Cover Story

Cashing In on Communism

By Maureen Fan
Sunday, February 18, 2007

A COUPLE OF YEARS AGO, SHI XIAOYAN SOLD 17 OF HER 20 CARS. That left her with just the Porsches -- a Boxster and the 911 Turbo -- in the garage downstairs. Shi, who also goes by Celia, is the founder and chief executive of Illinois, the Beijing-based home furniture chain, and No. 21 on a list of the richest women in China, with a reported total wealth, along with her husband, Ye Mingqin, of $125 million. These days, she drives a $38,000 convertible Mini Cooper.

"I drive an economic car -- saves gas," she explains. "You know, you have to save something for your next generation; you shouldn't spend everything."

The next generation, of course, includes Shi's son Jason, 11. Three years ago, for his eighth birthday, Jason got a Subaru Impreza, which he had customized and regularly drives at his father's racetrack.

That kind of conspicuous consumption might not be quite so conspicuous in Beverly Hills or even Great Falls. But this is China, where, until fairly recently, being rich was not only rare but virtually criminal.

After the 1949 Communist revolution, private wealth became a huge social liability. Much of it was confiscated by officials or voluntarily handed over by owners who feared persecution otherwise. Villas and large homes were seized and transformed in the interests of the state: housing for municipal workers, medical schools, government offices and the like.

Treasures in the form of antique paintings, calligraphy, Ming and Ching dynasty vases and jade sculptures were burned or smashed, often by their owners. With the Great Leap Forward and various other anti-capitalist campaigns in the late 1950s, Red Guards came and took whatever trappings of wealth remained.

If, at the beginning, Communist officials were close to the people -- farmers and peasants who were reacting to the corruption of the overthrown Kuomintang government -- eventually, they became enamored of and kept many of the confiscated goodies. Jiang Qing, leader Mao Zedong's wife, was notoriously extravagant -- reportedly having her swimming pool filled with mineral water, riding horses in parks closed to the public and watching foreign movies -- all while urging her countrymen to embrace poverty. After the Cultural Revolution (1966 to 1976), many people petitioned the government to get their possessions back: A few things were reportedly returned, but not many.

Well-known Communist slogans at the time included: "The poorer you are, the more glorious you get" and "To cut off the tail of capitalism." Free enterprise became so thoroughly reviled that even peasants selling fresh eggs were criticized as capitalists. During the Cultural Revolution, capitalists and rich landlords joined "rightists" and other "bad elements" as targets of persecution. People who spoke English or had Western training or education were fired, denounced or paraded through the streets.

Essentially, the rhetoric for three decades made it seem to be a crime to get rich.

China's "opening and reform" period began in 1978, thanks to Deng Xiaoping, the pragmatic son of a well-off landowner. After Mao's death in 1976, which ended the brutality and chaos of the Cultural Revolution, Deng marshaled reform-minded colleagues to restructure China's shattered economic system. Though Deng continued to elevate socialism over capitalism, he believed in market forces and pushed for stronger economic ties with the outside world. In 1979, he allowed parts of the southern province of Guangzhou to become a special economic zone -- Western-style management of business was permitted, and foreigners were encouraged to invest in and run factories there. He also visited the United States that year, which bolstered his desire to modernize China by turning from heavy to light industry and acquiring more technology.

The earliest Communist-era entrepreneurs, from about 1978 to the mid-1980s, were mostly people on the margins of society, members of the lower classes and sometimes criminals, people who knew little about the market but had nothing to lose by risking denunciation or the scorn of their neighbors, not to mention what little money they had. They often had to smuggle everything in -- from clothing to radios to watches -- just to build an inventory. But after making money was sanctioned by the government, many of the people who decided to xia hai, or jump into the commercial sea, and start their own businesses were either government officials or people with close connections to officials.

Any early belief that increasingly free enterprise would lead to political liberalization was crushed in the 1989 massacre of pro-democracy demonstrators by government troops in Tiananmen Square. Many entrepreneurs joined the students, calling not just for democracy but also for an end to government corruption. Much, but not all, business came to a standstill, until 1992 when Deng took a now-famous tour of the south, a trip that generated hundreds of newspaper articles and at least 20 books. Though 88 and already ailing, and with many of his pronouncements issued by a daughter, Deng promoted a package of economic reforms. He thought fair competition would stimulate business and allow some people to get rich, which would slowly spur others to follow suit. On his southern tour, he repeated a phrase he first used in October 1985 when meeting with a U.S. business group in Beijing: "Rang Yi Bu Fen Ren Xian Fu Qi Lai" (Let Some People Get Rich First). This call for economic exemplars was erroneously translated by Western media into the much more black-and-white "To Get Rich is Glorious," which became a catchphrase in the West for another burst of entrepreneurial activity in China. Though Deng continued to praise socialism, his push for economic reform became enshrined in the constitution and in Communist Party literature.

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