In January 1979, just two weeks after the end of the Third Plenum, the new party boss in Guangdong, Xi Zhongxun, got approval from Beijing to start drawing up plans for "special zones" that would be opened up to foreign investment. The first zone opened shortly after that in Shekou, a corner of Shenzhen. The Chinese Merchant Steamship Company, a Hong Kong firm set up and owned by the government in Beijing, had been lobbying for a place where old ships could be taken apart for scrap, which could be sold at high profits to the resource-hungry capitalists in Hong Kong. The fact that the company in question was technically "foreign" but actually controlled by the People's Republic made the experiment that much easier to implement. "Shekou thus became the first place in China to allow foreign direct investment and the first area where decisions about a company inside China could be made by people located outside the country," noted Yu Guangyuan. (Xi Zhongxun, the official responsible for the creation of the Shekou zone, was the father of Xi Jinping, the current Chinese president.)
Economic trends in the outside world gave the officials in Guangdong an additional incentive to open up their province to the outside world. Neighboring Hong Kong was experiencing one of the characteristic disadvantages of a surge in economic growth: a sharp rise in wages. This was rapidly eroding the colony's international competitiveness, and Hong Kong businesspeople were casting desperately around for new sources of labor. The most obvious place was just over the border.
C. K. Feng was a junior executive with Eltrinic, a small Hong Kong firm that made small electrical devices: a bug zapper, an electric can opener, snow-melting equipment for the U.S. market. Eltrinic's production was fairly labor-intensive, and the rising wages were hitting it hard. So when one of the company's bosses heard from a contact on the mainland that the Communist Party was soon going to start inviting in foreign manufacturers, Feng took notice. "I volunteered to go the mainland to open up and find workers there," he said later. "I was so concerned about the workers' shortage in Hong Kong." He first traveled to Baoan -- the same spot that Gorman visited a few months later -- in late 1978, and soon began plans to construct a small factory building and to transport machinery there from Hong Kong. The mainland authorities gave Feng a special Hong Kong travel permit, actually a thick book used to record a variety of data. This presumably privileged access did not seem to reduce the number of papers that had to be filled out at each crossing, however. Each time he entered China, Feng said, "it was like crossing into a different world."
In spring 1979, after jumping through countless bureaucratic hoops, Feng opened the first Eltrinic factory in Shenzhen. It employed 20 local workers. (The company's total work force at the time was around 700, almost all the rest of them in Hong Kong.) The first year was spent training them. The factory's intended production -- heating elements for blow dryers -- required a certain amount of skill, and the mainland workers were starting from scratch. None of them had ever seen a blow dryer. But they weren't fussy. "The workers produced whatever you wanted them to produce," Feng recalls. "They didn't care." Maintaining communications between the factory and headquarters in Hong Kong was no easy task. The only local telephone was located in the village administration office, and placing calls was hair-raisingly frustrating business. The villagers, however, were extremely happy. When the production line was inaugurated, they killed a dog -- a much-valued local delicacy -- for a banquet to celebrate the occasion. The somewhat more fastidious Hong Kongers were bemused.
The founding of Feng's factory preceded the formal establishment of the "special zones" on 26 August 1979 -- and that, in itself, says quite a lot about how development in China was progressing at this time. Even as Guangdong was pressing Beijing for formal latitude to manage its own affairs and attract foreign investors, the first contacts between the province and foreign investors were already being made.
These areas were granted exceptional conditions to attract foreign investment, but they could also be easily quarantined from society as a whole. The latter point conveniently placated party conservatives, who worried that the populace might succumb to the corrosive effects of capitalism. Ironically, potential foreign investors shared their appreciation; to them, Deng's enclave strategy offered a vital degree of protection against political backlash from the Maoists. To be sure, the SEZs needed time to show results, but that was not a problem. Reform in China was supposed to be slow; the country had experienced tumult enough. The main thing was that the cornerstones of a new economy -- one driven by efficiency rather than ideological correctness -- had been laid. The new revolution could begin, albeit in its own, cautious way.
No one embodied that revolution better than Rong Zhiren. The restaurant that he opened in that spring of 1979 proved a big success. Three years later, by now an affluent Guangzhou entrepreneur, he received the privilege of meeting Deng Xiaoping at a social event for Guangdong Province luminaries. The fact that a local businessman was deemed worthy of such a gathering said a great deal in itself; a few years earlier Rong would have been imprisoned for the same activities that now gave him prestige. Deng, he says, always remained an example. "I took heart from his three-time rise and fall," Rong says. "Deng's return [in 1977] sent me an important message." If you persevered, you had a chance to do more than just survive. You might even prosper.