Private entrepreneurs in China have come a long way?from a handful in 1978 to 17 million today (1.3% of the total population). This estimate by China?s General Social Survey Report (2010) recognises the new social strata, that of a distinct mercantile class. Other studies testify that China?s mercantile class?from the average earner to billionaires?is an eclectic group of professionals, cadres and individuals hailing from divergent social backgrounds but united by ambitions of striking it rich.
The success stories of China?s cr?me de la cr?me of entrepreneurs attested by Forbes are many. Shanghai-based Hurun, famous for its series of ?rich list?, released its recent list on September 7, 2011. Hurun ranks Liang Wengen of construction giant Sany Group (70 billion yuan, R48,000 crore), Zong Qinghou of beverage company Wahaha (68 billion yuan, R44,000 crore) and Robin Li of popular search engine Baidu (56 billion yuan, R38,000 crore) as the top three. Hurun?s publisher Rupert Hoogerwerf says that there are now an estimated 271 tycoons with wealth more than $1 billion (R4,500 crore). Success stories from rags to riches are wildly popular in China, inspiring millions of Chinese to ?plunge into business? or xiahai as the Chinese say.
Hurun?s Wealth Report says that 960,000 individuals have wealth each exceeding 10 million yuan (R7.2 crore) up 9.7% over last year. Interestingly, Hurun says that the average age of millionaires in China is 39 years and of billionaires, 43 years. Obviously, the new class is prospering in what Forbes (2004) said of China, ?a land of millions of awakening consumers.?
China?s increasing numbers of private entrepreneurs attests to the strong winds of change in the post-reform (1978) period. Some scholars, such as Carolyn Hsu, have even said that China?s remarkable growth is a result of its entrepreneurship. Private entrepreneurs have been rehabilitated; indeed, now they are a part of President Hu Jintao?s official entourage on foreign travel.
The prominence offered to entrepreneurs is a sharp contrast to the fate of private entrepreneurs during the Maoist era (1949-1976). Then, private entrepreneurs were literally at the receiving end of the barrels of the gun. The infamous Five Anti?s campaign of 1952, which sought to eliminate economic crimes, de facto eliminated private entrepreneurs. Thus, the Maoist era succeeded in stifling and crushing the historically well-known entrepreneurial spirit of the Chinese people. By 1956, China could claim that the private sector had been eliminated. Compared to India, China cuts a picture of stark contrast. Old business houses in India, such as Tata (1868), Bajaj (1940s) and Birla (1870) among others, have a rich history and continued to flourish in post-independent India.
In China, much water has flowed under the bridge in the post-reform period. Reformer Deng Xiaoping reversed almost all of the Maoist self-defeating economic measures. Deng recognised and underlined that bold initiatives were often the result of the spirit of enterprise and entrepreneurship. Deng?s famous acolyte, ?glorious to be rich?, spurred many cadres and card-carrying Communists to ?plunge into the sea?. State-owned enterprises (SOEs), however, continued to control the commanding heights of the economy.
During the 1980s, the private sector was limited to individually-owned enterprises (geti hu or geti jingji). These enterprises could only hire fewer than eight workers, based on Karl Marx?s statement in Capital that crossing the line resulted in exploitation. Many private enterprises went into disguise or became ?red hat collectives?. They were privately-owned, but were registered as collectively-owned enterprises (COEs) referred to as ?red-hatting? (wear red hats or dai hong maozi). Deng Xiaoping?s ?Southern Tour? in 1992 further encouraged private enterprises. Sinologist Bruce Dickson notes that the number of private enterprises after 1992 grew by 35% per year. China Macro Finance, a New York-based group, has been cited by The Economist (2011) saying that private enterprises grew by 30% per year between 2000 and 2009.
The dramatic growth can be attributed to many factors, among these privatisation of township and village enterprises (TVEs) and SOEs. TVEs were set up by the local governments (and some were indeed ?red hats?) in the initial years of reform. By 2004, however, 90% of TVEs were registered as privately-owned. The reform of SOEs on the principle of holding on to the big and letting go of the small (zhua da, fang xiao) led to the growth of the private sector. The privatisation of state or COEs led to many cases of managers-turning-entrepreneurs. As sinologist Yang Jing points out, managers took over businesses, which already had established business assets (production chains, factory, and headquarters).
There have been other complementary institutional initiatives. In 2000, the private sector was given the same status as the public sector. In 2002, ex-President Jiang Zemin reversed an earlier ruling (of 1989) paving the way for private entrepreneurs to join the Communist Party, marking the rise of what sinologist Bruce Dickson calls ?red capitalists?. In 2004, China?s Constitution was revised to protect private enterprises. And, in a dramatic move in 2007, the Property Law established the propriety of private property.
OECD?s Economic Survey of 2005 said that the private sector produced ?well over half of the GDP?. China Daily, in 2010, quoted entrepreneur Yan Jiehe as saying that private enterprises account for ?75% of China?s economic aggregate share, 75% of state revenue and nearly 80% of new job opportunities?.
A survey on Private Enterprises and Entrepreneurs in China in 2008 (SPEEC) attests that 80% of the private enterprises operate in the secondary and tertiary industries. The SPEEC highlighted that the proportion of private enterprises with registered capital between 0.5 million and 5 million yuan (between R36 lakh and R3.6 crore) increased about 12% in the decade 1997-2008, while the proportion of businesses with start-up investment of over five million yuan (R3.6 crore)jumped from 1% to 14.5%. The survey also indicated that while 33% of new entrepreneurs were members of the Communist Party, up 15% since 1997 and that 63% of them were members of the Federation of Industry and Commerce in 2008 versus 53% in 1997.
But problems remain. Political scientist Zheng Yongnian, in a recent field study in Guangzhou and Zhejiang, indicated that more and more entrepreneurs are leaving China, ?feeling unsafe, cannot find a protector or find it too expensive to maintain a protector?. According to Zheng, the problem is serious because there are no ?independent groups of entrepreneurs that can
protect their rights?. In the recent past, observers say that Hurun listees have often been singled out for target (political persecution or mafia). Like India, kickbacks and pay-offs help entrepreneurs buy peace. It is also rumoured that the rich avoid rather than court publicity, as the limelight makes them subject to scrutiny.
Also, for many of the private enterprises, the sources of funding are mysterious, ? largely unofficial and even secretive? (The Economist, 2011). China Daily cited China Entrepreneur Survey System in April 2011 saying that entrepreneurs cite ?shortage of capital? as a major problem.
However, China?s new lot of bourgeoisie, as Kellee Tsai has indicated, is not a cohesive group capable of collective action. This fact undermines the famous political scientist Barrington Moore?s classic statement that the bourgeoisie are the harbinger of democracy. Economic well-being creates sources of wealth, power and a strong middle class, all of which play a key role in democratisation.
Thus private entrepreneurs are somewhat the archetypal ?birds in the golden cage??few thriving, few frail and adventurous, and few escaping the cage. But hard found after the Maoist years, this time round, this should not be lost.
The author is a sinologist, currently a visiting fellow at Institute of Chinese Studies, Delhi. Views are personal