Asia-Pacific

Society

Capitalism, the Chinese Way

Shanghai's Paramount Club
Golden Age Shanghai's lavish and newly refurbished Paramount Club caters to wealthy entrepreneurs who have joined the ranks of China's ultrarich (Photo: AFP).

People in Shanghai who have made something of themselves head for the Golden Magnolia furniture store to buy a new sofa for a couple of thousand dollars. They wind their way through six floors filled with European luxury goods to Zou Wenlong, China’s most successful furniture importer. The 40-year-old magnate has set up his office on the top floor to resemble the Oval Office in the White House. From behind his enormous desk, decorated with a golden globe and American eagle, he looks out on a Japanese Zen roof garden. The view includes a sea of skyscrapers, and it stretches to the city’s famous skyline on the Huangpu River.  China’s largest city lies at his feet.

Zou’s American business consultant, Catherine McCormack, is quick to set things straight: “Mr. Zou lives a very modest life. He does not wear a Rolex, and his personal car is not an expensive model.” But Zou, who grew up in the backwoods of Manchuria as the son of poor corn farmers and never saw a university, does not believe in modesty. Once the sun sets over the Huangpu, he summons a Mercedes 500S and invites us to a lavish crab dinner.

What makes him so talkative this evening? Finally, a member of the nouveau riche like himself, the sort of person that the party and university crowd in the government in Beijing have never taken seriously, is ready to tell how entrepreneurs contribute to the country’s growth. Zou remembers how things were: “In the planned economy, those at the top controlled everything, and we believed them when they said that capitalism was evil.”

This was until 1992, and the 14th Communist Party Congress, when Jiang Zemin was confirmed as the successor to Mao Zedong and Deng Xiaoping, and the green light was given for private businesses. Zou left the state-owned furniture factory where he had worked for six years, and founded his own company. Four years later, he moved from Manchuria to Shanghai. Six years later, he employed 1,000 workers. He now owns six big furniture stores in greater Shanghai. “It was only when I became an entrepreneur that I contributed to China’s economic growth,” says the multimillionaire. “It is true that I am working for my own gain—but I am also creating jobs. In this sense, entrepreneurs give to society more than they take.”

Twenty-five million new companies have sprung up in China in the past decade, from furniture stores to Internet service providers to private schools. In the past five years, the private economy’s contribution to the Gross National Product has increased from 20 percent to 60 percent. Despite the poor global economic situation, the People’s Republic continues to grow at more than 7 percent per year.

The really astounding thing here is this: The father of this miracle has refused, to date, to call his child by name. Party secretary and head of state Jiang Zemin continues to refer to China as a “socialist market economy.” People like Zou, who wants to be not just rich, but respected and recognized as well, cannot understand this attitude. Especially since Jiang [has studied in] Shanghai and has, as even the furniture magnate admits, “not made any mistakes.” That is the point. Pragmatic reformism, coupled with a will for power and a good tactical sense is the secret recipe for Jiang, who has marked an era that apparently will come to an end this November with the election of a new head for the party at the 16th Communist Party Congress.

Jiang studied machine tool construction in order to rise within the party’s ranks. Later he learned power politics and moved to Shanghai, which at that time was scarcely more advanced than other Chinese cities, and he became party chief. In 1989, after the suppression of the student revolt, Deng Xiaoping summoned Jiang to Beijing to take the top post.

Jiang never let himself get caught in the dispute over whether to choose a planned or market economy. Confucian philosophy is his hobby, foreign policy his passion. He managed the dismantling of the state-owned companies matter-of-factly, without permitting himself to rush into capitalism. His elitist tendencies, however, have preserved, up till now, an unbridgable gap between him and the people: The workers are still more enthusiastic about Mao, the farmers about Deng, and not even the new entrepreneurs praise Jiang.

Jiang presides over the most successful era in modern Chinese history. In his 13 years in power, the People’s Army has been utilized only to provide disaster relief. Persecution of dissidents and religious groups, on the other hand, has not diminished, and questioning the system remains taboo, but freedom of expression for both the media and the people has increased tremendously.

Prize-winning Beijing writer Mo Yan (Red Sorghum) describes the political progress: “If we were to say that Mao was a god, then Deng was a demigod—but Jiang is just a human being. Today, people can tell jokes about Jiang. And that reveals a new popular consciousness.” If you accept what Mo, the author of peasant epics, says, it seems almost logical that private enterprise is also blossoming under Jiang, the Citizen King.

For if Mo is right, it has only been under Jiang that China has finally abandoned feudalism.

Zhang Chaoyang, often referred to as “China’s Bill Gates,” does not see Jiang’s years in office as all that epochal. “Mao was a revolutionary, Deng a reformer, and Jiang is a manager. As a result, his achievements are somewhat underestimated,” says the founder and CEO of sohu.com, China’s most successful Internet provider.

Last year, Jiang invited entrepreneurs to join the Communist Party. Zhang Chaoyang does not view the party’s opening up to its former class enemies as all that important. Things are changing independently of politics. “The market economy has been born. All companies, including the state-owned ones, are now competing with each other. Under Jiang, companies have won a great deal in power and rights. Above all, they can now dismiss employees. As a result, millions of people are out of a job, but millions of people are also launching their own companies and are getting rich. Change is everywhere,” Zhang says.
Will Jiang someday be acclaimed as a hero of the retreat—as Mikhail Gorbachev was before him? Did he secretly transfer power from the party to business?

Critics within and outside of the party are complaining that China is turning into a paradise for capitalists. In their view, multimillionaires like Zou, people surrounded with incredible luxury, are just like the evil exploiters of older times—for example, in Shanghai during the 1920s and ’30s. But reality is refuting such critics: There are now merely 10,000 entrepreneurs, among China’s population of 1.3 billion, who possess a net worth of 10 million euros [US$10 million] or more.

No one, however, has prepared the country better for the problems of progress than Jiang Zemin. He has given the entrepreneur class freedom and offered them a place in the party, without equating their interests with his administration.

For Xu Ming, the editor in chief of the influential Shanghai weekly Shehui Kexuebao, Jiang is paving the way for social democracy in China. But reality is refuting that notion as well. What is clear, though, is that when Jiang retires, he will not buy a new sofa at Golden Magnolia.

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