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The State Taketh, Chinese Entrepreneurs Say

In one case, a Xinjiang businessman lost all his hard-earned assets after officials noticed his wealth, his family says.

March 11, 2004|Mark Magnier | Times Staff Writer

URUMQI, China — Bai Yiben worked hard to build up his property development business after retiring from a state-owned textile company in 1992, saving every penny and plowing it back into the company. After years of struggling, his firm turned the corner in 2000.

His newfound wealth didn't go unnoticed. Powerful officials linked to China's military and Communist Party decided they wanted the fruits of his labor, family members charge.

Officials hounded Bai, 68, and his two sons, they say, manufactured state's evidence, brought suit in their own courts with no pretext of objectivity, forced the three men into a life on the run and ended up with everything. The officials aren't talking.

"They're frying our flesh with our own oil," elder son Bai Shengjun, 40, said in a brief telephone interview from his hide-out somewhere in China.

Chinese entrepreneurs have often paid a high price in a society that has never fully trusted them, a vestige of Mao Tse-tung's days when private ownership was deemed a cardinal sin.

The National People's Congress, scheduled to meet through Sunday, is expected to enshrine private ownership in the constitution. But experts and businesspeople say a huge gap remains between lofty language and what actually happens at the hands of local officials.

"Since China is not a law-based society, real change is going to take awhile," said legal scholar Du Zhaoyong -- perhaps as long as two decades.

Judges, bureaucrats and military officials have a major stake in the status quo, Du said. "If you recognize private property, they're no longer in a position to just take it away at will, which reduces their power."

Statistics on government harassment of businesspeople and appropriation of their assets are not available, given that it's not an area the state wants to highlight. But abuses are widespread, experts say, citing a case in which officials of the Beijing Civil Affairs Bureau seized businessman Hou Ruichang's $1.8-million company, kicked him out and claimed it as their own; another in which entrepreneur Cao Jiguang's electronics company was taken over by a local agency in Shenzhen; and a move by Shanxi province authorities to push out businessman Yang Yongru from his cement company.

"Stronger laws are in the works, and many of these problems reflect a transition period in China," said Zhang Xingshui, director of the Beijing Kingdom law firm. "In reality, though, the state frequently uses its power to punish private enterprise, putting them in jeopardy."

Without proper safeguards, experts say, companies have less impetus to invest or take risks, knowing they may not be able to reap the benefits.

"I helped my country and employed many people, including the disabled," businessman Hou said. "Not only didn't they recognize my contribution, they stole my property."

Bai Yiben's case in Xinjiang province underscores how thorny the issue remains as China moves from communism to a market economy.

Bai always liked to keep busy, said family members and former employees, and the prospect of sitting around playing mah-jongg after retirement wasn't terribly appealing. So in 1992 he started his real estate company, drawing on his years of experience developing property at his former company.

Given restrictions on individual real estate developers and the perceived value of a government protector -- "finding a mother-in-law," in local parlance -- he affiliated with an arm of the Xinjiang province Bingtuan, a powerful quasi-military entity with its own territory, courts, police and prosecutors.

Bingtuan affiliates never invested in Bai's company, the family said, with the relationship largely limited to Bai's paying an annual management fee in return for its blessing to operate.

Bai had a temper and was on the stingy side, said former employees, and refused to pay bribes, take local officials out for lavish dinners or otherwise "smooth the joints" -- all common practice in a society where power, not law, governs how resources are allocated and decisions made. It would prove to be a major mistake.

In Xinjiang, China's westernmost province, the call of Central Asia is often louder than that of China's mainstream Han culture. Street and store signs are in the Uighur language, people have distinctly Caucasian features, and the province has battled a Muslim separatist movement for decades. Given China's long-standing fear of dissolution, the military has even more clout here, and a bigger claim over the local economy.

For years, Bai didn't tell his wife that his company was affiliated with the military, confessing only after trouble erupted. Blame the connection on naivete, single-minded focus, a bit of stupidity, his son said.

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