sign in sign up
<<
Home , Ai Baojun, Cai Wu, Huang Qifan, Hu Wenming, Li Keqiang, Li Qiang

bindex.indd 540 3/14/11 3:26:49 PM ’s development, at least in part, is driven by patriotism and pride. . . The Chinese people have made great contributions to world civilization. . . Our commitment and determination is rooted in our historic and national pride. . . It’s fair to say that we have achieved some successes, [nevertheless] we should have a cautious appraisal of our accomplishments. We should never overestimate our accomplish- ments or indulge ourselves in our achievements. . . We need to assess ourselves objectively. . . [and aspire to] our next higher goal. . . [which is] a persistent and unremitting process. Politburo Standing Committee member

In the face of complex and ever-changing international and domes- tic environments, the Chinese Government promptly and decisively adjusted our macroeconomic policies and launched a comprehensive stimulus package to ensure stable and rapid economic growth. We increased government spending and public investments and imple- mented structural tax reductions. Balancing short-term and long- term strategic perspectives, we are promoting industrial restructuring and technological innovation, and using principles of reform to solve problems of development. Politburo Standing Committee member

I am now serving my second term in the Politburo. . . President ’s character is modest and low profile. . . we all have the high- est respect and admiration for him—for his leadership, perspicacity and moral convictions. . . Under his leadership, complex problems can all get resolved. . . It takes vision to avoid major conflicts in soci- ety. Income disparities, unemployment, bureaucracy and corruption could cause instability. . . This is the Party’s most severe test. In seven years under President Hu, the CPC has successfully maintained sta- bility while pushing forward with reform and opening-up. Politburo member; Head, CPC Publicity Department

ffirs.indd i 3/14/11 3:23:13 PM China’s democratic development should cater to its own condi- tions. . . the American political system should not be used to judge the Chinese political system. . . We have our own models and goals for political reform. . . We will do what is in the best interests of our people—which surely includes the development of democracy and the rule of law. . . China’s political and legal system is certainly not perfect, and we are certainly not satisfied. This is why President Hu stresses advancing intra-Party democracy and democracy of society. . . Reformers must take risks. . . The people must decide. Politburo member; Head, CPC Organization Department

Our growth model of 30 years, which enriched us rapidly, has come to the end of its cycle. . . . During the economic downturn, we’ve reached consensus on the need to transform our developmental model. . . We are determined to develop ’s capability for independent innovation. . . . We’re not interested in ‘facelifts’. Yang Politburo member; Party Secretary, Guangdong Province

How China should develop is a hard issue. China has achieved great economic success, but with many severe problems arising as a result— such as widening income gaps and increasingly strained human relationships. So, regarding urban development, the issues awaiting solution are how to produce a harmonious environment between human beings and nature, and among human beings themselves. Politburo member; Party Secretary, Municipality

We must have passion for our work, enthusiasm for our career, and care for our people. . . We stress dedicated work, honest performance, innovation, and unity among our officials. We will go nowhere if we ignore reality or fear innovation. . . I’m not interested in ‘reports’, only results. Gaoli Politburo member; Party Secretary, Municipality

ffirs.indd ii 3/14/11 3:23:14 PM How China’s Leaders Think

The Inside Story of China’s Past, Current and Future Leaders

Revised Edition

Robert Lawrence Kuhn

John Wiley & Sons (Asia) Pte Ltd

ffirs.indd iii 3/14/11 3:23:14 PM Copyright © 2011 by Robert Lawrence Kuhn. Published in 2011 by John Wiley & Sons (Asia) Pte. Ltd. 2 Clementi Loop, #02-01, 129809

All Rights Reserved

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop, #02-01, Singapore 129809, tel: 65- 6463-2400, fax: 65-6463-4605, e-mail: [email protected] This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought. Neither the authors nor the publisher are liable for any actions prompted or caused by the information presented in this book. Any views expressed herein represent those of the authors and do not represent the views of the organisations they work for.

Other Wiley Editorial Offices John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, USA John Wiley & Sons Ltd., The Atrium, Southern Gate, Chichester PO19 BSQ, England John Wiley & Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario M9B 6H8, Canada John Wiley & Sons Ltd., 42 McDougall Street, Milton, Queensland 4064, Australia Wiley-VCH, Boschstrasse 12, D-69469 Weinheim,

Library of Congress Cataloging-in-Publication Data: ISBN 978-0-111-808590-5 (paperback) ISBN 978-0-111-810427-9 (e-pdf) ISBN 978-0-111-810426-2 (e-mobi) ISBN 978-0-111-810425-5 (e-pub)

Printed in Singapore by Toppan Security Printing Pte. Ltd. Typeset in Plantin, 11 point, by MPS Limited, a Macmillan Company 10 9 8 7 6 5 4 3 2 1

ffirs.indd iv 3/14/11 3:23:14 PM Contents

About the Author vii Acknowledgments ix Overview: How China’s Leaders Think xiii

PART I GUIDING PRINCIPLES 1 1. Pride 3 2. Stability 14 3. Responsibility 19 4. Vision 27

PART II THINKING REFORM 35 5. Subjugation, Humiliation, Oppression 37 6. Reform’s Epic Struggle 51 7. Tiananmen and Thereafter 66 8. What’s a “Socialist Market Economy?” 73 9. How Communism Adopted Capital and Ownership 93 10. The Hidden Power of ’s “Three Represents” 105 11. The Driving Relevance of Hu Jintao’s “Scientific Perspective on Development” 120 12. Snapshots of Economic Reform 131 13. The Countryside is Core 143 14. Rebalancing Imbalances 152 15. How Reform Permeates All Society 161 16. Here Come the Lawyers 172 17. Facing Up to Corruption 180 18. Values and the New Social Contract 187

ftoc.indd v 3/9/11 7:12:40 AM vi CONTENTS

PART III DOING REFORM 201 19. Provincial Pictures of Reform 203 20. Regional Dragonheads: (Shanghai) and Binhai (Tianjin) 216 21. What to Do with State-Owned Enterprises? 225 22. The Private Business Revolution 244 23. Banking Reform: The Largest Assets and Greatest Risks 253 24. Reforming Science & Technology with Sparks & Torches 266 25. Education: When Reform and Tradition Clash 276 26. Healthcare and Medical Reform: One Doctor’s Story 281 27. Media and Publishing Reform: Hidden in Plain Sight 290 28. How Telecommunications and the Internet Changed China 308 29. Diversity of Culture; Question of Censorship 320 30. How China’s Leaders Love Film 331 31. Why Religion Became Important 344 32. Foreign Policy Breaks Free 361 33. What does Military Reform Mean? 379 34. Telling China’s Story to the World 391

PART IV REFORM’S FUTURE 405 35. China’s Future Senior Leaders 407 36. China’s New Kind of Leaders 426 37. China’s Economic Future: How Far Can It Go? 447 38. Guangdong Visions 459 39. China’s Political Future: Is Reform Real? 473 40. China Threat or China Model? 491 41. China Reflections and Visions 507

Index 521

ftoc.indd vi 3/9/11 7:12:41 AM About the Author

Dr. Robert Lawrence Kuhn is an international investment banker, corporate strategist, China expert, and public intellectual. Since 19891, he has worked with China’s leaders and advised the Chinese government (economic policy, industrial policy, mergers and acquisitions, science and technology, media and culture, Sino-U.S. relations, international affairs, and international com- munications). He has visited more than 50 cities in over 20 provinces and regions in China, working with leaders in government and business. Dr. Kuhn advises leading multinational companies, CEOs and C-Suite executives, on formulating and implementing China strategies (sectors include financial services, technology, energy/resources, industrial, media and entertainment, and consulting), and he works with major Chinese com- panies on structuring their capital markets financings and M&A activities. Specializing in M&A for over 30 years, Dr. Kuhn was president and co-owner of the largest M&A firm in the U.S. representing middle-market companies (which he sold to in 2000). Dr. Kuhn advises and works with China senior leaders on special projects. He is recognized as the author of The Man Who Changed China: The Life and Legacy of Jiang Zemin, a precedent-setting biography—the first of a living Chinese leader published in China—which was China’s best-selling book of 2005. He is the author of two event-marking books: China 30 Years: A Great Transformation Of Society (2008, in Chinese), which commemorates China’s 30th anniversary of reform and opening up and emphasizes President Hu Jintao’s political philosophy and policies; and How China’s Leaders Think (this book, first published in October 2009), which commemorates China’s 60th anniversary and focuses on China’s new (“Fifth”) generation of leaders (conversations with ~100 leaders), including Vice President Xi Jinping. Dr. Kuhn advised then Party Secretary (now Vice President) Xi Jinping on his U.S. visit (2006); he wrote exclusive articles with Politburo Member Li Yuanchao on China’s political reform (BusinessWeek, 2008) and the Party’s commitment to learning (Forbes, 2010), and with Politburo Member on transforming Guangdong Province (BusinessWeek, 2009). Dr. Kuhn is the author or editor of 25 books on business strategy, finance and , including Dow-Jones Irwin’s seven-volume

flast.indd vii 3/15/11 12:22:18 PM viii ABOUT THE AUTHOR

(5,500-page) Library of Investment Banking and China’s Banking and Financial Markets: The Internal Research Report of the Chinese Government. Five of his books have been published in China, including the first on invest- ment banking (). Dr. Kuhn is often in the international and Chinese media. He appears on CNBC, BBC, Euronews, Bloomberg and (CCTV); he writes for Bloomberg BusinessWeek, Forbes, People’s Daily and ; and he is quoted in numerous publications, including The Wall Street Journal, The New York Times, USA Today, and The Los Angeles Times. He is featured essayist in Chief Executive magazine and senior international advisor of Global People magazine (published by People’s Daily). Dr. Kuhn appears regularly as the senior China commentator on Euronews, the largest television and new media news network in Europe (also prominent in Russia, Africa and the Middle East), and as the senior international commentator on CCTV News, which is broadcast internation- ally in over 100 countries as well as throughout China. Dr. Kuhn created, co-produced, wrote and presented CCTV News’ official six-part television series on Expo 2010 Shanghai and the future of Shanghai (“Expo’s Meaning, Shanghai’s Mission”). Dr. Kuhn was profiled in Barron’s (2010) and on CCTV Channel 1’s “Focus Talk” (2009), and he is one of the “China Visionaries” in the ten- episode television series produced by (Dr. and Dr. Kuhn are the only Americans). Dr. Kuhn is senior advisor to CCTV and Xinhua News Agency. Dr. Kuhn is chairman of The Kuhn Foundation, which produces Closer To Truth, the PBS / public television series (which Dr. Kuhn hosts) on the mean- ing of state-of-the-art science and the relationship between science and phi- losophy/theology (www.closertotruth.com). The Kuhn Foundation also sponsors projects facilitating communications between China and the world. Dr. Kuhn has a B.A. (Phi Beta Kappa) in Human Biology from ; a Ph.D. in Anatomy and Brain Research from the University of California at Los Angeles (UCLA), and an S.M. in Management (Sloan Fellow) from the Massachusetts Institute of Technology (MIT).

Endnote

1 Personal Note: After the Tiananmen crackdown on June 4, 1989, I determined not to return to China. Over a year later, during the summer of 1990, I co-chaired a conference at UCLA on “Generating Creativity and Innovation in Large Bureaucracies” and invited Professor Kong Deyong of the State Science and Technology Commission, whom I had met in early 1989 on my first visit to China. It was Professor Kong, who later became Science and Technology Counselor at China’s Mission to United Nations, who convinced me to come back to China to support those, particularly in the science communities, who sought reform and opening-up. I returned in the fall of 1990.

flast.indd Sec1:viii 3/15/11 12:22:19 PM Acknowledgments

When China celebrated the 30th anniversary of reform and opening-up in December 2008, I was about to celebrate the 20th anniversary of my first coming to China in January 1989. The invitation had come from Dr. , state councilor and chairman of the State Science and Technology Commission, who asked a small group of American investment bankers to advise Chinese research institutes in their first, fledgling efforts to adapt to the market economy. A scientist and a gentleman, as well as a senior leader, Dr. Song is an inspiration to all who know him and it is my honor to acknowledge him first. I was hooked from the moment I arrived. The Chinese had a fresh, if naïve, enthusiasm; they were eager to learn, and ready to improve their civic and material lives. I knew then that China’s culture, history, politics and economics would soon come to matter a great deal to the world. What I didn’t know then was how much China would come to matter to me. In recent years, especially since the financial crisis of 2008–2009, I have been commentating on China—appearing on CNBC, BBC, Bloomberg, others; writing for BusinessWeek, Forbes, Chief Executive, Xinhua News Agency, others. Beginning in 2010, I am appearing regularly on China Central Television (CCTV News), where I often explain Western or American views, and on Euronews, where in the context of current or breaking news, I describe and analyze Chinese perspectives—often, extending the theme of this book, explaining “how China’s leaders think.” I am privileged to facilitate commu- nications between China and the world. The need has never been greater. There are many people to whom I give credit for this book, but one stands above all, my long-time friend and partner, Adam Zhu. I met Adam on my first trip to China when Adam was assigned by the State Science and Technology Commission to be my guide. It has been Adam’s vision, acumen, creativity, intensity, perseverance, commitment, dedication, and all manner of innovative ideas that has made my work in China and this book possible. His understanding, insight and special sensitivities are appreciated at the highest levels in China. His political knowledge and savvy instincts make

flast.indd Sec1:ix 3/15/11 12:22:19 PM x ACKNOWLEDGMENTS

things happen, even “impossible” things. If books like films, had “produc- ers,” Adam Zhu would be credited as this book’s “producer.” To describe all the challenges that Adam and I have faced since 1989, and all the adventures we’ve shared, would require another book. We are commit- ted to China and its future—to help in our small way China’s historic reform and development; to tell the true story of China to the world. I am appreciative of the advice and counsel of Minister Liu Yunshan, head of the CPC Publicity Department, and Minister Li Yuanchao, head of the CPC Organization Department; and Minister , head of the State Council Information Office; Minister Leng Rong, head of the CPC Party Literature Research Center; Minister of the Ministry of Culture; Zhao Qizheng, chairman of the Foreign Affairs Committee, Chinese People’s Political Consultative Conference (and former minister of the State Council Information Office); and Yang Yang, head of the International Cooperation Bureau, Chinese Academy of Social Sciences. I appreciate the research of Yang Mingwei of the CPC Party Literature Research Center. I am in debt to all those whom I interviewed for this book. I have learned a great deal from them and I have tried to represent their views faithfully and fully. I am honored to be in trust of their memories. I appreciate the wise advice and insightful (and sometimes critical) sug- gestions of Shanghai-based writer Duncan Hewitt. I appreciate the steadfast, all-around help of David Cao, my assistant in , who somehow, single- handedly at night, did most of the translations. I thank the team at John Wiley & Sons, particularly C.J. Hwu, for their content commitment and publishing excellence. Finally, the encouragement and love of my family—Dora, Aaron, Adam, Daniella, and Mother Lee—mean a great deal. Though I have received a good deal of advice, I take full responsibility for all ideas, opinions, errors and mistakes. The book is anchored by exclusive interviews and special (though limited) access in China, which I appreciate but for which I made no concessions. I received many suggestions—some helpful, some contradictory—but always with unambiguous agreement that all editorial decisions would be mine and mine alone. I am proud to be considered an old friend (lao pengyou) of China, a high compliment indeed, achieved after these two decades of learning and living. I dedicate this book to those good people, particularly my friends and col- leagues, whose commitment, foresight, persistence, and courage are helping to strengthen economic, social and political reform in China and to help China understand the world and the world understand China. Those who have taught me to understand and appreciate China come from all walks of life. They include farmers, soldiers, policemen, drivers, waiters, janitors, students, graduate students, factory workers, office workers, migrant workers, retired workers, laid-off workers, children, teenagers and grandmothers, as well as leaders, ministers, officials, executives, managers, scientists, professors and scholars. I have had the privilege of visiting more

flast.indd Sec2:x 3/15/11 12:22:20 PM ACKNOWLEDGMENTS xi

than 40 cities in China, from to , Shanghai to Lanzhou, to , Tianjin to Chengdu. My activities in China have been an overwhelming life experience. Some years ago, after finishing a late-night meeting in Beijing, I was asked when do I take vacations, since my Chinese friends knew that I had intense business and media lives in the U.S. “This is my vacation!” I said. I wasn’t kidding. To me, working in China, is energizing and exhilarating, even when frustrating and challenging. There is an infectious enthusiasm among the Chinese that is refreshing. Some may call my zest naïve, but I am invigorated by the Chinese spirit. The fact that personal relationships, not just business competitiveness, still play a role in commerce I find satisfy- ing—and I hope that these Chinese ways will not fall fast victim to the mar- ket economy. Perhaps those special “Chinese characteristics” can continue to embed respect for traditional values such as honoring old friends. To conclude, I would like to express my appreciation to some of these who, over the years, have helped me to learn and love China and to under- stand the Chinese people. They are friends, colleagues, and associates; some I have interviewed formally, others informally. Others I have appreciated their insights, whether in person or in writing. Still others have facilitated and supported my work, which was not always simple or risk free. Although the list is long—and I fear I am forgetting some people—I am pleased to thank all who have assisted Adam and me, in our limited way, to communicate the real China to the world: Xi Jinping; Li Keqiang; Liu Yunshan; Li Yuanchao; Wang Yang, Yu Zhengsheng; ; ; ; ; ; ; ; Song Jian; ; ; Wang Chen; Leng Rong; ; Cai Wu; Liu Binjie; Zhao Qizheng; Cai Fuchao; Wang Zhongwei; Teng Wensheng; Zheng Bijian; Liu Mingkang; ; Quan Zhezhu; ; Wu Jichuan; Tie Ning; Huang Jiefu; Li Bing; ; ; Yuan Chunqing; ; ; ; Tu Guangshao; ; Hu Wei; Feng Guoqin; ; Wu Xinxiong; Wang Yongsheng; Ma Xuming; Wang Weiguang; ; Wu Jinglian; Lu Baifu; Wang Huijiong; Gao Shangquan; Xing Bensi; ; Sun Zhijun; Jiao Li; Wei Dichun; Zheng Hongfan; Wang Yibiao; Shi Rende; Zhao Xuewei; Ye Xiaowen; ; ; Wu Jincai; Mi Ligong; Zhao Peng; Wang Guoqing; Qian Xiaoqian; Jiang Weiqiang; Zhang Yanbin; Liu Zhengrong; Li Xiangping; Xu Ying; Wu Jianmin; ; Zhou Wenzhong; Zhang Yan; Lan Lijun; Wang Baodong; Tian; Cai Zhenhua; Cong Jun; An Wenbin; ; Zhang Jingan; Jin Xiaoming; Zhao Shaohua; Ding Wei; Dong Junxin; Jia Tingan; Liu Yongzhi; Xiong Guangkai; Li Zhen; Yang Guhua; Bao Guojun; Guo Zhigang; Bao Bing; Wen Bing; Wu Xiaoling; Zhao Shi; Zhang Haitao; Tian Jin; Zhang Pimin; Zhu Hong; Shao Ning; Ni Di; Du Daozheng; Zhao Huayong; Zhang Changming; Hu En; Li Xiaoming; Gao Feng; Sun Yusheng; Li Ting; Li Jian; Zhu Tong; Jiang Heping; Wang Wenbin; Guo Zhenxi; Zhang Haichao; Jiang Mianheng; Fang Xinghai; Wang Luolin; Yang Yang;

flast.indd Sec2:xi 3/15/11 12:22:20 PM xii ACKNOWLEDGMENTS

Enfu; Wu Enyuan; Lu Xueyi; Zhang Xiaoshan; Li Yang; Wang Tongsan; Zhuo Xinping; Jin Chongji; He Chongyuan; Liu Aichen; Qin Zhigang; Gu Xia; Jiang Zehui; Shen Yongyan; Tong Zonghai; Song Ning; Yin Yicui; ; Song Chao; Jiao Yang; Xue Peijian; Li Ruigang; Hu Jinjun; Zhonglun; Sun Wei; ; Qi Huaiyuan; Gou Lijun; Duan Chunhua; Ren Xuefeng; Wang Hua; Chen Miner; Bayin Chaolu; ; ; Ding Minzhe; Zhang Baogui; ; Huang Yunbo; Xie Xinsong; Zhu Qing; Wang Min; Sun Yongchun; Liu Baoju; ; Liu Changyun; Zhu Xiaodan; Gan Lin; Ge Changwei; Li Shoujin; Wang Jingsheng; Mo Gaoyi; Liu Geli; Huang Xiaodong; Yang Xingfeng; Li Weiwei; Liu Lianyu; Mo Dewang; Ouyang Changlin; Huang Qifan; Li Xiaojie; Jiang Jianqing; Yang Chao; Wang Jianzhou; Xu Lejiang; Zhang Jianguo; Gao Xiqing; Fu Chengyu; ; Liu Chuanzhi; Zhang Ruimin; Yang Mianmian; Zong Qinghou; Zhu Jianghong; Li Rucheng; Liu Lefei; Liu Leting; Xiao Qingping; Fan Yifei; Pan Gongsheng; Tian Guoli; Li Xiaowei; ; Wang Guoliang; Pu Jian; Pan Gang; Niu Gensheng; Wang Hai; Zhou Houjian; ; Simon Chen; Miao Jianmin; Yu Yibo; Margaret Ren; Jiao Zhen; Zhang Weihua; James Liao; Wang Xianshu; Qiu Zhizhong; Eugene Qian; Zhao Jing; Wei Christiansen; Francis Leung; Zhang Yu; Li Nan; Wang Jianqi; Yu Long; Chen Zuohuang; Wang Liguang; Chen Xieyang; Ann Hu; Li Qiankuan; Xiao Guiyun; Molly Gong Zhongxin; Fan Yun; Wang Feizhou; Pang Xinhua; Chen Bing; Zhu Gongshan; Hunter Jiang; Pan Shiwei; Tong Shijun; Su Yunsheng; Wang Lifen; Lu Dongfu; Bi Dachuan; Zeng Jinsong; Guan Runlin; Ren Yinong; Jesse Chang; Cui Jin; Tan Xiangjiang; Ruan Wei; Li Qiang (CCTV); Xu Changdong; Annie Zhang; Chen Yaoyao and Jin Qingzhong. A special thanks to Shi Zhihong and Zhang Jianmin.

To all I say, Xie Xie.

Robert Lawrence Kuhn Beijing, People’s Republic of China New York, New York Los Angeles, California

August 20, 2009 February 18, 2011 (second printing)

flast.indd Sec2:xii 3/15/11 12:22:20 PM Overview

How China’s Leaders Think

On January 18, 2011, just as China’s President Hu Jintao was arriving in Washington, D.C. on a four-day to the United States, I was stand- ing on the historic Bund along the Shanghai riverfront during a rare Shanghai snowfall, about to be interviewed by CNBC on the significance of President Hu’s visit. I had been prepped to comment on the consequences of 2010, the year in which China had become the world’s second largest economy but also the year in which a cascade of China-related confronta- tions and controversies had led some to call 2010 China’s worst diplomatic year since 1989. But this was not what CNBC decided to ask me. Live on camera, and without notice, the astute CNBC hosts questioned me about China’s next leader, Xi Jinping, who is in line to become general secretary of the Communist Party of China and president of the country, in 2012 and 2013, respectively. I was surprised by what they said.1 The first CNBC host, Martin Soong, began appropriately by asking, “How much do we know about Xi Jinping?” “We know a good deal,” I said. “He comes from a distinguished family. His father () was one of the founders of New China and a true reformer under . His father was also imprisoned by for many years and suffered during the (1966- 1976). And Xi Jinping, as his son, in his early life, also suffered during the Cultural Revolution. But Xi Jinping’s experiences in remote mountainous areas (of Province) put him in touch with the people.” Speaking on CNBC, I explained that during his career, Xi made steady advances at all levels of government—beginning at the county level, rising through municipality administration, and then serving as Party secretary run ning Zhejiang Province, which with 50 million people is one of China’s wealthiest and most balanced provinces. Zhejiang’s key characteristic, I said, is that the province is considered the center of entrepreneurship in China,

flast.indd Sec2:xiii 3/15/11 12:22:21 PM