China's rich can no longer do no wrong


BEIJING -- For a couple of years, Chen Baohong lived a charmed life.

The purchasing manager of a southern Chinese missile factory, Mr. Chen was rich, that blissful state of existence that in the early 1990s economic boom every Chinese was supposed to desire. And as a "da kuan," or "big spender," Mr. Chen did what every "da kuan" was supposed to do: flaunt his money shamelessly.

His child was enrolled in a fabulously expensive private school. Mr. Chen bought a car, though he didn't know how to drive.

But now the tables have been turned on the new rich, including Mr. Chen. Too many people's standard of living has fallen while a few were enjoying great wealth and enjoying the fruits of corruption.

In Mr. Chen's case, jealous neighbors and colleagues began complaining that he had acquired his wealth illegally, and Mr. Chen's factory launched an investigation. The results of the investigation aren't yet in, but Mr. Chen believes he knows why the inquiry began.

"Jealousy did me in," he says. "You have to walk more carefully now than in the past. It's a delicate time."

Indeed, the rich who used to be admired for bucking the Communist system are now widely viewed as cheats, as signs of a fragile social order in which the gap between rich and poor is widening at an alarming rate.

"Common people see the rich as having gotten their wealth illegally, or only semi-legally," says Ge Xianfeng, a researcher with the Development Research Center, a government-affiliated think tank. "With many people's income falling, the rich are resented."

One cause of the growing resentment is what the semi-independent economic journal Reform calls the "new poor." The journal estimates that 12 million city dwellers live in poverty, compared with 1 million five years ago.

State-owned enterprises, including Mr. Chen's, are reducing wages and, in some cases, laying off workers. About 11 million industrial workers earn just $12 a month, one-tenth the national average.

The frictions between rich and poor have begun to worry China's leaders, especially as they try to maintain social stability during the delicate transition between an ailing Deng Xiaoping and a new generation of Chinese leaders. The government has proposed a national income tax. It has also tried to suppress the most obvious signs of the wealth gap -- by, for example, extending a moratorium on the construction of golf courses and banning new private schools.

At the same time, China's well-off have begun to exercise self-restraint.

Cooling it

"I used to give interviews to foreign and Chinese television stations," says Wang Shihao, an investor in luxury apartments and hotels. "Now I don't. I'm worried that someone will see what I have and want to steal it."

For Mr. Chen, the change has been more dramatic. He now rarely dines out. He has abandoned plans to buy a luxury villa. When neighbors ask about his imported television and VCR, he responds that his foreign brother-in-law gave them as gifts.

In an interview, Mr. Chen seemed genuinely confused about what brought him down.

As purchasing manager for a defense contractor with $20 million in sales, Mr. Chen was courted by suppliers eager to sell the company raw materials. Given previously unimaginable latitude to make decisions, Mr. Chen claims he helped his company by buying supplies at low prices and ensuring a smooth supply of raw materials -- a chronic problem given China's transportation problems.

'Gifts' no problem

But Mr. Chen admits that he paid himself hefty bonuses and didn't refuse the numerous "gifts" that suppliers lavished on him.

"This isn't so unusual in China," says Mr. Chen. "I had to do the same thing to get other deals arranged, so I didn't think anything of it when people gave me a few things."

Conversations with Mr. Chen's colleagues show that he probably DTC was operating in a gray area: What he did might not have been illegal but it probably wasn't ethical -- a common situation for many of China's nouveau riche.

"If he had been more discreet, this wouldn't have been such a problem. But he lorded it over all his neighbors and people began to talk. After all, he used to be the same as everyone else," one of his neighbors says.

Getting rich by cheating

Mr. Chen's use of his position to enrich himself jibes with the popular view of the rich. In a recent survey, when asked how many rich people had acquired their wealth legitimately, 60 percent answered "not many" or "none." Other surveys show that the rich are among the least-admired people in the country.

According to Mr. Ge, the social researcher, people now realize that getting rich in China often means being well-connected. Mr. Chen, for example, would never have been promoted or left unsupervised if his wife hadn't been part of the local city government, or if he hadn't been friends with the company manager. Others acquire wealth through sweetheart deals offered by bureaucrats, who can award choice pieces of real estate or monopolies over a lucrative service.

Government propagandists have begun trying to convince the public that at least some of the excesses of the rich are disappearing.

Drop in nightclubs

The official Xinhua news agency, for example, claims that 20 percent of China's 200,000 nightclubs closed or merged over the past year as expense accounts dried up and as the rich supposedly became philanthropists instead of conspicuous consumers.

But there is also evidence that the wealthy have continued to spend as they please. There are, for example, statistics about cognac consumption: French distillers last year sold $186 million of cognac in China, making it the world's largest cognac market.

For Mr. Chen, the lesson is to offer the appearance of simplicity:

"The main thing is not to act like a big spender," he says. "I should never have sent the kid to the private school. That's what did me in."

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