June 16, 2021

Happy and watched like a billionaire in China

“It’s good to get rich.” “To be rich is glorious.” Deng Xiaoping notably pronounced these phases in 1992 during a tour of southern China, and they were widely reported in the country’s media. The “little helmsman” came to power in 1978, two years after the death of Mao Zedong, and he immediately launched the modernization of the Chinese economy. But in 1989, the severe crackdown on the student occupation of Tian’anmen Square in Beijing greatly isolated China on the international stage.

Encouraging private initiative and the enrichment of the population made it possible to turn the page on risky Maoism initiatives such as the “Great Leap Forward” or the Cultural Revolution and to open up new perspectives. The Chinese have fully understood the message launched by Deng Xiaoping. In March 2021, some thirty years later, official statistics indicate that there are 992 billionaires in China, 253 more than the previous year. The Covid-19, which raged in the first half of 2020, has not stopped this progression.

The areas where the greatest wealth is located in China are diverse. The American magazine Forbes establishes a world ranking each year: currently, the American Jeff Bezos, CEO of Amazon, is in the lead with a fortune valued at 177 billion dollars, followed by the South African-turned-American Elon Musk (151 billion of dollars), boss of Tesla and, in third place, by the French Bernard Arnault, CEO of LVMH (150 billion dollars). The thirteenth fortune in the world, valued at 68 billion dollars, is held by a Chinese: Zhong Shanshan. Originally, he was a mason, then he was a journalist before embarking on the bottling of spring water under the Nongfu Spring brand, which made his fortune.

Next, in the area of ​​software, is Zhang Yiming. His Beijing-headquartered company ByteDance is valued at $ 75 billion and created the TikTok short video mobile app. This one is very popular in China but also in the United States. To the point that Donald Trump even tried to block it. Further in the rankings is He Xiangjian, whose fortune is valued at $ 37 billion. His company, Midea group, located in Foshan, not far from Canton, manufactures household appliances. Or Qin Yinglin, $ 33 billion, whose Muyuan Company breeds more than 10 million pigs annually.

Representatives of special interests

In most of the big Chinese cities, luxurious districts shelter the residences of the richest. Rolls-Royce, the British automobile firm owned by BMW, achieves its best sales in China. In the early 2000s, under the presidency of Jiang Zemin, the communist power highlighted the Chinese billionaires. Lei Jun, founder of Xiaomi smartphones, which also sells air purifiers, or Dong Mingzhu, owner of household appliance brand Gree, became members of the National People’s Congress alongside 3,000 senior party officials.

But it was especially in the second Chinese assembly, the Chinese People’s Political Consultative Conference (CPPCC), that billionaires were invited to sit. This institution meets in early March for ten days, alongside the National People’s Assembly. It is chaired by a high dignitary of the regime, but its 2,200 members are not all Communists. In addition to these wealthy entrepreneurs, the CPPCC brings together representatives of small parties which were allies of the Communist Party when it took power in 1949, as well as celebrities from sports, song and television.

This assembly is called upon to give an advisory opinion on all kinds of economic and social subjects. This allows the regime to affirm that before government decisions, representatives of special interests are consulted. And especially those from the business world who can express themselves there. Without, of course, going so far as to oppose.

Multiplication of checks

There are therefore opportunities in China for dialogue between the leadership of the Communist Party and some of the country’s most prominent and wealthy business leaders. But these, like the whole of the employers, are constantly and closely monitored. In 2014, the city of Beijing, for example, regulated in detail the advertising of luxury goods. Words such as “supreme”, “royal”, or “luxurious” were banned from posters on the public highway. The explanation given in the Chinese press was that “The display of luxury has a negative impact on all of society” car “This risks provoking a feeling of resentment among the poorest”. In 2015, a study by Peking University revealed that a third of the country’s wealth is controlled by 1% of Chinese households, while the poorest 25% share only a small 1%.

Under these conditions, Chinese power seems to want to prevent wealthy business leaders from taking on too much importance in the economic system. Hence all kinds of controls which have multiplied in recent years and which exert significant pressure on the giants of the Chinese economy. In 2015, the Fosun company was targeted. This vast conglomerate is active in the fields of pharmacy, finance and tourism. Its CEO, Guo Guangchang, disappeared for four days. It has only been said that he “Helped” the police in an investigation into his fortune. In 2017, it was Wang Jianlin who was arrested.

Wang Jianlin, boss of the Wanda group, in 2017, in Beijing. | Wang Zhao / AFP

At the head of the Wanda group, he owns a large number of studios and cinemas in China. But Wanda increased investments abroad giving rise, according to the suspicions of the police in Beijing, to significant capital flight. After a few weeks, Wang Jianlin was released and the group announced that it was selling the equivalent of 8 billion euros of hotels and amusement parks around the world.

Recently, a restraint concerned Alibaba, the world’s largest B2B commerce platform chaired by Jack Ma. In December 2020, the group was accused of “Monopoly practices”. Specifically, it was criticized for prohibiting traders wishing to use its platform to sell their products via competing sites. In April 2021, Alibaba was fined $ 2.8 billion, or 3% of its revenue. On its networks, the group said: “We sincerely accept this sanction and will adhere to it firmly.”

An example not to follow

This case of Alibaba shows that in Beijing, the authorities are determined to deepen their control over the large Chinese groups. The aim is for them to be more in the service of Chinese government policy rather than growing up in their own interests. Seen from Beijing, the power of the American tech giants Google or Facebook is an example not to be followed. And in China, the firmness of the authorities is aimed in particular at the giants of the new Chinese economy, Baidu, Tencent or Xiaomi, which, in recent years, have developed and enriched considerably in China and in the rest of the world. Xi Jinping and the Communist Party leadership want to control these big corporations and the vast other conglomerates that have arisen as the Chinese economy has grown in strength. Otherwise, their importance will give them growing autonomy.

This is not the first time that a ruling Communist Party has encouraged and then put the brakes on private initiative. Chinese leaders have full knowledge of what happened in 1921, when Russia had only been Soviet for four years. Lenin instituted economic liberalization under the name of NEP (New Economic Policy). It was then urgent to give a dynamic to the regime which had just faced a civil war and found itself confronted with a terrible famine. The NEP was a “Strategic withdrawal” in the construction of socialism and Lenin had declared that it was about “Give capitalism a limited place for a limited time”.

From then on, agricultural surpluses in the USSR were no longer requisitioned by the state and farmers were allowed to sell them on the free market. So much so that the production of family farms increased rapidly, and the peasants preferred to keep their production in order to sell it later at a better price. The result was a general increase in agricultural prices, which caused heavy industries or banks, in state hands, to increase their prices as well. The government declared a price freeze in 1925. Four years later, Stalin organized a nationalization of the entire economy, accompanied by extensive planning giving priority to the industrialization of the USSR. The objective was then to catch up with and exceed the performance of the capitalist economies. On January 6, 1930, a decree ended the NEP.

Increase Chinese wealth

In China, the government is not far today from seeing in the powerful and modern large companies of the country, the equivalent of what the agricultural owners were in the days of the NEP in the USSR. Beijing’s logic is no longer to encourage enrichment, but to show that the regime’s communist foundations have not been forgotten. There is no question of adhering to the spirit of free enterprise which is one of the foundations of the economy in the West.

China’s economic development and all the reforms that have been necessary since 1980 have always been initiated and authoritatively led by the leadership of the Communist Party. The goal is not to set up Chinese capitalism. On the contrary, it is first of all a question of making the best possible use of market resources to increase Chinese wealth and, then, of consolidating the monopoly of the Communist Party by strengthening its power. Faced with these objectives, billionaires in China have an economic function as an encouragement to enrichment. But they are not asked to be role models for society. This is what the Chinese Communist Party has been trying to let them know lately.