Zhu Rongji, the former Premier of the State Council of China, passed away on August 12 at 11:06 a.m. local time in Beijing due to illness. He was 98 years old. Among his many achievements, his most significant contribution to Chinese economic history is the country's accession to the World Trade Organization (WTO) in December 2001.
The WTO membership allowed China to fully overcome the economic hardships marked by the Tiananmen Square incident and inflation, paving the way for over 20 years of rapid growth. After the Tiananmen Square protests in 1989, China faced isolation due to Western sanctions and subsequently encountered another crisis in the 1990s, with inflation rates exceeding 20%, threatening the very achievements of its reform and opening-up policies. Zhu Rongji was the key figure who managed to control this crisis.
Beginning his bureaucratic career in economic planning, Zhu became the mayor of Shanghai in 1988. With the trust of Deng Xiaoping and Jiang Zemin, he was appointed Vice Premier in 1991 and a member of the Politburo Standing Committee in 1993. As Vice Premier, he gained nationwide trust by implementing stringent fiscal policies and financial controls to curb rampant inflation.
Upon becoming Premier in 1998, Zhu's primary focus was on securing WTO membership. At that time, China was heavily protecting its domestic market with high tariffs and various non-tariff barriers. Additionally, Chinese products faced high tariffs when exported, and numerous regulations hindered foreign companies from entering the Chinese market. China's tariff barriers exceeded 40%, state-owned enterprises had never experienced market competition, and the financial sector was closed to foreign capital. To gain the support of the U.S. and other Western nations for WTO membership, these issues needed to be addressed.
Zhu aggressively pushed for the restructuring of inefficient state-owned enterprises, consolidating many of them. This decision resulted in millions of workers losing their jobs, a gamble that could undermine the legitimacy of the Communist Party's rule. He established asset management companies to deal with non-performing loans in struggling state-owned banks and restructured them into commercial banks. Tariffs were reduced to below half, and sensitive sectors such as agriculture, telecommunications, and automobiles were brought to the negotiation table. Each of these measures faced fierce resistance from domestic vested interests and posed significant political risks due to rising unemployment. Any misstep could have derailed the entire reform process.
External circumstances were also challenging. In April 1999, Zhu visited Washington and reached a bilateral agreement, but a month later, relations between China and the U.S. soured following the NATO bombing of the Chinese embassy in Yugoslavia, complicating the accession process.
Despite these challenges, Zhu's leadership, charisma, and unwavering belief in the necessity of reform enabled these efforts to be completed swiftly. His decisive action, technical expertise, and steadfast conviction that China must integrate into the global economic order were crucial; without them, the reforms of state-owned enterprises, financial liberalization, and tariff reductions could have faltered or failed.
After joining the WTO in December 2001, China underwent a dramatic transformation. With lower tariff barriers and an influx of foreign investment, the country quickly emerged as the world's factory. According to the World Bank, China's trade growth rate accelerated from an average of 13.9% from 1979 to 2001 to 21.6% after joining the WTO, while foreign direct investment (FDI) increased nearly tenfold during the same period.
Exports surged, and foreign exchange reserves ballooned. The shadows of the Tiananmen Square incident and inflation faded rapidly amid the heat of rapid growth. China's manufacturing competitiveness also strengthened significantly. As foreign companies flooded into China, their expertise was transferred directly to the country, further driving market-oriented reforms.
The manufacturing foundation established during this period has led to China becoming the world's leading producer of smartphones, electric vehicles, and batteries. This growth has fostered the rise of IT companies like Alibaba, Tencent, and Huawei, creating an industrial environment conducive to the emergence of AI firms like DeepMind.
Today, the foundation laid by Zhu's push for WTO membership underpins the ongoing U.S.-China competition for global economic dominance. A reformer of his era has passed away, but the wave of openness he championed is far from over. Even as the U.S. and China vie for supremacy in the global economy, the starting point of that competition lies in the door to the WTO that Zhu opened 25 years ago.
* This article has been translated by AI.
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