SEOUL — A little over a month ago I was on the way to Shanghai to spend a month teaching at Fudan University. I read an article in a Hong Kong newspaper that said the topic on everyone’s lips in China was the upcoming 16th National Congress of the Communist Party of China. This is the congress at which the new leaders of the party will be announced, those taking over from President Jiang Zemin, Premier Zhu Rongji and National Peoples’ Congress Chairman Li Peng.
Well, that may be the topic on the lips of the people who hang around in expat bars in Beijing, but it is not a topic that it is easy to get people to talk about at all in Shanghai. A bored glaze comes into people’s eyes when the topic is raised.
For most people it does not matter who gets the top posts. Some go up, some come down, as they say. Who cares who gets what post? Nothing much will change as tight party control means that individual leaders do not have a great deal of room to maneuver on major issues. Top national leaders simply implement the party line; deviation is not appreciated.
What does matter is the appointment of people lower down the ladder, the provincial governors and mayors of the major cities and other local leaders. These people can really have an effect on the quality of life of the citizens of the areas they represent; a dynamic leader can attract resources from the center and make things happen. So people are waiting, with considerable interest, to see who will get the positions on the lower rungs of the ladder. But it is not something they are talking about.
So what are the hot topics in China today, or at least in Shanghai?
One topic that came up a lot while I was in Shanghai was the campaign being waged against tax evasion. This campaign is being led by Zhu and is targeted initially at conspicuous high earners. Zhu is said to have been infuriated by the discovery that the lists of the top earners in China did not include many top taxpayers. It is a popular campaign as there is a lot of resentment about corruption among the rich who, people feel, should at least be made to pay taxes.
The clampdown has already seen one of China’s leading female film stars imprisoned for nonpayment of taxes, a move that has reminded many other film stars they are behind with their tax payments. They are now queuing up to put their tax affairs in order. But the big cases that have attracted most attention are those involving two Shenyang businessmen, Yang Rong and Yang Bin (not related).
To succeed in business in China, private entrepreneurs have to work closely with local governments. Those who have been in business for some years, especially in areas that are politically conservative, such as the northeast where Shenyang is located, often form joint ventures with local government to strengthen that support. Such companies are described as “red hat” companies. Yang Rong set up such a company several years ago, the government collaborator being the Liaoning provincial government. The company is well-known in China as Brilliance China Automotive Holdings.
When such red hat companies become successful, there are often arguments over who owns the equity and about who is responsible for the success of the company. It is not unusual for the private partners to find themselves in prison after such arguments. Businesses in China often sail close to the wind legally; it is easy for government officials to enforce their position by finding some legal excuse to arrest their private partners and take over the companies.
Yang Rong seems to have been tipped off that his government partners were about to come up with some such excuse, such as nonpayment of taxes, to throw him in prison. He escaped to California at the beginning of the summer. Successful Chinese entrepreneurs usually have such bolt holes, California being a popular location for them.
The other Yang case is even more bizarre. Although born in China, Yang Bin has a Dutch passport. He did not run away, but his chosen “escape” mechanism was original: He got the North Korean government to announce that he was to be the governor of a new special economic zone at Sinuiji on the Chinese border. This SEZ was so special that it was to be a special administrative region modeled after Hong Kong, with its own government and legal system.
After the North Korean announcement, there was a sense in China that the Chinese government would stop its moves against Yang rather than upset the North Korean government. This turned out to be wrong. After a brief delay, for the relevant party committee to decide what to do, Yang was apprehended and put under house arrest. The North Korean government had its wrist slapped and was reminded that it is a client state of China. It was forcibly told by the Chinese government that setting up such a SAR on the Chinese border and appointing a Chinese entrepreneur to run it was just not on. California would have been a better bet than Pyongyang for him, too.
That is what people are talking about in the restaurants and bars in Shanghai, not the 16th National Party Congress. Oh, and who has bought a car, who has bought a house, whose children are going to which university, who is going where on holiday and Manchester United’s performance last week.
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