The Secret Document That Transformed China : Planet Money In 1978, a group of farmers in a Chinese village called Xiaogang wrote a secret contract and hid it in the roof of a mud hut. They were afraid the document might get them executed. Instead, it wound up completely transforming the Chinese economy.
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The Secret Document That Transformed China

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The Secret Document That Transformed China

The Secret Document That Transformed China

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UNIDENTIFIED MAN #1: Hey. (Speaking Chinese) PLANET MONEY.

DAVID KESTENBAUM, HOST:

That's right. Hello. And welcome to PLANET MONEY. I'm David Kestenbaum.

JACOB GOLDSTEIN, HOST:

And I'm Jacob Goldstein. Today is Friday, January 13. And today we have for you the first of our podcasts from - David, the trip you and I just took to China.

KESTENBAUM: Today, the story of a secret document written in a small village and hidden in the roof of a mud hut.

GOLDSTEIN: The people who signed this document, they were afraid it might get them executed. Instead, it wound up completely transforming China's economy.

KESTENBAUM: First, you've got to give us the PLANET MONEY indicator.

GOLDSTEIN: Today's PLANET MONEY indicator - 48 billion.

In the month of November, America's trade deficit was $48 billion. This is according to numbers the government put out today. The trade deficit was up from the previous month. But, really, it's been bouncing around in the same range for a while now. The sort of medium-term picture we're seeing of a picture over the past really couple of years now, basically our exports have been rising but so have our imports.

KESTENBAUM: So exports are rising. Imports are rising. That means we still have this big trade deficit, which is a key part of the whole global imbalances problem we've been talking about forever now on the podcast.

GOLDSTEIN: And another key piece of this global imbalances problem? It's China. They have a trade surplus. They export more than they import. And, in fact, of America's $48 billion trade deficit in November, $27 billion of it came from our trade deficit with China.

KESTENBAUM: More about that in an upcoming China podcast. Key thing for now - China is a huge global economy. It's the second-largest economy in the world.

GOLDSTEIN: So, OK, on to today's show. Before we get to that secret document in the roof of a mud hut that transformed the country, let's just get a feel for where China is today. Let's start out on a train.

(SOUNDBITE OF MUSIC)

UNIDENTIFIED WOMAN #1: Ladies and gentlemen, welcome to Beijing-Shanghai express train.

KESTENBAUM: Ladies and gentlemen, this is not just any train. This is part of China's new bullet train network, the largest in the world.

UNIDENTIFIED WOMAN #1: It is a great pleasure to have you on board. Remember...

GOLDSTEIN: I want some speed though. Like, so far it's just like a train. I want a little more bullet.

KESTENBAUM: Then some conductor pushes the bullet train button or whatever and it starts to move - faster.

GOLDSTEIN: There's actually a readout that tells us our speed, 130 kilometers an hour.

UNIDENTIFIED WOMAN #1: (Speaking Chinese).

KESTENBAUM: One thirty-eight, 140 - tops out at over 300 kilometers per hour. That's over 200 miles an hour. It makes Amtrak look primitive. The bullet train stations here, they are these huge, gleaming things like airports.

GOLDSTEIN: And what's really striking about this whole picture is just how far China has come in just a few decades.

KESTENBAUM: Our story happens in 1978, a year when most Americans had cars and garages. I was 9 years old sitting on the couch watching "Welcome Back, Kotter" on television.

GOLDSTEIN: Your contemporaries in China at this time, David, for the most part, they didn't even have electricity. And you could argue that this transformation, the change that took China from mud huts to bullet trains started in a single, small village in rural China. The village is called Xiaogang, and we went there.

KESTENBAUM: (Laughter) It's very nice to meet you. Thank you for talking to us.

YAN JINCHANG: (Through interpreter) Oh, no. There's no - it's no trouble. Thank you for coming.

KESTENBAUM: This is Yan Jinchang. And, by the way, none of the people we talked to in Xiaogang spoke English. So what you're hearing here is a translation.

GOLDSTEIN: Yan Jinchang, he's one of the people who started China on this path to bullet trains.

And one of the really fun things about reporting on China's economy is - well, so if you're in the U.S. and you want to talk to one of the founding fathers of the U.S. economy, you want to talk to Alexander Hamilton, you're out of luck. He's been dead for hundreds of years. But in China, a lot of these key people, they're still around.

KESTENBAUM: Yan Jinchang is not an economist. He's not a politician. He runs a small restaurant in Xiaogang. And 30 years ago, when all this happened, he was a farmer.

(SOUNDBITE OF METAL GATE OPENING)

KESTENBAUM: Yan Jinchang opens a big metal gate behind his restaurant. And he takes us out to the fields where he used to farm. Back in 1978, everyone here worked on a collective farm.

Look, you can grow things in winter.

YAN: (Speaking Chinese).

KESTENBAUM: Mao Tse-tung had just died. And it was still basically the height of Communism in China. And on our visit to this village, we actually spent a long time just trying to figure out how the system worked on a Communist farm. The basic idea was that people would work together for the common good.

KESTENBAUM: And in this world as Yan Jinchang explains it, nobody owns anything.

YAN: (Through interpreter) I used oxen to farm, but they weren't mine. They belonged to the group. Back then, even a piece of straw belonged to the group. Individuals didn't own anything.

KESTENBAUM: At one meeting with Communist Party officials, one farmer asked - what about the teeth in my head, do I own those? No was the answer. Your teeth belong to the collective.

GOLDSTEIN: Everything in this world was centrally planned. The farmers were told what to plant by a communist party official from outside the village. And sometimes they were told to grow rice even if they didn't have enough water to properly grow rice.

KESTENBAUM: Yan Jinchang says back in this era, every morning, a whistle would blow to mark the start of the workday. Sometimes the guy blowing it would have to blow it twice. The farmers would drag themselves out of their huts and go to work on the fields. At the end of the day, the whistle would blow again, and everyone would stop.

GOLDSTEIN: You'd get points for working all day. But it didn't matter how much or how hard you worked. You just had to show up. Even if you had decided to go out early and pull weeds or something, it wouldn't make a difference for you.

YAN: (Through interpreter) Work hard, don't work hard, everyone gets the same. So people don't want to work.

KESTENBAUM: And after the harvest, the government collects what everyone has grown and gives the village an allotment of food. But in the case of Xiaogang, the allotment was never enough.

KESTENBAUM: So they were hungry all the time. Their kids never had enough to eat. And Yan Jinchang and the others, Xiaogang farmers, they had to walk to other villages and beg for food.

YAN: (Through interpreter) We were farmers. We were supposed to produce food. To beg for food was not honorable. We felt very ashamed. It was hard to knock on doors and beg for food. My face was burning.

KESTENBAUM: This is the way things were all over China. This is basically the way the entire economy was set up.

GOLDSTEIN: So the farmers in Xiaogang were starving, and they needed to do something. One farmer in particular was pushing for a change. His name? Yen Hongchang.

KESTENBAUM: We tracked down Yen Hongchang as well, and we talked to him in this open garage attached to his house. There were sacks of grain piled up along the walls. He smoked cigarettes the whole time. It was this really cold, rainy day.

GOLDSTEIN: And he told us that, out of desperation, the farmers came up with an idea. But the idea they had was so dangerous they had to call a secret meeting to discuss it.

YEN HONGCHANG: (Through interpreter) That day, it was about 5 in the afternoon. We made it to (unintelligible) home. This was a secret meeting. We snuck in one by one.

KESTENBAUM: There were 18 farmers crowded into this small room. Yan Jinchang was there.

Were there enough chairs for all of you?

YEN: (Through interpreter) There were no chairs back then. How could there be chairs? Some of us crouched. Some sat on the floor. There were some little tiny stools. But we had no chairs back then.

KESTENBAUM: Yen Hongchang says everybody there was afraid to talk. So finally, he spoke up.

YEN: (Through interpreter) I said, everyone is here and knows what this is about. And everyone knew, but no one dared to speak. Some spoke up. I said, we are all here because we have to find a way to save ourselves.

KESTENBAUM: To save themselves, they have an idea that is both revolutionary and as old as dirt. Rather than farm as a collective, each family gets to farm its own plot of land. And if a family grows a lot of food, that family gets to keep some of that food. You own what you grow.

GOLDSTEIN: But owning in Communist China in 1978? That's something like treason.

YEN: (Through interpreter) I was scared. But if you were too scared, you wouldn't be able to do it, and that wouldn't work.

KESTENBAUM: So in this little dirt-floored room by the light of a broken-down oil lamp, these farmers are talking about this idea. The older farmers who remembered the days before Communism when they could farm their own land, they said, we have to try this. But a lot of the guys in the room, they were really scared.

YEN: (Through interpreter) Most people said, yes, we want to do it. But there were others who said, I don't think this will work. This is like high-voltage wire. Back then, farmers had never seen electricity, but they had heard about it. They knew if you touched it, you would die.

KESTENBAUM: But they decide they have to do this. The alternative is to continue begging and going hungry. They decide they need to write this down, write down a contract laying out how this is going to work and put their names on it so they're all bound to it, so no one can go back on it. There's only one problem. Paper, just plain paper is hard to come by in Xiaogang in 1978. Yen Hongchang told us he's going to write on a cigarette pack. But it turns out, this other farmer had some paper, so he runs to get it.

GOLDSTEIN: And Yen Hongchang writes this historic thing. It's short. It's just a few sentences long.

KESTENBAUM: Do you remember the exact words that you wrote?

YEN: (Through interpreter) I wrote it myself. Of course I remember.

KESTENBAUM: Can you tell it to us?

YEN: (Through interpreter) We will divide up the farmland between the families. The head of each family signs or stamps his approval. Each family will give a share of the crop to the government and the collective at the end of the year. If we are put in prison or executed, we will not complain. And the others in the group will raise our children to 18 years old.

KESTENBAUM: They are, in a sense, the first capitalists of modern China. Their livelihood is in their own hands. If it works, they'll have enough to eat. If they get discovered, they could be killed. But one by one, the farmers come forward to sign onto the contract.

GOLDSTEIN: They realize they need to hide this thing. And, eventually, Yen Hongchang winds up slipping it inside a piece of bamboo in the roof of his house.

KESTENBAUM: Yan Jingchang remembers the first day he went out to farm after they signed the contract. It just felt different.

YAN: (Through interpreter) I felt comfortable in my heart, energized. I could really show off my abilities.

GOLDSTEIN: Did you work harder than before?

YAN: (Through interpreter) Of course I work hard, we all did because whatever I produce was mine. If you didn't work hard, that's your loss. And we all secretly competed. Everyone wanted to produce more than the next person. That got people working hard.

KESTENBAUM: It's amazing to think this is the same land. They have the same tools. It's the same farmers. But just by changing the economic rules, just by saying you get to keep some of what you grow, everything changes.

YAN: (Through interpreter) We started work before the sun came up, and we worked until it was dark.

KESTENBAUM: This working-all-the-time thing actually gets them into trouble. Yan Jingchang says the neighbors noticed it, and they started to suspect something funny was going on. Why were these crazy farmers going out to work before the whistle blew, before dawn? And why were they working so late?

GOLDSTEIN: And at harvest time, there was an even bigger problem. It was impossible to hide. They had an enormous harvest. It was more food, according to Yen Hongchang, than they had grown in the previous five years combined. It was both exciting and terrifying.

KESTENBAUM: One day, Yen Hongchang gets a call from some local party officials. They summon him to their offices. When he gets there, he says they swear at him, and they treat him like he's on death row. They say they're going to lock him up.

GOLDSTEIN: Fortunately for Yen Hongchang, at this moment in history, there is this really broad debate going on in China. There are powerful people within the party who are saying, we need to try some economic experiments.

And, in fact, the regional party chief in this area, he was one of these pro-reform guys. And he had visited Yen Hongchang and had said to him, what you're doing here, it looks interesting. You should keep at it.

KESTENBAUM: So when Yen Hongchang gets called in, he begs for permission to make one phone call. He gets it, and he calls the regional party chief, the guy who'd been supportive. And luckily for him, the official answers the phone. But the local official next to Yen Hongchang, he grabs the phone away from him.

YEN: (Through interpreter) He grabbed the phone, but I could still hear what the regional party chief was saying. He said, do not change anything. I approved this experiment. Allow him to continue working on the farm.

GOLDSTEIN: So they let Yen Hongchang go. He goes back to the village and keeps farming. And this experiment, it keeps working. Eventually, word of what's happening in Xiaogang makes it up the chain of command through the Communist Party to the very top, to Deng Xiaoping, the guy basically running China at this time.

KESTENBAUM: Deng Xiaoping is one of the pro-reform guys. At this moment, he is poised to become the key reformer who creates China's modern economy. Deng Xiaoping has been wanting to change the way farming works in China, and he likes what's happening in Xiaogang. But this is still Communist China. It's just two years after the death of Mao. And lots of people are opposed to what's going on in Xiaogang, so Deng can't say anything bad about Mao or collective farming.

GOLDSTEIN: Deng's big-picture idea is let's not worry about whether something is capitalist or Communist or socialist. Let's worry about whether it works. There's this famous quote that's attributed to Deng that, David, we actually heard all the time when we were in China. It doesn't matter if a cat is white or black. As long as it catches mice, it's a good cat.

KESTENBAUM: Deng Xiaoping doesn't stand up in public and give these Xiaogang farmers medals. He's quieter about it. He decides to have these two writers tell the story. He calls them in and says, I support this. You guys should go tell the Xiaogang story to the rest of China.

And pretty soon, people all over China are farming like the people in Xiaogang. Farmers own what they grow. The government starts trying out other economic experiments. Factories spring up in cities along the coast. China lets foreign companies in. Coca-Cola opens a plant in Beijing. And China's economy grows like crazy.

GOLDSTEIN: And this crazy economic growth, it has gone on and on for more than 30 years now. Since the farmers in Xiaogang signed that contract, something like 500 million people in China have risen out of poverty. They've moved from mud huts with dirt floors and oil lamps to houses with electricity. They've moved into a world of cities and high-rises and new roads and bullet trains.

KESTENBAUM: People all over China know the one-sentence version of the Xiaogang story. If you're driving by the town on the highway, there's a little sign by the highway exit. There's a small museum in town telling the story of the contract. And it is this incredible true story that marks the beginning of China's economic rise. But when you look at what has happened to Xiaogang since then, things get complicated.

GOLDSTEIN: They get especially complicated when it comes to Yen Hongchang, the guy who should be sort of a hero of modern China, the guy who was the first one to speak at the meeting who actually wrote the contract and hid it in his roof. But on our first day in town, when we asked the local Communist Party officials if we could talk to Yen Hongchang, they told us he was out of town.

KESTENBAUM: But we went back to Xiaogang the next day, and we found Yen Hongchang, which is why you heard him in this story. We asked him if he had been out of town.

Were you here yesterday?

YEN: (Through interpreter) I was here yesterday.

KESTENBAUM: We were told you were not here yesterday.

YEN: (Through interpreter) I was here yesterday.

GOLDSTEIN: When you ask about what happened in that hut in 1978, everybody agrees. Everybody tells the same story. But when you ask about what has happened in Xiaogang since then, Yen Hongchang and the party officials, they tell two very different stories.

KESTENBAUM: The official version is that everything in town is great. New factories are springing up. There are lots of jobs. Xiaogang is living happily ever after.

GOLDSTEIN: Yen Hongchang says he's had a different experience. He says he started a few businesses over the years. But once they became profitable, the government took them away from him. He also says those new factories springing up around town, a lot of them are just empty. Local officials say none of this is true.

KESTENBAUM: The tension you hear though really throughout the Xiaogang story between free enterprise and state control, that is everywhere in China today. The government has let go of some parts of the economy but it's holding on tightly to other parts.

GOLDSTEIN: That fancy bullet train network, for example, it's run by the government. And last year, there was a collision that killed 40 people. The head of the railway ministry, he's been arrested on corruption charges.

KESTENBAUM: On our next China podcast, we'll talk about how the government still controls and directs large parts of China's economy. There's a question about whether the country's economic growth will continue or if maybe not too far off, China's incredible run will run out.

(SOUNDBITE OF MUSIC)

GOLDSTEIN: We'll post some photos from Xiaogang on our blog. That's at npr.org/money.

KESTENBAUM: As always, we'd love to hear what you think. Send us email at planetmoney@npr.org.

GOLDSTEIN: I'm Jacob Goldstein.

KESTENBAUM: And I'm David Kestenbaum. Thanks for listening.

(SOUNDBITE OF MUSIC)

UNIDENTIFIED SINGER: (Singing in Chinese).

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