Wrangle over law to legitimise China's looted state property


On December 29, 2006, the 176-member standing committee of the National People's Congress (NPC — China's law-making body) lent its support to the draft of the proposed Property Law. Many fear this controversial law will help launder the enormous state wealth already appropriated illegitimately by corrupt Communist Party officials and their hangers-on, as well as encourage more such activities.

The NPC, comprising about 3000 delegates from across China, will be asked to turn the draft into law at its annual session in early March. Despite the rubber-stamp nature of the purported top law-making body, opposition cannot be ruled out.

Because of widespread discontent, the NPC standing committee was pressured to send the draft law back for modification by the drafters six times during the last four years. Beijing University law professor Gong Xiantian told the Guangzhou Daily in December that the NPC had never before redrafted a law so many times.

New critics

The controversy first became national news in August 2005 when Gong wrote an open letter to the NPC criticising the draft for alleged fundamental shortcomings, shortly after it was opened for public consultation. (See Links magazine #29 at <http://www.dsp.org.au/links> for Gong's letter in full.)

A month later, officials called Gong in to elaborate his views, but the subsequent draft still failed to address some key popular concerns. The draft was scheduled for approval by the NPC in March 2006, only to be withdrawn at the last minute.

Then a new campaign to articulate the public concerns began, spearheaded by a group of about eight intellectuals and Communist Party of China (CPC) cadres, led by former chief of the National Bureau of Statistics Li Chengrui and Gong. This culminated in a new open letter critical of the draft presented to the NPC standing committee and the nine-member standing committee of the CPC's Political Bureau on December 9, signed by 718 individuals. Many signatories provided their employment details — a daring act in China.

The signatories comprised 250 CPC officials, ex-officials, military personnel or other CPC cadres; 100 professors, scholars or other intellectuals; 141 workers or peasants; and 228 students or graduate students from top universities, mainly in Beijing.

The letter outlines five main areas where the draft allegedly violates China's constitution:

* That the draft is weak in asserting underlying pro-socialist principles, and in effect invalidates articles 12 and 13 of the constitution, which stipulate the sanctity of state property under socialism as well as that of legally acquired private property of individual citizens;

* That it seeks to formally authorise the state executive bodies, such as the State Council (China's cabinet) and state enterprise management, to execute the ownership rights of public resources such as mines, river systems, seas, public land and state enterprises, despite a long record of some officials rampantly pocketing state wealth;

* That it invalidates Article 8 of the constitution, which seeks to protect the collectively-owned economy still practiced in pockets of rural China (these residual communes currently represent 3% of China's rural economy, covering nearly 9 million people);

* That it seeks to protect private property in general, failing to differentiate between illegitimately acquired and legally obtained property;

* That it contains only token measures in seeking to facilitate the recovery of looted state property. The letter proposes that the draft should spell out that efforts to recover those assets would not be subjected to time limits.

Despite isolated empty proclamations that state property will be protected, the draft is, in fact, fairly explicit in its agenda, including by omissions, in facilitating the continuing wholesale appropriation and privatisation of state assets by the party officials in power and their hangers-on.


A blatant example, as the open letter points out, is in relation to the formal rights of the state to recover its assets lost through unauthorised transactions. This right, however, is critically undermined by the associated stipulation that any transactions — even those involving assets whose legitimacy to be sold is in dispute later on — could be sealed conclusively so long as four conditions are met: 1) that the buyer at the time of the transactions didn't know that the seller wasn't authorised; 2) that the transaction is based on a fair price; 3) that the registrations required for the transaction are completed with the proper authority, or for those deals not requiring registrations, that the assets are already passed on to the buyer; and 4) that the transaction contract is valid.

Such looter-friendly provisions, the letter comments, in effect nullify the right of the state to recover the misappropriated state property.

A recent study by retired researcher Sun Xuewen, who was previously with the Institute of Contemporary China Studies, revealed, quoting "sources in authoritative departments", that each wave of China's so-called economic reform has been accompanied by massive losses of state assets, noting that such losses amounted to 50 billion yuan per annum in the 1980s, 100 billion yuan per annum in the 1990s and 150 billion yuan per annum since 2000.

Quoting figures from the State-Owned Assets Supervision and Administrative Commission, Sun's study says by 2003, 90% of China's small state enterprises and 70% of its medium-sized state enterprises had become privately owned. It adds that in "the absolute majority" of China's local cities and counties, state enterprises have ceased to exist.

According to Sun's study, following yet another wave of major restructuring of state enterprises in 2000, the state sector's share in the country's industrial production has plunged further to 31.6% from 37.5% in 1999, a far cry from the 100% in 1978. Sun wrote that if enterprises where the state has merely a controlling rather than a full stake were excluded, the state's share in industrial production would be down to 15.3%. The enterprises that the state has only a partial stake in are generally restructured to be ready for speedy privatisation.

In contrast, according to Sun, private firms' share of industrial production was 62.1% and that of the collectively owned enterprises was down to 4.6% in 2004.

Quoting a February 28, 2005 People's Daily report, Sun wrote that the "weight" — not specifying the exact measure though — of the non-state-owned sector in 27 of the country's 40 key industries already exceeds 50%, even up to 70% in some cases. Sun observed: "This means that by 2004 the Chinese economy is in gross terms already privatised."

Power turns into capital

Where did China's private sector get the initial capital to embark on its capitalist exploitation of Chinese labour? No doubt foreign capitalists funded a section of them. But ample anecdotal evidence shows that a significant section was in fact looted public assets resurfaced, after a quick trip overseas, as "foreign investment" in China.

This helps to explain the breathtaking disparity in China. According to Sun, 1.5 million families in China own 70% of the country's wealth. He added that from having 500 millionaires in 1993, China's millionaire count jumped to 1 million in 1995, and more than 5 million in 1999, with more than 1000 of the 1999 batch in possession of net worth exceeding 100 million yuan.

Sun further quoted a 1999 survey by the statistics bureau revealing that 8.6% of China's richest families own 60.4% of the country's financial assets (including bank deposits, bonds, shares and cash), with the top 1.3% of families owning 31.43% of such assets. This leaves the poorest 43.7% of families (those owning 5000 yuan or less) holding less than 3% of such assets. Sun considers this super-rich layer as constituting a new bourgeois class.

Do China's workers and peasants also become better off as the country's fledgling capitalists do? The Gini coefficient, an international measure gauging social inequality, provides some clues. A zero Gini ratio reflects absolute equality while 1 indicates absolute inequality.

From 0.16 in 1979, China's Gini ratio has increased to 0.389 in 1995, 0.417 in 2000 and 0.45 in 2001, according to Sun's report. Prominent left Chinese intellectuals share the consensus that the country's ratio has already reached 0.5. The world's average Gini ratio is 0.4: 0.42 for the US, 0.49 for Latin America and 0.28 for Japan.

According to UN figures, China's poorest 20% only accounts for 4.7% of the country's gross income and gross consumption, with the richest 20% accounting for more than 50% of both income and consumption.

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