Both Party Man And Businessman

Henry C.K. Liu hliu at
Thu Mar 1 09:41:11 MST 2001

Debates like this in China is a good sign. It will lead to the
resolution of the contradiction of the need to develop the Chinese
economy and raise the standard of living for the people (which needs to
be done within a global capitalistic environment) and the CPC basic
function as the political arm of the working class.  The issue is to
what extend and what is the proper balance between practical compromise
and ideological purity.  At what point is capitalism no longer the
servant and becomes the master.  Remember, these Party businessmen are
members of the national bourgeoisie whom foreign transnationals also
regard as enemies.  When socialist forces in China are still weak in a
global sense, should not the CPC unite all who can be united to fight
against the enemy: foreign capitalistic domination.  Western social
democrats attack China for tolerating its national bourgeoisie for good

I invite members of this list to participate in this debate, but please
spare us with doctrinal condemnations.


FEER  Issue of March 8, 2001

Both Party Man And Businessman

The Chinese Communist Party is debating whether to drop its ban on
private-enterprise owners being
allowed to join its ranks. Hardliners worry the party would lose the
ideological basis for its rule. Yet
some pioneers are already mixing party and company business

By Susan V. Lawrence/BEIJING
Issue cover-dated March 8, 2001

PEOPLE LIKE Hu Gang aren't meant to exist in China. Hu, an engaging
43-year-old software engineer, is CEO and chairman of the board of the
privately owned Xin Dalu  Jituan, or Newland Group, based in Fujian
province. It has more than 1 billion renminbi ($120 million) in assets,
of which Hu owns 40%. But what makes him particularly noteworthy at this
moment in China's long and winding transition toward a market-based
economy is that Hu is also a Communist Party member and head of his
company's party  branch, which he set up when he founded the  hi-tech
firm in 1994.

Hu sees no contradiction in being a head of a private enterprise and a
party-branch leader. His relationship to the party, like that of most
private-enterprise heads, is pragmatic and ad hoc. But plenty of people
in the party find the dual position of people like Hu disturbing. Party
doctrine holds that the heads of private companies are, by definition,
"exploiters," and that their employees, no matter how well paid, are
being exploited.

With the party still styling itself as the "vanguard of the working
class," party rules formulated in 1989 specifically bar
private-enterprise bosses from joining the party. For those already in
the party, there are strict demands, including "voluntary acceptance of
supervision from party organizations," and agreeing to put the "vast
majority" of after-tax profits into a fund for further developing the
business and for public welfare. Violators are not allowed to stay in
the party.

Hu sees no need to apologize for being either a party member or head of
his party branch. "If the party is to grow strong and more advanced, and
not slide backwards," he says, "it needs to mobilize the best talent to
join this organization." He counts himself in that category. "Whether
this organization has strength," he says, "depends not on whether it is
in power, but on whether it has the best people, and whether it can earn
the support of the people."

While socialism may demand the ultimate abolition of private enterprise,
Hu says confidently that China is committed to something else: socialism
with Chinese characteristics. That, Hu says, means "whatever is good for
the development of society and for raising people's standard of living."
He argues that "the point of 'Chinese characteristics' is not to set in
stone what China has to become in order to be socialist."

The awkward reality that people like Hu do exist--driven home to Party
General Secretary Jiang Zemin on a tour last year of the booming
southern coastal province of Guangdong--is now forcing the party to
re-examine its policies. Conservatives are leaping into the debate to
argue forcefully for upholding the ban on private-enterprise heads
joining the party.

Recent issues of unofficial Marxist journals such as Zhenli de Zhuiqiu,
or The Search For Truth, which describes its mission as "critiquing
bourgeois liberal thought and anti-Marxist thought," are filled with
articles justifying why the ban should be upheld. In contrast, liberals,
including prominent thinkers at China's Central Party School, have used
more elliptical language to suggest that the party should consider
relaxing the ban.

At the core of the debate is the question of what the party's
relationship with private business should be. Some analysts argue that
the issue is as significant as China's 1999 decision to make sweeping
market-access concessions in order to join the World Trade Organization.
Although China's WTO membership is still pending, those concessions
clearly signalled Beijing's embrace of the notion of integration with
the global economy.


A decision to allow private-enterprise heads to join could send a
similarly powerful signal that the Communist Party has come to terms
with private business, and would almost certainly spur the sector's
development. It would also, however, involve jettisoning much of the
ideological basis for party rule and would perhaps, as hardliners fear,
ultimately threaten its very hold on power.

Hong Kong-based Goldman Sachs Managing Director Fred Hu sees the party's
decision to revisit the issue of the ban as part of "a paradigm shift in
official thinking toward the role of the private sector" in the past two
years, highlighted most dramatically by Jiang unveiling his "Three
Represents" theory in February last year. As it repositions itself for
the future, the party, Jiang declared, should first represent "the
development needs of the  most advanced forces of production."

Although just what Jiang meant by that is hotly contested, Fred Hu
believes it was Jiang's way of seeking to make the party's vision of
itself "compatible with market reform, private ownership, integration
with the global economy" through WTO membership, and the introduction of
the latest technology.The party, Fred Hu asserts, is working hard "to
adapt itself to the new social and economic reality in China, which is
an economy increasingly dominated by the private sector, with a lot of
active entrepreneurs. The party is trying to embrace this emerging
entrepreneur class."

The private sector has grown in fits and starts since Deng Xiaoping
began to move China away from a planned economy in 1979. The party's
policy toward private business for many years was, "don't publicize,
don't encourage, don't ban," Wang Zhiguo, vice-chairman of the
semi-official All-China Federation of Industry and Commerce, told
reporters in late February.

"The most important part was the last bit--don't ban," Wang said. "It's
why we have today's new world for private enterprises."  Indeed, in
parts of the country, particularly on  the thriving east coast, the
private economy now threatens the dominance of the state-owned economy.
For example, Zhejiang province's party secretary has reported that in
1998 private businesses there accounted for 45% of industrial output.

Yet the party's ever-evolving attitude toward the owners of such private
businesses has remained contradictory. In an article last year in the
journal Party Building Studies, Zhejiang Party Secretary Zhang Dejiang
observed that private businesses "are beneficial to developing the
social forces of production and raising people's living standards." The
party, he noted, had rightly moved to a policy of "protecting the legal
rights of private businesses," and "encouraging and supporting" their


Zhang, however, went on to argue strongly against allowing
private-enterprise owners to join the party. Using Marxist terminology,
he held that they "privately control the means of production" and employ
workers. Allowing them into the party would "blur the party's nature,"
and alienate the party's base among the workers and farmers. He
cautioned that it could also result in private-enterprise owners "using
their economic power to manipulate grassroots elections and control
grassroots organizations," with "serious political consequences."

The language of the party ban, written after the Tiananmen Square
bloodshed of 1989, is even blunter. "Between private-enterprise owners
and workers there in fact exists the relationship between an exploiter
and the exploited. Private-enterprise owners cannot be absorbed into the
party," says Communist Party Central Committee Document No. 9, issued on
August 28, 1989.

Then-newly appointed party chief Jiang set the tone for that edict at a
meeting a week earlier at which he mused: "Our party is the vanguard of
the working class. If we let people who aren't willing to give up
exploitation, and who depend on exploitation for their livelihood, to
join the party, what kind of a party would we be building?"

The party does not make public how many private-enterprise heads are
also party members. Many, like Hu Gang, joined before entering the
private sector. Others were recruited in the 1990s by local party
committees eager to bring major economic actors into the fold.

Hu Gang professes himself bewildered by all this fuss over the party's
policy toward people like him. "I don't know about Beijing. I haven't
spent much time in Beijing. It is a political and cultural centre, and
things can be sensitive. But in the south, this issue just isn't an
issue," he says on a visit to Beijing in late February, to attend the
annual meeting of the China Association of Science and Technology
Private Entrepreneurs.

Hu Gang first applied to the party as a teenager assigned to work in the
countryside at the tail-end of Mao Zedong's Cultural Revolution. He
applied again at university in Fujian's capital, Fuzhou. "If you wanted
to do something for China's people, or for this society, you had no
other route open to you," he says. The party finally accepted him in
1987, when he was working for a research institute attached to the
state-owned Fujian Computer Group.

Fourteen years on, Hu Gang has his own company, with a subsidiary,
Newland Computer, listed on the Shenzhen Stock Exchange. Newland Group's
core business is information technology hardware and software--from
bar-code scanners to billing and network-management software for
mobile-telephone networks. He plans to list another subsidiary on
China's second board when it opens later this year. It is a
biotechnology firm that has invented a blood test that claims to be able
to offer early diagnosis of a wide range of cancers. He admits to being
"wealthy, very wealthy."

Under his leadership, Hu Gang says, Newland's party branch has two main
functions. One is to encourage party members--recruited by himself--to
set an example for other employees by working particularly hard. The
other is to organize classes in "patriotic education" for the workforce.
On his orders, the branch invites historians to lecture on aspects of
Chinese history in which Newland staff can take pride, and also on
China's humiliations by foreign powers.

"In our modern history, our society was crippled and bullied because the
country wasn't strong," he says. He mentions the Eight-Power Allied
Force that invaded Peking in 1900 to put down the anti-foreign Boxer
Rebellion. "They fought their way in and stole our treasures," he says
indignantly. His conclusion: "If your country is strong, no one will be
able to bully you." He tells his workers that by helping to develop
China's hi-tech industry, Newland is helping to make China strong.

Newland's party branch does not, he emphasizes, organize political study
sessions, in which party members would normally read party-run
newspapers and study party documents. He dismisses such exercises as
"formalism." While the branch is affiliated with the Party Committee of
the Fujian Province Science Commission, he says his branch has limited
dealings with it.

The party wants private businesses to have party organizations. In
Zhejiang province on the east coast, nearly a third of private
businesses with more than 100 employees have one. The Zhejiang party
secretary wrote last year that he hoped to raise that to 80%  within
three years.


But the party doesn't support having business owners run party
organizations. On the contrary, the party's idea is that a prime
function of party organizations should be to "supervise" the enterprise
head. They are meant to ensure that he or she does not evade taxes,
produce sub-standard goods, or otherwise break the law. Hu Gang gives no
suggestion that his party branch has any role in "supervising" him. He
and his managers, he stresses, make all the decisions in the company.

Even if the debate ends with a ruling that strips him of his party
membership, Hu Gang says he won't be greatly bothered. "Especially since
the 1990s, I've felt that whether I'm a party member or not isn't that
important," he says. "If you say I can be a party member, that's OK. If
you say I can't be a party  member, I don't feel anything in

He concedes, however, that allowing private-business heads into the
party, and thus overturning the verdict that they are "exploiters,"
would improve the climate for businesses such as his.

Discrimination against the private sector has eased in the last two
years. Private companies can now get bank loans more easily. They can
also list openly on China's stock exchanges. Newland Computer listed in
August last year, soon after the policy changed to accommodate private

But the party's lingering suspicion toward the private economy still
keeps private businesses out of lucrative sectors that the party deems
strategically sensitive. Hu Gang is outraged that as part of its WTO
agreement with the United States, China agreed to allow foreign
companies to invest in its telecoms companies, while it still prohibits
Chinese private businesses from doing the same.

The likely outcome of the debate is unclear. Chinese analysts say the
fact that it is even  under way means Jiang is at least open to the idea
of adjusting policy before the party's all-important 16th congress--due
to meet in late 2002. Like Fred Hu, Hu Gang sees in Jiang's Three
Represents signs that the party chief has evolved toward a greater
acceptance of private business. The third part of the formula describes
the party as representing "the fundamental interests of the broad
masses." "He doesn't say 'workers' or 'the proletariat,'" Hu Gang notes.
Jiang's theory "is good for the development of the market economy," he
says. "It gets us over the theoretical barriers."

He pauses, and grins broadly. "I very rarely discuss these kind of
political questions," he says candidly. "I usually worry about the
economy, about things like the WTO and the state of the U.S. economy.
The U.S. economy drives the whole global economy," he confides
earnestly. "I really do hope that  the U.S. economy picks up."

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