By Clay Chandler Washington Post Foreign Service Thursday, November 1, 2001; Page E14
SHANGHAI -- The phenomenal growth of Liu Yongxing's animal-feed business has made him China's richest man, according to rankings published recently by Forbes magazine.
With an estimated net worth of $1 billion, the 53-year-old entrepreneur and his Shanghai-based Hope Group are symbols of the new China, a socialist society where government leaders laud free markets, capitalists are welcome to join the Communist Party and average incomes are rising.
But Forbes's list of the 100 richest individuals in China also illustrates the growing income inequality here that has alarmed some Communist officials.
Liu and his brother, Liu Yonghao, top a short list of Chinese entrepreneurs amassing huge personal fortunes not seen here since the heyday of colonialism. And they are piling up personal wealth at a far faster rate than their countrymen in a nation where the average annual income per person is about $1,000 -- with about 120 million Chinese living in abject poverty, earning no more than $1 a day.
At the same time, China's new business barons are creating jobs and contributing to the growth of an economy long shackled by policies favoring unproductive state-owned firms. The dramatic expansion of China's private sector has helped this economy, the largest in the developing world, grow at an annual rate of better than 7 percent this year.
The Forbes survey found that the 100 richest people in China boasted an aggregate net worth of $18 billion in the year ended Sept. 30. That's small change by U.S. standards: The most recent Forbes ranking of global billionaires put the net worth of Bill Gates alone at over $58 billion. But what's remarkable about China's wealth numbers is how fast they're rising.
The wealth of the top 50 on this year's China list jumped 40 percent, to $14 billion, from $10 billion last year, in spite of a global economic slump.
In this year's survey, the 50th person on the list, construction and property tycoon Lou Zhongfu -- had a net worth of $110 million. In 1999, the first year Forbes conducted the survey, the 50th-richest individual was worth a mere $6 million.
The Forbes findings parallel those of several academic studies of the distribution of income and wealth here in the three decades since China's leaders rejected the ruinous economic dogmas of Mao Zedong.
"Nearly all the data I've seen suggest massive increases in inequality in China, particularly over the past 10 years," said Nicholas R. Lardy, a Brookings Institution specialist on China's economy.
Experts say the problem is no longer just the yawning chasm separating China's prospering urban dwellers from its struggling farmers, but also the rapidly growing gulf between the rich and the ordinary Chinese within cities. Indeed, Lardy speculates that wealth and income disparities in China are now wider than those of any other developing economy.
China's leaders have expressed concern about the income trends. According to a recent report in the state-run China Daily, the 8.7 percent of the nation's population in the highest tax bracket hold more than 60 percent of China's bank deposits.
In June, Gao Hongbin, a senior cabinet official responsible for poverty relief, warned that the widening disparity between rich and poor has become a "very serious problem in society."
The remarkable growth of China's new capitalists helps explain the intensity of debate within the Communist Party since July 1, when President Jiang Zemin marked the 80th anniversary of the party's creation with a speech unexpectedly declaring that private businessmen should be granted party membership. Conservatives were horrified at the prospect that the party Mao founded to protect working-class Chinese from exploitation by capitalists would now include them in its ranks.
Notably, though, the Forbes list includes 10 people who are already Communist Party members.
China's admission to the World Trade Organization, which could come as early as December, is expected to aggravate inequalities by creating new investment opportunities for those with capital, and by bidding up wages for high-skilled labor even as it squeezes farmers and forces closure of inefficient state-run firms.
Personal wealth remains a new phenomenon in China. Most of those on this year's list didn't start their businesses until the 1980s.
Liu's rise shows how China's booming economy has offered new opportunities for those with pluck and luck. He began in 1982 as a lowly street vendor, fixing radios in a stall. After a disastrous initial attempt at raising quails, he and his brothers tried their hand at selling cheap grain to farmers around their hometown of Chengdu. Their feed was cheaper than imported products, and of better quality than the moldy stuff from state-owned plants.
Now Hope Group runs factories throughout China and Southeast Asia, and the Lius are hoping WTO membership will enable them to muscle into the flour-milling business.
The Forbes list suggests a degree of mobility within the ranks of China's most affluent. Eighteen people on last year's top 50 list failed to crack this year's top 100. Rankings slipped this year for many whose wealth is tied up in stocks, reflecting sharp declines over the past four months on the nation's two exchanges.
So is China in danger of another proletarian revolution? Lardy argues that ordinary Chinese, much like ordinary Americans, are probably willing to put up with big gaps between rich and poor as long as they perceive that those with fortunes made them fairly.
"It's sustainable as long as people feel that these fortunes were the result of skill, hard work or even good luck, rather than political connections or corruption," Lardy said. "In that sense, I think the data underlines the imperative for leaders' efforts to promote growth and crack down on corruption."