An insider details the 'Black Box' of money and power in China
An insider details the 'Black Box' of money and power in China
China's paramount leader, Xi Jinping, has urged tycoons to share their wealth with the rest of the country in an effort to pursue "common prosperity," leading to concerns that the state could choke out the private sector and give the Communist Party even more sway in everyday life
By Li Yuan
Published: Sep 25, 2021
Desmond Shum in Oxford, England, Sept. 12, 2021. A memoir by the well-connected businessman offers insights into the Communist Party’s thinking as it tightens its grip on the private sector. (Andrew Testa/The New York Times)
To build a logistics hub next to Beijing’s main airport, Desmond Shum spent three years collecting 150 official seals from the many-layered Chinese bureaucracy.
To get these seals of approval, he curried favors with government officials. The airport customs chief, for example, demanded that he build the agency a new office building with indoor basketball and badminton courts, a 200-seat theater and a karaoke bar.
“If you don’t give this to us,” the chief told Shum with a big grin over dinner, “we’re not going to let you build.”
Shum recounts the conversation in a memoir that shows how the Communist Party keeps business in line — and what happens when businesspeople overstep. Released this month, “Red Roulette: An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China” shows how government officials keep the rules fuzzy and the threat of a crackdown ever-present, limiting their role in the country’s development.
“In order to achieve anything in China, you have to wade into the gray zones,” Shum said in a phone interview from his home in Britain. “We were all licking blood off the blade.”
Many of the events depicted in the book can’t be independently verified, but Shum’s front-seat view of the interplay between money and Chinese politics isn’t in question.
He was once married to Duan Weihong, who was close to the family of Wen Jiabao, formerly China’s premier. Duan, also known as Whitney, was a central figure in a 2012 investigation by The New York Times into the enormous hidden wealth controlled by Wen’s relatives.
Duan disappeared in September 2017, though Shum said she had reached out shortly before the book’s release to urge him to stop.
Some readers might struggle to sympathize with the former power couple and wealthy Chinese business leaders like them. The book describes the riches they amassed through wheeling and dealing with powerful government officials, who used their influence to make deals happen. And, of course, the combination of money and politics breeds corruption around the world.
But Shum’s book has come out just as the future of China’s entrepreneurs is in doubt. The government has cracked down on the most successful private enterprises, including Alibaba Group, the e-commerce giant, and Didi, the ride-hailing company. It has sentenced business leaders who dared to criticize the government to lengthy prison terms.
China’s paramount leader, Xi Jinping, has urged tycoons to share their wealth with the rest of the country in an effort to pursue “common prosperity,” leading to concerns that the state could choke out the private sector and give the Communist Party even more sway in everyday life.
“The party has an almost animal instinct toward repression and control,” Shum wrote in the book. “It’s one of the foundational tenets of a Leninist system. Anytime the party can afford to swing toward repression, it will.”
Despite their flaws, mistakes and crimes, China’s business types have played an important role in lifting the country out of poverty and building it into the world’s second-largest economy — something the Communist Party is reluctant to admit.
Instead, the party forces business owners to stay subservient to the state. They must follow written, as well as unwritten, rules. Even the connections to Wen didn’t help when a midlevel bureaucrat wanted something.
“In China, power is everything, while wealth doesn’t amount to much,” Shum said in the interview. “The entrepreneur class is a suppressed class under the party, too.”
In a response to a request for comment, China’s Foreign Ministry said the book is full of smearing and baseless allegations about China.
Shum and Duan operated businesses during China’s Gilded Age in the 1990s and 2000s, when the party loosened its control over society to beef up its legitimacy and economic bona fides after the 1989 Tiananmen crackdown on pro-democracy protesters. Back then, the party often tried to co-opt rather than strong-arm business leaders, both to keep business under its thumb and help it claim credit for China’s economic miracle. That meant talking them into becoming party members and joining the country’s ranks of lawmakers and political advisers.
It worked. Many businesspeople believed they could shape a liberalizing China. They sought protection of property, an independent judiciary system and a more transparent government decision-making process to better protect people — wealthy and otherwise — from the party’s power. Some raised serious issues during the government’s parliamentary sessions. Others backed nongovernment organizations, education institutions and investigative media outlets.
That period was short-lived.
“Only in times of crisis does the party loosen its grip, allowing more free enterprise and more freedom,” Shum wrote. “China’s growing economy presented the party with an opportunity to reassert its dominance.”
According to Shum, the tightening process started after the 2008 financial crisis but accelerated after Xi took the party’s helm in late 2012.
“Economy used to be the first order of business,” he said. “Since Xi, there’s no doubt that politics became the driving force behind everything.”
Xi has set the tone that the relationship between government and business should be “friendly and clean.” Government officials should not hesitate to interact with and help private businesses, he has said.
But years of crackdowns on lawyers, journalists and civil society activists under Xi have left fewer checks and balances. The power imbalances between government and business have only deepened.
Shum believes that the majority of the business class is aware of the problems in the system, but few are willing to speak up because the cost is too high.
Many businesspeople have managed to move at least part of their assets abroad, he said. Few make long-term investments because they are too risky and difficult. “Only idiots plan for the long term,” he said.
Shum’s observations match what others say. A Beijing-based businesswoman told me that “Red Roulette” drilled a hole into the black box of the government-business dynamic in China. Two real estate tycoons had told me their humiliating experiences of having to stand outside some bureaucrat’s office for hours in order to get approvals for their projects.
To win a green light for the airport logistics hub, Shum dined with officials nearly every day for a few years, downing one bottle of Moutai, the famed Chinese liquor, at each meal. His employees brought officials fine teas, ran their errands, and looked after the needs of their wives and children.
One employee accompanied so many people to so many sauna trips that his skin started peeling off, he wrote.
The top airport and local district officials changed three times during the project’s span. Each time, Shum’s team had to restart the ingratiating process.
“Many people assumed that with the protection of the Wens,” he said, referring to the family of the former premier, “we would be counting money without having to get up in the morning. The truth is, it was exhausting.”
If Duan and Shum had to jump through all sorts of hoops to push their projects ahead, other businesses without their political connections must endure much more to make things happen.
Shum said he began writing the book in 2018 partly because their son, then 8, started searching his mother’s name online. He thought it would be better if he could give his account of her and their marriage, which ended in divorce in 2015.
Then, right before the book’s expected publication this month, he said, Duan called him, trying to persuade him to pull the book. He’s not sure whether she was speaking for herself or conveying a message from the Chinese authorities. But he’s sure she wouldn’t be happy about the book.
“This is who she is,” he said. “She never wants to come out of the shadow.”