The first volume of "Chen Qingtai's Collected Works" is titled "The Road to Enterprise Reform," and I have only skimmed a few speeches and manuscripts, but I did have some impressions. Therefore, I would like to congratulate the author. I will start by talking about the reform path of Dongfeng Motor in the 1980s.

【Where did the idea of enterprise reform come from?】

At the time, Chen Qingtai was the Chief Engineer of Dongfeng Motor, and the first piece in his book is a retrospective of the development history of the Chinese economy from both positive and negative perspectives. He believes that "during the early days of liberation, the 156 construction projects imported by our country were relatively advanced and prosperous at that time, laying the foundation for the development of many industries. However, after a certain level of production capacity was formed, some enterprises stagnated. These enterprises rarely continue to develop new technologies and new fields to transform existing products and production structures. Over time, these enterprises gradually became prosperous and then declined, with technology and products becoming very outdated. The country had to spend huge amounts of investment for difficult transformation." The transformation from prosperity to decline of these large state-owned enterprises is an unpleasant common phenomenon. Is this not a "major strategic issue for the country," and a matter of national destiny? Therefore, he advocates that Dongfeng Motor should transform from a "single production-type enterprise to a development and management-oriented enterprise. This requires breaking the habit of "everyone getting an equal share of the pot," and establishing the courage to enter the market competition; to abandon the concept of "production first" and establish the spirit of "quality first, customer first, and service first"; to eradicate the poison of the notion that "technology is useless" and establish the view that "scientific technology is an important productive force." "Through the efforts of the entire factory, we have formulated development rules that catch up with world levels and established a "three-legged" technology development system." I believe that even today, these ideas are not outdated.

【What does "reform" really mean for Chinese state-owned enterprises (SOEs)?】

The concentrated turn of China's economic reform policy is the reform of the system, as well as the reform of state-owned enterprises. The planned economy system has caused many abnormal behaviors in state-owned enterprises. Chen Qingtai believes that "1. The pursuit of enterprise goals is politicized, with a tendency towards anti-economic accounting; 2. The pursuit of maximizing consumption funds has a short-term tendency towards enterprise behavior; 3. The pursuit of expanding the outward production of enterprises has a tendency towards anti-technological progress; 4. The pursuit of self-enclosed omnipotence has a tendency towards anti-professional collaborative work; 5. The pursuit of decentralized construction funds has a tendency towards smaller investment scales." Some of these problems have been addressed, while others are still being addressed. During the early stages of reform, such as when the country faced power shortages and needed to expand production, the planned economy system had to issue directives based on the power gap, increase budgets, expand basic construction, and set new production targets, such as how much coal to mine, how many workers to hire, and how many power plants and mines to build, with little emphasis on economic accounting, technological progress, or professional collaboration. I believe that the "anti" mentioned by the author here is not the "opposition" kind of "anti," but rather the abnormal behaviors that enterprises passively develop under the dominance of the planned economy system and mechanism, which go against common sense.

At that time, private enterprises gained significant benefits with relatively small investments. Despite the various shortcomings of private enterprises, they solved the urgent needs of the country's economic development. The Chinese private enterprises that emerged as a result of the reform were the earliest type of market entities to enter the "market economy" track, naturally arousing great interest from the author, Chen Qingtai, and giving strong support from the National Federation of Industry and Commerce. As the leader of Dongfeng Motor, a large state-owned enterprise, Chen Qingtai was not only an outstanding entrepreneur in the management of large state-owned enterprises but also a reformer keen on practicing China's socialist basic economic system.

【Highlights of Reforms】

In 1985, Chen Qingtai became the director of Dongfeng Motor. During the wave of reforms, Dongfeng Motor identified an important task of breaking the "egalitarianism" practice, which meant sharing profits equally regardless of performance, rather than destroying job security for employees. Therefore, they took on the task of a 7% "progressive profit-sharing" (see footnote) responsibility for the country. However, the proportion of internal accumulation, welfare, and incentive funds within the company was adjusted from 6:2:2 to 6.5:1.9:1.6, signifying that the company had a duty to the country, itself, and its employees beyond taxation.

After experiencing product stagnation in 1981, Dongfeng Motor began to focus on the market, emphasizing the final benefits and effects of terminal products. While people are familiar with the two resources and two markets, they often forget the third point: "to learn two sets of skills" - one is the skill of domestic construction, and the other is the skill of developing foreign economic relations. The leadership of Dongfeng Motor emphasized the transformation of the company towards a development-oriented enterprise and placed importance on learning from the operational and management experiences of Japanese, French, and German enterprises.

Comrade Chen Qingtai made significant contributions to the design and legislation of modern corporate systems. The modern corporate system was more conducive to state-owned enterprises shedding their "red hats" and opening up direct financing channels, injecting new "social elements" into public ownership. This is probably another good thing that many people haven't thought of.

The leadership of Dongfeng Motor valued the production of material civilization as well as the construction of spiritual civilization. They had a strong professional spirit in enterprise management, but it was not just that. They regarded "running a business" as a career and motivated themselves accordingly. They clearly recognized that "once the spirits of millions of people are unified under a great goal, they will be transformed into a powerful material force and will create powerful productivity."

Author: HU Deping

May 12, 2023

edited on May 14th

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This article represents only the author's personal views. The original Chinese version can be found at the following link: https://mp.weixin.qq.com/s/6eVBX7bqtgnP_Twor6nuvg

Footnote: 

1. Chen Qingtai, born in Fengrun, Hebei Province in 1939, graduated from the Automobile Department of Tsinghua University. He joined the Communist Party of China in 1956 and is a senior engineer. Currently, he serves as a standing committee member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), vice chairman of the Economic Committee of the CPPCC, honorary director and researcher of the Enterprise Research Institute of the Development Research Center of the State Council.

2. Hu Deping, born in Liuyang, Hunan Province in November 1942, is the son of the former General Secretary of the Communist Party of China, Hu Yaobang. He graduated from the Party History Department of the History Department at Peking University with a university degree. He has held various positions, including Deputy Minister of the United Front Work Department of the CPC Central Committee, a member of the Standing Committee of the 10th National People's Congress, a member of the Internal and Judicial Affairs Committee of the NPC, the First Vice Chairman and Party Secretary of the All-China Federation of Industry and Commerce, a standing committee member and vice chairman of the Economic Committee of the National Committee of the CPPCC. He is also the founding chairman of the China Biodiversity Conservation and Green Development Foundation (CBCGDF).

3. "Progressive profit-sharing" is a form of responsibility system for contracted management in which the contracting party agrees to transfer a certain percentage of the profits to the state. The profit base and the proportion of annual increase are determined jointly by the contracting party and the contracted party, and they remain unchanged during the contract period. The company must increase the amount of profits handed over to the state annually based on the agreed percentage of the profit base.