Washington Post



In China, the Rich Seek To Become the 'Big Rich'

New Wealth Creates Class Divisions

By John Pomfret
Washington Post Foreign Service
Sunday, March 17, 2002

CHENGDU, China -- When Deng Hong was 17, he led a company of Chinese soldiers into battle against the Vietnamese. By the time he was 20 he was out of the military and selling clothes. By 30, he had made millions in China's go-go property markets. He divorced his Chinese wife, married an American, immigrated to the United States and bought property in Hawaii and Silicon Valley.

"I was," recalled Deng, now 41, "living the American Dream."

But Deng junked that dream and returned here to Sichuan province to pursue another. The reason, he said, was that becoming "big rich" in China was easier than in the United States. He was right: At last count he owned 35 cars, including a Ferrari, a Lamborghini, some Jeeps, a Corvette, several 600 series Mercedes-Benzes and a fat Lincoln Continental. He shuttles between two houses in Chengdu and a suite at his convention center. He recently purchased the rights to develop 100 square miles of land next to one of China's national parks.

"Many Americans I meet don't believe there are rich people in China. They still think we are pulling rickshaws," he said, puffing on a small, finely rolled Cuban cigar. "They're wrong."

Deng is part of a growing class of rich Chinese who are remaking China's social, economic and political landscape. A country that once proclaimed itself a workers' paradise has now become a paradise for the well-heeled. After striving to obliterate classes for years, China has become one of the world's most stratified societies with, according to Chinese economists, a gap between rich and poor that dwarfs the divide in the United States.

"When China's leader Deng Xiaoping said, 'To get rich is glorious,' I don't think he imagined this," said Zeng Xiangquan, a labor economist at People's University. "The chasm between rich and poor in this country could have serious political implications."

When President Bush visited China in 1975 as a young man, this country had few, if any, wealthy people. An old friend remembered Bush pedaling around Beijing on a bicycle, amazed at the sea of Chinese workers dressed in blue or green. There were no private cars and few private houses. When Bush returned to Beijing last month, he saw streets crammed with cars, including high-end roadsters. More than 3,000 BMWs have been registered in Beijing, along with thousands of Mercedeses and more than 20 Porsches -- after less than a year of sales. BMW plans to open a factory here by the end of the year.

Housing for the wealthy has boomed as well. When Bush first came to China, only a few Chinese in the stratosphere of the Communist Party lived in luxury. Today, every major city sports gated communities fit for kings and modeled after those in the United States.

The sign at the entrance to the Lemon Lake housing development in a northern suburb of Beijing says it all: "North American Demeanor, Rich and Strong." The houses there, with sunny breakfast nooks, vast master bedrooms, basement bars and American Standard bathrooms, look like they were plucked from a lane winding through Potomac, Md. The smallest is 2,500 square feet, while the biggest is 4,500 and sells for $1.1 million. The first phase of the development, 68 houses, is sold out.

"A few years ago our buyers were from Hong Kong and Taiwan and a few foreign companies. Now, they are almost all Chinese," said a real estate broker who sells expensive properties in Beijing. "The people who buy here live a completely different life from the rest of us. They don't pay taxes. Most of them have two children because they don't need to obey Chinese family planning laws. They are completely free, probably freer than the rich in America."

There are no ready statistics on the number of wealthy Chinese. That is partly because the government still clings to its Communist ideology in public and partly because the wealthy fear publicity. A reporter from the state-run Central Television said he shelved a documentary project about the rich in China because few wanted to be interviewed and most of them made their first million by breaking the law.

But according to research last year by the Chinese Academy of Social Sciences, 80 percent of China's $894 billion in bank deposits is held in 20 percent of the accounts. And some of Beijing's trendiest stores, including a Hermes outlet at the Palace Hotel and a Fendi boutique at the China World hotel, office and retail complex, routinely sell upward of $5 million of goods a year.

Some kindergartens in Beijing charge higher tuition than Beijing University, China's premier institute of higher learning. Market research by Seventeen magazine found that many girls in China's major cities got a monthly allowance of more than $100 -- the average annual salary for workers.

Many social trends begin with the rich. For her doctoral thesis at Yale University, Wang Gan studied the wealthy in Shenzhen, a Chinese city bordering Hong Kong that is famed for its money and sleaze. She was struck by how the rich set the tone for the whole society.

"The things they sought after soon became things that government officials sought after -- a certain cellular telephone model, a lifestyle such as golf. They would invite a government official to their golf club, outfit him on the spot with the best equipment, buy him a gold card membership and then take him golfing," she said. "Their cultural influence was enormous. Now many Shenzhen officials are good at golf."

Wang's research also pointed to the close relationship between China's rich and the Communist Party. Indeed, many of China's wealthiest people are members of the Communist Party or are relatives or friends of party members and have parlayed their connections into cash.

Deng is an example. His father was an officer in China's air force. A military background has often been considered a key ingredient in the recipe for Chinese wealth. Deng says that is because military officers were trained to be trustworthy and disciplined. Others say the old-boy network of the People's Liberation Army is beyond the reach of the law.

Take Hao Yaning. The burly former tank company commander is now a millionaire advertising executive who used connections with his former comrades to build a veritable palace in a valley east of Beijing. For the front, Hao said he took as his inspiration William Randolph Hearst's castle in California. Hao modeled the back -- whitewashed walls and blue shutters -- on a Greek hideaway owned by Aristotle Onassis. Underneath a spacious lawn graced with a fountain runs a bowling alley. Out back, a kennel contains more than 50 purebred dogs, including a Tibetan mastiff.

Deng, in addition to his army background, has assiduously cultivated ties with the city government of Chengdu. Ask him which is more important, his relationship to other businessmen or to the government, and he does not hesitate: "I really don't have anything to do with my fellow businessmen," he said, echoing other well-off Chinese. "My business depends on the government."

So much so that last year, Deng surrendered 30 percent of his stake in the convention center to the Chengdu city government, for nothing. One of his senior executives is the former deputy mayor of Chengdu. For his development project next to the national park in western Sichuan, he has hired retired government officials.

Deng had to rely on government ties to win approval to develop that site, 100 square miles of land next to one of China's last remaining wilderness areas, Jiu Zhai Gou. Deng plans to build 100 vacation houses, a five-star hotel and a golf course. Each vacation home will sell for at least $300,000, he said.

Like many of China's rich, Deng said he does not worry that the increasing gap between rich and poor could result in social unrest. But that gap was the hottest topic at the past two annual meetings of China's legislature, and the bulk of Premier Zhu Rongji's work report to the current legislative session focused on increasing the incomes of China's poorest farmers.

In 1998, the government recognized private property as an important part of the economy. This year there is talk that the legislature could amend the constitution to grant protection to private property.

President Jiang Zemin, in a speech July 1 to commemorate the 80th anniversary of the Communist Party, said entrepreneurs and other rich businessmen should be allowed to become party members, something that actually has been happening for years. Jiang also came up with a new theory, called the "Three Represents," to bolster the party's position in China. It basically states that to stay in power the party must now represent the interests of the "most advanced productive forces in China" -- meaning the rich and the middle class. This signals a 180-degree turn from the party's old roots in workers, peasants and soldiers.

With their two children, country house on the outskirts of Beijing, jet-setting lifestyle and effortless integration of East and West, Pan Shiyi and his wife and partner, Zhang Xin, seem to encapsulate what it means to be at the top of "advanced productive forces" in China. The pair developed a community near Beijing and have recently contracted with a group of 12 architects to build country estates by the Great Wall outside the capital -- each villa would go for more than $1 million. They are also building villas in the canal-crossed village of Boao on Hainan Island.

"It's like the south of France. It's so beautiful," Zhang said. "Every time we go to the south of France, we think China needs a place like this."