had to accept Chen’s opinion. In Sept. 1988, the CCP central government announced that price reform was to be abandoned. Prices in China fell under reimplementation of strict controls.

In this confrontation with Chen, Deng suffered significant political setbacks and had to allow Chen to have more say in China’s economic decisions. But Deng blamed Zhao for the failure of the price reforms.

Zhao, the scapegoat for Deng’s failure, could not defend himself in the political turbulence. However, media reports that had boasted about Deng’s price reform could prove Zhao’s innocence.

In 1989, as Zhao opposed Deng’s ordering the military suppression of Tiananmen Square student protests, Deng removed him from the CCP’s general secretary position and replaced him with Jiang Zemin.

Zhao was put under house arrest for 16 years until 2005, when he passed away.

Chen and his faction reached their prime after Deng failed in his reckless and hasty price reforms in 1988. Deng’s order to crack down on student protests with military troops made him politically unfavorable. Jiang Zemin, though promoted by Deng, now followed Chen.

Deng wanted to win back his power by resorting to economic reform, which was the opposite of Chen’s planned economy and a weapon for him to use against Chen. As Shenzhen was one of the earliest Chinese cities opened to the world, it was symbolic of China’s opening up and reform. Hence, Deng decided to travel there, and it is in this city that he issued his well-known warning to his political opponents: “Whoever is against reform must step down.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


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Dr. Cheng Xiaonong is a scholar of China’s politics and economy based in New Jersey. Cheng was a policy researcher and aide to the former Party leader Zhao Ziyang, when Zhao was premier. He also served as chief editor of the journal Modern China Studies.