Zhao Xiao, a doctor of economics, graduated in 1999 from the Guanghua School of Management, Peking University. He now works as director of the macroscopic strategy department of the Research Center at the China Commission for Managing State Properties. He is also a postdoctoral researcher working for the China Economic Research Center of Peking University. Zhao has long been studying the issue of China's super rich business magnates. A Xinhua reporter recently interviewed him on the charged tycoons.
Question: How many types of corrupt Chinese business magnates are there?
Zhao Xiao: I think there are four. The first are those business people who were charged for tax evasion, like Liu Xiaoqing, the noted Chinese actress. Regardless if she is found guilty or not, the practical effect was evident after she was detained. In 2002, the amount of tax collected from China's private enterprises increased by 40 percent from 2001. Tax evasion was and is popular among many magnates and more similar cases will undoubtedly emerge in the future.
The second sort are those masters of real estate companies who were charged for "land enclosure", such as Zhou Zhengyi and Yang Bin. Half of all listed tycoons in the Forbes China’s Rich List work in real estate, and at the same time, the exchange of land is the very field with the most corruption cases. Business in the land market has involved 2,500 billion yuan (US$302 billion) value of state-owned assets, which exceeds the annual GDP of the country. In addition, corruption in the land issue usually involves stock and financial fields, creating a very complex problem indeed.
The third sort are those who were charged for property right abuses. Yang Rong is such an example.
The remainder includes Lai Changxing for smuggling and Sun Dawu who was charged for illegal financing.
Question: Are those charged tycoons suffering from defects in the current economic system or is that just a coincidence?
Zhao Xiao: These two causes exist simultaneously. There was no system in place to regulate this kind of behavior at the start of China’s economic reform. Certainly though, the reality of the country being in a period of social transition has determined an unsound system. Those "troubled magnates" usually emerged alongside some corrupt officials. However, no one asked them to be corrupt, and internal reasons would also be one side of the cause.
Question: Is there a characteristic common to all these corrupt magnates?
Zhao Xiao: Except for the cause inherent in the system, they usually managed to reap a profit in a short term by ignoring existing rules. They have two things in common: first, they would like to be more profitable in certain fields or markets. Second, they have an indifferent attitude towards law, mainly because they lack education.
Question: What is your opinion on how to prevent the emergence of further "problematic magnates" through constructing a better system?
Zhao Xiao: I don't think it is possible to lower the emergence of "problematic magnates" by changing the current system radically, in a short time. But we can carry out reform in several main sectors initially. Three aspects could include: one, establish standard regulations on land exchange; second, strengthen the financial system; third, speed up government reform. In addition, it would also be important to improve tax regulations, which include two aspects: one, to compel entrepreneurs to pay tax and two, government should provide better public infrastructure and services to make entrepreneurs more willing to pay.
Question: Can you predict the future paths of China's magnates?
Zhao Xiao: I am optimistic about their future. I feel that there are three trends: first, the increase of the magnates' wealth will continue to be fast and on the rise. The number of magnates listed in Forbes will continue to go up also. Second, rich businessmen will appear in a greater variety of industries, not like today when most are centralized in the real estate field. Third, China's magnates could follow international customs and expose their wealth publicly to allow for greater accountability.
Question: China's magnates, like Russia's, became wealthy over a short period. What's the similarity between them?
Zhao Xiao: Russia applied shock therapy to her economy while China applied a policy of gradual reform. So China’s magnates have been slower in getting rich. However, there are still things in common, like how some magnates in both countries have accumulated capital.
Finally, I don't think tycoons can control the government in China, because China's political power is centralized and the private sector has a limited space for expansion, so far.
(China.org.cn translated by Wang Zhiyong, October 6, 2003)
