Zhu Rongji’s Death Rekindles Debate Over Human Cost of China’s Economic Reforms

The death of former Chinese Premier Zhu Rongji (朱镕基) has brought fresh attention to one of the most consequential, and painful, chapters of China’s economic transformation: The restructuring of state-owned enterprises (SOEs) that displaced tens of millions of workers around the turn of the century.

Zhu, who died on Aug. 12 at 98, served as premier from 1998 to 2003 and became closely associated with the market-oriented reforms that helped reshape China’s economy and paved the way for its entry into the World Trade Organization (WTO) in 2001.

His legacy, however, looks very different depending on who is looking back. For supporters, Zhu was a forceful economic reformer who confronted inefficient state enterprises, bolstered the financial system and helped integrate China into the global economy. But for millions of workers caught in the restructuring, the same period brought widespread unemployment and the collapse of a system that had once promised lifelong economic security, so long as one remained loyal to the Party.

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Nearly 30 million workers laid off

Under the policy commonly known as “grasp the large, let go of the small” (抓大放小), Beijing retained control of major SOEs in strategic industries while smaller and often unprofitable enterprises were restructured, sold, merged or allowed to fail. The scale was enormous. Chinese government figures show that more than 27 million SOE workers were laid off beginning in 1998. A subsequent government white paper put the total at 28.18 million between 1998 and 2003.

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For many workers, losing an SOE position meant much more than just losing a paycheck. Under the old “iron rice bowl” system, state employment had traditionally provided extensive job security alongside benefits including health care, housing and retirement support. These jobs were highly sought-after for their stability. But research examining the reforms found that a whopping 27 million workers, roughly 27 percent of SOE employment in 1997, were laid off between 1997 and 2002.

Beijing established reemployment centers and expanded social assistance in response. In his final government work report in 2003, Zhu said more than 18 million laid-off workers had found new employment through various channels and pointed to increased government spending on social security and reemployment programs.

Yet for many families, particularly older workers with skills tied to declining heavy industries, the transition proved far more difficult and unsustainable.

Northeast China bore the brunt

The impact was especially acute in China’s northeastern industrial heartland, where cities had been built around sprawling state-owned factories, mines, and heavy industries.

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The region had been a centerpiece of China’s planned economy, with dozens of major industrial projects developed with Soviet assistance during the 1950s. By the 1980s and 1990s, however, the Northeast was losing competitiveness as China transitioned toward a market economy, with many cities dependent on aging, inefficient state-owned heavy industries that struggled to adapt.

That helps explain why Zhu’s death has prompted sharply different reactions among Chinese social media users. Some commenters recalled the reforms as necessary measures that ultimately contributed to China’s extraordinary post-WTO expansion. Others, particularly those discussing experiences in the northeast, remembered shuttered factories, unemployment and families struggling to rebuild their lives.

Economic transformation at a cost

The controversy reflects a larger contradiction in Zhu’s legacy. His government pursued reforms that made SOEs more commercially disciplined while China opened itself further to international trade and investment. China’s WTO accession became a defining milestone in its emergence as a major manufacturing and exporting power. But the benefits of that transformation were unevenly distributed.

For workers who lost secure state jobs during the mass layoffs of the late 1990s, the Zhu era could understandably be remembered very differently from the years of private-sector growth, foreign investment, and export expansion that followed.