CHINA
CP official defends new capitalists' `original sin'
Eva Cheng
25 January 2007
Last November, Hu Deping, the deputy chief of the united front department of the Communist Party of China (CPC) central committee, called for a halt to the popular campaign that seeks to force mainland China’s new class of capitalists, most of whom acquired their initial wealth from embezzling the state sector, to return their ill-gotten gains for the public benefit.
Hu is the eldest son of Hu Yaobang, the CPC general secretary whose sudden death in April 1989 triggered the students’ and workers’ anti-graft protests in Beijing’s Tiananmen Square, the regime’s suppression of which led to the massacres on June 4-5 of that year.
When speaking publicly on behalf of the country’s capitalists, Hu usually does so in his capacity as the first vice-president of the capitalist employers’ All-China Federation of Industry and Commerce. But Hu’s other hats, which include being a deputy of the National People’s Congress (China’s top legislative body), his senior position in the CPC and his connection to his father, do not necessarily fade into the background.
In a November 17 interview with the Southern Weekend magazine, Hu used his usual euphemism for disguising the class he speaks for, calling capitalist firms “people’s enterprises”, adding that rather than being critical of these enterprises, they should be provided with more assistance. Hu likened these firms to developing infants that needed feeding with more milk.
The CPC regime’s deliberate drive since 1992 to restore capitalism across all of China has been built on the widespread looting of state assets by government and party officials, their relatives and cronies. On the ideological front, the new capitalists are assisted energetically by an influential group of neoliberal economists and other intellectuals who have privileged access to China’s mass media.
The restoration process, however, has come at a high cost to most workers and peasants, who in recent years have advocated a more systematic effort to investigate where the initial capital of the new capitalists came from, and that if it came from the illegal appropriation of public assets, to have it returned.
‘Original sin’
Opponents of the neoliberals have likened this seed capital to “the first bucket of gold” and those who got it as bearing “original sin”.
Responding to such charges, Hu said in his Southern Weekend interview that proposals that illegally acquired wealth be returned to the public sector negates the “great achievement” of the post-Mao economic reform program.
Although there have been lively internet debates between China’s pro-capitalist neoliberals and the pro-socialist “new left” and others in recent years, all of them have to frame their arguments around a nominal support for the “reform” policy. Any public critique of the “reform” itself remains taboo in China.
In response to allegations that some of the pro-capitalist measures are violating existing Chinese laws and the country’s constitution, Hu countered with the rhetorical question of whether farming based on a family unit after the dissolution of the rural communes in the early 1980s and the associated opening to foreign investments weren’t also contrary to the laws at the time.
Hu advocated that China should scrutinise these reforms at the end of the 1970s in the specific historical context in which it found itself, i.e., with an economy on the brink of collapsing. By conflating the limited market reforms of the late 1970s and early 1980s with the post-1992 wholesale drive toreplace the nationally planned, state enterprise-dominated economy with an economy dominated by capitalist businesses, Hu tried to justify the latter policy by appealing to the necessity for the earlier much more limited measures.
Hu argued: “If one doesn’t put [the post-1992 restorationist measures and practices] in their historical context, the persistent accusations based on the [existing] laws and constitution are scary indeed, but wouldn’t be very convincing.”
He further claimed that the seed capital of most of China’s capitalists actually came from informal bartering, emphasising that these dealings were also illegal before the reform period.
According to the January 4 China Daily, Wang Yang, the CPC secretary of Chongqing municipality, assured an early January meeting of local capitalists that his administration would “be lenient with the ‘irregularity’ of private companies [that took place] during their early days”.
He reportedly added: “Like anything new, the ‘irregularity’ of private companies during the fledgling state is a ‘birthmark’ they are born with and where their vitality lies.”
In a similar vein, in February 2004, the provincial government of Hubei advocated in an official document “forgiving” the “original sin” of the private enterprises born out of official corruption. It further proposed that no prosecution of such crimes should be permitted if the time that had elapsed since the crime was committed exceeded the statute of limitation in the criminal code. Under the code, the statute of limitation for crimes attracting a maximum penalty of five years of imprisonment, for example, is five years, and 15 years for those carrying a maximum penalty of 10 years or more.
The debate around the question of new capitalists’ “original sin” first arose in 2002-03 when neoliberal ideologue Zhang Weiyang, of Beijing University’s Guanghua School of Management, advocated a general amnesty for China’s bureaucrats-turned-capitalists.
Hu’s November public defence of these capitalists has revived this debate, which has also been fuelled by new scandals in the preceding months about the embezzlement of state assets by corrupt officials and their capitalist cronies.
Shanghai corruption scandal
The most recent high-profile case involves the illegal loan to tycoon Zhang Rongkun of the 3.5 billion yuan (US$450 million) made from Shanghai’s 10 billion yuan social security fund. Last year, the US Forbes business magazine ranked Zhang as China’s 16th richest person with a net worth of $605 million (up from $350 million in 2004).
The pension-fund loan to Zhang was only revealed when the financial management arm of Shanghai’s Social Security Bureau filed a writ against two private firms controlled by Zhang last August for the repayment of 3.45 billion yuan.
Questions were raised in March 2002 about where Zhang obtained his enormous financial resources when he, having just turned 30, secured for the price of 3.2 billion yuan a 30-year right to operate as a toll road a section of an expressway joining Shanghai and Hangzhou.
Zhang has made more big-ticket investments in toll-roads since then. By June 2005, his firm, Fuxi Investment Holdings, was managing 200 kilometres of toll-road, involving investments exceeding 10 billion yuan.
In 2004, Zhang spent 906 million yuan to secure a 8.15% stake in Shanghai Electric, the largest power-generation equipment maker in China. Based on his immense private fortune, Zhang was able to raise 1 billion yuan in public bonds in China last March. This was the first time a private individual in China won so much public confidence as to be able to sell bonds to the public.
For his involvement in the pension-fund loan scandal, Chen Liangyu was sacked in September from his posts as a member of the CPC Politburo and as the Shanghai CPC secretary. Other officials who have been sacked as a result of investigations of the scandal included Zhu Junyi, director of the Shanghai Municipal Bureau of Labour and Social Security, and Qin Yu, deputy secretary of Shanghai’s Baoshan district CPC committee.
The January 26 Asia News reported that as a result of continuing fall-out from the Zhang loan scandal, “Fan Deguan, secretary-general of the municipal committee of Shanghai’s Communist Party, yesterday tendered his resignation, government sources reported.
“Fan had a brilliant career rising from deputy headmaster of a county school to become one of the most powerful figures in Shanghai and a close aide to former party boss Chen Liangyu.
“On Tuesday the Communist Party announced the expulsion of Qiu Xiaohua, the former head of the National Bureau of Statistics who had been sacked on charges of corruption (taking bribes) and depravity (having more than one wife). Once considered one of the country’s top economists, he was dismissed from his post on October 12, 2006, to which he had just been appointed (March 2006). He had been deputy director since 1999. Unofficial sources report that he was linked to Zhang Rongkun…
“In 2006 more than 200 graft cases involving government officials prompted [Shanghai] city prosecutors to investigate 495 people from government agencies and state-owned enterprises, ordering the arrest of 81 top officials…
“Some analysts though think that this newly-found aversion for corruption might simply reflect President Hu Jintao’s desire to bury his predecessor’s power base. Former president Jiang Zemin was at one time mayor of Shanghai and knew all of the fallen leaders.”
