Red, rich and rising
China’s Communist Party is getting more inclusive towards capitalists, and that may be no bad thing. The Party may elevate China’s richest man, industrialist Liang Wengen, to its elite central committee, according to a report in Time Weekly magazine. There are risks when money and power get too close. But China has much to gain from giving higher status to the private sector, and nurturing entrepreneurship.
Embracing the low-profile Liang, whose wealth was measured at $9.3 billion by the Forbes Rich List in September, is symbolic. The party’s 200-odd-member central committee is made up mostly of politicians and heads of state-owned companies. Yet private companies are growing faster than the rest of the economy, and now make up 50 percent of China’s GDP, according to the Federation of Industry and Commerce, in spite of policies that favour of SOEs and foreign enterprises.
It’s wise to reassure the wealthy. Many of China’s successful entrepreneurs are already taking their talents and capital elsewhere. About 27 percent of Chinese with investable assets above $1.5 million have already changed nationality, according to a survey by China Merchants Bank. The number of Chinese people emigrating to the United States through the investment channel has risen at an average of 73 percent a year for the past five years.
Entrepreneurs have much to teach China’s leaders. The country has been run for a decade by engineers, who were experts at building things. Businessmen tend to pay more attention to earning a return on capital, and can help promote a higher-quality of growth. They also have more experience of driving efficiency, and create more jobs than the capital-intensive SOEs.
Crony capitalism is the biggest risk. Some will worry that Liang is just trading wealth for power, though he can help allay those concerns by arguing powerfully and publicly for better treatment of the private sector. But Liang’s promotion at least makes the link between big business more transparent. If it is handled right, promoting the red capitalists may bring positive changes for China’s economy.