With freer hand, Chinese executive blazes new path
Deyang, China — Soon after his appointment in 1984 as director of the Second Heavy Machinery Plant, Ma Xinglong introduced 34 workers to a new concept: He fired them. Such executive decisions are the stuff of revolution today in China, as leaders - eager to reform the economy - grant managers autonomy and discard the nation's decades-old ``iron rice bowl'' guarantee of a job.
The 13th Communist Party Congress in Peking this week will further curtail state control over industry. This will grant state-run enterprises greater leeway in hiring and firing workers, investing capital, and other business practices, according to senior Chinese economists.
The new reforms will help China reduce the inefficiency of its state-run enterprises, an albatross that burdens the economy after more than three decades of strict economic control by Peking.
Twenty percent of these factories recorded a loss last year, according to an unclassified CIA report released in August. And much of Peking's $3.8 billion budget deficit in 1986 went toward propping up the critical state enterprise sector, which accounts for 70 percent of the value of China's industrial output, the report said.
The experience that Mr. Ma has had since 1984 offers a glimpse of the challenges and successes of a Chinese executive empowered by reform to tackle the deeply ingrained waste at a state-run heavy industry.
Trumpeting a motto of ``best quality, increase efficiency,'' Ma raised the factory's before-tax revenues 64 percent between 1983 and 1986, from $2.2 million to $3.6 million. Gu Zhimin, chief economist at the plant, estimates the figure will reach $5.4 million this year.
The establishment of the ``management responsibility system'' in 1984 accounts for much of this sudden surge in profits, says Ma.
Under this plan, which so far has been put into operation at 45 percent of the state-run enterprises, Peking sets a production target and tax but allows the factory director to determine how to meet the quota.
``The change is tremendous,'' said Ma. ``Before, I had to follow directives from Peking and spend a lot of time on paperwork going back and forth from here to Peking.''
Last year the plant, after paying a state tax, gave its hometown of Deyang $550,000 in annual taxes under a four-year agreement. It kept $1.65 million, or 75 percent of the revenues after paying a state tax, Mr. Gu said. Before 1984 it surrendered all its revenues to Peking.
The new system gives Ma another incentive to eliminate waste. If production exceeds the state quota, the plant grants him a bonus ranging from 30 to 50 percent of his $740 annual salary. If production falls short, it docks him 15 percent.
Also, the plant may purchase a portion of its raw materials on the new free market instead of from the state. And it may keep 30 percent of its foreign exchange earnings from exports, a strong inducement to managers to upgrade quality to international standards.
But, most dramatically, the new system has added weight to Ma's title as factory director in labor relations.
``I found out that 34 workers weren't showing up for their job, so I cut them from the salary list - I fired them,'' Ma said with a smile.
During most of China's 38 post-revolution years, party cadres who were all-powerful on factory floors upheld ideology over efficiency and, rather than dismiss workers, administered heavy doses of Mao Tse-tung thought in an effort to increase their employees productivity. With reform, however, business-sense rules at the Second Heavy Machinery Plant, said Ma.
``I am in complete charge and there is no conflict with the party cadres in the factory,'' he said, sitting next to a party secretary clad in a Mao suit.
But later, he said that there is tension with some 5,000 party cadres who comprise 25 percent of the factory's workforce, affirming reports of widespread resentment over reform among cadres in other factories.
``My biggest headache is dealing with cadres who have not yet been given production quotas,'' he said. ``There is no way to judge their performance.''
Peking has euphemistically labeled this problem ``overstaffing,'' treating cadres with poorly defined factor tasks as redundant workers. According to some estimates, state enterprises could lay off from 15 to 20 percent of their employees and not suffer a decline in output.
Although some cadres say they have been wronged by reform, party leaders probably will approve granting autonomy to directors at more state-run factories during the congress, Western diplomats say.