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  • Aug 21, 2014
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PUBLISHED : Saturday, 02 November, 2013, 3:02am
UPDATED : Saturday, 02 November, 2013, 3:02am

China's entrepreneurs wary of latest plan for grand reforms

Private businessmen have heard this tune about reining in the state sector before, just before they got thrown to the lions

Almost everyone has been beating the drum for President Xi Jinping's to-be-announced grand reform plan for the making of the China dream: the media, the professors and the bankers.

But private entrepreneurs have not joined in. That is surprising, because Xi's grand plan is supposed to have everything to do with them.

There is tipped to be a dramatic loosening of government approval procedures, which will mean less official stamps and therefore lower hidden costs for the private sector.

There is also expected to be a breaking up of state monopolies, including the juicy banking and telecommunications sectors, and a stripping of the government ranking assigned to state enterprise managers.

In short, it is about reducing government intervention and the building of a level playing field. The private entrepreneurs should be very excited.

Yet they are not. In their blogs, media interviews and public speeches, the talk is about a law to protect their life and property. After all, what is the value of a blue sky if it can be taken away from you at any time?

Among them is Lenovo Group founder Liu Chuanzhi, who is nicknamed the "Godfather of Entrepreneurs" and has all along maintained that "businessmen should only talk business".

After all, what is the value of a blue sky if it can be taken away from you at any time?

In a recent interview with state media, Liu pointed to the first element of the Three Represents ideology introduced by former state leader Jiang Zemin, which said the party should represent the developmental needs of China's advanced production capacity.

"In the country's 30 years of reform and opening up, entrepreneurs and businessmen have definitely fulfilled this [First Represent]. That should have given us an important status.

"Yet sometimes we doubt we have that status. Entrepreneurs very much want the recognition of society, in particular recognition by the party and the government that is protected and implemented by law."

This is the man who, in 2002, called the party's adoption of the Three Represents "recognition of the status and effort of private businessmen".

Like Liu, many entrepreneurs back then believed private enterprises would play a bigger role from then onwards.

They have every reason to feel cheated.

Various industries were opened to the private sector following the 2002 meeting, in a move similar to what Beijing is pitching these days. A good example is the aviation industry, which saw the establishment of a handful of private airlines and the beginning of real competition.

But as the financial crisis began, all private airlines, which did not enjoy the financial and political backing of their state-owned rivals, were forced into liquidation.

One of their founders, Lan Shili of the now defunct East Star Airlines, was jailed for four years for tax evasion after he refused to sell to state-owned giant Air China for one yuan.

It has been more or less the same with other industries.

As the example of Chongqing shows, it is all about politics, not business ability.

Former Politburo member Bo Xilai purged "unsupportive" businessmen in the name of cracking down on triads when he ran the municipality. When Bo fell, it was the turn of the "supportive" ones to be arrested or harassed, and then freed after paying for their "sins".

In the name of Xi's anti-corruption campaign, more businessmen have gone down in recent months.

Damned if you do, damned if you don't.

Any comfort entrepreneurs took because no lives were lost disappeared after they saw what happened to Hunan property developer Zeng Chengjie.

Zeng was executed after a Hunan court ruled he had illegally raised 3.45 billion yuan (HK$4.34 billion). Zeng's fundraising was not the most blatant, yet he was the only one who paid with his life. His assets were sold to a Hunan state-owned firm at 10 per cent of their value, without any legal appraisal.

The fear and distrust are overwhelming.

"We are like a group of gladiators thrown into the coliseum to show the king a good fight. The king said the winner would be spared. You kicked and chopped with all of your might," said the founder of a listed private enterprise.

"Now you are the last one standing. Then the king says: 'Throw him to the lions because he stepped on the yellow lines during the fight'."

Why should they believe the game will be different with Xi?

They may not doubt the new leaders' wish to rein in the state sector and expand the private one. But they have played the game long enough to know they are always second class, no matter what the slogans say.

Thus you hear outspoken entrepreneur Wang Shi appealing to his peers "not to avoid policy uncertainty with overseas migration".

You see private property developers spending billions of dollars to scoop up office towers in Manhattan, American cinemas and European brands.

Actions are always stronger than words.

shirley.yam@scmp.com

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This article is now closed to comments

dunndavid
Even more so than in the United States under Obama, China's capitalists are effectively on strike. They mostly invest in real estate or spirit their capital out of the country.
pslhk
Ms Yam
With a broad spacio-temporal perspective
you reported a fire from across the water
“Damned if you do, damned if you don't”
but neglected to offer an obligatory advice
on the opportunities between action and inaction
-
Is jumping into water to join you this side of the river the only resolution?
-
Why does the king rule that allegation of overstepping the yellow line
justifies throwing the last man standing to the lions
the king being the eventual last standing man?
-
Could it be just a different rendition of the same dilemma
that in capitalist economy is one between needs
for anti-trust and for grooming industrial leaders?
Here on your side of the river
we’re playing the HKtv episode
pslhk
Let’s look at the allegation about that private airlines company
being sold to a national carrier for a dollar
before talking about similar stories in other industries
Let’s start with its books to scrutinize its capital structure and cashflow
Perhaps Ms Yam could help fill in the blanks
-
For those who prefer sensational realities
consider “the law’s grabbing hand” in p 39 of the Economist (02nov p 39):
“In criminal cases, the government can confiscate assets only after conviction.
Under “civil forfeiture”, it can grab first and ask questions later.
Property can be seized merely on the suspicion
that it has been involved in a crime.
Citizens have no right to a swift hearing.
the agencies that seize the assets keep most of the proceeds ,
and can use them to pad their budgets
or buy faster patrol cars.”
That is neither China nor India, but the USA where
“the federal government share $450 million
of seized assets with state and local authorities in 2012”
 
 
 
 
 

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