Edward Cunningham: Jiang Zemin propelled China’s economic rise in world, leaving successors to deal with massive inequality that followed

By the summer of 1989, a series of problems were threatening China’s stability. Soaring inflation was undermining the economy at home while the violent suppression of Tiananmen Square demonstrations had left it largely a pariah state abroad. Yet, within a few years the nation rebounded — beginning two decades of high economic growth, membership in the largest trading club in the world and international acceptance on the global stage.

That transition came thanks in no small part to an underestimated, Soviet-trained electrical engineer: former Chinese President Jiang Zemin, who died Nov. 30 at 96.

I first traveled to and studied in China in 1992. At that time, the still-powerful former leader Deng Xiaoping was publicly criticizing Jiang’s more conservative approach to the economy. Eventually Jiang fell in line and supported Deng’s liberalization measures and the idea of economic transformation. Yet, while Jiang’s subsequent policies laid a strong foundation for China’s growth, they also likely sowed the seeds of excess that set the stage for current President Xi Jinping’s rise.

Jiang was picked to lead the country as general secretary in June 1989 after the ouster of former leader Zhao Ziyang for Zhao’s conciliatory approach toward the Tiananmen Square protesters.

Within three years, Jiang embarked on a grand experiment together with Deng and then-Vice Premier Zhu Rongji, which required Jiang to do what others had been unable or unwilling to do: force the restructuring of inefficient state-owned enterprises in a wide range of sectors. This resulted in the laying off of millions of workers who had expected such jobs to be lifelong “iron rice bowls.”

From 1998 to 2002, approximately 34 million people were fired as China privatized hundreds of state-owned enterprises and shuttered thousands more.

This concerted effort proved an important and necessary step toward preparing Chinese companies for more direct market competition and integration with the world economy by the turn of the century.

Jiang’s real influence began upon Deng’s death in February 1997.

In July of that year, he presided over the handover of Hong Kong to the mainland. He then proved an able leader during the macroeconomic storm of the Asian financial crisis that began that same month. China quickly recovered and by 2001 had both acceded to the World Trade Organization and won the bid to host the 2008 Summer Olympic Games.

By 2002, China’s economy had grown to represent over 4% of the global economy. Jiang sought to re­inforce such economic dynamism through more formal means, and revised the constitution that same year to formally allow corporate elite and private business entrepreneurs into the Chinese Communist Party.

This economic liberalization was paired with housing privatization policies. Combined, they spurred the creation of a burgeoning middle class and large-scale private wealth generation.

What was missing, though, was adequate regulation to provide a check on the often-wild results of unbridled growth. Economic inequalities grew dramatically in the 1990s and on through 2005, when Jiang formally relinquished his final title as the head of the military.

This created large social fissures, as rampant corruption began to permeate central and local governments, crime rates rose, and even the military itself got into business schemes. Local governments resorted to rafts of arbitrary and extra-budgetary fees levied on citizens to pay for critical public goods and services, as well as infrastructure, which had eroded over time.

Jiang’s successors needed to respond to the problems his policies created. They did so by elevating the role of the state in social and economic life, promoting what they described as a more “balanced development” model.

But Jiang’s legacy is more than just soaring economic growth and staggering inequality. It is also important to note that the end of his leadership marked China’s first orderly transition of political power since the founding of the People’s Republic of China in 1949.

That precedent was, and continues to be, important. While he initially maintained some influence for several years after formally stepping down as general secretary, Jiang’s most singular legacy may be showing the world — and the Chinese people — that smooth transitions of power were indeed possible. Whether they still are possible remains an open question.