Chinese entrepreneurs, unsettled, speak out for reform

BEIJING — When Chinese property magnate Zeng Chengjie was executed for fraud in July, it sent a chill through the business community here. Zeng’s real misstep, according to associates and supporters, was not the crime he was charged with — defaulting on loans from ordinary citizens — but backing the wrong political horse: When his patron, a provincial governor, was jailed for corruption, Zeng found himself stranded, they say, a victim of China’s shifting political sands.

If the country’s economic miracle is to be sustained, its private entrepreneurs will be expected to do more to foster growth and innovation. But many business leaders say the economic playing field is tilted sharply against them and in favor of the country’s mammoth state-owned enterprises, while the political climate remains treacherous. Although many entrepreneurs undoubtedly still make a lot of money, some have begun to complain that they survive only at the whim of a distrustful Communist Party.

Rescue helicopters fly over a sinking South Korean passenger ferry that was carrying more than 450 passengers, mostly high school students, Wednesday, April 16, 2014, off South Korea's southern coast. Hundreds of people are missing despite a frantic, hours-long rescue by dozens of ships and helicopters. At least four people were confirmed dead and 55 injured. (AP Photo/Yonhap) KOREA OUT

Rescue helicopters hover over the sinking South Korean ferry on Wednesday.

Photos of the day

South Korean ferry capsizes, Boston marathon bombing anniversary, T. rex bones, Viking longboat on the Thames and more.

More world coverage

Palestinians want to continue peace talks, but with a map

Palestinians want to continue peace talks, but with a map

Abbas meets with Israeli lawmakers and says talks can continue, but certain conditions must first be met.

Ukrainian defections raise tensions

Ukrainian defections raise tensions

Ukrainian troops meant to be restoring order in the country’s restive east have apparently defected to the side of separatists.

Syrian rebels fear loss of revolution’s capital of Homs

Syrian rebels fear loss of revolution’s capital of Homs

Amid the bombardment by Assad’s forces, some rebels look for the exit, while others brace for a final fight.

“In the eyes of some people, we are dogs,” businessman Sun Dawu told a small group of entrepreneurs, economists and lawyers who met in Beijing last week to discuss Zeng’s death. “In the eyes of government officials, we are pigs. In our own eyes, we are sheep — sheep for slaughter.”

Entrepreneurs interviewed by The Washington Post say that many of their friends and associates have invested significant sums abroad in the past few years, as a fallback should they ever run into trouble; some are emigrating. The trend is a vote of no confidence in the party that concerns some economists, even if it has yet to reach a tipping point.

Within China, most business leaders try to keep their heads down, concentrating on maximizing returns to shareholders and investors. A small but growing group, however, says the time has come to speak out for political reform, for the rule of law and a judiciary independent of the Communist Party, and for the protection of private property and civil rights. In the process, they are breaking a taboo in Communist China that business leaders never discuss politics.

“Right now, people dare not speak out, but is that a normal society?” said Wang Ying, a fund manager at the forefront of the reform advocates. “The reality is that the more you avoid and hide, the harder it is for you to survive. Can entrepreneurs really survive if they kneel down?”

The debate over whether to speak out or stay silent has spread as far as an exclusive online networking group for 2,000 of the nation’s top entrepreneurs known as Zhenge Island. The group, which also stages lavish networking events, has been described as a high-level version of Facebook for members, who pay an annual fee of more than $3,000. Most members are owners of small or medium-­size businesses, a group that tends to feel the most vulnerable.

Wang Ying had formed a reading group with about 100 Zhenge Island members to discuss “Robert’s Rules of Order,” a 19th-
century American handbook of parliamentary procedure, but was indirectly admonished last month when Liu Chuanzhi, founder of the enormous and politically well-connected computer maker Lenovo, told members that they should stay out of politics and talk only about business.

That, Wang Ying and others say, is simply impossible in modern China, where every business needs a political patron — and that to demand that people not talk about politics is itself to take a political position. She said she felt she had no choice but to resign from Zhenge Island.

Scarcity of bank loans

The sense of disquiet among Chinese entrepreneurs deepened in recent years with the arrest of business leaders and the confiscation of their assets during a populist campaign against organized crime in the city of Chongqing from 2009 to 2011. Many of the business leaders punished complained that the proper legal process had not been followed.

Among the problems facing private entrepreneurs in China is the Communist Party’s stranglehold on the nation’s vast household savings and the way it funnels those savings in the form of cheap credit through the nation’s banking system to state-owned enterprises. That leaves private-sector businesses often short of the loans they need to expand, or driven to break the law by borrowing directly from ordinary people, as Zeng did. Many owners also say they are forced to bribe local party officials to gain patronage and political protection.

While Zeng may have made mistakes, his main mistake was to be too close to an individual official, said businessman Sun, who runs a thriving animal feed factory near the city of Baoding, a two-hour drive south of Beijing. “After the official was charged, his bad luck came,” Sun said in an interview at his firm’s sprawling complex. “To run their businesses well, entrepreneurs have no choice but to maintain good relations with local government. It’s like breathing in the polluted air in Beijing. You can’t stop breathing just because the air is polluted.”

Sun himself ran into trouble a decade ago after he gave a speech at Peking University in which he called for greater rights for China’s farmers, complaining that there were “eight caps [party cadres] for every straw hat [farmer]” in rural areas. At the same time, he said, he was involved in land and tax disputes with local officials, which did not help his cause. After the speech, he was investigated and convicted, like Zeng, of having borrowed money from private farmers to support his business when bank loans were scarce. He spent more than five months in custody and was given a three-year suspended prison sentence but says his fate could have been far worse.

“I don’t regret it at all,” he said. “Maybe I was punished for what I said, but, at the same time, I was saved because my voice was out in public. The public knew who I was, and after I was arrested, the media supported me, and public opinion supported me. The tragedy of Zeng Chengjie is that because he did not speak out, no one knew his story, and he was not saved.”

Adapt or speak out?

Billionaire investor Wang Gongquan has emerged as a leading liberal voice in the business community, co-authoring a petition last month calling for the release of jailed dissident Xu Zhiyong. With corruption rampant, inequality growing and the environment in ruins, Wang Gongquan says, citizens and entrepreneurs need to join forces to push for change. On their own, he says, individuals treated unjustly by the all-powerful state sometimes feel they have no recourse but to turn to violence. “If the government does not open society, it will cause more hurt and more violence,” Wang Gongquan said, “which is not in the government’s interest, either.”

The largest private-sector companies, such as Lenovo, are insulated from some of these pressures, enjoying party support as a “national champion” of industry in their own right. Other private entrepreneurs find protection as members of the Communist Party. Some benefit from the corrupt nexus of state and business that keeps the party in power; others prefer to work quietly for reform from within the system, for fear that changes to the current system will bring social instability, which would be bad for business.

Lenovo’s Liu declined to be interviewed for this article, but he has argued in previous interviews that his company has to adapt to the prevailing political and economic environment, supporting reforms when the government undertakes them but “staying there without moving” when the climate is less favorable — and never crossing “the red line” of opposing the government.

“Chinese entrepreneurs are a very weak class,” he told Caijing, an economics magazine, last year. “I need to be responsible to dozens of thousands of employees of my enterprise. I can’t have a more reckless attitude. . . . I don’t think it is reasonable to ask [entrepreneurs] to struggle with the tide or become the dominant force for reform.”

Among Zhenge Island’s members, Liu’s view appears to dominate, as Wang Ying acknowledges. “Many people think it’s dangerous to stand up and speak out,” she said. “But they ignore the fact that the more people stand up, the smaller the danger.”

Zhang Jie contributed to this report.

 
Read what others are saying