China's economy has seen unprecedented growth in the years since Deng Xiaoping opened up its markets, but at what cost? Some of the country's biggest success stories share their thoughts on the spiritual price of doing business
The ‘children’ of Deng Xiaoping
Deng Xiaoping was no Winston Churchill. He possessed a thick southern accent most people found nearly impenetrable, and was anything but garrulous. In fact, little of what he said was memorable or even original. His most-cited aphorism – “To get rich is glorious” – did not actually spill from his mouth; historians suspect its provenance can be traced to the West.
But in deed more than word, Mr. Deng was the linchpin in redirecting China’s economy away from the backward, centrally planned beast it had become under Mao Zedong. He set it on a path that would see decades of unrelenting growth and the creation of credulity-defying prosperity.
What he wanted to do, he said in 1978, was to “light a spark” for change:
“If we can’t grow faster than the capitalist countries, then we can’t show the superiority of our system.”– Deng, 1978
And on many indicators, grow they did – more than the U.S
Percent Growth: 1978 - 2013China (U.S.)
- Air TransportPassengers carried 22,809% 172%
- GDP per capita 4,293% 402%
- Imports 17,809% 1,204%
- Exports 22,560% 1,021%
- Urban Population 196% 10%
- Disposable Income (per capita) 7,761% 669%
He succeeded in spurring growth, and wildly so, marshalling the power of the world’s most populous nation. Now, 110 years after his birth – an occasion that its leadership has sought to celebrate with lengthy TV biopics and other remembrances – China is filled with millionaires.
But has the sudden influx of wealth made it happy?
Where chasing profit was once grounds for harsh re-education, the country’s heroes and superstars – Jack Ma and an entire generation of tuhao, or nouveau riche – are now, in ways both spiritual and economic, the children of Deng.
President Xi Jinping has consciously sought to present himself as the current generation’s version of Deng. But for many of Deng’s figurative progeny, wealth and happiness haven’t always come together. In a recent survey published in the People’s Tribune magazine, worries about a moral vacuum, personal selfishness and anxiety over individual and professional status were high on the list of top concerns about the country today. The poll reflected a pervasive cultural disquiet that has reached even into the ranks of those most richly rewarded by the Deng-led opening up.
“On the social level, money became the only currency in terms of personal relationships, and that’s a really sad reality,” says Yang Lan, one of the country’s top television hosts.
She points to “the lack of a value system” that she sees when she hears young girls “discussing how they would love to be a mistress so they can live a wealthy life before they are too old. And you see girls discussing these things very openly.” China, she says, needs “a new social contract.”
There is little doubt that those who no longer need to worry about making money are more free to criticize others, raising the spectre of hypocrisy. But pained reflection has been among the less-anticipated products of the wealth China has amassed. The comforts of financial security have provided a new space to rethink the path the country has taken and ways it has fallen short.
And as China’s economy slows to a pace not seen in decades, it also faces a moment to consider the sweep of its modern history – decades marked by the vicious turbulence of the Mao years, followed by the full-throttle race away from it inspired by Mr. Deng.
From 1978, the first year of the Deng-led reforms, China has been so thoroughly reshaped that even numbers struggle to do it justice. Gross domestic product has expanded 156-fold, the value of imports and exports is 727 times higher, and savings are up by a factor of 2,131.
The growth has been driven by an extraordinary – and massive – cohort of people who have turned personal quests for profit into a national obsession. “China has, in absolute numbers as well as percentage of populace, the most successful entrepreneurs anywhere in the world,” says Peter Fuhrman, chairman and founder of China First Capital, a specialist investment bank based in Shenzhen.
But even those who most warmly embraced the Deng mandate are now pausing for a second look at a country whose vast financial progress has become marred by other problems. China today is “selfish,” says Wu Hai, a serial entrepreneur and hotelier who speaks with sadness about what his country has become.
The mandate to get rich has become a mandate “to take advantage of other guys, to make a killing. We are at that stage,” he says. “It’s not a good society. In the countryside, they kill a newborn girl because she is a girl. That’s the country you are in.”
He Yongzhi, who built a restaurant and hotel empire to escape the grinding poverty that keeps mothers up at night sewing clothes for their children, sees the nation as a work in progress. “Deng Xiaoping built up the frame of a great building,” she says. But it is far from complete, and “in some places, it’s already leaking.”
The most obvious improvements to that frame are ones that dominate the Communist discourse in China today, including efforts to vanquish corruption and build a more functional court system. But they amount less to building on the Deng foundation than to rejecting it, as Beijing oversees campaign after campaign that, acknowledged or not, constitutes a war on his legacy. Among his more memorable exhortations was that it doesn’t matter if a cat is black or white, so long as it catches rats. The ends, in other words, justify the means, a principle that catalyzed the spread of corruption.
Now, President Xi is leading a widespread effort to root out the rot. “Basically, they are saying it’s wrong. In the past 35 years, whoever got rich must be suspected of being corrupt,” says Bo Zhiyue, a senior research fellow at the East Asian Institute of the National University of Singapore. “That’s really a cultural shift, and also a cultural shock for a lot of people.” As chief executives of state-owned companies face calls to temper their pay and restrain spending, fine hotels are removing star ratings, luxury brands face diminishing sales, and even Moutai, the famous Chinese liquor, has been forced to slash prices.
For the Chinese government, “the role model has changed – now you have Lei Feng … basically you cannot have more than you deserve,” Mr. Bo says, referring to a young People’s Liberation Army soldier reputed to have died in 1962 and held up during the Mao era as an exemplar of selfless devotion.
It’s an open question whether the President will be able to impose anything close to selflessness on a country that has, in recent years, come to quite like five-star hotels, Moutai and new freedoms.
Yet a desire for change has also brought a nagging doubt to the Deng generation: that the China it has helped build somehow fails to satisfy its people. One of the more difficult questions facing its leaders, then, is how to steer China toward more than just the accumulation of wealth.
To fail in that would be to court disaster, says Hung Huang, a magazine publisher and social-media personality.
“You cannot sustain a country with so many unhappy people,” she argues. “They will rebel. You will have the French Revolution.”
Zhuo Wei’s office is an apartment on the outskirts of Beijing. In the living room, two people peck away at computers. But a guitar sits on a couch, and the bedrooms have beds that are used – the place looks more like a dorm than the lair of China’s No. 1 paparazzo.
Mr. Zhuo has parlayed a love for It’s a Wonderful Life into making a living by taking surreptitious photos of China’s rich and famous. For more than a decade, he has stalked a rising celebrity class, documenting the foibles of those who are having affairs or breaking the law, and helping to burnish the image of those who are not.
He has hidden in parking garages, loitered in bushes, spent untold hours waiting in airport arrival areas, and driven at breakneck speeds down freeways. He is indefatigable, once knocking on 500 doors to find someone, and possesses home addresses and licence-plate numbers for hundreds of celebrities. He knows what schools their children attend, and what their mothers and assistants look like. His networks of paid sources span bars, hotels, shops and restaurants.
And yet, Mr. Zhuo sees in what he does the seeds of the kind of journalism that could challenge power – if only China would let it. In a country whose political news is heavily censored, he feels he is trading in a form of truth. “News can help us judge ugliness and expose the dark side of humanity, the fake and bad parts of human nature,” he says.
And in attaching himself to some of China’s best-known names, Mr. Zhuo has accomplished something else: He has made himself matter.
He has established himself as a member of a generation that has shaken off communism to follow individual pursuits, and reap the rewards. “It’s not important what you shoot or what you write,” he says. “It’s important to prove your existence.”
Mr. Zhuo, now 43, was born into a working-class family in Tianjin, just east of Beijing. His father made furniture; his mother was an accountant. As a child, he was destined to a soot-stained job at the local state-owned steel giant. If lucky, he might have become a bureaucrat.
What he knew was that he was unlikely to rise much beyond the humble station of a family still living in a house bought by his great-grandfather. “Before the 1990s, it was quite difficult to change your fate in life,” he says.
But his country was remaking itself. The same China that would produce a class of Ferrari-driving celebrities – domestic stars now pull in Hollywood-class incomes, with actress Fan Bingbing’s annual earnings estimated at $22.5-million – was shattering old strictures to allow a new kind of social and professional mobility.
After high school, Mr. Zhuo, as expected, got an office job at the steelworks. But he nurtured a dream of being a journalist, a profession he saw as populated by people who are “well-educated and intellectual.” He also developed a love of movies, joining amateur-critics groups where he practised his writing and discussed movies that came to inspire him. From the 1946 Jimmy Stewart Christmas classic, he came to believe that “after suffering failures and difficulties in life, human nature comes out victorious in the end,” a thought that gave him hope that he could improve his circumstances.
And he discovered exactly the kind of tenacious reporter he wanted to be by watching a Japanese movie about a private investigator’s tireless efforts to dig up government scandals. So when he got his first journalism job at a newly established newspaper, and it came time for him to find a particular actress in a Shanghai neighbourhood with 1,000 doors, he knocked until he found her – on some 500 doors in all.
It was a persistence that would serve him well when he began to make celebrities his main focus, amid a flourishing modern Chinese entertainment business. Last year, Chinese box-office receipts reached $3.6-billion, and the country is fast closing the gap with the United States (whose cinemas brought in three times that).
Mr. Zhuo helped to shape and feed an appetite for celebrity news. The Chinese paparazzi business remains small – there are just 20 or so doing it full-time on the mainland. Mr. Zhuo’s team is the biggest: seven photographers; three drivers alongside himself; and a partner, who also takes pictures as needed.
“We are different from foreign paparazzi,” Mr. Zhuo says.
“They only follow one person. We have to follow different people every day.” Photos of individual stars don’t yet tend to pay well enough to sustain a photographer, so his business takes a bulk approach.
Beijing through the eyes of a paparazzo unfolds in a series of tree-lined boulevards, foreign restaurants, and masses of luxury cars. It’s also glimpse of the distortions that plague the Chinese system. Mr. Zhuo can name off the stars whose cars sport military licence plates, which provide a kind of immunity to fines, speeding tickets – or even rules of the road, like the need to stop at red lights.
“Many stars, when they reach success and win their fame, they start defining themselves as in a special class,” he says. “What we do can at least play a role in supervising them a bit.”
But privilege is one of the hallmarks of a Chinese system built on graft and guanxi, or relationships – and there are limits to how that power can be challenged. Those military licence plates, for example: Mr. Zhuo won’t publish them. And although he has the tools and the skills to find and document corrupt behaviour among government officials, he doesn’t do it. In a country run by heavily monitored and censored media, much of it state-owned, there simply aren’t buyers for that kind of photograph.
His team has already broadened its coverage to sports stars, news anchors and business titans. “Maybe our targets could be even larger … great social figures,” he says. But in China it is “very, very difficult” to build the news industry into something credible. “Our work is far from deep enough and strong enough.”
He nonetheless holds out hope that one day he will do the kind of journalism he dreamed about as a teen. Given the right environment, he says, “we will definitely produce wonderful, outstanding journalists – like the ones who worked on the Watergate report.”
The first time Grace Huang struck it rich was in the Chinese equivalent of Grade 3 – and she did it by using a tactic she now considers a national curse.
It was the early 1980s, and the country’s sudden embrace of capitalism had filtered down to summer programs at elementary schools. “Teachers were really promoting getting some work experience – even for kids like us,” she recalls. Other students accompanied parents to their jobs. She and a friend decided to start a business selling the sweetest of third-grade commodities: ice cream.
The going rate at the shops for an ice-cream sandwich was 20 fen (hundredths of a renminbi). Ms. Huang figured she could beat that, and persuaded her father to go to the local ice-cream factory at 6 a.m. to buy in bulk, for five fen a sandwich. They hit the streets and started selling for 15 fen. “So we undercut everyone,” she says. “Because we were two little girls, we attracted a lot of business.”
At least, they did for two weeks, until the shopkeepers were irked enough to make them go away. Which Ms. Huang did, with money for candy – and the knowledge that she could compete.
Today, she is chief executive officer of iPinyou, which runs what she calls “Uber for advertising” – China’s largest matchmaking service for companies looking to advertise online and those with space on digital billboards. What she does serves as a barometer of the retail frenzy that has been the hallmark of China’s reform. This year, online sales are projected to top $500-billion, far surpassing those in the U.S.
The whole world wants in, and the more than 200 workers in
iPinyou’s crowded downtown Beijing office frequently meet with those of Google and Facebook. “Every day we have roughly 400 or 500 campaigns online at the same time,” she says, with ads that appear on 150,000 different websites. “Our clients are like Unilever, GM, McDonald’s,” as well as advertising agencies such as global giant WPP.
“We are seeing 300-per-cent growth every year. And I think that’s not going to be slowing down at all in the next probably three to four years.”
At 39, Ms. Huang is one of China’s rising Internet magnates thanks to the transition launched by Deng, but it was her father who actually experienced it. Among the country’s first computer-engineering graduates, he worked at a research institute whose computer lab was among the earliest air-conditioned spaces in Ms. Huang’s home town, Changsha, the capital of Hunan province.
In the early 1980s, he seized on xia hai (“jumping into the sea” of business) – the reforms that allowed employees of state-owned enterprises to submit business plans and then share in the profits if the projects succeeded. “That was a great period, when smart people could make something more than what they already had,” Ms. Huang says.
“I personally am a big admirer of Deng Xiaoping. His policies really changed a lot of peoples’ lives, including my dad’s.”
She shared his desire to build, starting the first student newspaper at Beijing University, the country’s most prestigious. After graduation, she was hired by Procter & Gamble – 4,500 people had applied for just eight openings – and assigned to market Pantene hair-care products, then the company’s biggest global brand. She says that, like her, more than half the successful business leaders she knows in China have Western experience.
She left P&G, studied entrepreneurship at UCLA, and then worked with McKinsey & Co., the global business consultant, “until there was a moment where I felt like I can do it on my own.”
She joined a friend’s company that sells baby products; and then, while in the U.S. in 2007 to give birth to her second child (one way that the well-to-do skirt China’s one-child policy), discovered that “you can do everything on the Internet. I realized there was a huge opportunity.”
Looking to adapt her marketing expertise, she formed a company, and began by fashioning algorithms to track online shoppers. She hired a chief technology officer who had worked at Google, patented the new technology, and managed to stay ahead of competitors – all while confronting one ugly downside of China’s breakneck rise: In a society that has made wealth its ultimate end, often any means will do. “I always feel frustrated,” she says, “because in China everybody wants to undercut other people.” They don’t just find a way to cut costs, as she did as a child, they do it “by going past the law or bypassing regulations.”
This, she says, “creates a lot of problems. There is a lack of basic order, or discipline in the market.” It doesn’t help that the courts are often too weak to enforce laws. “In China, if you create something, 10 other people will copy it,” Ms. Huang says. “There’s no protection.”
She adds that this is one reason Chinese brands struggle to compete in places with a stronger rule of law. The disorder “will hinder long-term growth in certain sectors, even the whole country. I would be worried if I were a government official.”
ENTREPRENEUR / ICONOCLAST
As a teenager, she secretly listened to ABBA. As an adult, she has become rich and famous by questioning how others make their money. She grew up among China’s political elite, but speaks English like an American – and thinks like one as well.
Going against the grain has never much troubled Hung Huang, who has become a prominent critic of a society that she says has strayed from what once made it great – by doing the opposite of what was expected of her.
Her grandfather was a lawyer and scholar who had helped Mao Zedong secure a library internship at Beijing University, which laid the groundwork for the ideological awakening of the man who would transform China. Later, her mother tutored Mao in English, became a diplomat and married a future foreign minister.
Ms. Hung herself was a Little Red Guard who wore her Communist colours proudly and seemed destined to join the elite.
And yet today at 53, she does not belong to the Communist Party. She openly despises China’s political process. She is no longer even a Chinese citizen, and now travels on a U.S. passport.
Instead, Ms. Hung is one of China’s leading scourges, bluntly calling on a new generation to abandon the pursuit of wealth in favour of a future with, to put it in spiritual terms, a soul.
“After this booming 30 years of economic growth, we have a horrid value system,” she says. “We have somehow succumbed to greed. We don’t value knowledge as our ancestors used to. We don’t value kindness as Christians do. We don’t value devotedness as Muslims do. We don’t value the experience of elderly people as Confucius does. And we don’t value nature as Daoists will. We value one thing: money.”
Her willingness to confront that greed has given Ms. Hung a voice that now echoes across China.
It began when her family’s influence came to a crashing halt. In late 1976, Ms. Hung’s mother and stepfather were called “running dogs” of the infamous Gang of Four, stripped of their posts and placed under house arrest.
Still, she was able to attend high school and university in the United States, and after graduation was hired by a German commodities trader before taking work as a consultant. In 1991, she returned home permanently to continue consulting. She was called on “to explain to other people what China is like, what they should do.”
But as the years passed, she grew bored watching other people take her ideas and occasionally run them into the ground. Then one day an unusual opportunity surfaced to invest in and manage a magazine called iLook. “It sounded like more fun than oil refineries,” she says. The fit was never completely perfect. It was a fashion magazine “and I don’t even like fashion.” The work, too, was less than glamorous, a long series of meetings where she begged advertisers to spend.
But her conversations with ad reps, most 10 or 15 years her junior, provided an unusual look at China’s rising youth class. She disagreed “with their values, that money is everything and that they were very ruthless,” but knew it would be bad for business to tell them. “I can’t say, ‘Give me your money, but I think you have life entirely wrong.’”
Seeking an outlet for her thoughts, she began to write – “the best thing that happened to me.” In 2005, she posted a series of columns online. Six months later, she had 100 million hits.
She had tapped into a generation outwardly in furious pursuit of wealth and prestige but that inside has “huge balls of moral dilemma.” She says this is most apparent with women, whose “self-image has changed 180 degrees, from being the virtuous woman in the Confucian sense – to totally being a rich slut.”
The interest her writing stoked offered a revelation: Maybe she should infuse this voice into her magazine, too. She decided to retool. Children of the wealthy were returning from prestigious Western art and design schools to fashion new ideas into new products. Ms. Hung wanted to make her magazine about them.
It was, at the outset, frightening. For her first issue, she found four homegrown designers. The second, there were two. The third, there was one. “I was running out.” Money was vanishing, too. “Advertisers said, ‘You are becoming too niche.’ I didn’t take a salary for two or three years.” But among the less-appreciated elements of China’s post-Deng transformation has been its shift from being the world’s factory to being a producer of innovative cultural goods. For example, Chinese-born Yiqing Yin is now creative director of Léonard, the Paris fashion house; China’s Liu Wen is a top supermodel; and first lady Peng Liyuan a fashion icon.
Ms. Hung’s magazine chronicled their rise, and she helped the cause by opening a store in Beijing that sells locally made goods. Her business now posts revenues of $5-million to $8-million a year.
None of this has muted her criticism, but it has led her to hope that a new generation is embracing a more thoughtful future. “Chinese-ness is in essence slower, more natural, more connected with nature, less scalable, and less about money … and I see that essence … really sinking in.”
Back in 1970, when Yang Hongchang contracted an infection that left him a hunchback, his rural hometown was blessed with a lake for fishing and cursed with wet lowlands that crawled with poisonous snakes.
Under Communist rule, the blessings and the curses were all mixed up. The villagers were banned from fishing for themselves, because their catch could be sold and “that kind of thing belongs to capitalism.” Yet the snakes would bring Mr. Yang wealth he could never have imagined – from a sprawling alternative-medicine factory and a burgeoning global business.
Today, the man crowned “China’s snake king” drives a Volkswagen SUV, barks into an iPhone (housed in a gold case embossed with dragons) and is joint owner of a snake farm in South Korea.
If China has problems today, he says, they lie not in following the wrong path, but in straying too far from the course Deng set.
Mr. Yang was born in 1952, three years after the revolution that brought to power the Communists, who not only banned private fishing but tied up people’s boats and ordered everyone to farm rice. His village of 600 was the poorest of the region. A full day’s hard labour would earn a worker three mao, or three-tenths of a renminbi, worth the equivalent of a nickel today.
When Mr. Yang turned 18, he was struck by an illness, which he now believes was a spinal infection, that broke his body. He was left curled over, with a painful simian gait. Beyond the pain was the economic devastation. “I couldn’t even earn this three mao per day,” he says.
In the desperation that his illness and poverty created, he was forced to forge a will to overcome that would, years later, propel him far beyond his humble roots.
It began with a job. Unable to farm, he learned the basic skills to be an accountant, and found work at a neighbouring village. He earned 23 renminbi a month (just over $4 today) of which 18 went to the local collective committee to compensate for the farm work he was unable to do, and to provide access to collectively supplied grain and clothing. But it was an initial step up.
He couldn’t afford proper medical treatment, so a doctor in Shanghai suggested he try the restorative powers of dried skin from a poisonous snake mixed with hard liquor. He hesitated, fearful it would kill him. But his pain was too great. It took years of consuming an almost undrinkable home brew, but eventually, he says, the pain eased. He began to walk better – and to think the snakes could help others as well.
His village was already allowed to harvest non-poisonous snakes for their gall bladders, a popular delicacy. Because the pay was so low, “people thought hunting snakes was what beggars did,” Mr. Yang says. “So they didn’t think it was capitalism.”
Meanwhile, he was hunting venomous serpents for his own use, and when he had a surplus, he began to sell them as well. Sales grew, and to meet demand he started raising snakes.
His timing was fortuitous. “At that time, Deng Xiaoping encouraged developing the economy,” recalls Mr. Yang. He was already famous for growing snakes. “So the local leaders came around and encouraged me to start a company,” he says, and promised to help. They knew that “if our company ran well, it would add to local government finances.”
The Deng mandate had come from afar, but to someone like Mr. Yang, it carried intense personal resonance. “There was a shadow left by the Cultural Revolution, when people were criticized and persecuted for doing business. That was still on people’s minds,” he explains. “Deng’s words and speeches made clear that the politics would not change. We would not be blamed for developing capitalism.”
Mr. Yang had no lack of motivation. “Because we were very, very poor, our appetite for money was also very, very strong.”
He built processing facilities, sought new markets, partnered with a local university, and invested in new technology.
Today he raises more than 50,000 snakes a year and exports about 75,000 kilos of gall bladders, skin, bones and meat. A 60-capsule bottle of baby snake meat, considered the most medically potent, sells for more than $550, while his highest-priced venom goes for $900 a gram.
With a snake museum and an export business that sends his products around the world, Mr. Yang has sales approaching $10-million a year. His daughter has studied at Cambridge.
He considers Deng a “saviour” to rural communities. “We are grateful to him from the bottom of our hearts.” Yet he senses a growing fatigue with the single-minded pursuit of money – which he sees as a perversion, rather than unavoidable consequence, of the Deng philosophy. Talent wins out “as long as people earn money by working diligently,” he says. “But people don’t like the corruption.”
However, he does like one development: a rising interest in “how to maintain a healthy life.
“Ours are health products, so I’m sure business is going to grow in future years.”
In 1989, he was a student protester in Tiananmen Square. Twenty-five years later, those days are far behind him. Wu Hai is unshaven, clad in a T-shirt, rumpled black slacks and running shoes, and sitting in a spartan boardroom with a dozen employees talking about how to build a hotel with windows unmarred by frames.
What he wants to know most of all: Will they look distinctive? His company, Orange Hotels, has 45 locations with rooms inspired by everything from the Big Apple to such films as Casablanca, Inception and Star Wars. “We want to do something different from everyone else,” Mr. Wu declares. “I don’t care what other people think. The old ways are boring.”
That’s not to say the new ways are always better, and he laments a homeland whose quest for material gain has come with an ugly underside of mutual disregard.
Still, he revels in reinvention. Stencilled on one wall of his boardroom are the words “Imperialism and reactionaries are paper tigers” – aquote from Mao Zedong that seems out of place for someone tossing out the old.
“It’s a joke,” Mr. Wu explains. When he started building hotels, he found a promising spot next to an old wall that he wanted to knock down. But a group of old generals living nearby was adamant that it be preserved.
So he decided not only to keep the wall but to give the hotel a Communist Revolution theme, complete with little red books in each room and quotes from Mao on the walls. So the Chairman was less an inspiration than a punchline – and a path to greater profit. Afterward, Mr. Wu used some stencils in the office “to tell the story of how creative I am.”
It’s a bold remark for someone who, at 45, was born in a country that not only valued conformity but was poor. “We had congee [porridge] in the morning. We had congee for dinner.” In school, “there was no need to be creative – just memorize stuff, fill in the blanks.” But his university had computers, and he found them irresistible. He poured his energy into drafting code and even writing viruses. It was an escape from the strictures of the education system – needed in part, he says, because his teachers were clueless. “So I learned all the new stuff by myself,” he says. “I realized I am very creative when I was in university.”
He parlayed his programming skills into a job with a company building a computerized airline-reservation system. But it struggled to compete with a state-owned agency, so he struck out on his own and turned to hotels, where no one was booking electronically. He started a service and sent teams into Beijing and Shanghai office buildings with free memberships. About 20 per cent of those given a card used it.
He tapped into people’s growing desire to be their own travel agents, and soon his company was booking 30,000 rooms a month. He eventually sold it to Ctrip, now an online travel goliath, but the experience introduced him to the changing tastes of a rising middle class.
Confident that hotels could do more to appeal to such tastes, he entered the accommodation business, drawing inspiration from design-driven Apple (but choosing a different fruit). Orange hotels strived to be distinct from the outset. Mr. Wu experimented, choosing audacious themes. He developed an alarm clock that can wake up a husband with his wife’s recorded voice – and marketed it with a video showing a man awaking to be slapped by the woman actually in his bed.
Infidelity isn’t standard marketing for hotels, but viral videos create massive exposure. “If nobody knows you, you are a failure,” Mr. Wu says.
It has worked. Although his prices are modest – the equivalent of $110 a night in Beijing – some of his hotels now post a gross operating profit of 60 per cent. By the end of 2015, he expects to have 110 locations, rising to 180 by the following year.
The rapid expansion has forced him to confront rot in the bureaucracy – he views the payments he makes to speed approvals as a “tax.” But he largely admires what China has accomplished – and says he is now glad the Tiananmen protesters were vanquished. China’s system “is very highly efficient. No other government can compare.”
Still, he says, not all is well. Growing wealth fills hotels – business travel spending in China hit $225-billion (U.S.) last year, and may exceed that in the United States as soon as next year. But he grows anxious discussing a society willing to have tens of millions of children left behind in the countryside while parents move to cities to make money. Selfishness, he says, has become pervasive. “We only care about our own interests.”
He’s not opposed to looking out for number one: “Greed is good,” he says – just not the kind that involves inflicting harm on others, a problem that he sees plaguing business deals and personal transactions today.
He feels a certain pang when he looks to Western societies. “I am not jealous of their governments. I am jealous of their people …They are willing to help others. It’s a fair society, where people abide by the law.”
If you wanted to find the low point in He Yongzhi’s life, you might settle on the kitchen in her mother’s house, a two-square-metre space that she once shared with her husband and infant daughter.
To some she seemed the victim of her own stupidity – she had sold her own home to start a business in a place where capitalism had been illegal for decades.
But for Ms. He, that tiny corner of China was her springboard to success. Today, at 61, she is a restaurant magnate, a pioneer of domestic franchising and a property developer.
She has helped to create, and benefited from, a much more prosperous China that she sees little reason to criticize. She so admires the man who made this prosperity possible that, on 100th anniversary of Deng Xiaoping’s birth in August, she bought 100 works of art commemorating the occasion and donated them to his estate. Today, her companies have annual revenues of $180-million, and her fame is such that her autobiography is in its third printing.
She built all this on a pauper’s knack for making her own clothes, an indifference to risk and a thirst for profits that grew only after she had collected her first earnings – roughly $9.
Ms. He grew up poor in Chongqing, a city destined to grow into a sprawling mini-state of nearly 30 million in the heart of Sichuan, a province famous for its hot and spicy food. She remembers waking in the middle of the night to find her mother sewing clothes and making shoes because the family had no money to buy them.
That proved to be an inspiration. As an adolescent she loitered near tailor shops, using her hands to measure cuts when the proprietors weren’t looking, then racing home to replicate what she’d seen. Soon she was clothing 10 families, but as a labour of love. “I never even thought of doing business then. There was no private business at the time.”
But she had a thirst for opportunity, and a knack for bending the future to her will. After a flood raised the value of their apartment fivefold, she and her husband, Liao Changguang, sold it and ploughed the profits into a 170-square-foot shop they would make into Little Swan, their first restaurant.
“That was a critical decision that would change my fate,” she now says.
It was 1982, and Mr. Deng had set the country on a course toward private enterprise. She and her husband wanted to participate, even if they had to bunk with relatives, at times sleeping in her mother’s tiny kitchen.
For four straight months they lost money. But it was a fortuitous time to be serving hotpot, a fondue-like regional specialty that has diners sit around a pot of hot oil (and even hotter spices) used to cook chopped vegetables and strips of meat. Business had begun to bring outsiders to the city, and guests had to be treated to local fare. One memorable Sunday, Ms. He made as much as she did in three months at her day job in a state-owned shoe factory. The day’s profit alone created a stack of bills six inches high.
“We were so excited that we couldn’t sleep the whole night,” she recalls.
She soon quit her regular job, leaving behind the lifelong security of an “iron rice bowl” career that had put her in charge of 1,000 employees. “My quitting caused a big scene in the factory,” she says. Her brother-in-law was so embarrassed, he changed his route home so he’d no longer pass the restaurant.
She didn’t much care. She had the money to prove she was right.
She created a new hotpot bowl that allowed customers to cook with two different broths, making Little Swan famous in the process.
Soon customers were begging for a second location, even if such an expansion was still unheard of – KFC, the first Western chain to operate in China, didn’t arrive until 1987. But there was demand, and Ms. He was happy to meet it, opening one satellite and then another. In 1991, she made her first foray to a neighbouring city, and three years later started franchising Little Swan, which allowed her to expand even more rapidly.
After taking six years to reach 100,000 renminbi in sales, just one more was needed to reach a million, as a rising middle class began to spend on simple luxuries such as restaurant meals.
At first, she had no idea she was riding a current of change that was remaking the country. Her decision to go into business “was made when I looked at this big pile of money.”
But government policy was beginning to support getihu – people who were self-employed – even if the old guard remained deeply skeptical. When the money began to flow, Ms. He and her husband bought a motorcycle, and then an imported Mazda van. To some, it might as well have been a private jet. She was hauled in and ordered to pay 200,000 RMB in taxes (nearly $40,000), a punitive sum. The local party leader wanted to “cut off the tail of capitalism.”
“Leftist thinking was still around at that time,” she says. But “that leader was later dismissed.”
Ms. He built her chain into an empire that, as well as 318 restaurants, now includes six hotels and a factory that produces seasoning. She has been the lead developer of several now-famous tourist attractions, such as Hongyadong Cultural Centre, an 11-storey hillside shopping and dining complex inspired by Chongqing’s past.
She, her husband and daughter, an American citizen who has returned to China, jointly own property worth nearly $300-million. So it’s perhaps not surprising that her admiration for Deng Xiaoping has grown into adoration.
“Without him, there would be no me today,” she says. “I can think of nothing wrong that he did. He was such a wise person.”
Yet even she acknowledges that the Deng-led euphoria of wealth creation has left her country with problems.
“When my daughter came back from the U.S., she told me, ‘Mom, I still don’t like China. If you want to do anything, you have to use corruption.’”
Already, Ms. He warns, the generation that Deng made rich is abandoning the country he helped to build. She says 80 per cent of the people have already left the Chongqing compound where she has her home for places such as Canada.
“It used to be a great place where I could play cards or have fun with my neighbours,” she says. “But now they’re all gone.”