MCLC: party congress to showcase private business

[Denton, Kirk]

MCLC LIST
From: kirk (denton.2 at osu.edu)
Subject: party congress to showcase private business
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Source: China Brief, Jamestown Foundation, vol. 12, no. 20 (10/19/12):
http://www.jamestown.org/programs/chinabrief/single/?tx_ttnews%5Btt_news%5D
=39993&tx_ttnews%5BbackPid%5D=25&cHash=da5267e70760fa21a3842a51a7fc1fab

18th Party Congress to Showcase Rising Status of Private Business
By: Willy Lam

The 18th Chinese Communist Party (CCP) Congress is set to highlight the
leadership’s commitment to boosting the role of the private sector. This
is despite the fact that the phenomenon called guojin mintui (“state-owned
enterprises advance while private firms retreat”) seems to remain
unchecked. The limelight given to “red capitalists” is evidenced by the
fact that a record 24 private-sector (minying) businessmen have been
chosen as delegates to the Congress. It is true that these tycoons only
represent 1.06 percent of the 2,270 deputies. Yet at the 16th CCP
Congresses in 2002—when non-state-sector bosses were first allowed to
become deputies—only seven made the cut. This number was increased to 17
at the 17th Party Congress five years ago (Southern Weekend [Guangzhou],
September 6; Xinhuanet.com, September 6).

“That so many minying business people have been selected as congress
delegates reflects the party leadership’s open and accommodating attitude
[toward capitalists],” wrote China Enterprise News, which is an official
mouthpiece for non-state-sector businesses. “The party leadership wants to
encourage new forms of economic organizations.” As media commentator Meng
Shuqiang put it, minyingentreprenerous joining the ranks of party deputies
“can to a certain extent be seen as a sign of the party leadership’s
acceptance of non-state-run companies.” Meng added “This will enable
private businessmen to more effectively lobby for the interests of their
class” (China Enterprise News [Beijing], August 24; Sina.com [Beijing],
July 4).

China boasts more than 70 million minying enterprises, which have a total
registered capital of 28 trillion yuan ($4.5 trillion). It is estimated
these non-state-sector firms are capable of making investments worth at
least 60 trillion yuan ($9.6 trillion). Despite the non-state sector’s
pivotal contribution to the “Chinese economic miracle,” minying companies
face systematic discrimination. For example, many lucrative sectors
ranging from banking and finance to petroleum and telecommunications have
remained the preserves of 120-odd yangqi, or centrally held state-owned
enterprises (SOEs). Moreover, minying units face much higher hurdles
compared to SOEs when trying to secure loans from banks. At a time when
the rate of GDP expansion is set to decline owing to factors such as the
shrinkage of China’s traditional export markets, Beijing is hoping
private-sector firms will do more in boosting growth and creating jobs
(China Business Journal [Beijing], September 29; Zhuhai Special Zone
Daily, September 7).

In May, the central government promulgated a document called “Certain
Opinions on the Encouragement and Guidance of Private Investments toward
Healthy Development.” Among other things, this directive asked government
departments in areas including civil aviation, medical care, housing and
construction as well as strategic new industries to award more contracts
to minying firms. At the same time, 17 provinces have come up with a
variety of dispensations for privately-run concerns. For example,
provincial and municipal administrations have helped promising private
enterprises apply for loans from state banks (New Evening Post[Beijing]
May 23; Economic Reference News [Beijing] May 23). No less an authority
than Premier Wen Jiabao has called on local governments and relevant
departments to “liberate their thoughts and make bold experiments” by
encouraging private-sector participation in areas such as railways,
municipal infrastructure, energy, telecommunications, education and
medicine. “A new atmosphere of ‘smashing the glass door’ must be created
[for minying firms],” Wen said during an inspection tour of Sichuan
Province last July (CNTV.com, July 16; Xinhua, July 16).

Also significant is the fact that Vice President Xi Jinping, who is due to
become party General Secretary at the 18th Party Congress, is a keen
supporter of theminying sector. Fostering the growth of private businesses
is integral to the so-called Zhejiang Model of Development that Xi helped
nurture when he was Party Secretary of the coastal province from 2003 to
2007. Xi used to call minyingentrepreneurs “a great treasure of the
Zhejiang economy.” At the National People’s Congress in March, Xi told
Zhejiang parliamentarians that the province “should continue to push
forward the simultaneous development of different types of ownership
systems.” “We should help minying firms to go up market so that they can
attain breakthroughs in innovation and in restructuring,” he said (China
News Service, March 7; Xinhua, December 3, 2003).

Encouraging words of the likes of Wen and Xi notwithstanding, there are no
indications that the guojin mintui trend may be reversed any time soon. In
a recent report on the yangqi, Beijing-based Unirule Research Institute, a
respected private think tank, urged the CCP leadership to curtail special
privileges given to SOE conglomerates through “breaking up the
administrative monopoly of state-owned enterprises and ending their rights
of enjoying free or inexpensive use of state resources.” Unirule also
argued that had it not been for their access to free resources, including
land, the immensely lucrative yangqi would have made a loss (Unirule.org,
October 9; “Chinese SOEs a Target of Hu-Wen’s ‘Inclusive Growth’,”China
Brief, January 14, 2011).

Moreover, it is not certain whether the token presence of 24 private
businessmen as Congress delegates portends a real difference. To be
effective lobbyists, these “red bosses” must become at least Central
Committee members. At the 17th Party Congress, several big-name CEOs of
SOE conglomerates became full or alternate (meaning second-tier or
non-voting) Central Committee members. They included such luminaries as
Guo Shuqing, Jiang Jianqing, Jiang Jiemin, Wang Xiaochu and Lou Jiwei, who
were the chief executives of respectively China Construction Bank,
Industrial and Commericial Bank of China, China National Petroleum
Corporation, China Telecom, and China Investment Corp. Only one CEO of a
non-state enterprise, Jiang Ruimin of Hai’er Corporation—the famous maker
of household appliances—was chosen as an alternate member of the Central
Committee. This year, at least one more private-sector tycoon, Liang
Wen’gen, who is the boss of heavy machinery manufacturer Sany Group, is
expected to make it into the Central Committee (Sina.com [Beijing],
September 30; Ifeng.com, April 16). Yet Beijing needs to induct a
significantly larger number of minying businessmen into high-level party
organs before the latter can have a substantial input in industrial and
related policies.

Seen from another perspective, the newfound prominence of minying bosses
also reflects the CCP leadership’s desire to boost the party’s control
over private-sector enterprises as well as their employees. A key
criterion for tycoons being selected as deputies to Party Congresses is
the level of “party construction” in their firms. High-profile companies
whose heads have become Party Congress delegates—the Hongdou Group, Suning
Electric, Yurun Group, Huaxi Village Group and Yuandong Group—all have
been praised by the official media for their huge and well-run party
organizations. As Hongdou’s Zhou Haijiang pointed out, “minying
enterprises must implement the goals of the party and remain in unison
with the party on political issues” (Sohu.com [Beijing], September 24;
Hongdou.com [Jiangsu], August 2). With 5,400 CCP members among its staff,
the Sany Group has won recognition as having the most extensive and
best-run party cells among non-state enterprises in Hunan Province. Party
cells also have been established within Sany’s overseas offices. Moreover,
seven of the 11 members of the Sany board of directors are party members.
While the great majority of private entrepreneurs do not pay much
attention to whether their employees are party affiliates, Liang has
stipulated that only CCP members can be promoted to senior slots in Sany
(Dongfang Daily[Shanghai] June 29; Rednet.com [Beijing], September 24).

That the leadership wants to tighten control over major private firms also
is evidenced by the fact that party organizations in several provinces and
cities have run special classes for the sons and daughters of red bosses.
Two years ago, the Organization Department of Jiangsu Province set up the
nation’s first courses for the so-called “rich offspring of business
tycoons.” The municipal Party schools of a number of cities in Guangdong
are also in the process of tailoring study sessions for young private
businessmen. While these classes seem to be concerned mostly with business
operations and ethics, they also are geared toward ensuring that, after
they have taken over their family businesses, second-generation red
capitalists will toe the party line on economic as well as political
matters (Xinmin Evening Post[Shanghai], July 12; Yangcheng Evening Post
[Guangzhou], January 17).

While minying entrepreneurs and their workers may welcome their enhanced
representation in high-level party organs, the ideal of a level playing
ground for all important socio-economic sectors in the country is far from
being achieved. For example, party and government officials as well as
officers from the People’s Liberation Army (PLA) and the People’s Armed
Police (PAP) enjoy a lopsidedly large share of the number of congress
deputies as well as seats on the Central Committee. For example, fully
13.21 per cent of congress delegates this year hail from the PLA and the
PAP. It has been a long-standing tradition that about 20 per cent of the
seats of the Central Committee are reserved for PLA and PAP
representatives (People’s Daily, August 9; PLA Daily, August 9). Only when
private businessmen have attained a political clout that is commensurate
with their contributions to economy can the goal of “building a harmonious
society,” which is one of the major slogans of the outgoing Hu Jintao
administration, be realized.