'A Helpless Choice'

European Journal European Journal of of East Asian Studies 13 (2014) 262–283 East Asian Studies brill.com/ejea

‘A Helpless Choice’ Liu Hongsheng’s Zhanghua Company in the Throes of Socialist Transformation

Zhao Jin East China Normal University [email protected]

Abstract

By October 1953, when the Central Committee of the ccp formally decided to embark on the transition to socialism, the Chinese government already had overall control of the national economy. The newly announced ‘General line of transition to socialism’ heralded the incorporation of private industry into the national production plan, but it triggered all kinds of struggles in the course of public–private joint management. This paper takes a micro-level approach based on the study of one private company, Liu Hongsheng’s Zhanghua Woollen Textile Company, from the perspective of the private enterprise itself. Despite its lofty ideals of eliminating private ownership, the Communist Party of China had to accommodate its policy to the reality that the recovery of the national economy required the input of the private economic sector. The paper argues that the capitalists supported the ccp’s policy on the surface, but did their best to seek the development of their own enterprises. The ccp made concessions, but the basic thrust of its strategy remained geared towards the demise of private entrepreneurs. Even an influential ‘national capitalist’ like Liu had to hand over his enterprises.

Keywords

Shanghai – public–private management – Liu Hongsheng – industry – socialist transformation

In 1949, when the People’s Republic of China was founded, Mao Zedong upheld the role private entrepreneurs could play in the country: ‘private capitalism ranks second in modern industry, it is a great force that cannot be underesti-

© koninklijke brill nv, leiden, 2014 | doi: 10.1163/15700615-01302007 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 263 mated’.1 After decades of upheaval and war, Chinese industrialists could look forward to a new spring. Five or six years later, however, private companies were pressed into public–private joint management, a process that eventually led to their elimination as economic actors. The capitalist enterprises that should have played an important role in the modernisation of the country vanished from the historical stage. Research on the process of public–private joint management in the private sector has recently become the focus of a wide range of studies and approaches. A large number of scholars see the policy of public–private joint management after 1953 as a consequence of ideological choices, the impact of the Soviet model and the role of the various mass movements, especially the Three Antis and Five Antis movements after which the Chinese entrepreneurs completely lost faith in the future of private enterprise.2 Others look to the inner workings of the Chinese Communist Party, which impelled the regime towards a Soviet- style system of public ownership through a two-pronged strategy of bringing the capitalists into disrepute while controlling their companies through bank loans and maintaining a stranglehold over raw materials and market outlets. This strategy ultimately forced the business class to accept a sort of voluntary ‘euthanasia’3 in realising that the only way ahead was to ‘consciously and vol- untarily accept socialist transformation’.4 Some scholars point to the impact of agricultural cooperativisation, which had been completed ahead of schedule. Mao Zedong’s speech to business representatives in 1953 and the role of Bei- jing mayor Peng Zhen are also seen as contributory factors.5 The choices and

1 Mao Zedong, ‘Zai zhongguo gongchandang di qi jie zhongyang weiyuan di er ci quanti huiyi shang de baogao’ (Report to the second plenary session of the seventh central committee of the Communist Party of China), 5 March 1949, Zhonghua Renmin Gongheguo Jingji Dang’an Ziliao Xuanbian: 1949–1952, Gongshang tizhi (Economic Profiles of the People’s Republic of China: 1949–1952, Industrial and Commercial Volume) (Beijing: Zhongguo Shehui Kexueyuan Chubanshe, 1993), pp. 3–4. 2 Kuisong Yang, ‘Mao Zedong weishenme fangqi xin minzhuzhuyi—guanyu Eguo moshi de ying- xiang wenti’ (Why did Mao Zedong give up New Democracy? Concerning the issue of the influence of the Soviet model), Jindaishi Yanjiu, Vol. 4 (1997), pp. 136–151. 3 Yongfa Chen, Zhongguo Gongchan Geming Qishi Nian (Seventy Years of Chinese Communist Revolution) (Taipei: Lianjing Chuban Shiye Gongsi, 2001), pp. 605, 641. 4 Yong Gui, Siyou Chanquan de Shehui Jichu: Chengshi Qiye Chanquan de Zhengzhi Chonggou, 1949–1956 (The social basis of private property rights: the political restructuring of property rights of enterprises’ property in cities) (Shanghai: Lixin Kuaiji Chubanshe, 2006). 5 Roderick MacFarquhar and John King Fairbank, The People’s Republic, Part 1: The Emergence of Revolutionary China, 1949–1965 (Cambridge: Cambridge University Press, 1987), pp. 120–121.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 264 zhao aspirations of the capitalists may have been related to different political and economic goals, but ultimately they all accepted the demands of the government and took the road of joint ownership.6 While most studies have adopted a macro-level approach, this paper intends to provide a micro-study based on one specific private company from the perspective of private enterprise itself. There are several case studies on private factories and stores, but they focus on the concrete implementation of the government’s public–private policy in factories and its effectiveness.7 Little light has been shed on the production process in private enterprises, the senti- ments and reactions of the owners and the complexity of the struggle between the public and private sectors during the negotiations. I chose the Zhanghua Woollen Textile Company because it was a leading company, not just in Shang- hai but also in the whole country. It was established by Liu Hongsheng, a major industrialist, on whom Sherman Cochran and Kai Yiu Chan have produced extensive research. Kai Yiu Chan focused on the internal structure and the development model of Liu’s enterprises in the republican period.8 Although Sherman Cochran touched on the Lius after 1949, he did not examine the Lius’ complicated feelings and their interaction with the communists’ policy and other capitalist entrepreneurs.9

6 Xiaocai Feng, ‘Zhengzhi shengcun yu jingji shengcun: Shanghai shangren ruhe zoushang gongsi heying zhi lu?’ (Political survival and economic survival: how Shanghai businessmen took the road to joint private–public ownership), Zhongguo Dangdaishi Yanjiu, Vol. 2 (2011), pp. 91–138. 7 Ling-ling Lien, ‘Shanghai baihuo gongsi de shehuizhuyi gaizao’ (The socialist transformation of department stores in Shanghai), in Xie Guoxing (ed.), Gaige yu Gaizao: Lengzhan ChuqiLiang’anLiangshi,Tudi,GongshangyeBiange (Reform and Transformation: The Change of Industry and Trade, Land, and Food on the Two Sides of the Straits during the Cold War) (Taipei: Zhongyang Yanjiuyuan Jindaishi Yanjiusuo, 2010), pp. 333–372; Shi Changrui, ‘Yudahua fangzhi ziben jituan shehuizhuyi gaizao yanjiu’ (A study of the socialist transformation of the Yudahua capitalist textile group), ma thesis, Huazhong shifandaxue, 2008; Su Jing, ‘Sulun shachang de shehuizhuyi gaizao yanjiu’ (A study of the socialist transformation of the Sulun filature), ma thesis, Suzhou daxue, 2010; Wang Zuomao, ‘Guojia quanli yu gongsi heying. Yi Yudahua fangzhi ziben jituan wei zhongxin yanjiu’ (State management and public–private management. A study based on the Yudahua capitalist textile group), ma thesis, Wuhan ligong daxue zhengzhi xingzheng xueyuan, 2006. 8 Kai Yiu Chan, Business Expansion and Structural Change in Pre-War China. Liu Hongsheng and His Enterprises, 1920–1937 (Hong Kong: Hong Kong University Press, 2006). 9 Sherman, Xie Zhengguang Cochran, The Lius of Shanghai (Cambridge, ma: Harvard Univer- sity Press, 2013).

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 265

Incorporating private industry and commerce into the state-owned economy and eradicating private ownership were the ultimate choice of the communist leadership. Private industry and commerce were bound to be elimi- nated. However, the ccp’s policy followed a complicated process. When the new regime took power in 1949, it did not take measures to reform the ownership system immediately. On the contrary, it allowed and even supported its existence and development. In 1952, when the Five Antis Campaign hit the capitalists for the first time, the Communist Party seems to have altered its strategy. Yet, although the campaign served ulterior motives, the ccp realised that despite its lofty ideal of eliminating private ownership, it had to admit that the recovery of the national economy required the contribution of the private sector. The shifting policy precisely reflected the contradictions of the ccp between political objectives and economic reality. The struggle between the ccp’s mission of transforming the private economy and the attempts of enterprises to survive infused the course of establishing public–private joint management. This paper will attempt to tackle the following issues: what was the precise nature of the conditions of production and operation of the company before public–private management came into force? In what ways did business owners picture the future of their enterprises? What were the earliest stages of public–private partnership from the perspective of private business? In partic- ular, did Liu, as a major national capitalist and a member of the National United Front, and his Zhanghua Woollen Textile Company receive any special consid- eration or treatment from the authorities? The answers to these questions will provide a better understanding of the process of public–private partnership policy.

Liu Hongsheng and the New Regime

Liu Hongsheng (1888–1956) was born in Shanghai, but his family hailed from Ningbo. Liu was a famous industrialist, with many nicknames that reflected his success in a wide range of industrial activities: ‘coal king’, ‘match king’, ‘wool king’, and so on. The Zhanghua Woollen Textile Company was established in 1929. It was the first Chinese-run woollen textile factory in Shanghai. During the period of Sino-Japanese war and occupation, the woollen textile industry experienced sustained development. Zhanghua occupied the first rank in terms of premises, number of machines and size of labour force. The company’s core brand ‘sheep’ was popular for its quality and colour. It was marketed all over China. On the eve of Shanghai’s takeover, Zhanghua and ‘sheep’ were synony- mous in China for the woollen textile industry.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 266 zhao

On 22 May 1949, before the People’s Liberation Army occupied Shanghai, Liu Hongsheng fled to Guangzhou and then to Hong Kong. He also asked two of his sons to open factories in Taiwan, making preparations for the future. During his six-month stay in Hong Kong, Liu Hongsheng observed and carefully pondered his options, but eventually he was persuaded by the new regime’s policy and he returned to China to pursue his industrial dream. Given Liu’s reputation and influence, his return attracted the attention of upper-level leaders. Premier Zhou Enlai received him in Beijing and asked his opinion on China’s industrial development in the future, promising to provide help to support the growth of his enterprises. The ccp also placed Liu under its category of ‘national capitalist’.

The ccp and the Transition to Socialism

By October 1953, when the Central Committee of the ccp formally decided to embark on the transition to socialism, the Chinese government already had overall control of the national economy. Like most business owners, Liu Hong- sheng had not recovered from the Five Antis Movement and his core enterprise, the Zhanghua Woollen Textile Company, had yet to cope with the policies and institutional transformations these political campaigns had set in motion. The ‘General line of the transition to socialism’ advanced by Mao heralded the incorporation of the private woollen industry into the national production plan, forcing Liu to make new choices that would finally seal his company’s fate.10 Thus the case of Liu and the Zhanghua Woollen Textile Company exemplifies the predicament in which the owners of major companies—the so-called ‘national bourgeoisie’—found themselves at this critical juncture in the history of the prc. On 23 October 1953, 640 delegates representing every sector of the Chi- nese economy attended the meeting of the All-China Federation of Industry and Commerce in Beijing. Private industry and commerce accounted for the majority of the participants.11 Liu Hongsheng was elected deputy leader of the Shanghai delegation and appointed to the Congress executive and standing

10 Gerry Groot, Managing Transitions: The Chinese Communist Party, United Front Work, Corporatism and Hegemony (London: Routledge, 2004), p. 68. 11 ‘Zhonghua quanguo gongshangye lianhehui daibiao dahui zai jing kaimu’ (The assembly of representatives of the National Federation of Industry and Commerce opens in Beijing), Renmin Ribao (24 October 1953).

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 267 committees.12 The meeting aimed at publicising the resolution of the Central Committee of the ccp on the ‘General line of the transition’.13 Li Weihan, the United Front Minister, stated that:

the period of transition extends from the founding of the prc to the completion of socialist transformation. The purpose of the general line is to gradually achieve the goal of socialist transformation in agriculture, industry and private industry and commerce … acting according to the wishes of the capitalists themselves and the needs of the country. The People’s Government, acting step by step in a planned way, will transform capitalist industry into state capitalism and transform capitalist business on the basis of feasibility, because both [the public and private sectors] are essential and beneficial to the national economy and people’s livelihood.14

Advancing the ‘General line of the transition’ amounted to a fundamental reversal of the ccp’s earlier policy that the New Democratic period was sup- posed to continue for a long time before the advent of socialism. However, Mao was now proclaiming that capitalism would disappear within 10 or 15 years. Pri- vate industry and commerce, he said, would take the road of state capitalism. This was the tendency of the age and it would win the support of the people.15 On 12 October, the United Front Work Department of the Shanghai municipal committee held a meeting on the ‘General line of the transition’.16 The reactions in the Shanghai industrial and commercial community were mixed: (a) owners of businesses that were doing well were unwilling to hand over their companies; (b) those in difficulty were understandably ready to accept joint management; (c) companies whose performance was neither good nor bad

12 Liu Nianzhi, Shiyejia Liu Hongsheng Zhuanlüe: Huiyi Wo de Fuqin (A Short Biography of Liu Hongsheng: Remembering My Father) (Beijing: Wenshi Ziliao Chubanshe, 1982), p. 123. 13 ‘Zhonghua quanguo gongshangye lianhehui daibiao dahui zai jing kaimu’. 14 ‘Zai Zhonghua quanguo gongshangye lianhehui huiyuan daibiao dahui shang Li Weihan baogao guojia zong luxian he guojia zibenzhuyi wenti’ (Report of Li Weihan on the problem of state capitalism and the general state line at the assembly of representatives of the National Federation of Industry and Commerce), Renmin Ribao (28 October 1953). 15 ‘Jinyibubasiyinggongshangyenaruguojiazibenzhuyideguidao’ (The road to further incor- porate private industry and commerce into state capitalism), Renmin Ribao (11 November 1953). 16 ‘Huadong gedi zibenjia dui shixing guojia zibenzhuyi de fanying’ (The reaction of capitalists in East China to implementing state capitalism), Neibu Cankao (28 October 1953).

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 268 zhao still preferred to preserve the status quo. In general, the owners of Shanghai’s small and medium-sized businesses embraced the idea of state capitalism after a spell of ‘persuasion and education [that made them] willing to embark on the road of public–private partnership’.17 Liu’s perspective may have reflected that of most large capitalists. His son, Liu Nianzhi, recalled that Liu Hongsheng had displayed strong political con- sciousness, telling his family:

We must stay close to the Communist Party and take the socialist road with greater firmness. I have made up my mind to apply for public–private partnership. I want to take concrete action to support the Communist Party of China.

He even declared that he fully believed in the ability of ‘national capitalism to make business develop faster and better’.18 Liu Hongsheng clearly felt the irresistible wind of change blowing out of Beijing. The government itself showered high praise on Liu’s attitude:

Liu’s character is typical of the private capitalists. He has extensive con- tacts with the upper classes of society and is well educated. He observes current trends and knows that the road to socialism is inevitable, and for this reason the General Line receives greater support from Liu than from other capitalists.19

Nonetheless, the Zhanghua Woollen Textile Company had been established in the 1920s and embodied decades of hard work. At this critical stage in his company’s fortunes, Liu’s true state of mind and true feelings about the future of his company, indeed the attitude of his entire family, can only be a matter of conjecture.

17 ‘Huadong gedi zibenjia dui shixing guojia zibenzhuyi de fanying’. 18 Liu Nianzhi, Shiyejia Liu Hongsheng, p. 123. 19 ‘Zhanghua maoma fangzhichang gongsi heying guocheng zhong tongzhan gongzuo zongjie’ (Synthesis of United Front work in the process of public–private management at the Zhanghua Woollen Textile Company), 19 July 1954, a38-2-253, Shanghai Municipal Archives (sma).

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Bidding Farewell to the Free Market

The ‘hurricane’ of the Five Antis Movement in 1952 threw Liu into despair about production. He lost confidence in market outlets and placed little hope in the supply orders from the state.20 In the second half of 1953, the central government decided to expand the scope of its ‘unified purchase and sale’ policy to private companies in order to establish greater control over the supply of goods.21 The Shanghai municipal committee also decided that ‘large-scale enterprises which are necessary for the national economy and people’s livelihood should be controlled through public–private partnership, procedures for dealing with wool-processing orders, loans and other means’.22 Soon after, the Shanghai municipal government published detailed reg- ulations on the processing of orders.23 In the second quarterly conference of the corporation of Chinese department stores, the need for wool for the following quarter nationwide was assessed at 1.8 million pounds, of which woollen textiles represented 800,000 metres. As Shanghai state-owned commercial companies had only 720,000 pounds of wool available and 200,000 metres of woollen textiles, demand far exceeded what state-run companies could supply. It became inevitable that the government should order from the large private companies. The Zhanghua Company enjoyed a high reputation for the quality of its products and became the first choice for the government. Thus, after May 1953, the share of Zhanghua’s orders from the government increased significantly (see Table 1). In October 1953, state-owned companies purchased the entire production of the Zhanghua textile company.24 In addition, Zhanghua received occasional

20 ‘Zhanghua maoma fangzhichang laodong jingsai gongzuo jihua’ (Planning work on labour competition at the Zhanghua Woollen Textile Factory), 27 July 1952, a71-2-1789, sma. 21 Chi Jing, Zibenzhuyi Gongshangye de Shehuizhuyi Gaizao (The Socialist Transformation of Capitalist Industry and Commerce) (Shanghai: Shanghai Renmin Chubanshe, 1976), p. 51. 22 ‘Zhonggong Shanghaishiwei guanyu Shanghai jingji jiben qingkuang he zibenzhuyi gongshangye zhong ruogan wenti de diaocha baogao’ (Survey report of the Shanghai ccp Com- mittee on various problems in the basic economic situation of Shanghai and capitalist industry and commerce), 4 June 1953, Zhongguo Zibenzhuyi Gongshangye de Shehuizhuyi Gaizao, Shanghai (The Socialist Transformation of Industry and Commerce in China, Shanghai) (Beijing: Zhonggong Dangshi Chubanshe, 1993), Vol. 1, p. 188. 23 Zhaosong Zhu, Shanghai Jihuazhi (Monograph on Planning in Shanghai) (Shanghai: Shanghai Shehui Kexue Chubanshe, 2001), pp. 73–74. 24 ‘Zhanghua mao fangzhi gongsi yu Zhongguo baihuo gongsi Shanghai caigouzhan qianding baoxiao heyue’ (Agreement on exclusive selling rights between the Zhanghua Woollen

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 270 zhao table 1 Government Orders to Zhanghua in May–August 1953 (in renminbi)

Month Zhanghua output State purchase orders Share of state orders

May 7,507,157,248 6,176,123,429 81% June 7,471,653,846 5,876,335,697 77% July 5,501,922,147 4,645,458,239 84% August 7,494,165,605 6,903,758,308 92%

Source: ‘Shanghaishi renmin zhengfu fangzhi gongye guanliju yu huadong maoma fangzhichang gufen youxian gongsi gongsi heying de xieyishu ji youguan wenjian’ (Agreements on joint public–private management and relevant documents of the Administration of Textile Industry Management Office of the Shanghai People’s Government and the East China Woollen Textile Stockhold- ing Company), April 1954–May 1955, b133-1-45, sma. wool-processing orders from the central government. As the government achieved the implementation of the policy of wool-processing orders and state monopoly on the purchase and sale of the production of private enterprises, Zhanghua’s business became simplified and streamlined.25 By May 1954, Zhongbai, a state-owned department store, was purchasing the entire output of the woollen textile industry. This also meant that the Uniform Cloth Associa- tion no longer had any purpose.26 Nor, for that matter, did it have any supplies of wool. It was difficult to run the association any longer and its members applied for its dissolution.27 The woollen textile industry thus had to bid farewell to the free market and become a government production department. After the second half of 1953, without orders from the state-owned companies, Zhanghua could obtain little raw wool and the company had no right to question the quality, the source and the price of the wool. The output figures and quality of the products were all decided by the state-owned companies or

Textile Company and the Shanghai purchasing station of Shanghai department stores), 1 October 1953, s31-4-118, sma. 25 ‘Zhanghua maofang gongsi zhengmingshu’ (Certificate of the Zhanghua Woollen Textile Company), 19 December 1954, q199-33-338, sma. 26 The members of the Uniform Cloth Association were private enterprises in the woollen textile industry that took state orders to produce cloth for uniforms. 27 ‘Shanghaimaofangzhiyeyizhixiaozhifunilianyingchujieguxieyi’ (Agreement on the dissolution of the Union Office for the production and sale of uniforms of the Shanghai woollen textile industry), 14 May 1954, b128-2-1196, sma.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 271 by central government departments. Liu Nianzhi, Zhanghua’s general manager, was not used to this kind of planned economy and complained: ‘The government is not giving us access to raw material. Now I have no way to produce anything at all.’28 What he had not realised was that this was exactly what the government had in mind. Not only did Liu have no say in production policy, but the company earned little profit from state orders. Even the government admitted that the purchase price was ‘not reasonable … the profits of the woollen textile sector are not high’.29 The government was aware of the business conditions under which Zhanghua was operating as well as the latter’s willingness to hand over the enterprise. ‘Generally, because of low profits and difficulty in procuring materials, the capitalists (like the Zhanghua Company) are willing to participate in public–private joint management.’30

Walking a Cliff Edge: Liu Hongsheng and ‘Socialist Transformation’

By the second half of 1953, Liu was already prepared to hand over his enterprise to the state. In so doing, he would be demonstrating a positive and progressive attitude and earning a good reputation for himself.31 Even so, as Liu Nianzhi said, he was ‘really somewhat reluctant about the matter’.32 This ambivalence complicated matters. A report by the ccp branch at Zhanghua noted that Liu and his sons had been very nervous before the joint partnership came into being. Board meetings would be held at home instead of at the company. Liu’s attitude appeared to be unwavering when he wrote out

28 ‘Zhonggong zhanghua maofangzhichang zongzhi weiyuanhui guanyu Shanghai Zhanghua maofangzhi qingkuang diaocha jianyao baogao’ (Summary survey report of the ccp committee of the Zhanghua Woollen Textile Factory on the situation of the factory), 25 Febru- ary 1954, b133-1-45, sma. 29 Shanghai Minzu Maofangzhi Gongye (Shanghai National Woollen Textile Industry) (Bei- jing: Zhonghua Shuju, 1963), pp. 182–183. 30 ‘Dui Shanghaishi siying mao fangzhiye shehuizhuyi gaizao de chubu yijian’ (Preliminary proposals on the socialist transformation of the private woollen textile industry in Shang- hai), December 1953, b133-1-8, sma. 31 ‘Zhonggong zhanghua maofangzhichang zongzhi weiyuanhui guanyu Shanghai Zhanghua maofangzhichang qingkuang diaocha jianyao baogao’. 32 ‘Shanghaishi fangguanju guanyu 1954 yi, er pi gongsi heyingchang de qingkuang baogao, zongjie’ (Synthesis, report of the Bureau of Textiles of Shanghai Municipality on the situation of the 1954 first and second batch of public–private factories), 7 April 1954, a38-2-222, sma.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 272 zhao the application for joint management, but it turned to reluctance when it came to actually submitting the application form. In the end, Liu Nianzhi caved in under the pressure and sense of urgency communicated by the Party committee and trade unions in Zhanghua, and submitted the application. However, Liu continued to harbour hopes that the application might not be approved because of the poor state of the business, expecting the government to choose better-performing companies. Such an outcome would serve him in two ways: even if the application was not approved, he would have won the government’s trust, having displayed a progressive political attitude. At the same time he would have saved his company from premature takeover.33 In the event, the application was approved immediately after submission. The reason lay in the ccp’s need to create a model for public–private joint partnership. At the end of 1953, the Shanghai municipal committee decided that the authorities

should continue to make preparations for allowing the more typical enterprises to participate in the public–private joint management, and to set an example in order to gain experience so that the policy could get into full swing by the second half of the year.

In the textile industry, the implementation ‘should start with factories having hundreds of employees and famous brands. Companies like Zhanghua (Liu Hongsheng), Yinfeng (Ye Fukang), Xiexin (Tang Junyi) will be selected as typical targets.’ Despite its current woes, from the ccp’s perspective Zhanghua was ‘outstanding in every respect, with its long history, advanced equipment and technology, and innate robustness’. But it was not ‘playing to its full poten- tial’.34 All in all, Zhanghua was representative of the woollen industry. It was inevitable that Zhanghua should become an example of a public–private joint company in the woollen textile industry. Having devoted his entire life to the Zhanghua Company, Liu and his colleagues tried their utmost, before the partnership came into effect, to make sure that they would continue to have influence in the company. What Liu wanted most was to keep his predominant position and to retain the strongest possi-

33 ‘Zhonggong zhanghua maofangzhichang zongzhi weiyuanhui guanyu Shanghai Zhanghua maofangzhichang qingkuang diaocha jianyao baogao.’ 34 ‘Zhonggong Shanghai shiwei guanyu Shanghaishi siying gongye jinxing shehuizhuyi gongzuo de chubu yijian’ (Preliminary proposals of the Shanghai ccp committee on implementing socialism work in Shanghai private companies), 31 December 1953, Zhongguo zibenzhuyi gongshangye de shehuizhuyi gaizao, Shanghai, Vol. 1, p. 264.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 273 ble influence under the new scheme of things. Even in relinquishing the reins of power, Liu Hongsheng continued to care a great deal for his company.35 Liu Nianzhi, the manager, was very anxious too. Fully aware that public–private joint partnership meant a realignment of power and that the government would appoint a replacement for himself at the top of the company, he began to worry about future candidates for the post of factory director, in whose hands the real power would lie. When representatives from the private and public sectors met at the factory for the first time, Liu Nianzhi emphasised the importance of resolving the personnel problem, especially at the higher managerial levels. Agreement on the number of managers and directors in the companies needed to be reached as quickly as possibly.36 In addition to questions of power and status, there were economic con- cerns. First of all, there was the question of investment from the government. Zhanghua was still in a difficult situation. According to statistics, the company then needed a total working capital of 27 billion rmb, but it had only about 20 billion available. Liu Nianzhi hoped that the government would invest 15 billion, or at least 5 to 10 billion to relieve the company’s immediate cash flow difficulties.37 Liu and his family also wanted to withdraw advances of capital made to the company by themselves and their colleagues during particularly difficult periods in Zhanghua’s history. The sums advanced amounted to nearly 1.2 billion yuan and were a source of anxiety for Liu. Upon submitting the application for joint management, Liu Nianzhi immediately converted the sums advanced by shareholders into short-term loans in the name of the Chinese Dock Company, in the belief that the amounts corresponding to these short- term loans could then be easily recovered from the government.38 The third concern was over how the authorities would deal with the shares that belonged to two of Liu’s colleagues, Cheng Nianpeng and Hua Erkong, who had fled to Hong Kong on the eve of the communist victory. Cheng’s shares, amounting to nearly 10.8 billion yuan or 15 per cent of the total capital, were a gift from Liu, to acknowledge and reward his high technological expertise and management skills and to encourage him to redouble his efforts for the company. Hua for his part had long served as deputy manager and was the nephew of Liu Hongsheng’s secretary. His shares in the company amounted to 7.2 billion yuan or 10 per cent of the total capital. They were also a gift

35 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’ (United Front work synthesis of the ccp committee of Zhanghua), 6 September 1954, a38-2-253, sma. 36 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie.’ 37 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie.’ 38 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie.’

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 274 zhao from Liu. Another worry for Liu was the question of whether three of his sons, who lived in Taiwan, could continue to hold shares in Zhanghua. Acting on his instructions, Liu’s eldest, fifth and seventh sons had all invested money in Taiwan before the takeover of Shanghai and never returned to the mainland.39 Their share of the capital in Zhanghua accounted for 25 per cent. As the government representatives noted, Liu and his colleagues were extremely worried about the imminent transfer of property rights. They feared for their status and authority, but they were also afraid that all they had invested in the company would be confiscated. What they wanted most was for the government to invest in their company while allowing them to hang on to their shares. From the government’s perspective, all that Liu was asking for was more ‘power and benefits’. In this situation, how did Liu fight his corner? How did the government deal with the situation, and what was the outcome?

The Takeover of the Zhanghua Company

From the very outset, the ccp branch in the Zhanghua Company saw the coming partnership unambiguously as part and parcel of class struggle.40 This assessment was in line with the Central Committee’s explicit instructions to delegates at a meeting in Beijing in early 1954: ‘We are now beginning to launch the planned socialist transformation of capitalist industry, this is a profound, drastic, complicated, and sharp turn in class struggle. The bourgeoisie does not wish to die. The question is who will defeat whom?’41 On the other hand, from the very inception of the prc the ccp had always paid attention to a number of particularly big factories. Not only was Zhanghua typical of the wool textile industry in Shanghai, but Liu Hongsheng was also a

39 Jialong Gao (Sherman Cochran), ‘Zibenjia xuanze gongchandang. 1948–1956 de Shanghai Liushi jiazu’ (Capitalists choose the Chinese Communist Party. The Liu family in 1948– 1956), Dangdai Zhongguoshi Yanjiu, Vol. 1 (2009), pp. 317–318. 40 ‘Zhonggong zhanghua maoma fangzhi zongzhi weiyuanhui guanyu gongsi heying zhunbei de gongzuo jihua caoan’ (Draft plan by the ccp committee of the Zhanghua Woollen Textile Factory on preparatory work for public–private management), 27 March 1954, a38-2-227, sma. 41 Li Weihan, ‘Zai yi jiu wu si nian kuozhan gongsi heying qiye jihua huiyi shang de zongjie’ (Synthesis of the 1949 planning meeting on extending public–private management companies), 16 January 1954, Zhongguo Zibenzhuyi Gongshangye de Shehuizhuyi Gaizao, Zhongyang (The Socialist Transformation of Industry and Commerce in China, Central Volume) (Beijing: Zhonggong Dangshi Chubanshe, 1992), p. 557.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 275 member of the United National Front and wielded great social influence. In this instance, therefore, the government attached great importance to United Front work. The joint partnership policy was seen as a chance to ‘educate and unite with the bourgeoisie … through full consultation’.42 The reason the government put a high value on including the Zhanghua Company in the first wave of public–private joint management was that these companies would have a significant demonstrating effect, not only in Shanghai and east China, but also in the entire country. The negotiations began in a tense atmosphere. The representatives of the public sector included government officials, members of the factory ccp branch and trade union officials. Liu Nianzhi and his colleagues represented the private sector. For Liu Hongsheng, Liu Nianzhi was the most hard-working, competent and pragmatic of his many sons, the ‘trump card’ of the family.43 Liu’s aim in the negotiations, naturally, was to secure his rights and inter- ests to the greatest possible extent. The government needed both to take the initiative in the negotiations and to compel its private partners to accept its terms with sincerity. All in all, it was a test of the practical ability of the public sector representatives in dealing with public–private joint management. The discussions stretched from 18 April 1954 to the end of June when a partnership agreement was signed. There were three rounds of official negotiations and a series of informal meetings. The first round of negotiations dealt with the core problem of how much the government should invest in Zhanghua. The company’s long-term prospects on the production front were bleak and it was in dire need of cash. At a meeting of delegates before the formal negotiations, an official report noted ‘Liu Nianzhi’s appetite seemed to be boundless when he asked the authorities for 10–15 billion yuan.’44 The authorities, of course, were certainly aware of Zhanghua’s production difficulties: ‘Zhanghua needs liquidity of around 27 billion yuan, but has only 2 billion.’ However, the ccp representatives believed that the entrepreneurs were asking for too much. ‘Their aim is to get more investment from us. They are trying to solve their cash flow problems once and for all.’ The government was very clear on this point: the

42 ‘Zhonggong zhanghua maoma fangzhi zongzhi weiyuanhui guanyu gongsi heying zhunbei de gongzuo jihua caoan.’ 43 ‘Zhanghua maofangchang gongsi heying tanpan fang’an’ (Scheme for the discussion on public–private management at the Zhanghua Woollen Textile Company), 30 April 1954, a38-2-227, sma. 44 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie.’

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 276 zhao maximum it could invest was 2 to 4 billion, but ideally the investment should be limited to 2 billion.45 The official position was in line with the instructions of the Central Finance Committee: government investment should be kept to a strict minimum. At the national conference in early 1954 on expanding public–private joint management, documents drafted by the committee on ‘gradually transforming capitalist industrial firms having more than 10 workers into public–private partnership enterprises set clear guidelines for transforming capitalist industry: the government should ‘invest limited capital and cadres, and make full use of the existing company funds, cadres and technology to transform capitalist industry’.46 Such circumstance made for intense negotiations. After the first round, the government started to increase its pressure. This meant, first, continuing to firmly spell out investment policy, especially from the standpoint of developing national heavy industry. Second, the authorities sought to win support from skilled and experienced staff, relying on them to get a true picture of how much funding was actually needed. Third, they tried to isolate Liu from his fellow entrepreneurs. On the subject of capital injection itself, the government delegates asked Liu to come up with another plan based on Zhanghua’s true situation. Following detailed reports from staff and some hard bargaining, Liu and his colleagues agreed to revise their initial demands, admitting that, when putting forward their initial figure of 15 billion, they had not looked at the bigger picture and the need for the state to support the development of heavy industry. They were now ready to ‘review their needs’ and significantly reduce the amount of investment they were asking for. The policy by the Party organisations and other public sector representatives of both mobilising and fostering differences among their interlocutors finally forced Liu to accept the government’s position on investment. At the end of the first round of negotiation, they reached an agreement by which the government was to invest 2 billion, increasing the government’s share of the company’s total capital to 10 per cent. The report by the general party branch to the Shanghai municipal industry committee was smug in its tone: ‘Our first round of negotiations has successfully resolved the problem of investment.’47

45 ‘Zhanghua maofangchang gongsi heying tanpan fang’an.’ 46 ‘Guanyu you buzhou de jiang shi ge gongren yishang zibenzhuyi gongye jibenshang gaizao wei gongsi heying qiye yijian’ (Suggestions about progressively fundamentally transforming capitalist industries with more than 10 workers into public–private joint companies), 30 January 1954, Zhongguo Zibenzhuyi Gongshangye, Zhongyang, p. 573. 47 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’.

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Basically, the government had forced Liu and the private managers to accept its plan, regardless of the actual needs of the company, which no longer mattered economically. The central issue at the second round of negotiations was how to deal with the company shares and paid-up capital held by members abroad. Liu Hong- sheng and Liu Nianzhen displayed an apparently generous attitude: the government should take the shares of Liu’s sons, while those held by Cheng Pengnian and Hua Er’kang—both were accused of cooperation with the former National- ist Bureau of Investigation and Statistics, China’s military intelligence—should be adjudicated as enemy property. However, Liu was privately not willing to accept this approach, which would entail a heavy loss of shares for Zhanghua and actually make the state the majority shareholder of the company. The authorities suspected Liu’s thought processes and adopted a two- pronged strategy. On the one hand, they praised his ‘progressive’ attitude concerning the shareholders outside the country and said the matter could be dealt with by submitting the issue to the Industrial and Commercial Bureau or the courts. In fact, however, they were planning to handle Cheng’s and Hua’s shares differently from those of Liu’s sons. Since Cheng and Hua were ‘historically tar- nished’, it was thought advisable for the government to hold their shares while Liu’s three sons would keep theirs. There were two reasons for this approach: Cheng and Hua were considered as reactionaries, while Liu’s three sons were not. Second, the authorities sought ‘to facilitate further political differentiation between the Liu family on the one hand and Cheng and Hua on the other’. However, the Shanghai Industrial Production Committee did not approve this approach, as it ran counter to the ‘unity policy’. After consultation between the municipal committee and the United Front Work Department, the matter of Cheng and Hua’s shares was left undeter- mined. The time was not yet ripe for putting their shares in escrow. It was necessary to pursue ‘United Front work’ with both, to observe their performance and decide later. As for the three sons, the committee decided that their shares should not be taken into escrow. The sons had gone abroad before the victory of the ccp. They were not found to have indulged in reactionary behaviour.48 Clearly, the government was making a concession on the shares held by indi- viduals who had chosen to live abroad.

48 ‘Guanyu Zhanghua maoma fangzhichang heying zhong zhongda wenti de yijian’ (Sugges- tions on the major problems in the process of public–private joint management at the Zhanghua Woollen Textile factory), June 1954, b133-1-45, sma.

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The second round of negotiations also dealt with the private internal advances of capital to the company, as discussed above. Liu worried about the possible loss of these advances in the advent of public–private joint partnership. Liu Nianzhi expressed his thoughts to the public sector delegates: ‘Our shareholders are in difficulty right now and we hope to withdraw most of the sums advanced.’ The government for its part hoped that the 1.2 billion in question would be left with the factory and converted into investment funds. The Shanghai Industrial Production Committee mulled over the question for two weeks and then partially assented to Liu’s request. In its final decision, the committee agreed that 0.4 billion could be returned to those considered as ‘democratic activists’ while the remainder would be kept by the company as investment.49 Again, political criteria prevailed over economic and legal dis- positions. Investors actually lost most of the invested capital. The family actually had more leeway with the disposal of its foreign capital even if the government decided to take a firm stand. According to Liu Nianzhi, foreign capital amounted to us$2–3 million, although there was no certainty about the exact figure. The fact was that, despite all its tough talk, there was nothing the government could actually do. For one thing, the authorities could not figure out the exact amount of the funds held abroad and, for another, withdrawing capital from firms in Hong Kong and Taiwan would be a difficult task. What they did, therefore, was to establish the principle that company officials should go to Hong Kong and bring the money back. As for the capital invested in Taiwan, the problem would be solved when ‘Taiwan is liberated’.50 Obviously, government officials were keen to retrieve foreign capital and use it as a reserve fund, but short of direct threats of sanctions on Liu, there was nothing they could do to force the repatriation of the funds. The third round of negotiations began on 3 May. The core issues concerned personnel structures and the redistribution of power in the company. Eventu- ally the high-level personnel structures that were put in place clearly reflected the instructions of the Central Committee and the Shanghai municipal party committee in 1954 on public–private joint management. The government felt that the position of factory director, which wielded real power, should be taken

49 ‘Zhonggong Shanghai shiwei gongye shengchan weiyuanhui guanyu Zhanghua maoma fangzhi chang heying zhong cunzai zhongda wenti de yijian’ (Suggestions of the industrial production committee of the Shanghai ccp committee on the existing major problems in the process of public–private joint management at Zhanghua Woollen Textiles), May 1954, a38-2-222, sma. 50 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 279 by the public sector representative. After bargaining, it was decided the public sector representative would take the position of deputy general manager and a rule was established by which the position of factory director would be the person who was the deputy general manager. In addition, the public sector representatives also secured positions for Peng Han’en and Chen Shiding, who were not highly regarded in the company but who were technical staff close to the government. These two saw Liu Nianzhi as unreliable and this led the government representatives to appoint them as ‘deputy directors’, in charge of education and reform.51 When Liu Nianzhi saw that his request to be the director had been rejected, he realised real power would never be in his hands and therefore started actively cooperating with the government. Twice during the meeting, speaking on behalf of the private sector, he asserted that not only should the public sector representative share the position of director, but he himself was prepared to leave his position of general manager: ‘My ability is not adequate, I’m not familiar with the current situation, I can serve as the deputy manager.’ The government clearly knew, however, that Liu Nianzhi’s words belied his true wishes and decided to keep him in his position of general manager. The government came out as the clear winner. It secured the position of director, with direct control over the daily production of the factory, as well as the positions of first deputy manager and first deputy director for its representatives. As manager, Liu found himself entirely separated from the production line, as were his colleagues. There is no doubt that the government had obtained full control over internal operations and external business.

A Sense of Loss: The Outcome of Public–Private Joint Management

The public–private joint management agreement of the Zhanghua Woollen Textile Company was formally signed on 1 July 1954. It was the first woollen textile company to enter into the new system in 1954, and as such it was a pilot enterprise. The government saw the Zhanghua case as a good example. ‘Zhanghua has improved its management and production, created the conditions for joint management and is setting a good example in the industry.’52 Liu Hongsheng responded to this official praise by expressing sincere hopes for the

51 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’. 52 ‘Huadong fangzhi gongye guanliju Zhou Zidong daibiao fayan’ (Speech by Zhou Zidong, representative of the East China Textile Management Office), 28 June 1954, b133-1-45, sma.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 280 zhao future of public–private joint management and went as far as to declare in the press that his desire for socialism was boundless.53 What were Liu’s true feelings? Intelligence available to the authorities led them to believe that ‘following the creation of public–private joint management, the capitalists are basically stable’.54 The Liu family appeared to be satisfied with the new personnel set-up. On the day after the agreement was signed, Liu Nianzhi came to the factory to tell the members of the Commu- nist Party branch: ‘The old man [meaning himself] is very happy. He is deter- mined to come to the joint management meeting.’55 Liu Nianzhi was also satisfied because ‘the Textile Management Bureau had appointed him manager’.56 He publicly declared that he would be ‘responsible for the company’57 in the future. There was another factor that was a source of emotional satisfaction for Liu. According to government statistics, shortly after the public–private partnership came into force,

production at the Zhanghua Company increased by 70 per cent as com- pared with pre-1949 figures. The quality improved significantly to the top grade while the percentage of defective items fell from 34 per cent to 18 per cent. By the end of 1954, Zhanghua had not only paid off its debts but it even had a surplus.58

The major decisions were still taken by the Board of Directors, but the Board no longer consisted only of private entrepreneurs. It now had six members from the private sector and three from the public sector. However, in the eyes of the Communist Party, public–private joint management implied a relationship not

53 ‘Wo weishenme yonghu gongchandang. Shiyejia Liu Hongsheng shishi ban ge yue qian dui xinwenjizhe de tanhua’ (Why do I cherish the Communist Party? A conversation with journalists two weeks ago by entrepreneur Liu Hongsheng about his life), in Liu Hongsheng QiyeShiliao (Historical Materials on the Liu Hongheng Companies) (Shanghai: Shanghai Renmin Chubanshe, 1981), Vol. 2, p. 470. 54 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’. 55 ‘Zhonggong Zhanghua zongzhi weiyuanhui xiang Shanghaishi gongye shengchan weiyuanhui de baogao’ (Report of the Zhanghua ccp Committee to the Industrial Production Committee of Shanghai Municipality), 14 June 1954, a38-2-253, sma. 56 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’. 57 ‘Zhonggong Zhanghua zongzhi weiyuanhui xiang Shanghaishi gongye shengchan weiyuanhui de baogao’. 58 ‘Liu Hongsheng qiye jituan de shehuizhuyi gaizao’ (The socialist transformation of the Liu Hongsheng company group), in Zhongguo Zibenzhuyi Gongshangye, Shanghai, Vol. 1, p. 1186.

European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 281 of equality but of control and obedience. The public sector owed respect to the private sector while the latter owed obedience to the former. Clearly, Liu had lost all power and influence over major events in the company. In the matter of personnel appointments, in fact, Liu and the private managers were dissatisfied with the way in which power and positions were dis- tributed at the higher level, especially with the fact that the position of director was now in the hands of the state representative. Meanwhile, Liu Nianzhi, though still the general manager, felt greatly threatened, worrying that he would be left idle and powerless.59 He was not happy about the division of roles between the manager and the director. He was denied the use of the company stamp. Another deputy manager, Zhang Ziwei, who had been extremely eager to be in charge of supplies and marketing as well as accounting, felt that all power was concentrated in the hands of the state agents. The Communist Party saw such attitudes as ‘a form of protest’ which should not be permitted.60 The chain of decision-making on personnel matters had changed: the secretary of the Party branch would put forward a preliminary opinion and this would be discussed by the Party committee, which would then consult the dis- trict Party committee, negotiate the matter with the entrepreneurs, and make a report to the relevant bureau.61 The rules at any rate stipulated that once public–private joint management had been set up, ‘all candidates should be selected through consultations with both sides, and their names would be submitted to the Municipal Bureau of Textiles for vetting and final appointment’.62 Clearly, the Liu family no longer had any right to appoint or dismiss anyone. Nor did Liu and his fellow entrepreneurs have any say in day-to-day production. Before joint management came in, production and marketing at Zhanghua had already been brought into the orbit of national production and subordinated to the state planned economy, but the distribution of functions and powers then was such that the director was responsible for production.

59 ‘Zhonggong Zhanghua zongzhi weiyuanhui xiang Shanghaishi gongye shengchan weiyuanhui de baogao’. 60 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’. 61 ‘Liaojie Zhanghua maofangchang he Anda erchang qingkuang baogao’ (Report on understanding the situation of the two Zhanghua woollen and Anda factories), December 1954, b133-2-22, sma. 62 ‘Shanghaishi renmin zhengfu fangzhi gongye guanliju siying zhanghua maoma fangzhichang gufen youxiangongsi gongsi heying xieyishu’ (Agreement from the Textile Industry Management Bureau of the Shanghai People’s Government on public–private joint management at the Zhanghua Woollen Textile Stockholding Company), 28 June 1954, b133-1-45, sma.

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Now, production was still managed by the director, but he was from the public sector and specific issues were in the hands of the Party and the trade union. Liu and his former managers like Zhang Ziwei appeared to be ‘at the top’, but they were only in charge of ‘administrative management’.As the public–private joint management agreement put it: ‘[working] under the leadership of the Municipal Bureau of Textiles, they follow instructions and take responsibility for administrative matters’.63 The fact is that while public–private joint management marked a change in Zhanghua’s nature from private to ‘semi-socialist’ ownership, it did not mean that the Liu family retained the private half in their hands. Companies under public–private joint management belonged in fact to the government. The Liu family’s only hold over Zhanghua lay in Liu Nianzhi’s position as the so-called general manager, which was no more than a nominal position of honour. In other words, the company to which Liu Hongsheng and his managers had devoted themselves since 1929 was totally transformed into government property after the public–private partnership came into force.

Conclusion

The struggle between public and private was present throughout the course of public–private joint management and ownership. The tension had its roots in the ideological divergence on the role of private business. Although in the beginning the ccp did not intend to eliminate private ownership and planned to go through a long phase of development of the ‘New Democratic Society’, the two sides harboured diverging views about the question of how to achieve national industrialisation faster and better. Complex factors were clearly at work behind Zhanghua’s transformation from private ownership into public–private partnership. Liu’s choices were driven by the actual state control over the supply of raw materials, production problems and the fact that the company’s markets were entirely subordinated to the national production plan. Although private industry had already been in a difficult situation during the Republican period, the case of Zhanghua exemplifies the fact that with the founding of the ‘New China’, Zhanghua’s difficulties became part of a structural problem that the private entrepreneurs could not resolve through their own efforts.

63 ‘Shanghaishi renmin zhengfu fangzhi gongye guanliju siying zhanghua maoma fangzhichang gufen youxiangongsi gongsi heying xieyishu’.

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The Three Antis Movement in 1952 threw the ‘national capitalists’ as a category into disarray. Liu and his fellow entrepreneurs had seen the writing on the wall well before the advent of public–private joint management. When the government announced the transition to socialism at the end of 1953, handing over their enterprises became an unavoidable and politically advantageous choice in order to survive under the new regime. Liu publicly stood on the side of ‘progress’ in politics. When he chose to return to China at the end of 1949, he realised he had to work with the new regime and tried to win its trust. In 1953, when public–private joint management became part of the trend, it was clear that the future of Liu’s Zhanghua Company was not bright. His decision to take the lead in choosing to partner with the state was only part of the general momentum of events, way beyond his control. In the process of the negotiations that led to public–private joint management, the government became aware of Zhanghua’s importance as a model and made some concessions to Liu and his management. In the end, however, Liu lost much of the decision-making power over personnel and production. Liu Hongsheng was ostensibly satisfied with the results and kept his misgivings to himself. According to government documents, after public–private joint management came into force, Liu Hongsheng often went to the factory to oversee production ‘even though his condition was not very good’.64 Liu died in 1956. At any rate, by 1955, when the woollen textile industry in its entirety was finally brought under public–private joint management, the brand company to which Liu Hongsheng had devoted himself disappeared. Liu and his managers, those most familiar with production and business in the woollen textile industry, were deprived of actual power. As the process continued, the right to private property, the last safeguard and the very foundation of private enterprise system, was removed as well. Thereafter, Liu and others like him became nothing more than ‘senior staff’ in state enterprises. The policy of industrialisation of the ccp advocated total public ownership, while it discarded not just private ownership but even the very entrepreneurs who had been at the fore- front of industrial modernisation and had driven Chinese economic progress.

64 ‘Zhonggong zhanghua zongzhi weiyuanhui tongzhan gongzuo zongjie’.

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