Yuan Geng the Administrator, and the Shekou He Ran as a Model of Reform and Opening-Up | Shenzhen at 40, Part 4

"Yuan Geng was the brain of Shekou." Today, most people have forgotten him.

The slogan "Time is money, efficiency is life" came from Yuan Geng. In 1981 he took a boat from China Merchants' wharf in Hong Kong across to the Shekou Industrial Zone. The new zone had just finished bringing in water, electricity, roads, telecommunications and gas and leveling its land, and was hurrying to put up factories. Yuan Geng, who ran Shekou, thought the moment called for a slogan.

What he came up with on the boat had two more lines after it — "The customer is emperor, safety is the law" — but they did not ring loudly enough, and "emperor" sat badly with socialism, so they were allowed to fade away.

The two lines that survived were short and hard. Han Yaogen, who later worked under Yuan Geng as editor-in-chief of the Shekou Bulletin (《蛇口通讯报》), says Yuan thought of them after finishing an American book about Japanese corporate culture, at a time when Japanese firms looked unstoppable and were getting ready to "buy up" America. In A Biography of Yuan Geng (《袁庚传》), published in 2016, the story comes after Japanese workers built an aluminum plant in Shekou. They worked themselves ragged and were shrewd about it: they stayed outdoors through typhoons, and shipped in their own food and their own laundrywomen across the ocean so that the Shekou service company would not earn a fen off them. "It defies heaven for China to be poor. It defies heaven for Japan not to be rich," the 65-year-old administrator concluded.

The signboard with the slogan first stood in front of the industrial zone's command headquarters, and then moved twice. In 1984, when Deng Xiaoping came to inspect Shenzhen, Yuan Geng told an engineering company to work through the night and build a new sign out of five- or six-meter sheets of tin on a tripod frame — "Time is money, efficiency is life" — and put it up on the line where Shenzhen crosses into Shekou.

Before the Shenzhen Special Economic Zone was set up in 1981, Shekou and Shenzhen both belonged to Bao'an County, and afterward the two still found land questions hard to untangle. But Shekou was an industrial zone under China Merchants, which answered to the Ministry of Communications, so it was administratively separate. As of 1984 it still handed no revenue to the Shenzhen municipal government, and Yuan Geng had absolute say over it. He did not agree with Shenzhen's ambition to become a city of consumption; plainly, what he wanted was industry. The slogan, radical and friendly at once, read like a capitalist rewrite of the old Maoist call to charge ahead and get things done fast.

After Deng Xiaoping left satisfied, Shekou was quickly written up as a model. From January to October that year the industrial zone received more than 20,000 visitors, 4,690 of them from abroad.

1984 was also Yuan Geng's best year. At a symposium on the economies of the newly opened coastal cities, he spoke for over an hour without notes about Shekou's experience with reform. "Turning what is abnormal into normal — that is reform," he said, and the room went quiet. Someone later passed word to him: "The Premier said every sentence you spoke was sharp. … But none of them crossed the line."

That June, Yuan Geng became an adviser to Gu Mu, a member of the Central Secretariat and a State Councilor. The State Council decided to open 14 coastal cities and set up four new special economic zones. "Reform and opening-up were now under way in full."

1

There are two bronze statues of Yuan Geng in Shenzhen today, both cast in 2017. In China now it is rare for a local administrator to be cast in bronze; Yuan Geng's statues are unusual, and also easy to miss. One stands in Shenzhen Talent Park, a large head with a blurred expression. The park also holds several bronze young people, high-spirited and dressed like early returnees from abroad — the sort Yuan Geng brought to Shekou around 1985. The other stands beside the Sea World Culture and Arts Center, in the first leisure and entertainment district the industrial zone developed, now respectable and quiet. On a pedestal a little over a meter high, Yuan Geng's tie is blown to one side. The sculptor chose to have him take off his suit jacket, hook it over one arm, roll up his sleeves and stride forward.

The city's best-known statue is, without question, in the southeast corner of Lianhua Mountain Park: Deng Xiaoping in a Mao suit with a loose Western overcoat over it. It is about twice the size of Yuan Geng's, and the sculptor also chose to have this reformer stride forward, the sides of the coat flung wide. People line up all day to be photographed with him.

Remembering Yuan Geng, though, is a matter that can grow or shrink, rise or fall. Someone with knowledge of it says the statue was already finished when Yuan Geng died in 2016, but the unveiling ceremony was called off. Soon after, the Shenzhen Municipal Publicity Department announced that it would take charge of building a statue of Yuan Geng. The commemoration that has lasted is run inside Shekou Subdistrict by a civic group, the Shekou Community Foundation, which holds small discussion sessions on a regular schedule, raises money in Yuan Geng's name, and gathers photographs of him from Shekou residents for exhibitions. Among the people who met him, it is nearly impossible to find one he left cold.

People who knew Yuan Geng say he had a big nose and was fond of it, and would give it a rub whenever he finished making a point. A few other habits come up often: tipping his head back and shutting his eyes to show he was working through a hard question, and, when excited, curling his fingers and pounding the table.

It is hard to say whether he was old-fashioned or Westernized. Writing to his superiors to report or to ask for something, Yuan Geng used classical Chinese and closed with the courtesy phrase zhengqi. He also liked wearing Western suits, at a time — well into the mid-1980s — when both his superiors and his subordinates still wore Mao suits. With no tie, he would undo the top button or two of his shirt, sometimes. He would roll up his shirt cuffs to look more like a man who worked, though few photographs of that survive. He liked imported goods, which he thought better-looking and more dependable; his bicycle was a British joint-venture Three Guns, recognizable at a glance in traffic. He also had a long record of receiving foreign guests and winning negotiations, and those stories have been written down so many times that no one questions them.

Han Yaogen believes Yuan Geng's personal magnetism has not been exaggerated: "He took command of everyone who came into contact with him, myself included." Now 78, Han recalled this May, at his home in Shanghai, that Yuan Geng once pointed from Shekou across the water at a few buildings in Hong Kong's Yuen Long industrial zone and asked, "In a few years, can we beat that?" Han answered: "I'd give up my wife and children to come with you." He compared the impulse to a rich man's daughter setting off for Yan'an to join the revolution in the first years of the war against Japan.

Perhaps everyone then wanted to do something big and change how things were, and so they all recognized Yuan Geng when they saw him. Huang Zongying, the writer and film star, then past ninety, told Tu Qiao, the author of A Biography of Yuan Geng, in a tone of high drama: "The first time I laid eyes on him, I felt the country had hope."

The country may be putting it too grandly. In Yuan Geng's career, the Shenzhen mayor's post he gave up in 1981 was probably the highest administrative rank he could have reached. What he was doing, in essence, was building a utopia inside two square kilometers. At first he wanted to turn this port district into an Oriental Hawaii; later he had a housing compound, Bitao Yuan, built in imitation of California villa clusters, and showed it off to the Hong Kong businessman Y.K. Pao with great pride. Back from a trip to Southeast Asia, he brought roses to Shekou, set on making it a city of roses.

Still, from the beginning Shekou was seen as a model of reform that might be rolled out across the country. That made Yuan Geng ambitious and also left him under enormous pressure; on the phone he sometimes told Han Yaogen that they were "attacked front and rear, with the load piled on our shoulders." He said much the same to more than one person. After Shekou was heavily promoted in 1984, he said: "It's not that failure is impossible. But if Shekou really fails, then China has no hope left."

The test of success was whether the place could produce a new model, one nothing like the mainland's and still running soundly. The Shekou Industrial Zone was ringed with iron fencing, and you needed a special pass to go in or out. Whenever anyone said "whatever the mainland has, Shekou has too," it was a reproach — a sign that Shekou had picked up the bad habits of the old era. To a young manager just arrived in Shekou, Yuan Geng gave a stern piece of advice: "Coming to the Shekou Industrial Zone means you have crossed to this side of the mainland. You have to throw away everything from the other side, all of it."

2

The biggest difference from the mainland was in how money was regarded and how it was used.

"Time is money." China Merchants, a state-owned enterprise based in Hong Kong, sponsored the Shekou Industrial Zone and was responsible for developing it. The central government gave China Merchants the power to draw up to US$5 million at a time, but gave Shekou no funding at all — which meant that whenever China Merchants ran short, it had to do what the capital markets normally do and borrow from banks in Hong Kong.

Apart from building infrastructure, most of the money went into joint-venture companies and factories with foreign investors, with the revenue shared. Yuan Geng also proposed paying less tax on that revenue, or deferring it, and putting the money earned back in as seed capital for later projects. The central government agreed.

In 1984, Yuan Geng went to the central government for help for the first time, applying for a low-interest loan. A report submitted by China Merchants and Shekou said: "When a single enterprise develops an industrial zone and the funds it must raise itself exceed what one enterprise can bear, this tends to waste precious time and affect long-term planning and construction, and thereby also affect long-term returns and the superiority of the socialist system." Meanwhile the central budget kept supporting the development of the Shenzhen Special Economic Zone, and in a public conversation in 1985 — one that later set off a controversy over press censorship — Yuan Geng said he did not approve of this "transfusion from the state."

For the overall plan of the industrial zone, Yuan Geng put forward "three priorities, five refusals": priority to industry, to foreign-invested enterprises and to exports, while refusing processing with materials supplied by clients, compensation trade, polluting factories, imports of outdated machinery, and factories that would compete for export quotas. It looks far-sighted. Yet the industrial system Shenzhen went on to build rested precisely on the "three-plus-one" model of processing and assembly to order plus compensation trade that Shekou had turned down. Shekou itself never built a new system that could keep growing.

The industrial zone stopped taking staff assigned or transferred in through the state system; they were almost no help. Shekou began recruiting across the country instead. From 1981 the zone also ran a cadre management training program, admitting students nationwide; at its peak the acceptance rate was 0.48%. It brought in professors from China and abroad to teach these young students and give talks. The courses covered languages and business, and also psychology, a subject that had all but disappeared in China. Yuan Geng expected the students to be shocked and unhappy, and insisted on "brainwashing" and "poisoning" them anyway.

Yuan Geng opposed excessive administrative interference, and always wanted to try separating government from enterprise (though his understanding of that separation was itself disputed). In 1983 Shekou set up a management committee with authority concentrated in it, an idea borrowed from export-processing zones abroad. Without a clear blueprint yet, the Nanshan Development Zone, set up in 1982 with several large state-owned enterprises as joint shareholders, put in place something resembling a modern corporate system: "clear property rights, defined authority and responsibility, separation of government and enterprise (with China Merchants giving up control), and scientific management."

Some grand plans never happened. In 1984 the shipping magnate Y.K. Pao came to Yuan Geng hoping to invest together, and Yuan suggested they start a second civil airline, to "break the government's monopoly over a particular industry."

The new way of doing things drew criticism for a long time. People kept asking Shekou and Shenzhen the same question: when do you plan to return to socialism? People also came south often to check whether things were still working properly. In 1981, with not a single project signed, Yuan Geng still told Shenzhen mayor Liang Xiang that the projects were going along quite well.

Some questions looked complicated in the old logic. For instance: "In a socialist country where the working class is master of the house, how can capitalists not only be invited in to run factories but also be allowed to fire workers?" In a 1983 dispute in which women workers at a Hong Kong-invested factory protested against overtime, Yuan Geng sided with the workers, but he did not tie himself up in the question of the system; he simply said that "overtime should be voluntary."

Most of the time Yuan Geng was good at steering around sensitive and contested questions, while still meaning to challenge the existing system. In one speech he brought up "exploitation" himself. "Under capitalism, people with property exploit people without it. Is there exploitation under our system? Yes — the lazy exploit the diligent and the able. If I have to choose between the two kinds, I choose the first." Before the text was released publicly, though, he changed the line to: "A distribution system in which the diligent and the lazy come out the same, the expert and the ignorant come out the same, cannot be called a socialist distribution system."

Later, in many conversations, he came back to three kinds of people facing reform, by way of a classic comparison: after thirty years in a room with the doors and windows shut, someone opens a window for air, and somebody sneezes. Besides the firm supporters and the firm opponents, there is a third kind — people who know the old air was stale, but who say the air outside the window is no good either. "There are a lot of them, the weight of habit behind them is heavy, and real life often proves their logic works."

Yuan Geng's own position was plain: "Keep out the pollution, not the foreigners."

Democracy, he said, was a good thing: "We should practice socialist democracy." He encouraged people in the industrial zone to form associations and hold assemblies, and built public opinion into the mechanism that decided who stayed on the zone's management committee — opinion tests, satisfaction surveys, elections, and questioning of candidates by voters, along with a limit on how many terms committee members could serve.

People's Daily reported on Shekou's democratic reforms, and added: "Of course they have advantages of their own. The place is small and the population is small; 70% of cadres are college graduates and 85% of workers are high-school graduates. Not everywhere has these conditions, so Shekou's methods cannot simply be copied."

3

Most people who lived through Shekou's early reforms think that a man like Yuan Geng — open in his thinking and able to win backing from the central government — was hard to come by. The praise is aimed at the Shekou Industrial Zone and also rests on Yuan Geng's own complicated past: he was not a politician who rose steadily through the ranks until he was handed a heavy responsibility. He was a reformer with Chinese characteristics, and before he took on China Merchants and the Shekou Industrial Zone he had never done any work connected to the economy.

Yuan Geng was born in 1917 in Dapeng, in Guangdong's Bao'an County. At 19 he was admitted to the Guangzhou branch of the Kuomintang's Central Military Academy, the fourth branch of the Whampoa Military Academy. That youthful stretch must have marked him: in Shekou he preferred "commander-in-chief" to "director," both in addressing others and in being addressed. A Biography of Yuan Geng also describes him bringing up Sun Yat-sen's ideas often, and revising them. Where Sun Yat-sen had said China should "take Russia as its teacher," Yuan Geng thought it could now "take Japan as its teacher." He spoke with regret about the failure of Sun Yat-sen's democratic revolution: "Things are different now. We can try socialist democracy."

In 1941, Yuan Geng took part in the Great Hong Kong Rescue (the film Our Time Will Come, 《明月几时有》, is about that operation). From 1944 he was responsible for exchanging intelligence on Japanese forces with the U.S. military. He spent years in intelligence work, both before 1949 and after, including postings abroad.

In the 1960s, Yuan Geng was deputy director of the First Bureau of the Central Investigation Department, in charge of intelligence work in Guangdong. What he was praised for in those years was heading off two planned assassinations of senior Communist Party officials, one in Jakarta and one in Phnom Penh.

From 1969 to 1973, Yuan Geng, then past 50, was held in Qincheng Prison. Like most intelligence officers, he was accused during the Cultural Revolution of "selling intelligence" and "selling out the Party's interests." In Qincheng, he said, he was so bored that he began watching ants. He noticed that ants always acted as a group: when they found food they carried it back together, and no single ant helped itself to a share first. In the industrial zone he told people this story often, and he told it with weight.

People believe it was this wrongful imprisonment in Qincheng that kept Yuan Geng behaving like an ordinary man after he had power. He had no notion that he needed a car of his own and would ride in whatever was going. He also hated official airs, and disapproved of clearing the road for visiting officials or accelerating away when a crowd pressed in. In the early 1980s he often protected the radical young, though not always successfully.

After his release, Yuan Geng was appointed deputy director of the Foreign Affairs Bureau. In 1978 the Ministry of Communications sent him to China Merchants in Hong Kong to "open up the situation." That was a vague instruction. The facts were that China Merchants' office at the time was in a four-story wooden building and its assets came to 130 million yuan. Another important fact: since the 1950s people had been leaving Bao'an County without stopping and slipping into Hong Kong in hope of a better life. They did not always make it, and the bodies of those who failed washed up on the shore.

Tu Qiao, the author of A Biography of Yuan Geng, believes that before 1985 Yuan Geng's focus was not the economy — or at least not only the economy — but politics.

Later, at the first banquet he gave for Hong Kong businessmen in Hong Kong after the Shekou Industrial Zone was established, Yuan Geng was asked: in 1949 you led troops south to Shenzhen and liberated Shekou with your own hands, drove the capitalists out and built a society of public ownership; now you want to invite the capitalists back to run the economy. What exactly are you after?

In public conversations with government officials, an important purpose of the Shekou Industrial Zone was to earn more foreign exchange. Entertaining Hong Kong businessmen, Yuan Geng told them: "Of course you can remit the money you make — wire it into the bank we designate, the Bank of China, and dak [Cantonese for 'that'll do']."

4

Before he died, Yuan Geng often received visitors at his home in Shekou. He also often talked about what he regretted about Shekou. The regrets ran from large to small; a few came up most often.

In 1978, Li Xiannian intended to hand the whole 30 square kilometers of the Nantou Peninsula to China Merchants. Even though he understood the financial instruments of the capital markets, Yuan Geng carefully estimated how many square meters of industrial zone China Merchants' existing assets could actually build, taking Taiwan's Kaohsiung industrial zone as his model. His caution is understandable: the Ministry of Communications, which oversaw China Merchants, did not support him at first. It had had an unpleasant experience before, when ports and docks it built locally ended up being taken over by local governments. Administrative control by too many heads later became a serious problem in Shekou too. When Yuan Geng realized the industrial zone was too small, he asked the Shenzhen municipal government to allot more land, and the two sides fell out over taxes and autonomy.

Bound up with the dispute with the Shenzhen government was a disagreement over what "separation of government and enterprise" meant.

Yuan Geng always held that the Shekou Industrial Zone existed as an enterprise under China Merchants. In April 1987 it became Shekou Industrial Zone Co., Ltd., with a corporate board replacing the old management committee. He wanted the company as free as possible from the Shenzhen municipal government's control, and out from under cumbersome administrative procedure — one approval document could take three months. He had this enterprise take on the job of building public facilities, pouring in large sums so that public construction would serve the enterprise. Yuan Geng did not invent this method; but in the past, at Daqing and at Xiangtan alike, the people who used it had never tried to reach "separation of government and enterprise" through it.

A retired Shenzhen municipal official told Tu Qiao that in his view this was exactly what made such a separation impossible: like every state-owned enterprise, it was government and shareholder at the same time. It "simply does not match the experience of international, socialized production, or the experience of reform and opening-up," he said. "Why can't you just do things by law, the way Hong Kong does?"

Han Yaogen says Yuan Geng told him his biggest regret was not taking the advice of the Hong Kong businessmen Li Ka-shing, Henry Fok and Y.K. Pao to run Shekou as a joint-stock company.

"It was only after he lost his position, after he lost his ideals and his goals, that he examined himself and saw it — with a joint-stock system, it could not have been dismantled so easily. His ideal shrank later and came to rest inside Ping An Insurance. Ping An was a Shekou Industrial Zone in miniature. He told Ma Mingzhe: it has to be a joint-stock company, cut off from every official state-owned enterprise. What he regretted — the reason reform was overturned — was that it was never put on a legal footing. That is also where Yuan Geng's limits lay."

At the time, what Yuan Geng said most often about Hong Kong businessmen was, "They're crafty as hell." He turned down every one of their bold investment ideas, and in the end got a bus that was nearly ready for the scrapyard. He had it parked at the gate of the industrial zone and told everyone who went by that it was a gift from the Hong Kong businessmen.

What worried Yuan Geng was the state-owned enterprise and the central government losing control. "A special zone run entirely under our control" was the view at every level, and the fear at every level was of being "taken in by foreigners without knowing it," of turning into a concession, a state within a state. Shekou would not make that mistake: it hired foreigners as managers, but "this is not selling out the country," because China Merchants held 50% or more in each of the big plants it invested in. "He believed this was not a matter of economic figures but a political question, a rule that both the Communist Party and socialism ought to follow," Tu Qiao wrote in her assessment.

During the years the industrial zone was developing smoothly, the central government did raise the possibility that outside conglomerates might form a development company to handle the special zone's development. Yuan Geng argued that a development company formed by overseas conglomerates "would not necessarily be to our advantage," and proposed instead that "our country's three big institutions in Hong Kong — the Bank of China, China Resources and China Merchants — take the place of the foreign developer."

The industrial zone's democratic management reforms also became a problem by degrees. In 1988 only 66.8% of those eligible took part in the confidence vote on the board of directors. Before the vote someone proposed disclosing officials' assets, and the proposal drew no response. In the end confidence votes came to 50.6%. After workers protested a rent increase for single-employee dormitories, there was no established process for discussing the plan or changing it.

From 1986 on, some of the people who launched and watched the management reforms were saying that the biggest obstacle to democracy in Shekou was that "people had created for themselves an authority that could not be surpassed." That authority was Yuan Geng, of course. Shekou already had 30,000 employees and a population of 50,000, and yet "Yuan Geng alone was the brain of Shekou." Yuan Geng put forward the ideas; everyone else went off to argue the case for them.

Personal magnetism turned into a double-edged sword. It dissolved the question of trust with no effort, but as early as 1986 people were asking what would happen after Yuan Geng, and they kept asking all the way to the end of the Shekou era. In 1989 the same question was still being raised.

In 1989, at a news salon run by the Shekou Bulletin on the theme "Will Tomorrow Be Better?", some people realized for the first time that after ten years of development the Shekou Industrial Zone's revenue was only a little over 3 billion yuan, most of it from water, electricity, telecommunications and real estate. The zone had no enterprise or product worth boasting about; Shenzhen's Overseas Chinese Town and several listed companies were doing better by comparison. Some said Shekou had not even kept up with the mainland.

Yuan Geng retired in 1993 from the post of executive vice-chairman of China Merchants. The Shekou Industrial Zone had already been folded, in a 1992 redrawing of administrative boundaries, into Shenzhen's Nanshan District, as one of its subdistricts. From 1987 on, the taxes Shekou paid to Shenzhen rose year by year, and by 1993 what it kept was not even a fifth of what the industrial zone needed for its public utility costs.

Even so, at a preparatory meeting in Paris in September 1993 on the overall state of the earth, Yuan Geng gave a speech titled "A Model Speaks Louder Than Words" (《样板胜于雄辩》). In 2003 he wrote out the phrase "having once known the vast sea" in calligraphy and gave it to Zhang Yundong, then head of the Shenzhen bureau of the China Securities Regulatory Commission.

Many people who look back on the sweeping reform and opening-up of the 1980s — probably a stretch of time when enthusiasm for reform ran high among ordinary people and officials alike — have never heard of Yuan Geng. Never having heard of Shekou is just as normal.

References: A Biography of Yuan Geng (《袁庚传》), Controversy and Insight: A Record of Yuan Geng in Shekou (《争议与启示：袁庚在蛇口纪实》), Contemporary China's "Utopia" (《当代中国"乌托邦"》), Witnessing Shekou (《见证蛇口》)

Cover image photographed at the Shekou Museum of Reform and Opening-Up; the oil painting is by Pang Zhenjie. The cover image and any in-text images without a credited source were photographed by Sun Jinjing/QDaily.