Wednesday, 03 March 2010
When the process of capitalist restoration in China started, some 30 years ago, Deng Xiaping issued the slogan “to get rich is glorious” and he added “let some get rich first”. And some have certainly gotten themselves obscenely rich.
The destruction of the planned economy in China has created a massive and widening gap between rich and poor and at the same time a deep seated hatred against the new rich. According to a report in China Daily, a recent survey released by the Zhejiang Academy of Social Sciences found that “96 percent of the public said they feel resentful toward the rich.”
The survey shows that 70 percent of respondents feel that there is a “big gap” between the rich and the poor in China today. Despite all the talk by government and “Communist” Party officials about the building of a “harmonious society”, more than half of the people feel that the gap will only become bigger.
Interestingly the reason why the new rich are so disliked in China is because of the generalised perception that they made their wealth at the expense of the poor, by looting formerly state owned property, through corruption and by having political connections (guanxi) rather than by their own hard work.
Yi Zhao, a civil servant from Guangdong province, is quoted by the China Daily article as saying:
"Most of them collect wealth at the expense of the poor. Take those real-estate manipulators for example. They control the property market aiming for a higher price and a considerable profit. On the other hand, I simply can't accept the skyrocketing prices. Isn't it unfair to the majority who are unable to afford an apartment, even if we squeeze together the savings of three generations?” (Rich getting richer, but poor becoming resentful, Wu Yiyao, China Daily, December 10, 2009)
The Chinese press has been forced to report on this mood of anger against the new elite. The Mandarin phrase, "fen fu," or to hate the rich, has been coined in recent months to capture the public's bitter resentment.
Many of the new rich are not necessarily keen to give details about their ill-gotten wealth. However, a survey conducted by China Merchants Bank and Consultancy Bain & Company in 2009 indicated that by the end of that year as many as 320,000 Chinese individuals would possess a minimum of 10 million yuan (US$1.46m) each in disposable assets. A total of 8.8 trillion yuan in disposable assets held in the hands of a handful of rich individuals is already equivalent to 29 percent of the country's GDP of 30 trillion yuan.
In a separate study, Money Week, a weekly magazine under Nanfang Daily, released a list of the top 3,000 wealthiest families in China last year. The list shows the total assets of these 3,000 families reached 1.69 trillion yuan ($249 billion), and the top 10,000 rich families have average property worth 200 million yuan in China.
The numbers of the Chinese super-rich have gone through the global economic recession almost unchanged, and China now has more known dollar billionaires than any other country in the world with the exception of the US. According to the Hurun report there are 130 dollar billionaires in China to the United States' 359. “China's rich are getting richer, with the average wealth on the list [of] $571 million, up almost one-third from 2008”, said Hurun list compiler Rupert Hoogewerf.
Confirming the widespread perception that many have made their fortunes through insider knowledge and political connections, the report said that “one third of the people on the 1,000-name rich list are estimated to be members of the Communist Party of China.”
A more recent poll conducted by the official Peoples' Daily underlined this point, revealing that “91 percent of the respondents think all rich families have deep political backgrounds”. For 74 percent of those polled, the key to success for these millionaires is "being good at networking with officials" while only 16 percent think "wisdom and hard work of family members" are the reason for their success.
The same poll showed that “86 percent are concerned about the close relationship between entrepreneurs and officials in China, doubting whether this rich group could have accumulated its wealth if there were no links with officials.” The poll suggested that 69 percent of people think "badly" or "really badly" of the newly rich families in China, while only 3 percent said their impressions of the group are "OK" or "very good".
The reasons people gave for having a bad impression of these new layer of rich were very significant: for 79 percent the reason was that “they are involved in power-money deals”, followed by 48 percent who think this group has failed to shoulder its social responsibility, and 40 percent who think the group is rich but immoral.
The situation is aggravated by the brazenness and stupidity with which these new rich upstarts flaunt their wealth. The official broadcaster CRI, in a report entitled “Don't hate the rich unjustly” reported the outraged caused by a hotel owner from Dongguan, in Guangdong Province, who had flown “his family to an island on his private helicopter for a two hour swim”.
Everything is for sale, from prospective brides...
Another indication of the emergence of a new layer of super-wealthy individuals is the growing market for luxury goods, from expensive cars… to prospective brides! Yes, there is an on-line dating site which caters specifically for the very particular needs of the obscenely wealthy rich singletons. Membership of the Golden Bachelor “Diamond Love” costs 300,000 Yuan ($44,000). Its website states in Chinese the qualifications for joining: “a personal or family wealth of at least 2 million yuan ($292,000); a background that is extremely superior, wealthy and aristocratic; very good personal qualities or young, talented and beautiful.”
Golden Bachelor claims to have 5 million registered members and according to a CNN report it throws lavish matchmaking parties. One of these “bride markets” was held on December 20 in Beijing in a luxury hotel. “The ticket price was 100,000 yuan, ($14,600); 21 single women and 22 single men attended. Ladies took part in a wedding gown show and also sang, danced, even cooked for their moneyed suitors during a talent program.” But it was money well spent as “eighty percent of those who came found a date, according to the company.
… to health care
To add insult to injury, even though millions have been lifted out of poverty, the restoration of capitalism has also meant the destruction of the social protection network which existed under the planned economy, leaving millions of workers and poor without any protection.
A recent article in the Los Angeles Times described the situation of a health service run on a capitalist profit making basis. The description will sound familiar to millions of people in the United States: “Patients with good health insurance or ample savings can get first-class treatment at the best medical facilities, while millions of the uninsured and poor live in dread of a serious illness that could bankrupt their families. Hospitals are focusing ruthlessly on the bottom line to stay afloat. Costs are soaring, in part because of perverse incentives that encourage doctors to prescribe pricey drugs and needless tests.”
In a capitalist system, everything is for sale, as the Chinese masses have had to learn the hard way. The article continues: “the surge in demand feeds a black market for medical care. Packs of scalpers roam China's major hospitals, peddling appointment tickets for hundreds of dollars ‑ equivalent to months of earnings for a typical peasant. Despite crackdowns, these hustlers operate freely outside Beijing Union's registration hall. "Dr. Tang. Dr. Tang. Who wants a ticket for Dr. Tang? Rheumatology and immunology," a man repeated to passersby one evening in plain sight of guards. Other scalpers passed out handwritten business cards promising appointments with any physician.”
Tens of thousands of patients from rural areas, where the health service has broken down, have to gather their meagre family savings, perhaps accumulated by family members working as migrant labourers in the coastal areas, and make a long journey to the big cities in the hope of getting medical care.
This is the scene that faces them when they arrive at a hospital:
“Hundreds of patients and family members filled the hall, a dimly lighted space about the size of a tennis court. Each evening it turns into a campsite. A woman from a coal town seeking an appointment with a liver specialist dozed on a pile of jackets. A janitor sat on a copy of the Beijing News, holding a place for his cousin with kidney problems. Many in line passed the time by playing cards, knitting or dozing. When people needed to use the toilet or run to buy food across the street, neighbours in line held their place.”
“Nie, who traveled 250 miles from Inner Mongolia by train, was lucky to be first in her line, boosting her odds of getting an appointment with one of the hospital's coveted medical experts. But even that was no guarantee. Patients with pull ‑ and plenty of cash ‑ don't bother with queues. Scalpers who line up as if they were patients or collude with shady registration clerks snatch up many of the slots and sell them to the highest bidder.” (Want to see the doctor in China? Be rich, DAVID PIERSON Los Angeles Times, February 14, 2010)
The emergence of an “upper class”
"In recent years, the huge gap between rich and poor has become an indisputable fact in China," Li Wei, director of the social development department at the Chinese Academy of Social Sciences (CASS), said to China Daily in June 2009. According to the Blue Book on Chinese Society by the CASS, the average income of 20 percent of the richest Chinese families was 17 times higher than the poorest households in 2009.
Li described this group as an “upper class”. "I agree that there is such an elite group in China," he said, "wealth is just one of the entry passes into high society and only a small number of people with wealth, social status and power can be called the upper class." And he explained the composition of this “upper class”: “Most of them are business tycoons in both private and State-owned enterprises, as well as a number of powerful officials.”
But Li seems to think that this is a normal and inevitable process: "This social differentiation is inevitable in China because of economic development. It can be a stimulus for social development as long as every one has equal access to wealth." The problem is precisely that only a small minority have had access to the majority of wealth created.
Li Hongmei, a regular columnist for the official Peoples' Daily went even further and advocated the need for the state to have a pro-active policy to eradicate the very idea of equality from the minds of Chinese workers and peasants.
“The general public seems to grudge accepting the fact that a rising number of high net worth individuals have emerged and the wealth they controlled has been dramatically expanded. Influenced by the decades-long planned economy, the Chinese have been accustomed to the Chinese-style egalitarianism, shaping the stereotyped mindset of 'eating from the same big pot.' Hence, a great many people cannot rub off the deeply ingrained prejudice against wealth, as they were taught that there was something wrong inherently with being rich. (…) they tend to form an abnormal psyche of 'hating the rich.'”
Li was in fact making a very important point. Most of the times, the rule of Capital is not enforced through naked and open violent compulsion, but through the force of habit and custom. In no capitalist society do capitalists become wealthy through their own hard work, but rather by appropriating for themselves the fruits of the labour of others. But, in normal times, most of the people consider this to be “normal” and do not question it. Such habit and custom has not yet been fully established in China in the transition from a classless society to an extremely unequal capitalist society. Millions of workers and peasants still consider that the country belongs to them in one way or another and that public ownership belongs to all and therefore do not naturally accept that a handful of corrupt officials and their friends and relatives are becoming rich through the robbery of state property.
Hong Kong academic Wang Shaoguang also talks about the role of the state in destroying what he calls “the moral economy of the socialist state system”. “In order to create a market economy” he wrote in an article in China Reflected in 2003, “the ‘moral economy’ needs to be destroyed and a new ethic needs to be cultivated or imposed, something which will probably provoke protests against the market. Therefore, the development of the market requires a prolonged process of ‘legitimisation’, with the support of the shield of coercion”. And this is precisely the role that the Chinese state institutions are now playing: defending and enforcing the new property relations.
Hatred of the new rich, Li Hongmei admitted, is widespread: “Such terms as 'corrupt rich,' 'stinking rich' and other much harsher things are often used by ordinary Chinese to describe those 'wealthy but bad guys' in their eyes.”
Li acknowledged that the obscene behaviour of the new rich was partly responsible for this mood: “Misconducts of some affluent people as well as the illicit channels they used to accumulate their wealth will undoubtedly add a further irritant to the discontent of the less fortunate.”
But his conclusion was that what was needed was… to fool the people! “In a society with the rapid economic growth and increasingly enlarged circle of affluent individuals, it is quite desirable to cultivate a wealth culture, which can, for one thing, gradually change people's thought process and make them believe everybody can escape poverty and get rich through efforts.” (Don't hate the rich, be one of them, April 02, 2009 Li Hongmei, People's Daily Online)
Faced with this groundswell of public opinion, some of the staunchest defenders of capitalism in China are forced onto the defensive and attempt to justify themselves… by pointing out that it is not just private “entrepreneurs” that are thieves. Cai Jiming, director of the Center for Political Economy at Tsinghua University explained to China Daily that many amongst “this class included not only rich families on various fortune lists, but also many unknown rich people, like bosses of State-owned enterprises, who are getting rich by using the country's monopoly in some industries or abusing public rights.”
“I think problems in this field are more dangerous, and need tighter supervision. While for the private entrepreneurs, I believe they need more guidance, but generally speaking, the booming of the private economy is doing much more good than harm to the nation,” said Cai. (February 9, 2010, China Daily)
But, just who is this Cai Jiming who is so keen to provide a justification for Chinese capitalism? As well as being a “respected” academic he is also a member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the nation’s top political advisory entity.
But he is, of course, right; Chinese capitalism is not only the private capitalists which have emerged from nothing (with a bit of help from friends, connections and bribes), but also those who are the bosses and managers of State Owned Enterprises which they use for their own private gain.
A very perceptive article by John Garnaut in the Sydney Morning Herald described how far SOEs have moved from the days of planned economy. “China's state-owned enterprises (SOEs) are more competitive with each other and less beholden to central command than outsiders often think. But there's another web of incentives that can override those corporate interests: the private interests of officials who control them.”
He then proceeded to describe the business dealings of an acquaintance of his, identified by the nickname “Lee” whose friend has a lot of guanxi, connections with state and Party officials. “Lee's most reliable money-earning trick is flying to Tianjin to solve congestion emergencies at nearby Qinhuangdao port, where tankers are lined up to load coal from northern China and ship it down south. Delays can cost hundreds of thousands of dollars per day.”
"My friend uses his dad's connections to persuade the port authority to allow particular ships to load," says Lee's business partner. "Ships would rather give the money to my friend and the port officials than waste it out at sea. If they don't pay a 'bonus' then there's no way they can load their stuff in time. That's why port officials can earn a BMW per day if they want to, or at least one per week. And that's why smaller or foreign companies can't make money because there's no way for them to get their ships loaded efficiently and cleared to leave."
And Garnaut noted that “the same system works at congested Chinese airports. An official report last week suggested Beijing air traffic controllers were receiving kickbacks from executives at the state-owned Air China in return for preferential landing rights.”
This is not just the old corruption engendered by a bureaucratic regime, but a qualitatively different phenomenon in which managers of state owned companies, party officials and private capitalists become a single continuum of individuals interested in their own private gain in an economy run on the basis of profit. The majority of Chinese, quite rightly, intensely hate those who have benefited from the rise of this particularly nasty kind of state-led capitalism.
The current leadership of the Chinese “Communist” Party is acutely aware of that, and they know that if they are not able to maintain a certain level of economic growth, all this anger will raise to the surface in the form of a mass movement which would threaten their power, wealth and privileges. This is why, on the one hand they pursue economic policies which only serve to further pile up contradictions (in the form of massive overcapacity and speculative bubbles), and at the same time attempt to introduce some sort of welfare network which can alleviate the social contradictions created by the restoration of capitalism. This is the real meaning of all the talk about building a “harmonious society”: an attempt to introduce reforms from above to prevent a revolutionary explosion from below.