China's Richest Capitalist Draws Conservative Critics

The Beijing leadership's relentless, shifting battle over market reforms leaves even successful Chinese businessmen like Zhang Guoxi insecure. RURAL ENTREPRENEURS TAKE ROOT

WHEN Zhang Guoxi laughs, it is as if he has tossed up a fistful of gold coins with a smile and let the bullion shower him in bright, ringing abandon.

Mr. Zhang has much to laugh about: More than $50 million in assets make him one of China's wealthiest citizens.

But even Zhang speaks softly when describing how he tends his fortune under the eyes of Marxist cadres.

The farm-born plutocrat has learned that riches cannot buy him lasting freedom from the Communist Party, his fickle, exacting overlord.

Since starting out in 1973 with only the confidence of 21 hungry and indigent carpenters, Zhang has built a conglomerate with more than 3,000 employees and offices in Hong Kong, West Germany, Japan, and Canada. The Guoxi Group thrives on exports of expensive Buddhist shrines and other intricate wood carvings, and it is expanding into real estate and trade.

Zhang's story epitomizes the grim ordeal, fleeting revival, and renewed hardship that Chinese capitalists face under communism. As the youngest of seven children from a poor farming family, Zhang also illustrates how China's rapid development is primarily driven by the ambition of common Chinese to escape penury.

Zhang is one of many go-getters who have amassed millions since senior leader Deng Xiaoping checked the powers of bureaucrats and allowed market forces to animate part of the economy in 1979.

But no one else has Zhang's political skill. He alone had the verve to father a personal fortune in the cradle of China's revolution during the period of Maoist fanaticism and virulent anti-capitalism known as the Cultural Revolution (1966-76).

The location of Zhang's factories suggests that his road to riches was no easy street. His 10-story headquarters sticks out from the red, impoverished hills of Jiangxi Province like an arrogant, capitalist weed in the hothouse of China's communist revolution.

To the northwest, China's Red Army advanced for the first time in the Nanchang Uprising of 1927. To the southwest in the Jinggang mountains, Mao Zedong conceived his first soviet, the model for China's revolutionary state. Later, in 1934, the communists embarked south of Yujiang on the legendary, 6,000-mile Long March.

The key to success in such an unfavorable political environment, says Zhang, is keeping officials off balance with banquets, flattery, subterfuge, philanthropy, appeasement, and intimidation. "Entrepreneurs in China must be politicians; if they don't know how to politick, they fail," says Zhang, a member of the National People's Congress, China's parliament. Donations to the people

Over the years, Zhang has given Yujiang County $1.5 million for a junior high school, elementary school, broadcast tower, bridge, and other oblations to "the people." And in May, he donated $180,000 to an education foundation for Jiangxi Province.

"Zhang is a Communist Party member with lofty ideals," Jiangxi Gov. Wu Guanzhen said upon receiving the donation. "Zhang loves the party, loves the motherland, loves the people, and loves his native town. I hope that people at all levels of power learn from Zhang."

Zhang cultivates such praise by retaining political analysts and lobbyists in the provincial capital of Nanchang.

Back at his walled factory compound, Zhang spends much of his time entertaining officials in a banquet hall overlooking a fish pond and fountain. Waving chopsticks above a table stacked high with platters of steaming food, Zhang rallies reformist officials or punctures the umbrage of hard-line ideologues and bureaucrats.

He softens up officials with a stream of jokes and rollicking self-mockery while regaling them with eel, stewed turtle, "dragon-and-phoenix soup," "rock chicken," and other delicacies.

When the officials are ruddy and glutted, Zhang disarms them with comments about the reach of his self-made, multinational conglomerate. Or he describes how he has humbled a former governor of Jiangxi and other officials.

The millionaire recently has had less need to throw open the doors to his larder. Officials have been unusually cooperative since senior leader Deng Xiaoping began a campaign to revive economic reforms in January, he says.

Deng called for the ouster of all cadres opposed to change and said any policy that makes China strong is legitimate regardless of its ideological color.

"The speeches by Deng were a hard blow for the leftists," says Zhang.

Still, the leadership's relentless, shifting battle over reform leaves Zhang and heads of China's 200,000 other private enterprises extremely insecure.

Public hostility stirred by conservative leaders discourages China's most dynamic managers from investing and hampers economic growth, the party-sponsored Society of Historical Materialism recently said in a report.

Indeed, Zhang is increasingly looking overseas for opportunities for investment - and for refuge. He repeatedly asked a recent visitor about the comforts a multimillionaire emigre could enjoy in the United States.

Zhang Ronggang, an expert on private enterprises at the Chinese Academy of Social Sciences, says, "China needs to strengthen the legal protections for private enterprises and improve the image of entrepreneurs."

Yet Zhang Guoxi might not wait for the elusive embrace of political opinion. He annually spends just 60 days in Yujiang, traveling overseas or around China the rest of the time. And he has already found a home overseas for his wife and children.

"For the past 19 years I have worked with my head under my arm," he says, quoting an adage describing the anxiety of constant danger.

Zhang has endured three periods of persecution since persuading a handful of fellow carpenters to quit making shovels, ploughs, and other farm tools at a failing rural workshop and take up wood carving in 1973.

After a county official labeled Zhang a "newborn capitalist element" in 1973, a four-man "work team" of radical Maoists took up residence at the factory and watched his every step.

The Cultural Revolution Red Guards left empty-handed after six months. Zhang's workers had refused to denounce him. Also, Zhang had joined the party the year before and could claim a farming lineage, the most prized Maoist pedigree.

For years thereafter Zhang was persistently criticized by county and provincial officials. He regularly had to dismantle official obstacles to transport, energy, labor, and virtually all other aspects of his business.

In 1979, Deng's market-oriented reforms vindicated the piece-rate wage system, strict work rules, and other controversial policies that Zhang had instituted years earlier. With the approval of Deng, many parts of China gradually instituted the same exacting policies. "I owe my life and fortune to Deng Xiaoping," Zhang says. Conservatives strike back

Despite Deng's support for reform, Zhang was denounced by local officials in 1986 after the student demonstrations that prompted the party's ouster of reform-minded Hu Yaobang as party general secretary.

Zhang was accused of profiteering and dealing in gold. He received threats from people who are "dissatisfied with reform," he says. Some Chinese who favor an egalitarian system have felt Deng's reforms had brought disproportionate wealth to businessmen like Zhang.

Because of such perilous times, Zhang and his company now have a 12-man detachment of police provided by the Public Security Ministry.

At Zhang's Yujiang home - a small red sandstone dwelling on an alley that he calls his "slum" - Zhang retains a burly man as a valet, servant, and marksman. Dressed in a plain pea military uniform, the bodyguard packs a pistol in a leather holster. At bedside, Zhang keeps a rifle and double-barreled shotgun, both fully loaded.

Zhang most recently fell out with officialdom after the 1989 massacre of pro-democracy protesters in Beijing. County and provincial officials used as a weapon a speech by Party General Secretary Jiang Zemin denouncing private entreprenuers.

"After the 1989 incident I felt like retiring and if something like that happens again I'll go elsewhere," the 39-year-old millionaire says. The tumult of 1989 has helped prompt what Zhang calls a more mature outlook on his business and life.

"I've realized that in all these years of running the company I've failed as a father and husband and neglected my filial duties," he says.

In May, with his family in mind, he quit smoking. And not long ago he built an elaborate, white-marble tomb for his parents outside his ancestral village in Yujiang County.

While looking ahead, Zhang is also considering how to pass on his company to his children.

Spreading his arms, Zhang says, "My wealth will provide for my offspring for at least 10 generations!"

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