18th Party Congress to Showcase Rising Status of Private Business

Publication: China Brief Volume: 12 Issue: 20

Sany Chairman Liang Wengeng

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, minying entreprenerous 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 the minying 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 minying entrepreneurs “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.