For increasing numbers of Chinese, Li Ning, a former Olympic gold medal gymnast and current business entrepreneur, stands as a symbol of China's new "enterprise culture". Together with other select sports stars, pop stars, film actors and television personalities, Li Ning is a member of China's new "Star Culture". Their extravagant lifestyles, far beyond the realms of possibility for the vast majority, are being displayed and promoted by China's official mass media.
Who really are the "new rich" in China? A recent issue of Access China (December 1992, published by Macquarie University's Centre for Chinese Political Economy) spotlights the wealth, power and status of China's new rich. David S.G. Goodman and his team from Murdoch University's Asia Research Centre have been surveying 1000 of the new rich since 1991 and have drawn some preliminary conclusions.
The new rich are those with relatively high disposable incomes, in excess of 1000 yuan RMB per month, (the national average is 250-300 per month). Interestingly, the traditionally more educated layers such as teachers, technical personnel and cadres do not fall into the new rich category. If anything the wages of those involved in the state "service industries" and in state, party and social organisations have to some degree fallen off over the past 15 years.
From 1952 to 1978, China's economy grew at 6% per annum. Since the late 1970s, the annual growth rate has been at least 9%. In the early 1980s, the Chinese Communist Party (CCP) leadership implemented Deng Xiaoping's "economic reform" policies encapsulated by the slogans, "Don't be afraid to get rich" and "Let a few get rich first".
During the 1980s, the press was full of rags to riches stories about successful private entrepreneurs, especially from the agricultural sector. Last year, according to Asiaweek, a senior government
official estimated that the total savings of China's 10 million private business people exceeded those of its 800 million peasants.
With the growth of the new rich has come a demand for the chance to spend their new disposable incomes. Goodman notes that it is not uncommon "to find a million to a million-and-a-half RMB invested in the purchase and conversion of a restaurant [to a highly priced one] and in many cities the richest private entrepreneurs are restaurant owners and those concerned with food supplies ... the new status symbols include not only Hong Kong clothes, the latest technology and food fads, but for many rich households, the non-working wife."
By 1990, however, the private sector was responsible for only 5.5% of industrial output. Most estimates put the current figure at perhaps 6, and certainly less than 8%. According to Richard Pomfret, professor of economics at Adelaide University, although in China "the ownership characteristics of privatisation are fuzzy", the rapid growth of township and village enterprises has significantly reduced the share of state enterprises in national output.
"Recent official figures ... refer to over 150,000 private enterprises (with eight or more employees) ... employing over ten million workers with over 13 billion RMB in capital ... there are over 14 million private household businesses." ("Alternative Models of Economic Reform", also in Access China, December 1992.)
China's true private sector, Goodman points out, has been characterised by its small scale, low cost, labour intensive and short-term nature. There is little or no reinvestment in this sector, chiefly because the resources and structures are lacking for the development of a larger private sector.
Instead, when private entrepreneurs want to develop larger businesses, they find it necessary to set up joint ventures, usually with a section of the apparatus.
An individual entrepreneur, for example, might be producing small domestic boilers with one other
person, perhaps an engineer. They decide to tap into a larger market for huge industrial boilers. They pay a call on representatives of the local state authority and propose a deal. If the local authority provides the land and plant, they will provide know-how and invest their profits in the new business.
Importantly, the current taxation system is biased in favour of such deals, which are also largely unregulated by wider laws. The local authority can charge "management fees", while the private entrepreneurs pay lower taxes to the local authority than they otherwise would to the state. From such deals derives the burgeoning realm perversely known as the "collective sector".
Notes Goodman, "The growth of rural and urban collective sector industrial enterprises has been a major characteristic of the reform era, easily eclipsing the growth of private-owned and foreign-funded industrial enterprises".
Nationwide, car pools belonging to state enterprises have been turned overnight into taxi companies; glassworks sections of state enterprises are being transformed into "collective sector" jam jar factories. For many state enterprise managers, struggling to comply with the leadership's imperative to make their enterprises more profitable, the collective sector provides a ready solution of sorts. And it is here we find China's new rich.
"The managers of the collective enterprises that have mushroomed with economic development since 1978", explains Goodman, "are the most obscure but probably the most important members of the new rich. They are not only individually wealthy, but are also wielders of considerable economic power, particularly in industrial development, although their power is derived not for the most part from ownership but from control of economic resources ...
"These enterprise managers typically have a regular monthly salary of no less, and sometimes considerably more, than 1,000 yuan RMB. Salaries are well supplemented not simply by bonus payments, some of which can be considerable and in excess of the monthly salary, but often also by a share of
enterprise profits and various items of hidden income."
Who owns the new enterprises? The political problems surrounding ownership are enormous and, according to Goodman, responses vary depending on whom you talk to. "By definition, the managers of collective, or even state, enterprises are not the owners. However it is far from clear that ownership is as important as control, both generally and in this specific case. Certainly in the collective sector many managers consciously behave as if they were the owners and the relationship is ambiguous. Some are indeed the previous owners where the collective enterprise emerged from the private sector, and they are often aggressively defensive of their interests."
Quite a few of the collective enterprise managers, apparently, speak of handing down "their" enterprises to their sons.
Amongst the new rich many have party connections, were party members or are party members now. The system now is about turning cadres into managers. The party woos Star Culture members like Li Ning in order to emphasise political messages about developing an enterprise culture.
Goodman believes that the new rich as a whole are being subsumed by the party-state. The enterprise managers deal with more or less the same cadres who accept personal commissions for assisting foreign corporations to invest in China. It is, then, unsurprising that China's legal system has so far failed to clearly regulate activities within the collective sector. For the time being, it's to the advantage of new rich, both within and outside the party, that definitions of ownership remain fuzzy.
"The managers of the new collective enterprises often behave like capitalist entrepreneurs in economic development ...", notes Goodman. "Their behaviour is not only economically rational and profit maximising. It is socially also often reminiscent of crude caricatures of nineteenth century European capitalists, as for example in the lack of provision of labour insurance or pension funds."
Goodman finds that many Chinese "remain equivocal about the existence of the new rich, who are often simultaneously admired or despised for their wealth. One instinctive reaction is to attribute individual economic wealth solely to official corruption, or other illegal arrangement, rather than simply recognising the consequences of economic growth."
Commenting on Goodman's survey and analysis, one prominent Sinologist opined that, when all is said and done, the term "collective sector' itself is a dishonest one, disguising a process involving "the criminal privatisation of collective resources in China".