>>I suppose also that most of us, certainly including me, think that investment in China is dangerous, but we are somehow attracted.<<
Malcolm, China is the new Nasdaq in the mass consciousness, but with far broader risks. Lots of money to be made, if you know what you are doing. But.....how do you really know?
It is not my interest or goal to change your mind regarding your aversion to US stocks. I will merely point out, once more, that the US remains the world's largest growth engine, with the most innovative business culture and largest, most liquid, best regulated capital markets.
China's compitalists: Worst of both worlds
Asa Times 11.12.03
By Li Yong Yan
BEIJING - When communism mates with capitalism, the unlikely couple breeds a monster - a compitalist - inheriting the worst of both gene pools: ruthless power and unchecked greed.
Here is an illustrating example: A commercial real-estate developer takes an interest in a block of the city. He figures that by building a shopping mall on that lot, there will be a lot of money to be made. So he goes to the municipal government's equivalent of a zoning committee. Upon payment of the rent to use the land, the developer obtains permission to have his bulldozers roll into the site. Under the constitution, all land belongs to the people's government that is in a legitimate position to sell the use of the land.
Notice anything incomplete or missing from the transaction? A careful reader will immediately point out: "It can't be as simple as that. What about the buildings and the residents on the lot?"
The developer has already taken that issue into account. In fact, he is so thorough that he already submitted a plan to the government on how to dispose of the existing buildings, and residents, as well. Now the developer plasters a big notice on the walls of those buildings, informing the owners and rent-payers that the land under their feet will be put to another use by government order. Yes, they will receive a compensation fixed by the government. But no, the rate is non-negotiable. And they must vacate by end of next month, or face eviction.
Tough luck if your house happens to be located on the lot. But what's that you say, the compensation is hardly enough to afford your family a new roof? The land may be owned by the state, but the hut was built by your grandfather and you were never approached by either the government or the developer about the deal? Talk to the bulldozers.
First your water mains are shut. Then your power is cut. If you are still determined to hold your fort, you will be dragged out forcibly and the bulldozers will begin to tear down the walls in front of your eyes. You'll call the police. And they will tell you over the phone that it sounds like a commercial contract out of bounds to the police. "What contract? I never agreed to any contract with anybody about my house." Then you realize that you are protesting to a dead phone. So you will go to the court that on a good day will tell you that the eviction is perfectly legal and lawful. There is no case. "Look, the developer has all the correct papers to level your house. He has proper authorization from the government," the court official will explain to you kindly. "And the government is perfectly within its rights to do what it wishes with its own land, right?"
Sure enough, just behind the charging bulldozers, a cluster of court clerks stand by, their expression solemn and important. The thing is, they are on the opposite side, there to enforce the eviction should you dare obstruct "justice".
So you are thrown into the street, on your own, all alone against the government and the developer, both of whom do everything strictly by the law. This one-two punch is exactly what has happened across China, and it has driven some desperate people to take extreme measures. On August 22, Wong Biao, a resident in Nanjing, the capital city of Jiangsu province, returned from yet another futile attempt to talk with the local government only to find his house leveled to a pile of ruins. That was too much for the usually meek man. He set himself on fire. Less than a month later, on September 15, Zhu Zhangliang traveled all the way from his hometown in Anhui province to Beijing. Standing in Tiananmen Square, he poured gasoline on himself and lit a match. For the same reason.
What is so wrong about these sad episodes? On one hand, the government leases out the use of the land on purely commercial terms. Different locations have different prices. Nobody is coerced into the deals. On the other hand, the state uses its enormous power to force the deal down the throat of affected residents who never have a say in the process. Everybody has to obey. The compensation rate is whatever the government says it is. Even the developer's notice reads like a royal edict, "You must leave by 18th of October." The ownership of the land and the property on it is separate, and the state's rights override and ignore personal ones. Those in charge make sure you respect their ownership over the land your house sits upon. But then they never recognize you have a right to your own property, meager as may be.
In the past, when China practiced socialism to the letter and spirit, there was no such thing as commercial development. Every project was undertaken by the government, for the government and of the government. Every eviction notice was signed by the government that wished to build an airport or pave a road under your window. Now private and commercial real estate developments are cropping up like mushrooms all over the country. The government is raking in the land rent by the billions. To keep up the revenue, all avenues of negotiated settlements and legal remedies are closed to the "aboriginals" who are never invited into the conference room.
That is communism at its worst and capitalism at its ugliest. They combine to profit from each other's expertise at the expense of social justice. The abuse is not limited to the property market. Another chilling example is in the way workers' rights are trampled.
We all know that in their bid for power, China's communists loved to instigate and organize union strikes against "cold-hearted" capitalists. Mao Zedong told his followers, "It is right to rebel," when he was championing the "working class".
As soon as the communists took power, however, they removed the "right to go on strike" from the constitution. It is illegal to picket a factory because when communism took over all enterprises were nationalized and became state-owned. There was no other kind of ownership. Theoretically, therefore, you couldn't even protest against yourself. Fine and dandy. But then, things began to change. The very capitalists that were driven out are now eagerly courted. Foreign investments once regarded as imperialist aggression are now warmly received. As a result, ownership structure changed, too. There are now hundreds of thousands of wholly owned foreign factories operating in China. One would think that the communist government would surely follow its tradition by encouraging the Chinese workers in those mills to organize trade unions and allow them to go on strike in case capitalists from Japan, Korea and America revert back to their exploitative and inhuman nature.
Think again. Independent unions still are banned. Strikes remain illegal. The capitalists are now the protected species because Beijing can't afford to see foreign investments dry up. Nor does the government want the workers in state-owned enterprises to demand the "equal rights". It would be too much of an irony if an electrician working for a foreign employer had more protection than his counterpart in a socialist factory. Another fear factor is that independent unions just may grow too powerful - a la Poland during the late 1980s and early 1990s - for Beijing's comfort.
Therein lies the root of the social injustice highlighted by the act of self immolation in Tiananmen Square. That is how those residents find themselves on the short end of the property deal, oppressed by the state and exploited by the capitalists all at once, left and right, literally and figuratively.
Li Yong Yan is an analyst of Chinese business.
atimes.com |
