The Ferrari-Red Communists China at a Crossroads in Shift from World's Factory to Industrial Power


By Erich Follath and

Part 4: 'Accessories of Power and Corruption'

In China, with its lack of legal certainty, it's possible to plunge precipitously. In both politics and business, there is a thin line between success and failure, and between a successful corporate leader who enjoys the party's support, like Sany Chairman Liang, and someone whose connections aren't quite as good, and who once took one step away from the correct path, someone like Wu Ying.

She was considered China's Wonder Woman, a woman who succeeded at everything she did. A farmer's daughter and former hairdresser with strong entrepreneurial instincts, she built a chain of beauty salons. In 2005, with assets of more than $500 million, she was already among the wealthiest people in China -- and had not even celebrated her 26th birthday yet. But her career ended suddenly, after she had illegally borrowed money from private individuals in return for the promise of high returns, and was unable to pay back a large portion of the funds.

She was sentenced to death for financial fraud in December 2009, but the severity of the punishment was even criticized in the official press. In May 2012, the courts reduced her sentence to death with a two-year reprieve, the same sentence that was recently handed down to Bo Xilai's wife, although she was convicted of a capital crime for the murder of a British businessman. In the Chinese justice system, that two-year reprieve means the sentence will likely be commuted to a life term.

At least the excitement over young entrepreneur Wu prompted leaders in Beijing to violate an ideological taboo. They announced that private shadow banks were to be legalized. The new rule was to initially apply only to Wenzhou, the port city that the great reformer, former Communist Party Chairman Deng Xiaoping, also used for especially bold experiments. Premier Wen even seemed to want to take things a step further, by proposing that the state-owned banks' de-facto monopoly be lifted. Some already envisioned the dawn of a new era.

But now the enthusiasm has given way to a more sober assessment, even in Wenzhou. "Where is the real relief for smaller private companies like ours?" asks Zhou Dewen, chairman of the local small-business association. Lending has proven to be tenuous, says Zhou, while there is still considerable resistance to fundamental reforms in Beijing. And, once again, the prime minister has been exposed as little more than a figurehead and feel-good politician.

Many Chinese Embittered

A grimly smiling old man is sitting between stacks of American and Chinese business publications and books (15 of which he authored) in Beijing, in an apartment in the district were senior party officials live. Mao Yushi, 83, is a business guru hated by many and deified by some.

He doesn't mince words. He describes Mao Zedong as a "totalitarian" ruler, and calls the Marxist theories that are still taught at Chinese universities "hopelessly outdated." China's progress is solely dependent on other countries, Mao Yushi says coolly. "That's where all technological innovations and progressive ideas come from." In his view, China urgently needs to become politically liberalized, and the Communist Party should compete with other parties. "We have no human rights guarantees, no democratic institutions and no economic planning certainty. That's why many of our most talented entrepreneurs emigrate, even though China is still a fabulous place to make money."

Mao Yushi has low expectations for the upcoming party congress. The party elite, fearful of losing its privileges, will not take the necessary step of strengthening the private sector, he says. "Things would be different if Deng were still alive. He was open to new ideas, and he was a flexible man for whom solutions to problems were paramount, not an ideology." In May, Mao Yushi was awarded the Milton Friedman Prize for Advancing Liberty in Washington. He is a man who no longer needs to make allowances for anything or anyone.

He is worried about the gradual aging of and growing income disparity in Chinese society, and the social tensions that could arise as a result. Based on the so-called Gini coefficient, which measures the inequality of wealth distribution in a country, the differences between rich and poor are even more dramatic in China than in India. In China, more than one in four people lives on less than $2 a day. At the other end of the spectrum, the country will be the world's largest market for luxury goods by 2015.

Provocative Displays of Wealth

Many Chinese are embittered over blatant corruption, in a country where the relatives of politicians are usually the ones who become multi-millionaires, often without any discernible effort.

When the members of the Beijing Sports Car Club, founded in 2009, meet once a week in their own, exclusive lounge near the city's football stadium, they like to show off their toys, the Lamborghinis and Ferraris parked on a well-guarded parking lot. Zhang Kuan, 32, the chairman of the club, is eager to show off his dark-gray McLaren MP4-12C, a car worth hundreds of thousands of dollars, which he picked up in person at the Tianjin customs port in May. The club's 700 members also travel on luxury trips together, to places like Las Vegas and London. It's an insular group, and when they race at night, it's usually against each other. During the day, members are often spotted in the company of fashion models.

Cigar smoker Zhang bought his first car, a VW Santana, in 1999. Things went uphill very quickly for him after that, and he made a fortune with "investments, real estate and insurance," as he put it, somewhat vaguely, in an interview with Time in June. In addition to his Lotus, Zhang, who also has good political connections, owns several sports cars, including a fire-red Ferrari. He also collects luxury watches. "My father's generation isn't as keen on the things that interest me," says Zhang. "For him, luxury means the entire family getting together. But for people my age, it's always the latest toy that counts. That's how we express ourselves and live our dreams."

Ferrari Becomes a Red Rag for the Party

The provocative display of wealth troubled almost no one until recently, and certainly few government officials. But the word "Ferrari" recently became a red rag for many politicians, and it's even blocked on the Chinese Internet. Things aren't going well for the Communist Party and with preparations for its party congress. After the murder and corruption affair of former Chongqing party chief Bo Xilai and his wife, a new scandal surrounding an Italian sports car, its driver and an accident he had threatens to cast a shadow on the carefully planned political show.

Early one morning, seven months ago, a man driving a Ferrari in Beijing lost control over the car, possibly while engaged in sexual activity. The driver, who was allegedly naked, was killed immediately, while his female companions reportedly survived, but were seriously injured. The police covered up the circumstances of the accident. But soon the Internet was filled with rumors that the driver could have been the son of a prominent individual.

In early September, it was apparently no longer possible to conceal the details, or someone deliberately leaked them to the public. The dead driver of the Ferrari, Ling Gu, 23, was the son of a top official and a graduate of Peking University. His father is the long-standing secretary of party leader and President Hu Jintao. After the incident, he lost his influential job as head of the main office of the Central Committee and was demoted to an insignificant position. He was replaced by Li Zhanshu, a close associate of the new "emperor" designate. Was the scandal misused as a tool in the power struggle in Beijing?

For Dali Yang, a professor of political science at the University of Chicago, one thing is clear: "Chinese politicians are extremely concerned about the fact that the party is being so closely associated with expensive cars and watches, these accessories of power and corruption. They want to do everything in their power to prevent public anger from turning towards them."

Translated from the German by Christopher Sultan


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