By Xiao Zhonghua, published: September 19, 2015
“Everyone understands that, in China, the real estate business is closely entwined with power, and it has no way to succeed without the backing of political connections. Therefore, wealth generated from real estate is not wealth generated completely from the market economy. [He] can’t exit just because he wants to.” – Luo Tianhao, Don’t Let Li Ka-shing Run Away
An expert at Xinhua News Agency’s “Outlook Think Tank” (瞭望智库) recently published a brilliant essay entitled “Don’t Let Li Ka-shing Run Away.” This piece has caused quite a stir in public opinion in China and beyond. As an economist who understands a thing or two about how economics works, I lament the woeful standards at Chinese think tanks and can’t imagine how such a low-quality think tank can influence and undermine China’s political and economic policy decisions. I also can’t help but speak a few words of conscience on behalf of Li Ka Shing, China’s wealthy, the Chinese economy, and China’s proletariat.
I. Who Is Running Away and Why?
Is Li Ka-shing the only one [exiting China]? Of course not! There’s no question that foreign investors are pulling out in great numbers and that domestic capital is also fleeing on a large scale. Besides being the nature of capital to chase profits, it’s also beyond dispute there are also outflows of dirty money. However, not all of the money that is leaving China is dirty.
How do we judge whether money is clean or not? If we were to say that all commercial interests with political backing are dirty, then what about all of China’s state-owned enterprises? They’re all monopolies with strong political backing, so their money is the dirtiest of all.
Naked exchanges of power for money and vice-versa are of course violations of Chinese law, so you can just launch legal proceedings and carry out investigations. If you find political rent-seeking or graft, you can make arrests, hold trials, and confiscate the illegal proceeds. Those sorts of people couldn’t run away if they wanted to, since they can always be captured and brought back, can’t they? The whole world is opposed to serious corruption and economic crimes. Aren’t we always having people arrested and brought back to China?
But isn’t it brazenly ridiculous to say that, because Li Ka-shing was a real estate developer in China and China’s real estate market “works so closely with the authorities” that you can’t get anything done without “political resources,” therefore he can’t “come and go as he pleases”? No matter what you do in China, can you get anywhere without official approvals? With the possible exception of North Korea, China is the hardest place to do business because you can’t get permission to operate or access to markets without political ties. This has been especially true over the past two decades or so. What do you think all those myriad administrative reviews and approvals are for? How did it get to the point when a new government wants to greatly streamline administration and decentralize power, there are suddenly millions more administrative reviews and approvals?
How can you pin the faults of the political authorities on the people doing business in China? You rapaciously expropriate from them while they’re in business. Then you don’t permit them to spend their hard-earned cash, so that they lack the freedom even to put their capital in play?
When your governments and officials want to get rich, you make some property deals. You make these deals without the least bit of moderation, coaxing, tricking, or forcing developers into doing the deals. Then, when those deals run into trouble, it all becomes the developers’ fault?
For many years, local officials have described their governments’ so-called investment policies with a very vivid saying: “trick-hold-chew” (or PBK for 骗、抱、啃). First, you trick them into coming. Then you hold on to them for dear life. And finally you chew them to death. Isn’t this a realistic portrayal of how property development has worked in China, along with all sort of other industries?
You shouldn’t use your power in such willful and capricious ways! When power is used too willfully, business will suffer. Today’s businessmen, no matter whether they represent foreign capital or domestic capital, are all starting to flee. That’s because the authorities are acting too capriciously. The terrorist methods used in Chongqing under the guise of “singing red songs and fighting organized crime” led thousands of business leaders to flee abroad overnight. Isn’t this enough of a lesson for you?
I’m guessing that the most important reason why businessmen—especially China’s own businessmen—are pulling out of China is not because they’re pessimistic about China’s economic prospects. Rather, it’s because they have no confidence in the direction China’s political and economic policies are headed and there’s a spreading fear of the authorities.
In fact, our political and economic policies swing periodically from left to right, and from right to left, with no one able to make head or tail of things. This is not good. I don’t think it takes any great wisdom to understand that when people are uneasy, change is inevitable.
II. Why Won’t You Let them Run?
Are you trying to attack the local landed gentry and divide up their land, like during the period of land reform? I sense that, deep down, that’s what you want to do, and you’re accomplishing to different degrees.
You’ve basically accomplished your goal already. The stock market collapse has basically destroyed the middle class, while the truly powerful and wealthy have emerged without a scratch. But I believe that’s not enough for you, so is it your next step to introduce “mixed ownership” reforms and use “public-private partnerships” to go down the old path towards communism, like you did in the late 1950s? I doubt I’m the only one speculating and worrying about this. Businessmen are all shrewd people—who can’t see that there’s something fishy going on here?
I don’t know whether or not Li Ka-shing is willing to let you “mix” with his companies, but I would never allow it. I’d rather run my company into the ground, close up shop, and go home, even though I know you’d never even have any interest in a small enterprise like mine. The simple reason is that I’ve observed your abilities and what you’ve done over the years, and I know the wolfish nature of “public-private partnerships” and what the inevitable outcome will be.
Rather than carrying out forward-looking reform of the existing system, you instead go backwards in time and loot the people’s wealth. This is not the correct path of a ruler—it’s an evil path, a road to ruin.
Don’t blame me for presuming to speculate about the “emperor’s intentions.” You don’t give a good explanation for the new “Guiding Opinions on State Enterprise Reform,” while at the same time sounding the battle standard of “Don’t let Li Ka-shing run away.” Did you really think people wouldn’t jump to conclusions about what you’re up to?
III. Preventing Them from Running Will Just Make Them Run Faster
You’ve always believed yourselves to be extremely clever and that your grip on power permits you to do whatever you liked. But let me tell you, as soon as this brazen slogan of “Don’t let Li Ka-shing run away” left your mouth, everyone could clearly see the murderous intentions lurking behind it. If they don’t run now, it’ll be too late for them! So, China’s wealthy will do everything in their power to flee abroad. If you don’t believe me, just wait and see!
Of course, you can try raiding underground banks and imposing strict restrictions on foreign exchange to block the rich from fleeing. But today China’s economy is already completely integrated with the world economy, and it’s not such a simple matter to block foreign capital from pulling out or domestic capital from fleeing.
And the currency wars are just about to break out, if they haven’t already. I dare to predict that China will definitely lose badly in the currency wars and that the Renminbi will suffer deep devaluation versus the US dollar. We’re talking an exchange rate of 10 or even more than 20 yuan to the dollar when all is said and done. Again, if you don’t believe me, just wait and see.
My prediction doesn’t require the intervention of hostile external forces or Soros-types. It’s based on recognition that the rich who hold 80 percent of China’s wealth have begun to grow alarmed at your threats and mistaken actions and have begun to flee abroad. Li Ka-shing is only one of them.
You, not others, will always be the source of your own ruin.
IV. Aren’t You Ashamed for Making Businesspeople Fulfill Government Responsibilities?
The Xinhua think tank’s brilliant essay said that entrepreneurs like Li Ka-shing ought to take on two great “unfulfilled missions” of “giving consideration to the people’s livelihood and giving back to the poor,” on the one hand, and “doing more good deeds and operating social enterprises” on the other. I’m truly dumbfounded to see such ignorant talk come out of a state think tank.
The mission of a company is to do business, earn profits, take care of its employees, and pay taxes—that’s it. Taking care of employees and paying taxes counts as “giving consideration to the people’s livelihood and giving back to the poor.” As to whether or not to engage in charity or operate social enterprises, this doesn’t count as a company’s mission; it’s only a moral choice and ethical act taken by a company when it’s capable of doing so. Please remember, ethics and morality have never been duties, let alone a mission. Rather, they’re ideals to be pursued, and sometimes people achieve the ideal and other times they don’t.
Governments, on the other hand, are duty-bound to “give consideration to the people’s livelihood and giving back to the poor,” as well as invest in charity and social enterprises. Government has both a political responsibility and a social responsibility to do these things. What do governments do with the taxes that they collect from companies and citizens? Companies and citizens use their tax payments to fulfill their political and social responsibilities, whereas governments use their economic policies to develop the livelihood, charity, and social enterprises that they’re entrusted to take care of on behalf of companies and citizens.
How can a government be so shameless as to collect taxes without fulfilling its responsibilities, instead talking big and pushing all these responsibilities on companies?
All of these increasing burdens are making it harder and harder to run a company in China. There are so many gaps in the social security system, so you keep raising the social security levies every year, shifting all the burden on companies. When there’s inflation, you increase salaries for civil servants, forcing companies to raise wages as well, so the burden of inflation gets shifted to companies, too. Taxes only go up, never down. Even if you don’t threaten them, under such serious economic conditions it’s impossible for private companies to bear all these burdens. They can’t continue on, so their only choice is to flee. At a time like this, if you’re still thinking about plundering private enterprise, there’s only own road left for the future and that’s to go back to a planned economy.
Of course, perhaps that’s just what you’re hoping to accomplish . . .
Xiao Zhonghua (肖仲华) is an associated professor at Wuhan University of Technology.
Li Ka-shing’s moves on China reveal good timing, WSJ, September 6, 2015.
Online criticism of Li points to break-up with leadership, South China Morning Post, September 18, 2015.
中文原文： 肖仲华《“别让李嘉诚跑了”暴露了什么样的杀机？》, translated by China Change.