The State Taketh, Chinese Entrepreneurs Say

Bai Yiben worked hard to build up his property development business after retiring from a state-owned textile company in 1992, saving every penny and plowing it back into the company. After years of struggling, his firm turned the corner in 2000.

His newfound wealth didn’t go unnoticed. Powerful officials linked to China’s military and Communist Party decided they wanted the fruits of his labor, family members charge.

Officials hounded Bai, 68, and his two sons, they say, manufactured state’s evidence, brought suit in their own courts with no pretext of objectivity, forced the three men into a life on the run and ended up with everything. The officials aren’t talking.

“They’re frying our flesh with our own oil,” elder son Bai Shengjun, 40, said in a brief telephone interview from his hide-out somewhere in China.

Chinese entrepreneurs have often paid a high price in a society that has never fully trusted them, a vestige of Mao Tse-tung’s days when private ownership was deemed a cardinal sin.

The National People’s Congress, scheduled to meet through Sunday, is expected to enshrine private ownership in the constitution. But experts and businesspeople say a huge gap remains between lofty language and what actually happens at the hands of local officials.

“Since China is not a law-based society, real change is going to take awhile,” said legal scholar Du Zhaoyong -- perhaps as long as two decades.

Judges, bureaucrats and military officials have a major stake in the status quo, Du said. “If you recognize private property, they’re no longer in a position to just take it away at will, which reduces their power.”

Statistics on government harassment of businesspeople and appropriation of their assets are not available, given that it’s not an area the state wants to highlight. But abuses are widespread, experts say, citing a case in which officials of the Beijing Civil Affairs Bureau seized businessman Hou Ruichang’s $1.8-million company, kicked him out and claimed it as their own; another in which entrepreneur Cao Jiguang’s electronics company was taken over by a local agency in Shenzhen; and a move by Shanxi province authorities to push out businessman Yang Yongru from his cement company.

“Stronger laws are in the works, and many of these problems reflect a transition period in China,” said Zhang Xingshui, director of the Beijing Kingdom law firm. “In reality, though, the state frequently uses its power to punish private enterprise, putting them in jeopardy.”

Without proper safeguards, experts say, companies have less impetus to invest or take risks, knowing they may not be able to reap the benefits.

“I helped my country and employed many people, including the disabled,” businessman Hou said. “Not only didn’t they recognize my contribution, they stole my property.”

Bai Yiben’s case in Xinjiang province underscores how thorny the issue remains as China moves from communism to a market economy.

Bai always liked to keep busy, said family members and former employees, and the prospect of sitting around playing mah-jongg after retirement wasn’t terribly appealing. So in 1992 he started his real estate company, drawing on his years of experience developing property at his former company.

Given restrictions on individual real estate developers and the perceived value of a government protector -- “finding a mother-in-law,” in local parlance -- he affiliated with an arm of the Xinjiang province Bingtuan, a powerful quasi-military entity with its own territory, courts, police and prosecutors.

Bingtuan affiliates never invested in Bai’s company, the family said, with the relationship largely limited to Bai’s paying an annual management fee in return for its blessing to operate.

Bai had a temper and was on the stingy side, said former employees, and refused to pay bribes, take local officials out for lavish dinners or otherwise “smooth the joints” -- all common practice in a society where power, not law, governs how resources are allocated and decisions made. It would prove to be a major mistake.

In Xinjiang, China’s westernmost province, the call of Central Asia is often louder than that of China’s mainstream Han culture. Street and store signs are in the Uighur language, people have distinctly Caucasian features, and the province has battled a Muslim separatist movement for decades. Given China’s long-standing fear of dissolution, the military has even more clout here, and a bigger claim over the local economy.

For years, Bai didn’t tell his wife that his company was affiliated with the military, confessing only after trouble erupted. Blame the connection on naivete, single-minded focus, a bit of stupidity, his son said.

Bai started dealing with a contractor named Li Zuoxun in the Bingtuan network, a man with powerful friends whom he’d known from his old company. Li spent lavishly on guanxi, or connections, and enjoyed the good life, fancy clothes and flashy cars, said Bai family members, who cited court documents that they said proved Li never invested a cent in Bai’s company.

Li was jealous and viewed Bai’s growing fortune as a way to restore honor and wealth lost after the state-owned company he managed went bankrupt under suspicious circumstances, said Bai’s wife, Wang Jinxiang.

“He saw a sugar pie drop from the sky,” she said in her Urumqi living room decorated with a well-worn couch, an artificial marble television stand and a large, cloudy fish tank. “He figured, if I don’t take it, I’m a fool.”

Reached by telephone, Li declined to comment on the case or Bai’s allegations.

“Do not call me,” he said. “I’ll have nothing to do with you.”

Li’s son, who works at Bai’s old company, also was unavailable. Other officials could not be reached or declined to speak about the case.

But Bai Shengjiang, 35, Bai’s younger son, said he attended a meeting at which Li demanded a large piece of Bai’s company, along with a car and a title. Bai senior told him to take a hike.

“I have very powerful friends,” Li then told Bai, according to his son, adding that he’d already promised those friends parts of Bai’s company once he gained control. “I’m much younger than you, old man, and will ultimately win this showdown.”

“My father never spent anything on bribes, so no one was there to speak for him when he needed it,” Bai Shengjiang said. “Whereas Li promised money, this much to the court, that much to the prosecutor. As a result, they never judged the case objectively.”

In the end, powerful forces aligned against Bai, said Gao Zhisheng, a lawyer representing the family. “The court, police, prosecutor and party committee all worked together against him for doing nothing more than running a successful business,” Gao said.

Faced with such dim prospects, in early 2001 Bai and his younger son feigned a business trip and fled with the company accounts.

“We felt we had no choice,” Bai Shengjiang said. “They could easily destroy our records. Then we’d have absolutely no chance. The Xinjiang military court system is not a place to find justice.”

The elder son, Bai Shengjun, who had no links to his father’s company, stayed behind. On July 13, 2001, the police arrested him as authorities seized family assets, including their houses, four company vehicles and their private cars.

“We see the prosecutor from time to time driving around in our car,” said Xi Yanping, 35, Bai Shengjiang’s wife.

Two trials in Bingtuan-affiliated courts found Bai Shengjun guilty of destroying evidence and stealing state property, resulting in a sentence of life imprisonment. Appeal was denied. After two years in jail, Bai Shengjun fled while on medical leave. His attorney believes that the prosecutor encouraged the escape, which gives the state rights to a fugitive’s property.

A prosecutor in the office that brought the case against Bai Shengjun said his office was not influenced by Li in any way. Bai and his family are the guilty ones, he said, and were convicted of stealing government assets.

“That wasn’t private property,” said the man, who would identify himself only as Liu. “It was state property.”

Now all three Bai men are on the run, featured on China’s most-wanted list.

Wang Jinxiang, Bai’s wife, said she had not seen her husband in three years and was worried about his heart problems, adding that she was constantly harassed by the police and that her phone was bugged.

“This is blatant abuse of state power,” she said through her tears. “These people are supposed to uphold the law, but all they’re doing is breaking it. Little guys have no chance against them. Their consciences have been eaten by dogs.”