China Prepares to Issue 4 Million Pink Slips

A plan to cut in half its bureaucrats by end of 1998 marks historic shift for China.

In a land run by a massive state bureaucracy for more than 2,000 years, China's leaders are planning what could be the largest government downsizing in history.

To push forward China's drive toward open markets, the newly chosen reformist premier, Zhu Rongji, says he wants to cut one-quarter of Beijing's 40 ministries and half of its 8 million civil servants by the year's end.

"This is a veritable revolution in the sense that it really reorients the role of the government away from a central planning model," says Huang Yasheng, a China scholar at the Harvard Business School in Cambridge, Mass.

"Chopping away at the bureaucracy is actually a counterrevolution because it will erase part of the immense control the Communist Party has had over people's lives since it came to power in 1949," says a former Chinese Cabinet adviser who now runs his own business in Beijing.

During Mao Zedong's reign, Communist cadres planned everything from the shoes each citizen wore to where he or she could live and work. Although the party retains unquestioned political power, the emerging free-market economy gives ordinary Chinese greater freedom of choice over what they buy and how they live. As a result, the country's economic and social Big Brothers are finding themselves irrelevant.

"Many government officials use their power to live parasitically by soliciting bribes," says a young engineer. "So most people will be very happy to see these cadres lose their posts."

Yet it would seem to be political suicide to push half of Beijing's staff out of what were "jobs for life" into the Darwinian jungle of capitalism that China is becoming. Faced with a climbing jobless rate and no national unemployment benefits system, China risks creating a "surplus army of labor" that Marx once said would lead to the overthrow of the old order.

During his first press conference after being appointed premier on March 19, Mr. Zhu sounded almost fatalistic when he said: "No matter what lies ahead, be it landmines or an abyss, I will blaze ahead with no hesitation."

"Many cadres marked to be laid off are likely to try to sabotage the streamlining," says the former Cabinet adviser. "While the most senior officials cut from the government will find jobs lobbying their former comrades, 9 out of 10 cadres have little talent and are unlikely to find comparable posts in the private sector."

While Zhu vowed to cast half the state's bureaucrats into the sea of competition this year, he also said they would be provided with lifeboats in the form of retraining and government paychecks until 2001. Despite those guarantees, "Everyone from the heads of ministries slated to lose their posts to the workers who have been laid off from state factories is angry about Zhu Rongji and his reforms," says a senior government official in Beijing.

Yet Zhu plans to cut bigger chunks of the state's control of society. "Next year, many workers in the state media are set to be dismissed, and after that, downsizing will hit the Communist Party itself," says a state-run newspaper journalist in Beijing.

Already, China's economic reforms seem to be turning society upside down. Since being forced to compete with the private sector, half of China's state-run companies have fallen into the red, and many have begun their own downsizing.

During two decades of change, many elements of a pre-communist class society have emerged: China now has 1 million millionaires, along with 20 million unemployed urban workers and tens of millions of peasants who have left their farms for higher incomes in the cities.

Many party leaders realize "China needs to democratize if it is to maintain political stability in the face of the enormous economic and social changes it will be experiencing in the coming decades," says Larry Diamond, a senior fellow at the Hoover Institution in Palo Alto, Calif.

China's experiments with permitting more than a half-billion peasants to choose village leaders in fairly open and free elections "provide a peaceful way of venting discontent," says Jean Oi, a professor at Stanford University.

Both Ms. Oi and Mr. Diamond, who earlier this month observed grass-roots balloting in northern China, say the polls could similarly act as a pressure valve in urban areas wracked by unemployment.

While using villages as a testing ground for limited democracy, China's top leaders have never spelled out whether or when free polls might be held at the city, provincial, or national level. But Beijing said earlier this month that it intends to sign the UN Convention on Civil and Political Rights, which mandates free and fair elections. "That document says ... the basis of legitimacy of government is the consent of the people," says Robert Pastor, who headed the American team observing village elections here. "So the Chinese government's decision to sign the covenant is a clear statement of the political horizon."

Last week, Zhu praised the American observers and stunned the country by adding: "Of course I am in favor of democratic elections." Zhu, bucking the party line that China is already a "socialist democracy," said that a free vote for even the president and premier "is a question of political restructuring that can be worked out through the law."

"Zhu's plan to cut the central government is only the first part of a larger blueprint for political reform," says a senior ministry official here.

"Of course, China is not going to adopt the American system of government in one night. But I would not be surprised if the next generation of Zhu Rongji recently said he wants to cut one-quarter of Beijing's 40 ministries and half of its 8 million civil servants by the year's end. Chinese have the right to freely select China's top leaders," he adds.

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