Thoughts on economics and liberty

LKY was extraordinarily influential in changing China – the amazing story in LKY’s understated words

These extracts from LKY’s 2000 book, FROM THIRD WORLD TO FIRST, confirms how deeply Singapore has influenced China.


My meeting with Vice Premier Deng Xiaoping was unforgettable. A dapper, stocky man of 74, not more than five feet tall, in a beige Mao suit came down from a Boeing 707 at Paya Lebar airport in November 1978. … We met that afternoon for formal discussions in the cabinet room.

He invited me to visit China again. I said I would when China had recovered from the Cultural Revolution. That, he said, would take a long time. I countered that they should have no problem getting ahead and doing much better than Singapore because we were the descendants of illiterate, landless peasants from Fujian and Guangdong while they had the progeny of the scholars, mandarins, and literati who had stayed at home. He was silent. [Sanjeev: This was a crucial first in LKY’s influence over China – that he was a “lowly” Chinese, so the Chinese could obviously do much better]

The next day I made my points in one hour-actually half an hour, without the translation. … He was the most impressive leader I had met. He was a five-footer, but a giant among men.

Before his departure I called on him at the lstana Villa to talk for some 20 minutes. He was glad he had come and seen Singapore again after 58 years. It was a dramatic transformation and he congratulated me. I replied that Singapore was a small country with two and a half million people. He sighed and said, “If I had only Shanghai, I too might be able to change Shanghai as quickly. But I have the whole of China!”

He said he had wanted to visit Singapore and America before he joined Karl Marx – Singapore, because he had seen it once when it was a colonial territory, while on his way to Marseilles after the end of the First World War to work and study; America, because China and America must talk to each other.

… At the airport he shook hands with the VIPs and ministers, inspected the guard of honor, walked up the steps to his Boeing 707, then turned around and waved goodbye. As the door closed on him, I said to my colleagues that his staff were going to get a “shellacking.” He had seen a Singapore his brief had not prepared him for. [Sanjeev: Deng’s eyes opened from this visit, which proved crucial in China’s transformation] There had been no tumultuous Chinese crowds, no rapturous hordes of Chinese Singaporeans to welcome him, just thin crowds of curious onlookers.

A few weeks later I was shown articles on Singapore in their People’s Daily. Its line had changed. Singapore was described as a garden city worth studying for its greening, public housing, and tourism. We were no longer “running dogs of the American imperialists.” Their view of Singapore changed further in October the following year, 1979, when Deng said in a speech, “I went to Singapore to study how they utilised foreign capital. Singapore benefited from factories set up by foreigners in Singapore: first, foreign enterprises paid 35 percent of their net profits in truces which went to the state; second, labour income went to the workers; and third, it [foreign investment} generated the service sectors. All these were income [for the state}.” What he saw in Singapore in 1978 had become a point of reference as the minimum the Chinese people should achieve.  [Sanjeev: This was the TRUE start of China’s transformation

At the end of January 1979, Deng visited America and restored diplomatic relations with President Carter without the United States abandoning Taiwan.

On my second visit to China in November 1980, I found many changes. … Premier Zhao Ziyang met me for talks. He was a different character from Hua Guofeng or Deng Xiaoping. Of medium build, he had the complexion of someone with a light suntan over his fine features. I had no difficulty understanding his Mandarin because he had a good, strong voice without any heavy provincial accent.

… The next morning I met Deng Xiaoping for over two hours in a different room in the Great Hall of the People. … Deng argued that China was a huge country with a large population. It did not need the resources of other countries. It was preoccupied with the problem of uplifting its people out of poverty and backwardness, “a great undertaking that might take half a century.” China was too populous.

Premier Zhao Ziyang met me again in Beijing in September 1985. He referred to me as an “old friend of China,” their label for those they want to put at ease. Then he asked for my impressions of the places I had visited on my way to Beijing.

His manner encouraged me to speak up. I said I could give inoffensive observations, leaving out the critical, but that would be of no value to him. I first gave him my positive impressions. … Then I gave the negatives: Bad old practices were unchanged. As prime minister for over 20 years, I had stayed in many guesthouses, and could guess the nature of the administration from their condition. Jinan’s huge guesthouse complex gave an impression of waste; I was told my suite with its giant-size bathtub had been built specially for a visit by Chairman Mao. The labor to keep this complex in good condition could be put to better use running a top-class hotel. Because guests in residence were few and far between, the staff were out of practice.

Next, the poor road system. Parts of the 150-kilometer (approximately 90-mile) road from Jinan to Qufu, the birthplace of Confucius, were just mud tracks. The Romans built roads that lasted 2,000 years. China had labor and stones in abundance and there was no reason why there should be mud tracks linking Jinan, the provincial capital, to Qufu with its tourist potential.

Singapore had little culture or history and a population of two and a half million, but it had three million tourists a year (in the mid-1980s). China’s monuments and ruins resonated with history. Selling scenery, fresh air, fresh food, laundry services, curios, and souvenirs to tourists would give much employment and put money into the pockets of many people. China, with a population of about 1,000 million, had only 1 million tourists a year-800,000 overseas Chinese and 200,000 foreigners. [Sanjeev: This is HUGE – a full-fledged lecture from a minnow to a giant. But China took the painful message and acted to fix the problems]

Hesitantly, I suggested that they might like to send some of their supervisors to Singapore. They would not encounter language and culture differences and could observe our work ethics and attitudes. Zhao welcomed my proposal. He suggested that our managers and experts at top, middle, and grass-roots level visit China to assess their workers in a Chinese context. I said their workers might not respect our supervisors, because they were “descendants of coolies from Fujian province.” Later, they sent several delegations of managers of their state-owned enterprises to Singapore. They saw a different work culture that placed importance on the quality of work. [Sanjeev: Once again, LKY forced China to learn from Singapore]

He said China had three major economic tasks: first, build up infrastructure like roads and railways; second, upgrade as many factories as possible; and third, improve the efficiency of their managers and workers. He described the problem of inflation. (This was to be one of the causes of the trouble in Tiananmen four years later.) He wanted more trade, economic and technical cooperation between China and Singapore. China was ready to sign a three-year agreement with us to process not less than 3 million tons of Chinese crude oil per year, and would import more chemical and petrochemical products from Singapore as long as they were at international prices. Thus began their participation in our oil industry.

Their state oil company set up an office in Singapore to handle this business and also do oil trading.

… I was taken to meet Deng. He bantered about his advanced age of 81 compared to my 62. I assured him that he did not look old. … He repeated that he was already 81, ready to meet Marx, that it was a law of nature and everyone should be aware of it, except Mr. Chiang Ching-kuo.

… When I next met Zhao Ziyang, on 16 September 1988, he had been promoted to general secretary. He saw me at my villa in Diaoyutai, their guesthouse complex, to speak about China’s economic problems. He was disturbed by a wave of panic buying throughout China a few weeks earlier, in late August and early September. They had had to reduce construction, control the growth of money for consumption, and slow down economic growth. If other measures did not work, the government would have to stress party discipline – I took this to mean “punish high officials.” The panic buying must have reminded him of the last days of the Nationalist government in 1947-1949.

Then he took me to the restaurant in the Diaoyutai complex to celebrate my 65th birthday. During dinner, he asked for my views on a recent television series he had sent me, the “Yellow River Elegy,” produced by some younger members of his reform program think tank. It had depicted a China steeped in feudal tradition, tied down by superstitions and bad old habits, a China that would not make a breakthrough and catch up with the modern world unless it abandoned its old conformist attitudes.

I thought it overpessimistic. China need not abandon its basic cultural values and beliefs in order to industrialize and modernize. Taiwan, South Korea, Japan, Hong Kong, and Singapore had all sought to preserve their traditional values of thrift, hard work, emphasis on scholarship, and loyalty to family, clan, and the wider nation, always placing community interest above individual interest. These Confucian values had resulted in social cohesion, high savings, and investments, which led to high productivity and growth. What China needed to change was its overcentralized system of administration and the attitudes and mindset of the people, so that people would be more receptive to new ideas, whether Chinese or foreign, and be willing to test them out and adapt them to China’s circumstances. This the Japanese had done successfully. [Sanjeev: Amazing lecture by LKY – but the good thing is that the Chinese did listen to him and learnt]

Zhao was concerned that China’s economy was not taking off like those of the NIEs without being plagued by high inflation. I explained that this was because, unlike China, the NIEs never had to deregulate planned economies with prices for basic commodities controlled at unrealistically low levels.

He exuded the quiet confidence of a good mind that took in briefs swiftly. Unlike Hua Guofeng, he was a gentleman, not a thug. He had a pleasant manner, neither abrasive nor bossy. But one needed to be tough and ruthless to survive at the top in China, and for the China of that period he was too liberal in his approach to law and order. When we parted, I did not know that within a year he would become a nonperson.

The next day, 17 September 1988, I had my last meeting with Deng. …  I praised China’s economic progress. Yes, there had been “pretty good results” during the last decade, but good economic development had created new problems. China had to curb inflation. It was important to strengthen discipline. The central government had to exercise effective control but not contradict the opening up to the outside world. Good management was more important after opening up, otherwise there would be anarchy and “great chaos under Heaven.” China was a large country but backward in technology and even in culture. In the past decade, they had solved the problem of food and clothing. Now they wanted to reach a xiao kang (comfortably off) stage, quadrupling their 1980 per capita GDP to between US$800 and US$1,000. China had to learn from others, “including you and even South Korea.”  [Sanjeev: This speaks of the MASSIVE LEVEL OF INFLUENCE that LKY had on Deng]

I complimented him on the considerable changes in China, not only in new buildings and roads but, more importantly, in people’s thinking and attitudes. People were more critical and questioning, but optimistic. I said his 1979 visit to the United States, telecast in daily half-hour programs, had shown U.S. conditions, changing Chinese perceptions of America forever.

Deng remarked that the Americans had treated him very thoughtfully. … Deng said he dearly wanted to ensure the reunification of Taiwan with the mainland before he went to meet Karl Marx.


Sanjeev Sabhlok

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