Exposed: China's red billionaire
village By Poon Siu-tao
HONG KONG - China's Nanjie village, also
known as the "red billionaire village", has been
touted as the last stronghold of socialism amid
the capitalist-style economic reforms that have
swept the country over past three decades. Its
huge success, with economic growth outpacing even
the country's remarkable expansion over the
period, has now been exposed as a fraud.
The village has become practically
bankrupt, weighed down by 1.7 billion yuan (US$243
million) in net debts. It will take at least 200
years for the village to pay back the debts,
according to Wen Wei Po, a pro-Beijing daily in
Hong Kong. It is now clear that state coffers and
state-owned banks have paid a dear price for
setting up this model example of socialism.
With a population of little more than
3,000, Nanjie, in Lingyi
county of Henan province
in central China, has been of special significance
in the country's political life by persisting in
following the so-called socialist road of the Mao
Zedong era. Villagers still lead a collective life
as they did decades ago, sing revolutionary songs
and chant Mao slogans every day. The entrance to
the village features gigantic statues of Marx,
Engels, Lenin and Mao.
But there is a
world of difference compared with an average
Chinese village decades ago. All Nanjie villagers
live in villas, own their private sedans and have
deep pockets, attracting to the village the
sobriquet of "red billionaire village", reflecting
its combination of socialism with a market
economy.
Nanjie somehow created its own
"economic miracle", apparently against the tide of
the country's sweeping market-oriented economic
reforms, and maintained high-speed growth for more
than 20 years.
Doubts about how it managed
this are now being cleared up as more facts become
known. This so-called socialist collective body
started from scratch by running rural enterprises
in the late 1980s. Their businesses began with
brick manufacturing and flour processing, then
extended to food processing and pharmacy.
There are now more than 20 enterprises
collectively run by the village, employing more
than 10,000 migrant workers - Nanjie villagers
themselves do not really need to work. The village
administration has taken care of everything for
them, from clothing, food, housing to transport,
from birth to death. Each village official has on
average a monthly salary of a mere 250 yuan.
Nearly all villages across the country
have run rural enterprises and exploit migrant
workers. What has puzzled outsiders is how Nanjie
maintained such strong growth while nearly all
other rural enterprises have been gradually
eliminated by market competition because of their
poor management and low efficiency. It now turns
out that Nanjie's secret weapon was "capital".
After 1989, (when pro-reform protests in
Beijing's Tiananmen Square and elsewhere were
suppressed), China's political winds turned to the
"left". At that time, Nanjie happened to be
upholding "the great banner of Comrade Mao Zedong"
and sticking to the socialist road of "becoming
rich collectively". This was noticed by a leader
from the capital who appraised the village and
under direct or indirect instructions, the
Agricultural Bank of China became the ATM machine
for Nanjie. By 1998, the amount of loans it
granted to Nanjie were seven times those issued in
1991.
According to the Southern Metropolis
News, Feng Shizheng, an associate professor in
sociology with Renmin University in Beijing, who
has researched bank loans to Nanjie, concluded:
"Nanjie's high-speed economic growth relied on
bank loans, not on its own [capital]
accumulation." In Feng's view, Nanjie is a typical
example of "high growth, low efficiency". Only
with the support of huge bank loans could Nanjie's
economic growth outpace the national average amid
an economic efficiency that fell below the
national average.
Thus the village's
secret is very simple. Some person or persons, to
demonstrate the correctness of Mao Zedong thought
and to save what little that had been left by
socialism, ignored risks to have banks lend large
sums to Nanjie to set up and maintain this model
example of socialism.
Once it became the
model, the state had to throw in more capital to
ensure the village continued to shine. However,
the government leader who instigated the process
has retired and the Agricultural Bank of China,
undertaking a restructuring to become a
joint-stock bank, can no longer issue loans solely
on a political basis. As a result, Nanjie now
finds it difficult to obtain low-interest loans.
Not only that, it is under increasing pressures to
repay what it has borrowed.
To reduce its
debts, companies run by the village have in recent
years turned to marketing a soybean seed in the
name of Spaceflight II. They claimed that after
the seeds were sent out into space their genes
underwent a mutation that would increase their
harvest by 30%. Of course this was completely
fictitious. Many farmers who bought the seeds lost
their investment.
For Nanjie, it seems one
misfortune comes out in the wake of another. When
former village chief Wang Jinzhong died in May
2003, he was found to have kept in a vault in his
office 20 million yuan in cash and several
property ownership certificates under his own
name, remarkable for an official with a monthly
salary of 250 yuan. To make it worse, several
women carrying babies came to his funeral service
claiming to be his concubines and demanded shares
in his legacy.
Disillusion with the Nanjie
"myth" has cost the state coffers more than 1
billion yuan, while letting people become aware
that any artificial distortion of market
operations goes against economic laws and cannot
last long.
Poon Siu-tao is a
freelance writer for the Chinese edition of Asia
Times Online.
(Copyright 2008 Asia
Times Online Ltd. All rights reserved. Please
contact us about sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
