A Chinese Burg Sells Itself Out


It takes a village to raise a profit.

Or so thinks Zhang Jiacheng, a creative young entrepreneur who has embarked on a bold experiment here in southern China's poor, landlocked Guizhou province.

With a little research and a lot of moxie, Zhang, 35, persuaded local officials to sign over the entire village of Tongshui to his booming Chinese-medicine business. In March, this otherwise sleepy hamlet, home to 839 people and one telephone, suddenly assumed a surprising new identity: as a wholly owned subsidiary of Jasun Pharmaceuticals.

The village government was abolished. Farmers became employees. Fields and forests became assets.

And overnight, Zhang accomplished what the Communist revolution in China spent decades trying to prevent: He essentially privatized the entire village and, according to a simple three-page agreement, landed the rights to Tongshui's labor force and natural resources for the next 60 years.

It was an unprecedented move in China--and one of dubious legality in a land where, technically, communism still reigns.

But economic development is the mantra in China these days, and the people of Tongshui aren't interested in technicalities. "To get rich is glorious," the late Chinese leader Deng Xiaoping once proclaimed, and in the starry eyes of local Communist officials and villagers alike, Zhang promised plenty of glory: 100,000 yuan, or about $12,000, in every family's bank account within three years.

That's an astronomical sum in Guizhou, a province so rugged and depressed that "there aren't three days without rain, three miles without a mountain or three coins in anyone's pocket," as a famous aphorism puts it. Zhang's promised wealth amounts to nearly 75 times the annual per capita income in Guizhou's countryside--more than enough for this community to consent to being annexed, wholesale, by a private company.

"Everybody agreed to it," said farmer Yang Tonghai, 34, who enthusiastically signed himself, his wife, their two children and their little plot of land over to Zhang's firm. "He'll lead us to riches."

And to a possible confrontation with higher-level authorities, whose Marxist backgrounds still make many of them suspicious of China's rising private sector.

Although thousands of Chinese villages have started up businesses to earn more money, such enterprises are in effect government-run, overseen by local Communist Party cadres. Giving over an entire village to a private enterprise such as Jasun Pharmaceuticals could be deemed too threatening to party control, even though some cadres remain involved in administering Tongshui.

Tongshui's geography helps, since Beijing lies 1,100 miles away. With market reforms, central government control from Beijing has weakened enough that localized innovations such as the one in Tongshui can slip under the radar. "Heaven is high, and the emperor is far away," an ancient Chinese adage goes.

Zhang himself dismisses any suggestion that his venture oversteps the bounds of what's allowed.

"If you read [President] Jiang Zemin's 'Three Represents' and Deng Xiaoping's theories," Zhang said confidently, "you'll find that anything that develops the economy and benefits the people is good."

His plans, he says, will do both in Tongshui, as well as boost Jasun Pharmaceuticals' profit margins.

The key to the village's prosperity, Zhang says, lies in developing the area into a scenic tourist spot and turning its sun-kissed fields, which normally grow corn and tobacco, into producers of medicinal Chinese herbs for Jasun.

The company will pay the villagers for what they grow. Zhang says that every acre could yield an additional 30,000 to 40,000 yuan of income a year just by switching over to growing herbs for his factories.

His firm was established five years ago in nearby Zunyi, a city famous as the place where, in 1935, Mao Tse-tung consolidated his power within the Chinese Communist Party. Under Zhang's stewardship, Jasun rapidly blossomed into a successful, 1,000-employee company. It boasts 28 offices around the country--which hawk the company's treatments for arthritis, hepatitis and diabetes, among other ills--and Zhang is now a rich man by Chinese standards.

It's his turn, he says, to give something back to the community, a debt he wants to pay by helping a neglected place like Tongshui find a foothold in China's new go-go society.

"I was born into a poor peasant family, and I grew up in poverty," he said. "I always wanted to do something for my hometown after I became wealthy, but the conditions there aren't ripe yet. So I chose Tongshui."

Zhang became acquainted with the village through some of its residents, who had worked for him as day laborers during construction of one of his development projects.

The village is full of spectacular scenery. Dark green trees cascade down the hillsides. Stooping farmers with baskets on their backs still work the emerald fields by hand. Cicadas make the humid air buzz like a live wire.

Two months ago, residents got a taste of what could be when hundreds of visitors descended on Tongshui for the May Day holiday to relax and float downstream in rubber rafts, an activity Zhang wants to tout as Tongshui's main attraction.

The farmers scrambled to offer an authentic rural experience, serving up local delicacies--homemade sausage, Guizhou's famous chili sauce, wild vegetables--and opening their homes to urban sophisticates eager to sample country life.

Villager Yang made an extra 100 yuan (about $12) catering to "folks from the big cities," he said. "They think the air here is fresh."

But the roads are a bear.

Shoddy or nonexistent infrastructure continues to handcuff development of China's interior, which lags far behind the more prosperous eastern coast. In Guizhou, some peasant households in remote areas are so poor that family members have to share a single pair of trousers and pool with other households to buy a bag of salt.

The Beijing regime has launched an aggressive "Go West" campaign to encourage investment in the hinterlands, but the challenge of pushing development inland is starkly illustrated by the journey from Zunyi to Tongshui.

Though the distance is only about 50 miles, the drive takes 3 1/2 hours along chewed-up, mostly unpaved roads and narrow dirt tracks thronged with vehicles, from lumbering trucks to dilapidated buses packed with passengers inside and dozens of live ducks strapped to the roof. A breakdown of a single car can back up traffic in both directions for an entire day.

Since taking over Tongshui, Zhang has widened the bumpy spur road that runs through the village. But more work, residents say, needs to be done.

"We hope that there will be more construction, more projects, so that more people can come," Yang said as he sat in his sparsely furnished living room, a single lightbulb dangling from the ceiling.

Mild Skepticism and Modest Expectations

He and other villagers hold modest expectations for this first year of Zhang's grand experiment. The farmers are just now getting ready to plant their fields, awaiting word from Jasun as to which herbs to choose.

In addition to being paid by Jasun for their crops, the villagers can keep for themselves whatever they make from catering to tourists.

Even so, the people of Tongshui remain slightly doubtful about whether their new patron can really swell their coffers by as much as he pledged--a total of more than 20 million yuan ($2.4 million) in three years.

"Everybody thinks that's too high," Yang Zhenhu, a relative of Yang Tonghai's, declared with a skeptical laugh. He and his neighbors would be happy with half the promised 100,000 yuan, which they could use to renovate their homes, buy appliances and maybe eat a little better.

Even Zhang's own father-in-law, a consultant on the Tongshui project, described the 100,000-yuan figure in an interview as "only a goal," not an ironclad guarantee.

But the young entrepreneur insists that tourism and agricultural restructuring will bring in the money. And the peasants feel they have nothing to lose. Jasun now pays all the taxes and fees once borne by the farmers, and Zhang has promised his newly minted employees that, whatever happens, he will not let their incomes dip below what they were before he took over.

"If it doesn't work out, our farms won't be damaged and the land will still be there," said Yang Zhenhu, 43. "There won't be any harm done."

Residents have a lot more confidence in Zhang's ability to develop their village than they do in township and county officials, whose previous attempts to get the economy going, they said, all failed.

For Zhang's gambit to work, villagers say, their new boss must be given a free hand without meddling from the government.

But that may be too much to ask from a state that's used to having the final word on everything, from what crops you can grow to how many kids you can have.

Even the birth of Zhang's scheme, some residents say, bears the thumbprint of government interference. The way they tell it, Zhang had originally wanted to privatize only one section of Tongshui--the part most accessible to visitors--and not the whole village. It would have been far easier to manage, said resident Zhang Bi, 30, who is no relation to her new boss. "The more people you have, the more disagreements there are," she said.

A Fear That Residents May Lose Some Rights

But the township officials who oversee Tongshui insisted that entrepreneur Zhang take all of Tongshui or nothing. He agreed, and the villagers convened a meeting to discuss the plan. In the end, all 229 households signed on.

Local officials granted their approval and sealed their contract with Zhang on March 15. The two sides settled on a term of 60 years--double the time farmers normally contract their land from the state, which is still the nominal owner of all land in China.

"The township government acceded to the choice of the peasants--that's progress," said Li Fan, an independent analyst in Beijing who is an expert in local governance and democratization in China.

But Li is wary of a private company taking over what used to be government functions. The previous village administration in Tongshui has been replaced by a committee of party cadres and Jasun executives, who together will manage social services such as education, family planning and health care. Many of the details of the joint arrangement, however, are still fuzzy and need to be ironed out.

"What a company seeks is profits," Li said. "For instance, it won't enforce the birth-control policy if birth control conflicts with making profits. It won't care whether villagers have political rights or not. Can villagers elect the head of the management committee? Do they still have voting rights? Will they have the right to free speech?"

The residents themselves don't seem too preoccupied with such questions, focusing instead on the economic payoff Zhang promises.

"We're paying close attention to the . . . second half of this year. If he starts implementing some projects here, then we'll probably see some raises to our income," Yang Zhenhu said as he stood outside his home smoking.

A painted slogan from the radical 1966-76 Cultural Revolution, "Long live Chairman Mao," could still faintly be seen on a wall in his courtyard. But it was fast receding into both obscurity and irony here in a village that now belongs to an entrepreneur.

"We're all at the same starting line," Yang said, tracing a wispy circle with his cigarette to encompass the village. "If Zhang Jiacheng develops, then we'll all follow after him."

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