Carlos Barria / Reuters China's new Politburo Standing Committee members line up as they meet with the press at the Great Hall of the People in Beijing, November 2012.

The Cruise That Changed China

What Zhao Could Teach Xi

On September 2, 1985, the SS Bashan cruised through the green-leaved gorges of the Yangtze River, its prow breaking the waters along its 259-foot length. Inside, the river’s shifting light played off the hallways, staterooms, and modish decorations, and air conditioning kept the late-summer heat at bay. The luxurious cruise ship had entered service earlier that year, with room for nearly 150 passengers curious to see sights advertised as “inspir[ing] romantic poets and painters with [a] sense of timelessness, awesome beauty, and endless energy.” But the spacious decks of the Bashan were strangely empty.

Nearly everyone onboard was massed in the main hall, where a world of accents resounded: American, Chinese, German, Hungarian, Polish, Scottish. All eyes were fixed on a man with elfin features behind thick-rimmed glasses, wearing a long-sleeved white shirt and no jacket: the Hungarian economist Janos Kornai. Behind him was an incongruous prop for a river cruise, a blackboard on which he had sketched out economic models. On his left, Ma Hong, one of China’s leading policymakers, listened attentively, and a few seats away, Xue Muqiao, China’s most famous economist, sat smoking. The American economist and Nobel laureate James Tobin and the Scottish economist Sir Alec Cairncross were also in attendance. Elsewhere in the room sat two young Chinese scholars: Lou Jiwei, now China’s finance minister, and Guo Shuqing, who currently governs Shandong, one of China’s richest provinces.

The cruise ship was hosting a weeklong meeting of some of the world’s most brilliant economists, who had assembled to figure out a plan for China’s troubled economy. The gathering came at the zenith of an era when officials under Deng Xiaoping were scouring the globe for fresh ideas that would set China on the path to prosperity and global economic power.

The orders to gather the group onboard the Bashan had come directly from the top official in charge of the economic reforms already under way, Premier Zhao Ziyang. Zhao believed that China Bashan was the setting of the single most important of these many exchanges. The ideas discussed there would propel a shift in China to the mixed “socialist market economy” that exists today and has powered China’s economic boom.

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