Bloomberg News

China’s Wealthiest Discreetly Stay Away at Party Congress

October 01, 2012

Absent China Billionaires Show Wealth Limited at Party Congress

A Volkswagen AG Audi A6 sits parked outside of the Great hall of the People in Beijing. Photographer: Nelson Ching/Bloomberg

Zong Qinghou, China’s richest man, traveled to Beijing in March to represent his home province at the annual meeting of the country’s legislature. He won’t be going to next month’s Communist Party congress that will unveil China’s new generation of leaders.

While Hurun Report data show that the number of China’s richest among its lawmakers almost doubled in the past five years, the advance of the most affluent within Communist Party ranks has been more limited. The data from Hurun, publisher of a luxury-goods magazine that tracks China’s affluent, show the number of billionaire delegates at the Party Congress will rise by at most one since 2007, when it last convened.

The contrast may reflect heightened sensitivity among Communist leaders to the spreading influence of wealth in policymaking, especially after the scandal surrounding Bo Xilai, who was expelled on Sept. 28 from the party, drew global attention to the privileges enjoyed by relatives of China’s top leaders. Over the past decade, the opening of the party to industry chiefs and entrepreneurs has coincided with an increase in the country’s income divide and in incidents of social unrest such as strikes and protests.

Resentment Fear

“A ruling party, grappling to stay on top, doesn’t want to be resented,” said Perry Link, a professor at the University of California, Riverside who helped to translate the “Tiananmen Papers” -- insider party accounts of the events surrounding the 1989 crackdown on protesters in Beijing. “And there, I think, is an explanation for why the Party puts a cap on billionaires at the 18th Party Congress: fear of popular resentment.”

Dalian Wanda Group Chairman Wang Jianlin, with a net worth of $8.9 billion, was a delegate to the party congress in 2007 and Zong, chairman of Hangzhou Wahaha Group Co., the world’s 29th richest person with $19.9 billion according to the Bloomberg Billionaires Index, is one of about 3,000 delegates to the National People’s Congress, the country’s legislature.

Neither is on the delegate roster for the Party Congress this year, which was released in August and is where Vice President Xi Jinping is forecast to be named the Communist Party’s general secretary, replacing Hu Jintao.

Billionaires on the list for the congress, which starts Nov. 8, include Liang Wengen, the chairman of Sany Heavy Industry Co. and China’s seventh-richest man with a $5.2 billion net worth, and Great Wall Motor Co. Chairman Wei Jianjun, with a $3 billion fortune.

Getting In

Also picked to attend the Party Congress were Shandong Denghai Seeds Co. Chairman Li Denghai, with a $600 million fortune; Hongdou Group Co. Chairman Zhou Haijiang, with wealth of $369 million; Jiangsu Yanghe Brewery Joint-Stock Co. Chairman Zhang Yubo with $809 million; Chen Xueli, chairman of Shandong Weigao Group Medical Polymer Co., with $874 million; and Feng Yali, the chairman of Zhejiang Hailiang Co., whose family has $462 million worth of shares and cash, according to data compiled by Bloomberg.

Executives who are members of the National People’s Congress belong to what is notionally the supreme source of power in China’s government. Even so, the Chinese Communist Party controls the country, and its congress, held once every five years, determines China’s power structure.

Party Make-up

“The CCP, more than a decade after former President Jiang Zemin tried to open it up to private businesspeople, remains dominated by Party and government bureaucrats, military officers and executives of state-owned corporations,” said Susan Shirk, a professor at the University of California, San Diego, who was responsible for China affairs at the U.S. State Department from 1997 to 2000. “The CCP runs China and private business has almost no voice in the organization.”

In the five years from 2007, the number of U.S. dollar billionaires in the country has jumped to 251 from 106, outpacing the growth of the broader economy, according to figures from the Shanghai-based Hurun Report, which uses publicly available information such as corporate filings to compile its annual list of the richest people in China. Its 2011 lineup listed six people as taking part in the 2007 party congress.

In 2007, Hurun found 38 of the 800 richest people in China were delegates to the legislature. This year, 75 of China’s richest 1,000 people attended the NPC as representatives.

Wealth Climbs

While the party now may be limiting the number of billionaire delegates to its congress, past participants have seen a surge in wealth. Sany Heavy’s Liang became China’s richest person last year, with Zong reclaiming the top spot after he disclosed his stake in Hangzhou Wahaha.

Dalian Wanda’s Wang, whose company in May agreed to buy Kansas City, Missouri-based AMC Entertainment Holdings Inc. for $2.6 billion, took part in the 2007 congress. That year, he was ranked 146 on Hurun’s list. He’s now China’s second-richest person, according to data compiled by Bloomberg.

Yang Jian, a spokesman for Sany Heavy, said Liang doesn’t accept media interviews, particularly on issues such as the Party Congress. Shang Yugui, a spokesman for Great Wall Motor (2333) Co., said Wei wasn’t available to discuss his participation in the congress. Shan Qining, a Hangzhou-based spokesman for Wahaha, declined to comment. Zhou, Chen, Li, Zhang and Feng weren’t available for comment.

Deng Shengming, a spokesman at the Communist Party’s Organization Department, didn’t return a phone call seeking comment.

Jiang Initiative

Business people began joining the party in greater numbers a decade ago, when Jiang Zemin sought to broaden the party’s appeal beyond workers and peasants to include capitalist entrepreneurs as well. Today, many of China’s richest people are Communist Party members. Attending the NPC’s March gatherings offers an opportunity to foster business ties for executives including Zong and Wanda’s Wang.

“It was a conscious, deliberate, ideological decision of the party” to open up, former Australian Prime Minister Kevin Rudd, who speaks fluent Chinese and has followed China’s politics for three decades, said in a Sept. 21 interview. “Let’s face it, the structure of the Chinese economy and Chinese society is changing.”

Among the changes is a widening in the nation’s wealth divide. In his last press conference on March 9, Bo revealed China’s Gini coefficient, an index of the income gap, which he said exceeded 0.46. The index ranges from 0 to 1 and the 0.4 mark is used as a predictor by analysts for social disturbances. The reading for China was below 0.3 in 1981 and 0.39 in 1999, according to the World Bank.

Social Unrest

Rising income disparities have gone hand-in-hand with increasing social unrest. The number of so-called mass incidents -- strikes, protests and riots -- doubled nationwide in the period from 2006 to 2010 to 180,000 a year, Sun Liping, a sociologist at Beijing’s Tsinghua University, wrote last year.

While hundreds of millions of Chinese people have been lifted out of poverty by economic growth averaging 10.1 percent over the last 30 years, the nation’s expansion has moderated. The administration of outgoing Premier Wen Jiabao targets 7.5 percent growth this year. A survey of purchasing managers released today indicated the first back-to-back monthly contraction in manufacturing since the 2009 global recession.

Bo Affair

This year’s leadership transition has been rocked by reports of displays of wealth that don’t accord with the top salaries for officials of around 10,000 yuan ($1,591) a month. Bo Xilai’s suspension from the Politburo a month after he attended the National People’s Congress sharpened the focus on the nexus between wealth and power in China.

In addition to being expelled from the party, Bo will face criminal charges, the official Xinhua News Agency said Sept. 28. Bo abused his power, bore “major responsibility” in the murder of British businessman Neil Heywood and had improper sexual relations with several women, Xinhua said. Bo’s wife, Gu Kailai, was given a suspended death sentence Aug. 20 for poisoning Heywood.

While he championed slogans from the Mao Zedong era, the extended family of Bo and Gu had at least $136 million in share holdings and real estate, Bloomberg News reported in April.

Capping the presence of billionaires at the congress may be one way to offset the impression that the party has become elitist, said Kerry Brown, a former British diplomat in Beijing who is now a professor at the University of Sydney.

“I think it’s just a perception thing,” Brown said. “Having them start to colonize the party congress would raise all the hackles about the CCP being relaxed about inequality and creating a Chinese style of oligarchs. Having some worthy ones around is fine. Having too many raises lots of unwanted questions.”

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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