by Jianying Zha
On May 18, 2010, Huang Guangyu was sentenced to fourteen years in prison on charges of illegal operation, insider trading, and company bribing. The court also issued a fine of 600 million yuan (about $80 million) and confiscated some 200 million yuan (about $30 million) worth of his property. Meanwhile, the Chinese media reported that Bain Capital had purchased enough stock after Huang’s arrest to become Gome’s second biggest stockholder.
I have not found a satisfying answer to explain Huang’s surprisingly heavy sentence. While gossip goes around dinner tables, the legal process and much of the information surrounding the case remain opaque. But in the course of checking with various local businessmen, I often heard a remark about Huang’s personality: he was too ruthless in his dealings. His suppliers hated him because he cut prices so low they could make little profit. He sometimes treated his rivals with brutality. A widely circulated story, for example, tells how Huang handled a “traitor.” One of his company managers left Gome and started a competing business, so Huang’s men decided to teach him a lesson: they beat him up so badly that he ended up a handicapped man. This man, according to the folklore, became a determined and crucial informant in Huang’s investigation and prosecution. The moral of the story seems to be: he who is too greedy and too hard on others will be resented and fall. In popular opinion, Huang had crossed a certain line and was truly a bad tycoon. The fact that the official ties he had cultivated were not quite powerful enough to save him is not discussed but is widely understood.
The Turtles
Zhang Xin likes to talk about her fascination with left-wing British intellectuals during her years at Sussex and Cambridge. Pan Shiyi, her husband, is a believer in Taoism who describes himself as a “feudal” Gansu country boy. When you see them on television and in magazines, they are often dressed in a kind of Shanghai-Tang chic: Pan, with his black-framed techno glasses, might be wearing a silk brocade jacket; Zhang, with a dyed streak of ash-blond hair right above the eyes, might have on a sleeveless linen top with a mandarin collar and butterfly buttons. They look like art dealers or film producers. In fact, they build apartment complexes, office towers, and shopping plazas. At the ages of thirty-nine and forty-one, respectively, Zhang and Pan are the co-CEOs of the Beijing-based firm SOHO China and the most visible real estate developers in the country.
On a cold spring day in 2004, Pan and Zhang hosted a gala to celebrate the opening of their latest project, Jianwai SOHO—twelve white, minimalist high-rises arranged in a tilted phalanx on a prime block of Changan Avenue, Beijing’s main boulevard. Despite persistent drizzle, hundreds of luminaries showed up: businessmen and government officials, architects, publishers, artists, fashion editors, actors. A sudden downpour turned the open-air ribbon-cutting ceremony into a brave dash through the rain, spoiling starched clothing and fancy hairdos; at the formal dinner for five hundred guests in a gigantic white tent, some people were shivering in the evening chill. But glamour prevailed, as models sauntered down an improvised catwalk wearing Bulgari jewelry and Valentino couture. Later, a pair of professional dancers from South America performed a tango. The hosts worked the floor separately. They stepped onto the dais together only once. Pan, in a dark Prada suit, thanked the guests in Chinese. Zhang, in sky-blue silk embroidered with yellow dragons, offered appreciative remarks in English for the benefit of the many international guests.
The evening reminded me of a similar occasion, two years earlier, celebrating the completion of Architectural Gallery at the foot of the Great Wall. A pet project of Pan and Zhang’s, the gallery featured twelve fanciful houses, each designed by a prominent Asian architect. One, by Shigeru Ban, was a house made of laminated bamboo. Another, designed by Yung Ho Chang, a Beijing architect who was trained in California, was built entirely of packed earth. Each of the twelve houses was priced at a million dollars, which, even for Beijing’s newly rich, was a daunting sum to spend on a weekend residence that was more of a designer’s conceit than an example of luxury living. The project has since been renamed the Commune by the Great Wall and, partly because of the publicity it generated, has done well as a convention center and tourist attraction.
Jianwai SOHO is far larger in scale: when everything is completed, there will be twenty high-rise towers and four villas, encompassing 700,000 square meters, and its projected sale value is about $1.2 billion. The price per square meter, at about $2,000, is high but not beyond the reach of the intended clientele, who have been drawn by the buildings’ style—a contemporary blend of concrete, steel, and glass with interiors of fine-finish woodwork. By the time of the gala, 80 percent of the units had been sold.
The gala wasn’t the only promotional event Zhang and Pan had arranged for the complex. Earlier that afternoon, in a conference hall inside one of Jianwai SOHO’s buildings, they presided over a forum called “A Dialogue Among Architects: China and the World.” Besides Riken Yamamoto, the Japanese architect who designed Jianwai SOHO, the most prominently featured speaker was Patrick Schumacher, the partner of the celebrated Baghdad-born architect Zaha Hadid, who was then designing another project of Pan and Zhang’s: an upscale apartment complex on Changan Avenue near Jianwai SOHO. Schumacher showed slides and spoke to a packed hall, with Zhang standing nearby to translate for him. On a screen behind him, a cluster of buildings shimmered, their color somewhere between silver and gold. I have heard the Hadid design described as a “school of fish.”
The image that often arises when people speak of Pan and Zhang is that of a pair of turtles. In China, people like Zhang who have spent time in the West are known as hai gui (海龟/海归)—a pun on “sea turtle” and “returnee from the sea.” As the Chinese economy has become more integrated into the global market, hai gui have grown numerous. (“Globalization means going home,” one hai gui said to me.) By contrast, people like Pan are represented by tu bie (土鳖), the local turtles. The hai gui are valued for their international perspective; the tu bie are the ones who know how to get things done. Pan and Zhang have become the best-known tu bie-hai gui team in China. But, as they’ve learned, the alliance between tu bie and hai gui isn’t always without friction.
China has been called the world’s biggest construction site; everywhere you turn in cities like Beijing, there are cranes, scaffolds, steel rebars, skeletons of old buildings, half-finished new ones. Yet the people who are directly responsible for this constant din have largely stayed out of the public eye, and not without reason. Developers are regarded as China’s robber barons, men who have taken advantage of the muddled transition to capitalism by means of guanxi (connections), bribery, and fraud.
If you bring up the subject of developers at a dinner party, someone will tell you about a “tofu-dreg project”—a building that has started to fall apart after two years—or relate a story of forced eviction where neighborhood residents fall victim to deals made between officials and developers. A television series called The Winter Solstice reflects this popular view. It’s a portrait of a picturesque old town in central China that is undone by the onslaught of development, and it features a moblike building company: its bosses are greedy, scheming predators, their underlings thuggish killers. A Beijing real estate entrepreneur told me, “Of all the shows I’ve watched, this comes closest to a realistic portrayal of contemporary reality—though it shows only the tip of the iceberg.” Pan Shiyi, who says that he hopes to change the image of his profession, has certainly seen it at its worst.
Pan never planned on a career as a developer. Born in a poor village in the barren northwest province of Gansu, he grew up in the shadow of hunger and political misfortune: his father was labeled a “rightist”; his mother was an invalid. Pan and his siblings often worried about not having enough to eat. It was a considerable achievement when, after getting his college diploma in Langfang, near Beijing, he was assigned to an office job as one of more than forty thousand bureaucrats in the Oil Pipeline Bureau of the Petroleum Ministry. Still, he became convinced that it was a job without a future.
/> “I resigned because that was an open and exciting time,” Pan recalled as we sat in his large but sparely furnished office in SOHO New Town, a complex of high-rise towers he has built on the east side of the capital. The floor-to-ceiling windows offered a bird’s-eye view of bustling, traffic-jammed Changan Avenue, a dramatic contrast to hushed and orderly interiors. His large black desk was free of paper; his deputies and secretaries were keeping out of the way. “The words and actions of the nation’s leaders, such as Hu Yaobang”—the reformist Communist Party general secretary, whose later disgrace and death triggered the 1989 Tiananmen protests—“wearing a Western suit, made a very big impact on people,” he went on. “In that kind of atmosphere, I came to feel that my office job was redundant, useless.”
In 1987, Pan quit his job, sold all his belongings, and took the long train ride south to Shenzhen, which had been declared a “special economic zone,” exempt from many of the usual rules of state socialism. One of his college professors had started a company there, but when he found the professor, the company had gone bankrupt. Pan found a job at a consulting company helping to move Hong Kong factories across the border to Pearl River Delta. The next two years were gloomy. He hated the hot, muggy climate; couldn’t understand the local Cantonese dialect; worked overtime; and felt depressed. Everyone he knew advised him to go back to his government job. Only one friend, who had worked abroad, said to him: “The planned economy is doomed. Persevere. Don’t turn back, even if you become a beggar.”
In 1989, Pan made his way further south, to the backward island province of Hainan, which had just become a new “special economic zone.” It was a “dirty, stinky mess,” he recalled, largely without electricity. After sleeping on damp pillows in a moldy seaside establishment, Pan took a morning walk with a friend and discovered that the locals used the beach as a toilet. “A man’s taking a shit over there, and here comes a guy trying to sell watches to us. He rolls up a sleeve, and all sorts of watches are strapped around his arm. My friend chooses one, but the watch guy says, ‘No sale for you.’ My friend says, ‘Why not?’ The watch guy says, ‘Because your wallet has been stolen.’ We turn around and the pickpocket is right there, squatting on his heels not far from us. We give chase, he runs. The islanders run much faster than us. And the moment we are out of wind and stop, the pickpocket stops, too, and squats again. That was my first Hainan experience.”
Pan eventually became a brick-factory chief in Hainan, had a jeep to drive around, and was happier. But after a huge monsoon hit the island, many went out of business and left. Pan persevered. Finally, in 1992, Deng Xiaoping made his famous “southern tour” and called for faster and more thoroughgoing market reforms. The central government granted further exemptions to develop Hainan, creating a sort of free-enterprise zone that was among the least regulated in the country. Pan and five other young men he met in the south, all educated northerners, decided to form their own company, the Vantone Group, and try their hand at real estate. But they needed money.
Feng Lun, one of the Vantone founders, used to be the deputy chief of a State Council think tank and had government contacts in both Beijing and Hainan. The six men lobbied a state company from Beijing and impressed its boss with their business plan. The boss agreed to lend them five million yuan if they would pay 20 percent in interest and half of future profits. They bought eight villas, at 3,000 yuan (about $350) per square meter. Two months went by, but there were no buyers. Day after day, the young speculators sat in their shabby office, trying to figure a way out.
“We prayed and prayed for something to happen,” Pan said. By the third month, buyers began to show up. Pan set the price at 4,100 yuan per square meter and landed his first client: an entrepreneur from Shanxi. The moment another buyer arrived, from Inner Mongolia, Pan pushed the price up to 4,200. Soon, he was selling villas at twice the initial price.
This kind of real estate speculation was a major part of Hainan’s legend of wealth creation; a horde of adventurers and speculators were hyping and flipping properties. In the local idiom, the process is called chao lou, “stir-fry buildings.” Many latter-day “capitalists” were born in a process that Marx-conscious Chinese scholars have called “primitive accumulation.”
Feng Lun, who is now the chairman of the Vantone Group, described the Hainan period to me as resembling the gold rush in the American West: weak government controls, vague regulations, a stampede of fortune hunters. “Lots of strange things happened there,” he told me as we sat in a cigar chamber at a plush Beijing hotel. A wiry, genial man with rimless glasses, his thinning hair carefully brushed across his scalp, Feng looked more like a scholar than like a business tycoon. “For example, in a business quarrel, you’d be tricked into a night club where you’d be shoved up against a wall in a dark room with a gun pressed in your belly, and you’d be forced to sign a contract. This happened to people in our company. From time to time, someone would just disappear—murdered. Official seals were being faked all the time. But it was a very happy time. Because you suddenly arrived in a completely free zone—no law, no restrictions, no need to care about all that rotten traditional stuff.”
Feng told colorful tales of uptight Beijing cadres going to Hainan night clubs—brothels, essentially—where they were ministered to by “little misses,” and of their evolution from excruciating awkwardness to debauchery. “When your local hosts asked you to go to a night club, you could not refuse,” he told me. “Because that’s where people discussed business. You say, ‘I’m pure’? Then no business for you.” It took Feng, with his State Council background, a while to get used to the absence of order and security. “Then you discovered that life was very free and very crazy, and you enjoyed it very much. Experiences like that would change your view of the world, your norms of right and wrong.”
Feng described his education as “totally orthodox,” “fundamentalist Marxism.” He had joined the Communist Youth League at fifteen, the Communist Party at twenty, and had been a student cadre all the way from grade school to graduate school. “But, in the end, bah! I’ve changed completely.”
“And you’ve become a bad man?” I asked. (Bad man, huai ren, was a term jestingly applied to those rule-breaking Hainan adventurers. On another occasion, I’d heard Feng describe himself as “a good man among bad men, but a bad man among good men.”)
He laughed. “No, I think I’ve become a normal man.”
When Pan talks about Hainan, he stresses the business side of things, and invokes the dot-com era of Silicon Valley: “You are involved in raising market prices, and everyone is investing. You control an angle and make sure you get out in time. Not getting into a big rising market is stupid. But the smart ones don’t just drift with the tide. Go up when you can, and, while others are still going, retreat if you think it’s time.” During a visit to the local planning bureau, Pan noticed two sets of figures. First, Hainan had far more temporary than full-time residents. Second, on a per-capita basis, Hainan, though still a poor island, was building seven times faster than Beijing. This was a case of overbuilding, he concluded. It was time to pull out. Shortly before the Hainan real estate market collapsed, Pan borrowed fifty thousand yuan from the company account and left for Beijing.
Zhang Xin comes from a long line of Chinese immigrant merchants who settled in Burma. In the 1950s, as waves of anti-Chinese sentiment swept across Southeast Asia, her parents decided to move back to their ancestral land. Married in Beijing, they were both assigned jobs as translators at the Bureau of Foreign Languages. But the Cultural Revolution did them in: the two joined rival factions and, Zhang recalled, started fighting viciously. The couple separated in 1970, when Zhang was only five years old. Immediately afterward, her mother took her off to a cadre camp in the Henan countryside.
It was a difficult childhood. Her mother, a feisty, hardworking woman, dropped her off at the homes of various relatives and friends whenever she found her inconvenient. Zhang was transferred seven or eight times in her elementary school
years. Even after she and her mother moved back to Beijing in 1972, life was a struggle. “We slept on office desks at first,” Zhang recalled. “Every night, we laid out dictionaries on the desk and stretched out on them.”
In 1980, when Zhang was fourteen, she followed her mother to Hong Kong, where they lived in a tiny room and had almost no money. For a while, they both worked in a garment factory. Later, Zhang got an assembly-line job at an electronics manufacturing plant.
“They were giant buildings,” she said with a grimace. “Over twenty floors high, with hundreds of assembly lines inside, each line a small plant. The workers had no sense of belonging. They switched jobs—maybe just to the plant across the hallway—over the smallest pay raise.” Competition was intense but always at a low level; quick hands were all that counted. Zhang yearned to become a clerk in a quiet office.
Two years later, at the age of sixteen, she got a job as a warehouse clerk, fell in love with the math teacher at her night school, and, for a while, was content. But in 1984 a childhood friend visiting Hong Kong “turned my whole world upside down,” Zhang recalled. The young man could speak English and attended college. “Gosh, your life here is really no good,” he told Zhang. “You should go to America.”
She went to England instead. In 1987, having spent a couple of years learning English at an Oxford secretarial school, Zhang received a scholarship that enabled her to attend the University of Sussex. A gathering place for the British intellectual left, the Sussex campus was, in her eyes, full of idealists and eccentrics. She remembers one classmate who never washed his long hair. (“It looked like a shiny mushroom over his head.”) But, above all, she was fascinated by her leftist professors. “Many of them took part in the 1960s movements. Their understanding of communism was purely romantic, a metaphysical probing so different from ours.”
