The Party: The Secret World of China's Communist Rulers (29 page)

The Sanlu board had been shunted aside by the Shijiazhuang party committee in the panicky cover-up in August a month earlier. In the midst of a full-blown political crisis, the central and provincial party authorities which had taken charge of the case had blithely sidelined it again.

The first thing I noticed about the room booked as a meeting-place for parents of children made ill by the Sanlu formula were the sketches stuck on the wall. From a distance, they looked like typical children’s drawings, simple, skeletal-like stick figures with big smiles, alongside the outlines of the sun and flowers. A nice touch, I thought. Perhaps they had been done by sick children as they were being nursed back to health, as a kind of positive therapy. A closer look told a different story. One drawing showed two women holding hands, with the scrawled caption: ‘I love my mummies.’ Another, with two men, was captioned: ‘Gay is good.’

The room in a two-star hotel complex in west Beijing said much about the odds the parents and their lawyers faced in suing Sanlu and the government. Government buildings in cities and towns throughout China are built on a grand scale on prime real estate, in-your-face symbols of the power of the state, with grand vestibules and ornate meeting rooms, all designed to awe invited visitors. The people who take the state on, like lawyer Li Fangping, have to exist on more modest resources. For the meeting with aggrieved parents that day, Li borrowed a gay drop-in centre for the evening, hidden away on the thirteenth floor of a rundown, two-star hotel. Li’s activism, like that of the gay people who sheltered at the centre, had forced him to the margins of Chinese society.

As soon as the scandal became public, Li had sent out emails and text messages calling for lawyers to volunteer to organize class actions in each province where there were victims. The response was unprecedented. Within days, he had the services of 124 lawyers in 22 out of China’s 31 provinces and regions. ‘I think there are more and more lawyers who want to give their services to society,’ Li said. ‘But then, this was a crisis on a national scale.’ On this last point, the Party agreed. Sanlu should have been the biggest case Li had ever handled. But from the day the New Zealand government had belatedly informed Beijing of the problem, Sanlu became the concern of the top leaders of the country. Lawyers like Li, in such circumstances, were to be sidelined.

Once the scandal became public, the Central Propaganda Department changed tack in an instant. The department in Beijing had not been directly involved in the original conspiracy to suppress the news about the tainted milk, even though its Olympics reporting restrictions had given Shijiazhuang every incentive to join in one. Strict secrecy was no longer an option. With the games out of the way, the department’s job now was to manage the news and guide public opinion, with two objectives in mind. The department had to make certain the fury of the aggrieved parents did not get out of hand and become a larger public political issue. And it also had to ensure the scandal did not taint the image of the senior leadership itself.

To handle the legal fallout, another shadowy branch of the Party was brought into play alongside the propaganda department, a body known as the Central Politics and Law Committee of the Politburo. Li felt the committee’s influence as soon as he tried to mount a class action for his clients. The first call pressuring him to drop the action came from the All-China Lawyers’ Association. ‘Put your faith in the Party and the government!’ he was told. Soon after, he was called in for a meeting, for another instruction. ‘Don’t take these cases, and do not try to represent clients across provinces!’ The Justice Bureau in Beijing then got in touch. ‘If you take these kinds of cases, you must report them immediately!’

The Lawyers’ Association, the Justice Bureau and indeed any legal body, all ultimately come under the control of the Politics and Law Committee. The control is exercised, backstage, out of public view, through the party cells that all legal bodies are required to maintain. The party secretary of the Lawyers’ Association, for example, was a government official from the Justice Bureau in Beijing. The city’s Justice Bureau sat under the Justice Ministry, which in turn reported ultimately to the Politics and Law Committee. ‘It is the spider at the centre of a web,’ said Li, of the committee, ‘connecting the police, the prosecutor’s office, the courts and the judiciary.’

Li is a softly spoken Christian who displays his faith on a wristband, saying: ‘Pray for China.’ Each time he was told to drop the case, he says he argued back. ‘They are not happy that I have organized these private cases,’ he said. ‘They do not like private involvement at all.’ Li had no direct contact with the Politics and Law Committee. Such party bodies prefer to exercise their control at one remove, through government organs or state-controlled professional associations. Li said he had been told by a local journalist about the committee’s directives to rein the lawyers in. The conversation between Li and the journalist was an only-in-China moment, in many ways. The journalist was in possession of important, newsworthy information about party manipulation of the legal system. But while he could pass it on privately to Li, the party’s propaganda wing ensured he could not report it in his newspaper. Gradually, Li said, the lawyers around the country who had volunteered to take the case began dropping out. Some succumbed to threats that their licences would be removed. Most discontinued their actions once the courts throughout the country refused to take the cases.

The Politics and Law Committee, like the propaganda department, had a delicate political process to manage. They needed to ensure that justice was seen to be done, without letting the legal process develop a life of its own. The committee contrived first to get the trial of Ms Tian and her main co-defendants from Sanlu out of the way in a single sitting. In a day’s work that would have tried the hardiest sweatshop labourer, the three-judge panel opened proceedings at 8.30 a.m. on 31 December, and did not rise until nearly fourteen hours later, at 10.10 that evening. The sentences, for Ms Tian and more than twenty other people charged with a variety of offences, were all announced on a single day as well, a month later.

While the process was expedited, to limit the opportunity for victims’ families to protest, the courts’ verdicts were harsh. Three of the peddlers of the ‘protein powder’ received death sentences, one of them suspended. Ms Tian got life. The Shijiazhuang mayor was sacked, along with a number of senior officials immediately under him. The party secretary of Shijiazhuang, the most powerful official in the city, was also eventually removed from office. And Li Changjiang, the head of the food inspection service who earlier in the year had fumed about foreign criticism of Chinese product safety, was forced into an ignominious resignation. Tens of thousands of families received compensation according to a payment schedule drawn up by the government. As a final gesture to simmering public anger, the Supreme People’s Court in Shijiazhuang agreed to hear the lawsuits from five families, as a way of finally putting the issue to rest.

Soon after the Sanlu verdicts, a businessman in the US state of Georgia was arrested for knowingly selling contaminated peanut products, leaving hundreds ill and a number of people dead. The Chinese state media, stung by blanket foreign coverage of the Sanlu scandal, reported the Georgia case with glee. Nearly 600 people had fallen ill after eating the company’s products. Eight deaths had also been tied to the strain. The Xinhua headline drove the point home. ‘Fully Aware Product Could be Contaminated with the Salmonella Virus; Continued to Sell Products; Agencies in Charge Discovered the Situation but Did Not Investigate.’

Behind the resentful tone of moral equivalency of the Xinhua report lay a missed opportunity that the Sanlu case contained for the Chinese system. The human factors that drive cover-ups, of greed and self-interest, combined with an indifference to the consequences, are evident no matter where they occur. Institutions are fallible, and manipulated to corrupt ends, all over the world. The Sanlu case displayed more than the foibles of ordinary people trying at great cost to save their careers and businesses, however. From start to finish, the scandal provided a lesson about the Communist Party’s subterranean exercise of power, against its citizens, and also against itself.

In times of national crisis, the Party can choose to flaunt its leadership and its ability to mobilize resources on a scale few states in the world can match. The Party responded like a whirlwind after the 7.9-magnitude Sichuan earthquake in May 2008, for example, which killed nearly 90,000 people and left millions homeless. Wen Jiabao, the Premier, was on a plane to the disaster zone within hours of the quake. Thousands of officials, soldiers and ordinary citizens were marshalled in an instant for relief work. ‘Faced with such a grim natural disaster, the Party and the government are the powerful social mobilizing force of the socialist state,’ the
People’s Daily
said. ‘Any hardship can be overcome.’

The authorities’ relief efforts had initially been surpassed by the community itself. Rich entrepreneurs, fledgling NGOs, private companies and even individual citizens, in an unprecedented, spontaneous surge, had rushed to the quake site to set up independent relief efforts in such numbers that the authorities did not dare to force them to leave.

A few weeks later, the Central Organization Department called an unusual press conference to enumerate the Party’s own achievements during the rescue mission, as if to set the record straight. The Party, which sees itself in the Marxist tradition as the vanguard of the people, had clearly been uncomfortable with the impression that its relief efforts had been bringing up the rear. One of the department’s vice-ministers, Ouyang Song, listed the Party’s contributions to the earthquake effort at the press conference as though he was reading monthly production statistics. Over 500 party committees of soldiers, close to 10,000 grassroots party bodies, 1,000 temporary party organizations and over 40,000 party members, all ‘had faced danger and difficulty without retreating’.

The press conference, only the fourth in the organization department’s seventy-year history, was a strange affair. If Ouyang sounded like a machine politician boasting post-election about his get-out-to-vote effort, it was because after a fashion he was. The earthquake had paradoxically been a political triumph for the leadership, because of the way it had emotionally united the nation behind a single goal. But the Party’s sense of self-esteem still demanded it place on the record the work of its members in going to the rescue of their fellow citizens.

Success has a single father in China, a maxim which often makes for improbable reporting. According to an official media dispatch from the scene of a mining accident in Henan province in 2007, the moment one rescued miner emerged out of the blackness into daylight, his first words were: ‘I thank the Central Party! I thank the State Council! I thank the Henan provincial government! I thank the people of the nation!’ Apart from the fact that the rescued miner made no reference to his family or loved ones, what is notable about this quote is that it captures perfectly the ruling hierarchy, with the Party at the top, followed by the central government, the provincial leadership, and finally, the people. The organization department’s boasting about earthquake relief, or, on a much smaller scale, the reporting of the mining rescue, are the exceptions that prove the rule. Usually, party bodies prefer to fly under the radar, as they did in the Sanlu case, to ensure the sinews of their power remain out of sight.

In the Sanlu case, the Party’s multiple organizations, at a local and then central level, often at odds with each other but sometimes in concert, enabled the suppression of the scandal at every turn. Party bodies censored the news, usurped the management of the company, sidelined the board, and finally sacked and arrested the executives. When the victims mobilized to take legal action, party bodies intimidated the lawyers, manipulated the courts and bought off the litigants, before finally letting a handful of cases proceed. In the end, the Party also harshly punished the wrongdoers as it closed off the case.

In every instance and at each step of the way, the Party’s actions were only reviewable through its own internal processes and never subject to genuine public scrutiny. Other than passing references to Ms Tian’s position as the party secretary, the Communist Party’s role was barely acknowledged at all. Such observant silences remain par for the course in twenty-first-century China. The tasks of managing cadres, business, the media and the law are all in a day’s work for the Party, whose rule over China, it insists, represents ‘the verdict of history’.

The Sanlu crisis displayed the system at its secretive, cabalistic worst. When it came to the private sector in China, which has blossomed in tandem with the state in the past three decades, the Party was more than happy to take its share of the credit. The Party threw out its longstanding practice of operating backstage and made sure to advertise its presence in private companies out front, in public. Far from being in conflict, the Party wanted to ensure that the private sector and officialdom were seen to be working in harmony, for the mutual benefit of all.

The Party and Capitalism

The man known across China as ‘Mr Idiot Seeds’ pointed out of the window of his modest two-storey shop and storage centre at the towering office complex next door. ‘I wasn’t the only one in jail,’ he said. ‘Everything you can see around you is owned by the guy who was in there with me.’

Nian Guangjiu, his real name, has had lots of time over the years to make friends in prison. He was jailed first in 1963 for engaging in illegal speculation, by running a private fruit stall in his home town of Wuhu, in central Anhui province. During the Cultural Revolution a few years later, his old capitalist rap sheet alone was enough to put him behind bars again, this time as a ‘cow demon and snake spirit’. After the suppression of the 1989 protests, hardliners in the Party lumped entrepreneurs in with the student demonstrators as subversive threats to the state and sent Nian back inside for the third time. In the cell with him was a fellow serial entrepreneur, who emerged from prison to build the office tower next door.

In the years when he was free in the late seventies, Nian had opened a shop selling an affordable, everyman’s snack, the roasted sunflower and pumpkin seeds that Chinese chew meditatively, on and off, during the day. He bought in bulk from farmers and sold cheaply to consumers across the country. The same showy rebellious streak that had landed him in trouble with the authorities when he was growing up soon helped transform what could just have been a simple street-stall business. Nian’s illiterate father had always been known as the local ‘idiot’ in his district. Nian, who was also illiterate, was called the ‘little idiot’, or ‘idiot junior’, in turn. Grasping for a sales pitch for his seeds, he simply named them after himself. On the packet, next to a beaming picture of Nian, he added a tag-line to flesh out the product name–‘Idiot Seeds: The Choice of Clever People’. The brand quickly became famous. Within a few years, he had a thriving business, more than 100 employees and his first fortune.

Far from being thrilled with Nian’s success, the Anhui party chiefs who managed one of China’s poorest and most populous provinces were initially petrified. Trumping any concerns about the parlous local economy, they fretted that they might be committing a political error by allowing a private company like ‘Idiot Seeds’ to trade. Anhui sent report after report to Beijing about the ‘Idiot Seeds’ phenomenon, asking whether it should be shut down for being capitalist. Finally, Nian’s business landed on the desk of Deng Xiaoping himself in 1984. Soon after, Deng delivered a crafty rejoinder, in keeping with the wild economic experimentation he was encouraging at the time. Closing down the business would make people think the open-door policy had changed, he told the then ruling council of elders. Let’s look at it again in two years. ‘Are we really afraid,’ Deng said, ‘that “Idiot Seeds” will harm socialism?’

By the time I met him, in late 2008, Nian had morphed from subversive capitalist into a state-sponsored business celebrity. The official from the local propaganda department who greeted me at the entrance to Nian’s store was confirmation alone of his elevated status. Chinese officials habitually harass foreign journalists interviewing citizens about past injustices and see them out of town. Instead, the Wuhu official offered me a banquet, a city tour and help with anything else I needed. With the national commemoration of the thirtieth anniversary of Deng’s open-door policy just a few months away, the city had adopted Nian as its homegrown mascot for the entrepreneurial economy.

Now in his seventies, Nian has the look of an ageing matinée idol, with a deep farmer’s tan, loose, longish hair, and a faux-Nehru jacket lined with chinoiserie-patterned silk. His success had not rid him of his small-town habits. Every so often, he would noisily clear his throat and spit heartily on the office floor, as casually as if he were scratching his nose. His raspy voice and crackly laugh, toned by years of chain-smoking, was overlaid by a full-blooded local accent which made him difficult to understand. When he first started talking about his life, I wasn’t sure if I had heard him correctly. Had he just denounced Mao for his ‘enormous crimes’ and killing countless people? The official from the propaganda department laughed nervously. Don’t take him too seriously, he said.

As Nian warmed up, he began to sound less like a rebellious businessman and more like a party official. Slogan was laid upon slogan, punctuated by long pauses, and delivered in a booming voice. Each pronouncement finished with a screeching, rising inflection, as if someone was sticking a pin in his behind as he approached the end of the sentence. Anyone who has sat through speeches by top leaders in the Great Hall of the People will recognize this technique, of the rising pitch used to signal to the audience it is time to applaud. Nian hailed the ‘third plenary session of the eleventh congress’, in 1978, as the meeting which had ‘invigorated China’s fate’. (Applause.) He declared the Chinese economy to be in ‘good shape and developing in an orderly fashion’. (Applause.) He pronounced that the legal system had been modernized and freed from government interference. (Applause.) As he went on, the most striking thing about Nian wasn’t his occasional denunciations of the old Maoist system, but his praise for the Party, most of all for his hero, Deng Xiaoping. ‘Deng was wise,’ he said. ‘He perfected socialism. Before Deng, socialism had many imperfections.’

Nian’s statement–that ‘Deng perfected socialism’–captures in three words the topsy-turvy world that the Party and the private sector have come to inhabit in China. The Party, which espouses socialism, spends much of its time deferring to the market. Entrepreneurs like Nian, who worship the market, are careful to defer to the Party. In this environment, it is little wonder that the dividing line between what is public and what is private in China is often still impossible to detect. After coming to power in 1949, the Party closed private businesses and confiscated their assets. Over time, they criminalized private commercial activity, although the execution of the policy waxed and waned with political cycles and in different regions. The suspicion harboured towards entrepreneurs lingered long after Deng’s market reforms in the late seventies. As late as July 2001, Jiang Zemin’s decision to allow entrepreneurs to officially join the Party stirred a rare public split among the leadership and deep disquiet in the conservative rank and file. Deng, and Jiang after him, grasped what many of their conservative opponents never did–that the Party had much in common with private entrepreneurs, who disliked democratic politics and independent unions as much as they did. The Party’s authoritarian powers not only kept workers in line. They also bestowed on policy-makers a flexibility that politicians in democratic countries could only dream about. Even by the standards of a capitalist economy, the Party could be unusually pro-business, as long as the state got a cut along the way.

The Party’s distrust of the private sector was never about money nor the flagrant contradiction between individual wealth and the official Marxist and Maoist pantheons. All parties to this on-and-off-again, three-decade-long courtship agreed on the need to turn a profit. The real issue for the Party was the threat that the foreign and local private sector might become a political rival. The Party’s natural instinct, to colonize the private sector, has often been overwhelmed by the sheer wealth of the new entrepreneurial class. In response, party interests have promoted private companies as an engine of employment and reined them in when they have grown too big; invited entrepreneurs to join the Party, while intimidating and jailing business leaders who fall foul of it; and supported more secure property rights, while muddying the rules surrounding ownership of companies, assets and land.

The larger point, however, of an unprecedented partnership between a communist party and capitalist business, holds. It remains an uneasy, unstable and unholy alliance, but an alliance nonetheless that, in the short term, has turned more than a century of conventional wisdom on its head. It may have taken decades, but a broad consensus has now developed at the top of the Party, that far from harming socialism, entrepreneurs, properly managed and leashed to the state, are the key to saving it. Luckily for China, Deng learnt early on a lesson that nearly every other failed socialist state neglected to heed, that only a boisterous private economy could keep communist rule afloat.

The first time I met Zhang Ruimin, who heads Haier, China’s largest whitegoods manufacturer and one of the country’s best-known brands, I asked him what I thought was an obvious question. Zhang Ruimin was both chief executive of Haier and also secretary of the company’s Communist Party committee. How did he balance any possible conflict between the Party and private profit? Zhang dismissed the question out of hand. ‘I appointed myself party secretary of Haier, so I can’t have any conflicts with myself, can I?’ he replied.

In an interview with Xinhua, the official news agency, at about the same time, on the eve of the eightieth anniversary of the Party’s founding in 1921, Zhang had struck a more respectful tone. The agency observed that some reports attributed him with ‘superpowers’, since he had turned Haier from a near-bankrupt shell into a global company in only seventeen years. Zhang responded: ‘How do I have such power? I’m only an ordinary party member.’ Under Zhang’s guidance, the report added, middle and senior managers at Haier were voluntarily studying orthodox communist dogma to help with their work in the whitegoods sector. In 2002, Zhang became the first business leader to be admitted into the Central Committee.

Zhang was lionized in the Chinese press as the country’s most famous entrepreneur. Journalists, grasping for an analogy, often referred to him as ‘China’s Jack Welch’, a comparison that inevitably found its way into the headlines of the many stories about him in the foreign and local press. Haier was undoubtedly a success story and Zhang was entitled to take credit for its turn-around. In 1984, when he took over as chief executive, he legendarily wielded a hammer to smash fridges made by the near-bankrupt company to make a point to the workforce about product quality, a tale that populates all the business school texts about his entrepreneurial zest. Haier’s branded products can now be bought around the world. The comparison with General Electric and ‘Neutron Jack’ was fundamentally flawed, though, for a very simple reason. Haier is not a private company. And the moment its senior managers tried to exercise their power as shareholders to make it so, the local government issued a peremptory edict to stop them.

The status of Haier was symbolic of the central problem surrounding business in China. There is little dispute that the private sector in China has grown from an almost negligible part of the economy in the late seventies–so small that official statistics were not kept on it–to the prime engine of new job creation, if not economic output, thirty years later. But nobody knows, or at least can agree on, the true size of the private sector, because of the difficulty of defining who owns what in the first place.

In September 2005, CLSA, the emerging markets brokerage based in Hong Kong, produced a thick report about how entrepreneurs had taken over as the motor of economic growth in China. ‘The private sector now contributes more than 70 per cent of GDP and employs 75 per cent of the workforce, creating the foundations of the vibrant middle class, so a rollback of market reforms is not an option for the world’s largest Communist Party,’ the report said. ‘Today’s most important economic question is not, “How will the government respond to an economic slowdown?” but rather, “How will China’s entrepreneurs respond?”’

A week later, a rival and equally respected China research unit at UBS, the Swiss bank, put out a rejoinder, saying the private sector ‘accounts for no more than 30 per cent of the economy, whichever indicator you use’. The report said: ‘In China, the following big sectors are either 100 per cent or majority controlled by the state: oil, petrochemicals, mining, banks, insurance, telcos, steel, aluminium, electricity, aviation, airports, railways, ports, highways, autos, health care, education and the civil service.’

Yasheng Huang, at MIT, who has spent years poring through official Chinese data and documents on this issue, said when asked for his estimate of the size of the private sector: ‘The honest answer is that I do not know and I think many people do not know. This lack of knowledge itself is telling, and due to the fact that the private sector is still considered somewhat illegitimate.’ Although he did not arrive at an exact figure, Huang did reach one conclusion–the pure private sector in China at the end of the twentieth century, companies with no government ties or involvement at all, was ‘minuscule’, equal to about 20 per cent of all industrial output.

The confusion about what is public and what is private is a deliberate result of the system’s lingering wariness about clarifying ownership. Ask any genuine entrepreneur whether their company is private, or ‘
siying
’, literally, ‘privately run’, it is striking how many still resist the description in favour of the more politically correct tag ‘
minying
’, which means ‘run by the people’. In a people’s republic founded on a commitment to abolish private wealth, an enterprise which is ‘run by the people’, even if it is owned by an individual, is more favoured than a company that parades itself as purely private. Most economists now skirt the issue, by dividing companies into two categories, state and non-state, and leave it at that.

When the Party first gave the green light to the market economy, it was in the countryside that business was initially embraced with the greatest fervour. Under Deng’s new deal, farmers could sell on to the market whatever they produced above the quota demanded by the state. The impact was revolutionary. About five years after the reforms were launched, nearly every farming household in the country had dumped the old commune system and turned themselves into mini-businesses. The key to the revolution of the early eighties in rural China, where most of the population lived and worked, was that it had support at the very top. The party leadership, under Hu Yaobang and Zhao Ziyang, had deep experience in the countryside and also a decidedly liberal policy bent. Rural finance was plentiful. Property rights increased substantially. And private companies, which traded under the euphemism of ‘township and village enterprises’, thrived. Capitalism in China was both vibrant and virtuous in this period, says MIT’s Huang, and offered tens of millions of people a feasible path ‘beyond abject poverty’. The eighties model, however, lasted no longer than the decade itself. The potent combination of political and economic liberalism of this period ended in bloodshed in Beijing in June 1989.