China's risky power-money connection

• Source: Global Times
• [03:27 March 17 2010]
• Comments

By Chen Chenchen

China had 364,000 millionaires by the end of 2008, according to the Asia Pacific Wealth Report released by Merrill Lynch and Capgemini in 2009. The number surpassed the tally of millionaires in Britain and ranked fourth in the world.

Related statistics show that China's 3,000 richest families currently have assets of 1.69 trillion yuan ($248.5 billion) in total, with each family holding 565.4 million yuan ($82.8 million) on average.

This is merely the tip of the iceberg. We don't know the exact amount of wealth owned by these families. However, it's certain that these rich families have accumulated tremendous social wealth, accompanied by greater rights of speech and social impact.

Families with both power and wealth were eradicated after the founding of the People's Republic of China in 1949, due to land reform and privatization of production means. However, such forces have been rejuvenated after three decades of reform and opening-up.

Different from some developed countries where millionaires are largely grass-roots businessmen from competitive industries, the composition of China's millionaire club is worrying.

Many on the list of domestic tycoons were officials or heads of State-owned enterprises before the 1980s, like "Steel Czar" Shen Wenrong and TCL's CEO Li Dongsheng. Solid political capital ensured them more social resources and opportunities during the development of the market economy.

The intermarriage of power and money has seemingly become the way to do business in China. In the late 1980s, township enterprises were closely "looked after" by local governments.

This was the budding of the alliance between politics and business. It didn't stop after the 1990s, when township enterprises were reformed into private firms. Currently, some local Party schools actively foster fuerdai (second-generation rich), showing the continued power-money alliance.

The power-money alliance is familiar to other East Asian countries. The rise of modern corporations in Japan and South Korea has been accompanied by political support. However, the recent campaign funding scandal in Japan and the suicide of former South Korean President Roh Moo-hyun last May have demonstrated the plight facing these two countries where politics and business are too close.

China is not at that point yet. But its existing power-money alliance has made its society less fair. After the reform and opening-up, some people became rich first. They have rapidly accumulated wealth with their families' networks, which has contributed partially to China's economic miracle.

However, these families, as a community sharing common interests, firmly grasp the fruit of social achievements and crowd out ordinary people who want to start from scratch now.

When the existing rich, with strong PR and a heavy impact on decision-making, take away most bidding projects and grab bank loans while evading punishment for pollution and accidents, grass-roots businessmen either learn to copy them by buying power or simply bowing out.

When the nation's political and economic reform policies are decided over a few powerful families' dinner tables, reform will exist in name only.