China’s New Social Class

On the morning of October 19, 2007, at the entrance to the Dihu Park in Henan’s Zhengzhou city, a group of people crowded around at the handover ceremony of a Rolls Royce, one of the world’s most luxurious cars. The owner of this new car, valued at eight million RMB, was Lu Yongming, a real estate businessman from Henan. Lu Yongming is not the only owner of a Rolls Royce in China. From August last year until October this year, 18 Rolls Royces have been sold in China. In September of this year, 28 Bentleys were sold at once at a Bentley exhibition in Guangdong’s Dongguan city. China already has dozens of the world’s most expensive Rolls Royces and Bentleys. In fact, owning a Rolls Royce is not the end of Lu Yongming’s dreams; his next plan is to order a private helicopter.

Actually, Lu Yongming is not even famous in China. There are too many people who have as much money or even more money. Lu Yongming is not qualified to get into the top richest 800 entrepreneurs listed by Hu Run.

The so-called “Hu Run Hundred Richest” is an agency that specializes in studying the changes in fortunes of the richest entrepreneurs in all walks of life in China. According to the list published by Hu Run on the 10th of October, 2007, out of the top 100 of the 800 richest entrepreneurs, 74 own companies on the stock market; the top 75 have more than 10 billion yuanyuan.

These are the representatives of China’s new class”people’s enterprises,” referring to domestic businesses financed and run privately in China. These entrepreneurs start off as individuals, and when their businesses develop to a certain size, they become the boss. After further expansion, they are known as leaders of (industrial or commercial) “groups.” When their capital reaches one hundred million yuan or floats on the stock market, these businessmen become real “people’s entrepreneurs.”

Chinese private businesses and foreign businesses in China are both called “non-public economy,” that is the non-state-run economy. The non-public economy accounts for more than seventy percent of the GDP in China and provides jobs for the majority of Chinese workers. Among the non-public economy, Chinese people’s enterprises constitute the fastest growing and most profitable sector. As a result, China’s entrepreneurs are attracting ever more attention from society.

The main reason these businessmen are attracting attention is their huge wealth. In every sectormanufacturing, energy, real estate, steel, IT, retail, finance, agriculture and so onthe number one entrepreneur is valued at several tens of billions of yuan, and to a large degree they influence the existence and development of these businesses. Compared with state-owned businesses, private businesses are more lively, creative, flexible and competitive. These entrepreneurs truly control China’s economy and, to a certain extent, are the motivating force and leaders in China’s economy; they are the most energetic, hopeful and dynamic force in China’s society.

Because of their massive wealth, private entrepreneurs, who have lots of money at their disposal, have become a very special group with great wealth in a contemporary China marked by uneven wealth distribution and polarization. Lu Yongming is only average among the several million rich people in China. Not every entrepreneur can afford an eight million yuan Rolls Royce, but they all belong to a class of people who have cars, houses (some have villas as well), and never worry about food or clothing. According to China’s media, an annual income of more than 100 thousand yuan is considered high. Many people’s entrepreneurs earn more than a million yuan. The annual income of Yang Yuanqing, the CEO of Lenovo (Lianxiang in Chinese) is 21,750,000 Hong Kong dollars, while the average income of a salary worker is between 10 and 35 thousand yuan. The massive difference in income has adversely tainted the reputation of these rich entrepreneurs. People wonder where their “first barrel of gold” came from and how they became so prosperous when most people can never become rich, no matter how hard they work.

However, the question about “the first barrel of gold” has not affected the development of privately-owned businesses in China or stopped these entrepreneurs from becoming richer, because the party needs these businesses to create sources of tax revenue and employment opportunities. Therefore, in spite of the suspicions as to the source of “the first barrel of gold,” the government has knowingly prevented people from questioning the legality of the wealth of these businessmen.

Although some of these successful businessmen started from scratch and succeeded by sheer hard work, one fact never exposed by the media but known by everyone is that behind many successful people is shadowy support from those in power. Some children of high officials, or high officials themselves, privatize state-run businesses, make inappropriate use of state banks and government privileges for private gain. However the sheer number of such cases has caused them to lose their newsworthiness. Ordinary people calmly watch privatization and the development of the private economy and are used to the exposure of corruption among high officials amounting to billions of yuan. All of these officials, in one form or another, took state capital as their own together with entrepreneurs of privately-owned businesses.

Of course, private entrepreneurs also need to actively look for political protection. Every entrepreneur has a public relations story that cannot be publicizednot about the hardship of competition in the market but about bribery of officials and all the associated pain and agony. The key to success for the famous fuel smuggler, Lai Changxing, whose fortune was several billion yuan, was that he bribed officials at every level of the government. When exposed, Lai escaped to Canada, but those who helped make his smuggling possible, such as the deputy minister of national security, the director of public security of Fujian Province and the party secretary of Xiamen, all ended up in jail. Who can say that other “successful entrepreneurs” did not become prosperous with the help of political protection?

On the other hand, people’s entrepreneurs are also changing China’s society and politics. First of all, in their own fiefdoms, they dilute the party’s organization and politics. Tens of millions of employees are able to escape the bondage of government politics. They do not have to attend “political study,” or party or youth league activities. There may be great pressure in the workplace, but there is also personal space.

Also, because of the tremendous financial power of private businesses, many local governments, which depend on them for profits and taxes, have to maintain good relationships with them. Some places even allow the boss of a private business to be a honorary “committee member” in the county committee. Although entrepreneurs of private businesses still cannot get onto China’s political stage officially, the party now regards them as a new social class meriting great attention. At the end of the Communist Party’s Seventeenth Congress on the 21st of October, 2007, the general secretary, Hu Jintao, once again emphasized that the party “should encourage new social classes to make contributions in building a China with socialist characteristics.”

As more and more people’s enterprises move beyond China and engage with the rest of the world, the integration of China with the international economy is being greatly accelerated. Capitalist market economy, management ideas and the Western democratic legal thought which lies behind them are being introduced and popularized in every corner of China through people’s businesses. By means of the development of people’s enterprises, ordinary Chinese people who have never been exposed to Western culture and thought are gaining a basic understanding of such abstract concepts as competition, efficiency, human rights and the rule of law. Although today’s China still struggles to balance justice and efficiency, the current politic is more pragmatic, and ordinary people are leading a more normal and peaceful life compared with the past when class equality, collective benefit and political priority were overemphasized. It can be said that all of this has something to do with the efforts and success of private businessmen in creating wealth for society.

Of course, it could also be said that all this is also a result of the Chinese Communist Party’s policy of “reform and opening up to the world.” However, if one were to ask why the Party did not continue to hold to the policy of class struggle but chose instead “reform and opening up to the world,” then there is only one answer: the party knew very clearly that years of cruel class struggle had brought China to the brink of total breakdown. If the Party had not adopted the capitalist market economy and had failed to develop people’s business, then China would have faced the same fate as the former Soviet Union and East European countries. In this sense, the emergence of people’s enterprises was a product of changing of times and social progress; the appearance of this “new class” of entrepreneurs was the result of a societal transformation leading to the new “capitalists.” Because the name “capitalist” sounds too negative in China, the government gave people’s entrepreneurs a better-sounding name: “the new class.” This term is less provocative and has also helped sweep away possible barriers to future political “cooperation” when the Party wishes to engage with private businessmen.

In fact, the party’s sixteenth congress announced that people’s entrepreneurs would be allowed to join the party. At the recently ended seventeenth congress, the chief executive of Qingdao Hai Er Corporation, Zhang Ruimin, as a representative of “the new class,” managed to become a member of the central committee of the Communist Party. In the next twenty years, as China’s economy develops and privately-owned businesses invest more around the world, more entrepreneurs will become members of the central committee of the Chinese Communist Party, and the Chinese Communist Party will to a larger degree represent and protect the interests of privately-owned enterprises. In order to avoid another “Communist revolution,” it has even been suggested that the Chinese Communist Party simply change its name to the “Democratic Socialist Party,” turning it into a social democratic party. While it looks as if this suggestion is not feasible at the moment, it is by no means impossible.

The entrepreneurs seem to understand that only having money is not enough. There was a joke that was very popular a few years ago in which someone who had become rich but still lacked the corresponding social status or political power said, “Apart from money, I’m completely broke.” In order to get on China’s political stage and develop a capitalist free economy, entrepreneurs must show their “kind heart” to the public in China, winning understanding and support from a populace long exposed to doctrines of class struggle. A lot of the “new class” have made generous financial donations in order to establish a positive image. According to incomplete statistics, China’s richest fifty entrepreneurs donated altogether RMB 8.34 billion between 2003 and 2007. Chinese entrepreneurs hope to create a space of their own, recognized by the public, using their biggest assetmoney. Although their motives may be questionable, weaker members of society do need the benevolence of the rich. However, the charitable actions of the new class are not worth mentioning compared with the size of their wealth. Also, the Chinese government does not yet have laws and regulations to promote charitable work or to encourage the rich to donate. Some people in China have become rich, but their willingness to shoulder social responsibility does not match their wealth. While China has a long way to go in terms of constructing an urban society and maximizing the contributions entrepreneurs could make in building society and civil culture, the first elements of growth in this area are already discernible.

Like the development of any other social force, private entrepreneurs will continue to mature in a relationship of cooperation and conflict with the government. The ruling Chinese Communist Party, who wish to build a “harmonious society,” will have to bond with the people’s entrepreneurs at the same time seeking in various ways to control their development so as to avoid undue competition with them. The private entrepreneurs wish to preserve their status and wealth and thus not only need to deal with the question of “property law” but also need to pay attention to society’s problems and actively promote and take part in the construction of a democratic, law-governed system. “You can’t survive without money, but money cannot do everything.” The stability and development of China’s society require an economic foundation but must also be guaranteed by a democratic political and legal system. In addition to this, there must also be a spiritual support.

May China’s new social class—private entrepreneurs—be able to play an even more positive role in China’s future.

Image credit: in style by namealus, on Flickr