'Buy 20 Years'

European Journal European Journal of of East Asian Studies 13 (2014) 214–239 East Asian Studies brill.com/ejea

‘Buy 20 Years’ Li Kangnian, Class Identity and the Controversy over the Socialisation of Private Business in 1957*

Xiaohong Xiao-Planes Institut National des Langues et Civilisations Orientales, Paris [email protected]

Abstract

In 1956 the Chinese authorities accomplished the socialisation of private industry and commerce and handicrafts through the implementation of peaceful redemption and through taking charge of the original private management personnel. In January 1957, Shanghai industrialist Li Kangnian criticised the form of the redemption. He suggested extending the payment term of the fixed rate of interest (dingxi) from 7 years to 20 and changing the mode of payment to bank deposit receipts. In spring 1957 his proposal provoked a lively debate in commercial and industrial circles, whose members hoped to establish their relationship with the state on a contractual basis; they rejected the pressure exerted on them in the name of class conflict and asked for equal citizenship. However, these legitimate demands were severely suppressed during the anti-rightist campaign. The ccp’s propensity to instrumentalise policies made it impossible to achieve the original intention of using precious human resources, while it led to discrimination based on class and shaped a hierarchical society. In fact, the controversy over Li Kangnian’s proposals demonstrated a real confrontation between the patriarchal authoritarian culture of the Chinese Communist Party and the modern contractual culture of industrialists and merchants.

* This paper was first presented at the international workshop ‘The great transformation: modern industry and trade in postwar and post-1949 Shanghai’ (Lyons Institute of East Asian Studies (IAO), 3–4 March 2014). I would like to thank all the conference participants. I am also grateful for critical comments and constructive suggestions from Christian Henriot, Feng Xiaocai, Zhao Jin, Christian Lamouroux and Isabelle Thireau during the revision of this article.

Keywords controversy – compensation – nationalization – industry – ideology

After 1953, the Chinese Communist Party began the socialisation of private firms by introducing public–private joint enterprise. From the second half of 1955, with transformation centred on industries, the government accelerated the process and within a year had rushed through the socialisation of all private industrial, handicraft and transportation enterprises. Through restructuring and merger, all non-public sectors were brought into the planned economy regulated and controlled by the government. This transformation is considered a political and ideological project, the ultimate purpose of which was to elimi- nate class disparity and exploitation generated by the private ownership of the means of production. But the communist state claimed that the transformation was carried out by the peaceful redemption of the means of production from private industrial enterprises, an approach that differed from the confiscation of private enterprises enforced in the Soviet Union and some Eastern European countries. The purpose was to maintain an alliance with the ‘national bourgeoisie’, to prevent social unrest and the resulting losses, to make use of the production techniques and management expertise of industrialists, and to accomplish the industrialisation of the country. In concrete terms, the peaceful redemption included paying an indemnity in exchange for the property at a fixed rate of interest (dingxi), assigning jobs to the private staff who were in active service, and maintaining the high wages of the owners of enterprises. On 8 January 1957, during the second Shanghai Municipal People’s Assembly, Li Kangnian, a delegate representing private enterprises, submitted ‘Proposals concerning the fixed interest rate’ to the Assembly. He stated that if the liquidation amount of all private capital stock amounted to 2.2 billion rmb, the repayment by the government over seven years at a 5 per cent fixed interest rate would not conform with the original promise of full compensation for private industry. He suggested extending the redemption period to 20 years, with a deposit receipt issued by banks instead of a fixed interest rate in order to simplify the formalities of releasing the receipts and to abolish the class relationship within the public–private joint companies (gongsi heying). Li Kangnian’s proposals, known as ‘The 20 years’ redemption’ or ‘The 20 years’ fixed interest rate’, were reprinted in digest form in countless newspapers and periodicals in Shanghai and all over the country during the ‘mingfang’ (airing of views) period in spring 1957. The proposals became one of the main topics of controversy in meetings of business circles. This was the first

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 216 xiao-planes time that industrialists and merchants had responded collectively to official policies since the Five Antis Campaign in 1952.1 According to the ccp, the socialisation of capitalist industry and commerce in the 1950s was a complete success. It places particular emphasis on the ‘peaceful redemption’ and the acceptance of government policies by all industrialists and merchants. However, new research (including the present special issue) has unveiled a far more complex process and results than the official orthodox version.2 The present paper on Li Kangnian’s proposals and the controversies they generated will explore the actual practice of the communist state and the reactions of industrialists and merchants from different strata. As the manager of a medium-sized enterprise with several factories producing daily necessities in Shanghai, Li Kangnian’s opinion was representative of the situation among the owners of small and medium-sized businesses. These businessmen asked the authorities to deal with the issue of interest between the state and individu-

1 Yang Kuisong, ‘1952 nian “Wu-fan” yundong shimo’ (The Five Antis Campaign in Shanghai in 1952), Shehuikexue (Social Science Journal), Vol. 4 (2006), pp. 5–30; John Gardner, ‘The Wu-fan Campaign in Shanghai: a study in the consolidation of urban control’, in A. Doak Barnett (ed.), Chinese Communist Politics in Action (Seattle: University of Washington Press, 1969), pp. 477–539; Kenneth G. Lieberthal, Revolution and Tradition in Tientsin, 1949–1952 (Stanford: Stanford University Press, 1980), pp. 153–179. 2 The main works on the socialist transformation of private enterprise include Marie-Claire Bergère and Wang Ju, ‘Du capitalisme au communisme: cadres et entrepreneurs à Shanghai de 1949 à 1952’, in Marie-Claire Bergère (ed.), Aux origines de la Chine contemporaine. Mélanges en l’honneur de Lucien Bianco (Paris: L’Harmattan, 2002), pp. 83–140; Sherman Cochran and Andrew Hsieh, The Lius of Shanghai (Cambridge, ma: Harvard University Press, 2013); Toby Ho, ‘Managing risk: the suppression of private entrepreneurs in China in the 1950s’, Risk Man- agement, Vol. 2, No. 2 (2000), pp. 29–38; Lieberthal, Revolution and Tradition in Tientsin; Lu Ding, Entrepreneurship in Suppressed Markets (New York: Garland, 1994); Bennis Wai-Yip So, ‘The policy-making and political economy of the abolition of private ownership in the early 1950s: finding from new material’, The China Quarterly, Vol. 171 (Sept. 2002), pp. 682–703; Dorothy J. Solinger, ‘State versus merchant: commerce in the countryside in the early Peo- ple’s Republic of China’, Comparative Studies in Society and History, Vol. 21, No. 2 (April 1979), pp. 168–194; Feng Xiaocai, ‘“Shehui zhuyi” de bianyuanren: 1956 nian qianhou de xiaoshang xiaofan gaizao wenti’ (Marginal people of ‘socialism’—the transformation of small business vendors around 1956), Huadong shifan daxue dangdaishi yanjiu zhongxin (Research Centre of Chinese Contemporary History) (ed.), Zhonguo Dangdaishi Yanjiu (Research on Contempo- rary Chinese History) (Beijing: Jiuzhou Chubanshe, 2011), Volume 3, pp. 3–45; Xie Guoxing (ed.), Gaige yu Gaizao: Lengzhan Chuqi Liang’an de Liangshi, Tudi yu Gongshangye Biange (Reforms and Transformations: Changes in Food Production, Land Policies and Industry and Commerce on Both Sides of the Taiwan Strait at the Beginning of the Cold War) (Taipei: Insti- tute of Modern History, Academia Sinica, 2009).

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 217 als on the basis of contracts and to remove the branding of class status that the fixed interest rate implied. The government cracked down on the controversy in spring 1957 during the Anti-bourgeois Rightists campaign, and Li Kangnian as well as his supporters became the first ‘rightists’ to be stigmatised in commercial and industrial circles. The controversy not only reflected the quest of industrialists and merchants for their legal rights and interests and equal citizenship, but it also revealed the real agenda of the authorities towards private industry. Following the Five Antis Campaign in 1952, socialist transformation un- folded through a two-pronged approach: to debase the bourgeoisie politically and to take advantage of the same economically. However, ‘bourgeoisie’ was a politically ambiguous notion in view of the extreme diversity among the tens of millions of large or small manufacturers and merchants nationwide. This lack of clarity in a politically charged context was compounded by the sudden rush to implement the policy of socialist transformation at the end of 1955 and the beginning of 1956. The government made promises that it would assign jobs to all the staff from private management in order to make use of their skills and managerial experience; at the same time, however, it labelled them as capitalists subject to class transformation. The controversies proved that the official paternalistic measures did not meet the widely differing needs and expectations that existed among the so-called capitalists. The arbitrary desig- nation, and hence stigmatisation, that bourgeois status implied could hardly be regarded benignly by the industrialists and businessmen. To a large extent, the present research was made possible thanks to full access to Li Kangnian’s drafts of proposals and other related documents.3 My documentation also includes a large number of archives concerning Li Kang- nian and his enterprises, as well as all the reports on Li’s participation in the mingfang campaign in 1957. These detailed and vivid accounts by first-hand witnesses offer a privileged perspective on the concrete implementation of the socialist transformation of private industry. Because of the ideological hege- mony of the ccp, Li Kangnian and other businessmen who were engaged in debates had to adopt the political lexicon of the Party in order to express their opinions and demands. Through the analysis of their expressions and argu-

3 Li Kangnian’s private archives come from Mr Cheng Zai, a researcher at the Shanghai Acad- emy of Social Sciences. The manuscripts or typed documents represent a total of 179 pages. The main elements include Li Kangnian’s draft proposals, drafts of the withdrawal of his proposal, confession and self-criticism, minutes of meetings in the Political School of Business circle, his repentance plan and a summary of ideological remoulding.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 218 xiao-planes ments, I hope to shed light on the state of mind and practices of individuals or groups towards the state in this particular historical context.

Li Kangnian’s Business and Political Profile

A Fortune Built Up through Domestic Products Li Kangnian was born in Yinxian, Zhejiang, in 1898 in a literate family. His father worked as chief editor for a newspaper in Shanghai and as proctor and teacher at the Ningbo Normal School. Li’s father provided him with a thor- ough education in both classical Chinese and calligraphy.After graduating from higher primary school at the age of 14, Li Kangnian learnt business for about a decade in his native region in the city of Ningbo. He started off as an appren- tice and served successively as clerical staff, chief accountant, secretary and manager in several firms. During his apprenticeship, he also studied part-time and obtained his degree for high school from the correspondence school estab- lished by the Bank of China. In 1929, Fang Yexian, a Ningbo entrepreneur in Shanghai, hired Li Kangnian at the China Chemical Works as clerical staff and later as director of general resources and manager of the Jixing Bank. In 1933, domestic manufacturers in Shanghai organised a ‘self-help’ operation by establishing the China National Goods Company (Zhongguo guohuo gongsi), which boycotted foreign and Japanese goods. As president and general manager, Fang Yexian named Li Kangnian assistant manager and later general manager of the company. The retail department of the company was on Nanjing Road in downtown Shanghai. The company used the slogan ‘Chinese people use Chinese products’ in order to promote Chinese-made light industrial, arts and crafts products. This gave Li Kangnian his first experience of running a large enterprise. To improve the accuracy of the accounts, Li introduced double-entry bookkeeping, monthly balance sheets and monthly profit and loss statements, and he set up strict rules of product supply and product inspection. As a result, he gained the trust of lending banks and suppliers. He attached great importance to advertising, to encouraging individual skills, and to the training of employees. Li gradually expanded the market of Chinese- made products in Shanghai, in other cities and in Southeast Asia.4

4 According to Li Kangnian, ‘At first, there were only nine factories in the China National Goods Company. But soon the number increased to more than 30 and reached 500 half a year later and 2,000 one year later’; ‘Li Kangnian xiaozhuan’ (Li Kangnian’s biography), 15 August 1956, c48-2-1591–133, Shanghai Municipal Archives (sma). On Li’s activity in the company, see Lin

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Li Kangnian devoted 20 years of his life to the China National Goods Com- pany, from its beginning in 1933 to its suspension in 1953. This engagement was also the start of his business career, as it helped to build his social network with bankers and many domestic manufacturers. The company’s reputation and its sales network made it easier for him to invest directly in product man- ufacturing. In 1938, after the end of military operations, the Shanghai economy recovered quickly in the foreign concessions. Li and other manufacturers set up the Cuizhong Company, of which Li served as manager.

He attached great importance to product quality, insisted on using cotton yarn and dyes of high quality, and allowed production only after careful tests. Due to this quality control and excellent sales techniques, the ‘Zhongpai 414’ towel eventually made a real splash on the market and became a famous brand.5

The development of Cuizhong was closely related to the sales network of the China National Goods Company. Li Kangnian’s privileged position and the good reputation of the company encouraged a number of manufacturers to invite him to invest in, take over or participate in the management of their enterprises. In 1940 he joined the China Clock Factory as a shareholder and then served as its president and later its general manager.6 In 1941, the Shanghai Hongxing Sock Factory, known for over 20 years for its famous ‘Dog’s head’ sock brand, ran into a financial crisis. Seventeen investors, including Li Kangnian and Sun Hengfu, launched a call for 300,000 yuan for the restructuring of the

Bingwei, ‘Li Kangnian yu Zhongguo guohuo gongsi’ (Li Kangnian and the China Merchan- dise Corporation), in Pan Junxiang (ed.), Zhongguo Jindai Guohuo Yundong (China Modern National Products Movements) (Beijing: Zhongguo Wenshi Chubanshe, 1996), pp. 266–274; ‘Li Kangnian (1898–1964)’ in Shanghai Fangye Gongye Zhi (Gazetteer of the Shanghai Tex- tile Industry), Chapter 10, biography section, http://www.shtong.gov.cn/node2/node2245/ node4483/node56897/node60986/node60992/userobject1ai50129.html (last accessed: 19 Oc- tober 2014). 5 ‘Li Kangnian (1898–1964)’ in Shanghai fangye gongye zhi; Lin Bingwei, ‘Zhongpai 414 maojin shi zenyang chengwei mingpai de’ (How the Zhongpai 414 towel became famous), in Gongshang Jingji Shiliao Congkan 3 (Historical Materials Series on Industrial and Commercial Economy, 3) (Beijing: Wenshi Chubanshe, 1984), pp. 192–195. 6 Jiang Benfang, ‘Zhongguo zhongchang yu sanwu pai shizhong’ (The China Clock Factory and Three–Five Clocks), in Wenshi Ziliao Xuanji (Selected Works—Culture and History) (Beijing: Zhongguo Wenshi Chubanshe, 1999), pp. 106, 110–117; Wang Meifang, ‘Yongyuan de sanwupai taizhong’ (Forever Three–Five Clocks), in Minjian lishi (Popular History), http://mjlsh.usc .cuhk.edu.hk/Book.aspx?cid=4&tid=496 (last accessed: 19 October 2014).

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 220 xiao-planes factory.7 Li later became the president and chief executive of the Hongxing Company. Li Kangnian only held a small proportion of the shares in these enterprises: 6 per cent in the China Clock Factory, 3.7 per cent in the Cuizhong Towel Fac- tory and 2.2 per cent in the Hongxing Sock Factory.8 At the same time, he had invested in more than a dozen small and medium-sized enterprises where he served as director or supervisor. Li Kangnian’s total capital was about 50,000 yuan.9 Later, he wrote in an ‘autobiography’ for the ‘learning group’ held by the Municipal Political Consultative Conference that he ‘had been determined since childhood to be as good as others in everything’. Therefore, he ‘desired to be first in study and worked much harder than any peers’. Eventually, he ‘worked hard for the bourgeoisie’, and finally ‘devoted himself to the bourgeoisie’.10 From all this evidence, Li seems to have been a hard-working and skilful businessman with solid clerical and accounting skills and good commercial acumen. He seized the opportunity that the patriotic movement and the wartime economy created to actively engage in the production and sale of domestic industrial products, to create popular national brands and to accu- mulate some personal wealth and social reputation.

Adapting to the New Regime and ‘Fighting for the Interests of the Bourgeoisie’ Before 1949, apart from some limited positions in the Nanjing Road Business Association and the Huanqiu Goods Trade Association, Li Kangnian did not seem to be politically active. Yet he became actively involved in the ‘Friday dinner parties’ where businessmen exchanged information. It was one of the cross-industry organisations that had negotiated with the Nationalist government. After the founding of the communist regime, Li Kangnian became a target of the united front policy and became a member of the Chinese Peo- ple’s Political Consultative Conference (cppcc) at the municipal and district level and an executive member of the Federation of Industry and Commerce (hereafter fic). Li Kangnian was not very keen on politics, but under the new regime he worked hard to learn the vocabulary of official ideology to demon-

7 ‘Hongxing zhiwachang zhaogu jihuashu’ (Hongxing Weaving Factory Prospectus), y9-1- 263, sma. 8 Li Kangnian: ‘1954 nian 9 yue 14 ri youguan jianzhi jianxin shenqing’ (Demand for retaining various positions and incomes), 14 September 1954, b163-2-285, sma. 9 Calculated from the following files: Cuizhong Factory, 3 February 1955, b133-1-273-1; China Clock Factory, 13 September 1954, b163-1-394; Hongxing Sock Factory, y9-1-263, sma. 10 ‘Li Kangnian xiaozhuan’.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 221 strate his progress. Obviously, he was aware that although the Communist Party did not trust businessmen, political performance was the prerequisite for bar- gaining with the government.11 After the Five Antis Campaign, Li joined the China Democratic National Construction Association (hereafter cdnca) and later became a member of its municipal committee. In 1953 he was elected to the Huangpu District People’s Assembly and in both 1954 and 1956 was the representative of industry and commerce to the first and second sessions of the People’s Assembly at the municipal and district level. In addition, he also served in a few temporary agencies such as the parity bond committee, study conferences of the Municipal Consultative Committee, and so on. Obviously, Li Kangnian realised that, under the new regime, a positive attitude towards political activities was of considerable importance to the interests of enterprises and individuals. Nevertheless, reports by the Shanghai Light Industry Bureau stated: ‘Li has a certain status in politics, but lacks initiative in political campaigns.’ First, at the time of the bombardment on 6 February 1950 by the Nationalist air force, he had tried to close down the Cuizhong factory. Second, the towel factory was not considered sufficiently responsive to government processing orders because Li marketed the towels in the Southeast Asia region. Third, during the Five Antis Campaign, he organised ‘Thursday dinner parties’ with the aim of reporting false production costs and making illegal profits, which made him one of the famous slickers among the 303 merchants who ‘only confessed trifles’.12 At the end of the campaign, the China Merchandise Corporation was evaluated as a ‘semi law-abiding, semi law-breaking company’. In addition, the Cuizhong Towel Factory was listed as one of 15 key targets in the Huangpu district, and Li Kangnian, under pressure, admitted illegal gains of about two billion yuan (200,000 new rmb). The factory workers feared a stiff fine would affect the future operation of the enterprise and demanded a new audit to correct Li’s statement. Eventually, the Cuizhong Factory had to refund 823 million yuan (82,300 new rmb).13

11 Li Kangnian’s personal archives: Note of the denunciations made by person taking part in the political school of business circle in the second half of 1957 (draft). 12 ‘Shanghaishi renmin zhengfu qinggongye guanliju: Zhongguo zhongchang renshi anpai wenti (caogao)’ (Light Industry Administration of Shanghai People’s Government: Prelimi- nary opinions about the assignment of personnel in the joint China Clock Factory) (draft), 15 September 1954, b163-1-394, sma. 13 Yang Kuisong, ‘1952 nian “Wu-fan” yundong shimo’, pp. 25, 27; ‘Shanghaishi fangzhi gongye guanliju: pizhun heying dinggu fang’an’ (Shanghai Textile Industry Bureau: share pricing project of approved joint ownership), 3 February 1955, b133-1-273-1, sma.

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Among the enterprises managed by Li Kangnian, the China Merchandise Corporation closed down in 1953 because of a business slowdown and long- term liabilities. At the Cuizhong Towel Factory, the Hongxing Sock Factory and the China Clock Factory, the boards of shareholders applied to become public– private joint enterprises in August 1954. According to official regulations, the state representative was to preside over public–private joint enterprises but the original office staff were to be retained and their duties adjusted. In the personnel arrangement report at the Cuizhong Towel Factory, the ccp committee of Jiangning District wrote, ‘At first, Li Kangnian was positive about public– private joint ownership, but then he hesitated. Finally, he agreed to file a report after being repeatedly urged. He is relatively active at present, thinking of “loos- ening burden” and “keeping status”.’ Since Li had no technical background, reports said that he was ‘good at business, but ignores production’, and that ‘no political problem has been found’. He was still

a democratic personality and a target of the municipal United Front. He has a high reputation in business circles and he should still serve as manager. The position of deputy manager will be filled by the representative shareholder of the state.14

At the China Clock Factory, the Bureau of Light Industry made a similar assess- ment: ‘Li participates in study, so he has no choice but to show a positive attitude … All that he wants is fame and wealth. This is his character.’ In fact, the Bureau suggested that Li Kangnian, who already worked as manager of the Cuizhong Factory, might serve as president of the Chinese Clock Factory but no longer work as general manager.15 Eventually, Li succeeded in keeping his main positions in the three public– private joint enterprises: president of Hongxing Weaving Factory, president and general manager of the China Clock Factory and manager of the Cuizhong Weaving Factory. However, Li was less concerned about titles than about the decrease in his income due to public–private ownership of the three enterprises. He stated in reports to the municipal authorities and the cdnca that his monthly income from the three companies amounted to 720 yuan. But as a business owner who started empty-handed, his capital in the three companies

14 ‘Jiangning quwei: guanyu cuizhong maojinchang heying renshi anpai de chubu yijian’ (Jiangning District: preliminary opinions about the assignment of personnel in the joint Cuizhong Factory), 7 October 1954, a38-2-255-97, sma. 15 ‘Shanghaishi qinggongye guanliju baogao (caogao)’ (Report of Shanghai Light Industry Administration of the People’s Government (draft)), 15 September 1954, b163-1-394, sma.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 223 was small and he ‘never received any dividend after Liberation’. He asked the authorities if he might be allowed to retain this income for seven years according to the spirit of documents of the State Council, in order to pay back his debts in other enterprises. In addition, he asked to stay under the leadership of the state representative and to hold the posts in the three enterprises only as vice-president or deputy general manager. Li claimed that because of his numerous social functions, he would be away from production too often.16 In fact, Li Kangnian knew well that the state representatives were Party members who held the real power in public–private enterprises. Whatever his titles, he would never have real power.17 Obviously, he preferred to give up on titles and strive for actual benefits.

Li Kangnian’s ‘20 Years’ Proposal

According to Li Kangnian’s own testimony, he began to draft his proposal in late November 1956. At that time, the government had not yet announced for how many years the fixed interest would be paid, but many businessmen believed that it would only last three years if they were to give credence to Mao Zedong’s announcement that ‘in three years, the socialist revolution in the whole country will basically be completed’.18 In Shanghai, the leaders of the cdnca even called their members to take the lead in giving up the fixed rate interest within two years. Many businessmen were upset, while Li felt that this statement did not accord with government policies on the peaceful transformation of private industry and commerce. In addition, he saw that during the first year of implementing public–private management, the official payment of the fixed rate interest and its calculation method had provoked a series of new problems, such as tensions between public and private, inconsistency in the evaluation of assets and capital, no access to earnings by the capital agent of the enterprise and the directorate members who used to have shares, inconvenience in dis- tributing the fixed interest to small shareholders, etc. At the end of 1956, the government made public its decision to pay the fixed interest for seven years, starting in 1956. After seven years, if businessmen were encountering financial

16 Li Kangnian: ‘1954 nian 9 yue 14 ri youguan jianzhi jianxin shenqing’ (Demand for retaining various positions and incomes), 14 September 1954, b163-2-285, sma. 17 See b163-1-394, sma, and Xinwen Ribao (18, 22, 25–26, 27 March 1956). 18 Speech of Mao Zedong at the meeting of the State Council, 25 January 1956. Quoted by Li Kangnian: ‘Wode jianyi de qianqian houhou’ (Context of my proposal), June 1957, Li Kangnian’s private archives.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 224 xiao-planes difficulties, the period could be extended for some time (this was called ‘a tail’). Mao Zedong declared to the business community that the redemption was not based on a lie since the state did plan to buy private enterprises. ‘If we decide to apply the redemption, it will be a complete redemption. There will be no “semi-redemption, semi-confiscation”.’19 In the autumn of 1956, the ccp announced the ‘Double Hundred’ (shuang- bai) policy aiming at mobilising enthusiasm for the construction of socialism. In Beijing, the deputy director of the cdnca, Zhang Naiqi, proposed his famous thesis of the ‘Red Capitalist Party’.He meant that since socialisation was nearly completed, the cdnca could become a democratic party made up of the national bourgeoisie as a United Front organ. Li Kangnian, who was obviously very concerned about these new changes, quoted the declaration just made at the Eighth Congress of the ccp that ‘the principal internal contradiction is that production is lagging behind the situation’. But why the backwardness in production? He thought that it was because ‘the enthusiasm of the masses had failed to improve and their potential remained untapped, so the workforce had not been brought into full play’. He first emphasised that the government’s peaceful policy to transform industry and commerce was totally correct,

but during the transformation, since business owners could not fully reflect their actual situation and because of the lack of documents, it made it difficult to apply the practical spirit of Chairman Mao. This was something inevitable, which left many contradictions and even created new ones. These were not only real contradictions, but also psychological contradictions.20 cdnca members were encouraged to reflect the legal interests of the national bourgeoisie, but after the Five Antis Campaign the business community became very cautious. Li Kangnian knew there were risks, but despite words of caution from fellow businessmen he still decided to go ahead with his proposal, which he submitted to the Shanghai Municipal Assembly in early 1957.21

19 Mao Zedong, ‘Tong Minjian he Gongshanglian fuzeren de tanhua’ (Conversation with leaders of cdnca and fic), 7 December 1956, Mao Zedong Wenji (The Collected Works of Mao Zedong), 7 (electronic version: http://cpc.people.com.cn/GB/64184/64185/189967/ 11568182.html) (last accessed: 23 October 2014). 20 Li Kangnian, ‘Cong wo xuexi zhexue yihou …’ (My opinions based on philosophy studies …), Xinwen ribao (30 April 1957). 21 See the interview with Li Kangnian reported by Xu Zhihua: ‘Li Kangnian weishenme tichu

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According to data published in the press, the total capital stock and assets of private businesses in 1956 was assessed at 2.2 billion yuan. Li Kangnian considered that, based on the 5 per cent fixed interest rate, the annual redemption would be only 110 million yuan. Thus the period of paying the fixed rate of interest should be 20 years, not 7 years. Moreover, in his opinion, the definition of ‘fixed interest’ was ambiguous and inconsistent with the true implication of redemption. Since the capitalists in these enterprises still received a fixed rate of interest, they were regarded as exploiters, which resulted in class tension and a feeling of debasement among capitalists. He suggested changing the term ‘fixed interest’ to ‘redemption indemnity’. In addition, he proposed that the state issue a bank deposit receipt for the (socialist) transformation of private industry and commerce. The redemption indemnity would be paid off in one go but the payment of its proceeds would be spread over 20 years. This measure would also facilitate rewarding the small stockholders. For Li Kangnian, this solution would allow the state to take back all the capitalists’ stocks and to transform all private enterprises into state-owned companies at once. Con- sequently, the bourgeoisie would only hold some kind of public bond and all labels such as the public–private distinction, transformation and exploitation would be eliminated.22 In addition to the amount of redemption and the method of administration, Li’s proposal also required compensation for the irrationalities caused by the fixed rate interest allocation. He pointed out that during the wave of public– private ownership in 1956 the authorities had applied the ‘leniency’ principle to asset evaluation, but the enterprises that had opted for public–private ownership before 1956 had often seen the value of their assets reduced. In addition, trademarks, secret recipes, advertising and other intangible assets had not yet

dingxi ershinian’ (Why does Li Kangnian propose a fixed rate of interest for 20 years?), Xinwen Ribao (30 April 1957). 22 Li Kangnian’s proposals consisted of three parts: ‘Li Kangnian xiang Shanghaishi di’erjie renmin danbiao dahui diyici huiyi guanyu dingxi de jianyishu’ (Li Kangnian’s proposals concerning the fixed interest rate on the first session of the second Shanghai Municipal People’s Assembly), 8 January 1957 (typed out version); ‘Li Kangnian xiang Shanghaishi di’erjie renmin danbiao dahui diyici huiyi guanyu dingxi de jianyishu de buchong liyou’ (Li Kangnian’s supplementary proposals concerning the fixed interest rate on the first session of the second Shanghai Municipal People’s Assembly), 31 March 1957 (typed out version); ‘Cong wo xuexi zhexue yihou kan zhengfu yong heping fangzhen gaizao gongshang qiye caiqu shumai zhengce shishi dingxi banfa wenti’ (My opinions based on philosophy studies concerning the peaceful transformation of industrial and commercial enterprises through redemption and the fixed interest rate), 20 April 1957 (typed out version).

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 226 xiao-planes been taken into account. Some capitalists had become bankrupt because they could not deal with the Five Antis Campaign and were not able to obtain proper redemption.23 Moreover, in the past, employers and employees, including capital agents, directors and supervisors, all had a share in the capital reserves of the enterprise. At the time of the public–private transformation, however, all this reserve was calculated as part of the owners’ assets. Since the others had no access to the fixed rate interest, their legal interests were damaged. Li suggested that the government issue a number of deposit receipts as a one-off compensation for these employees and directors. He also proposed that some receipts should be used as a one-off consolation payment for bourgeois households with bankrupt assets, for those with too many debts and insolvency problems, for people who suffered losses from political movements, etc.24 table 1 Li Kangnian’s Proposed Distribution of Deposit Receipts

Amounts for distribution Modality of distribution (rmb yuan)

Total redemption value of private shares 1.980 billion yuan Total amount of deposit receipts 110 million yuan to be paid every year from 1958 to 1975 One-off compensation payment for the 100 million yuan capitalist representatives and directors One-off consolation payment for bourgeois 120 million yuan households in need Total value of private assets in industry and 2.2 billion yuan commerce published in newspapers in 1956

Note: the fixed rate interest paid in 1956 and 1957 was deducted from the interest on the 2.2 billion yuan. From January 1958, the remaining redemption would be paid over 18 years in 72 instalments.25

23 See Yang Shaozhen, ‘Sanshi’er nian lai de jingli’ (Thirty-two years of experience), in Gong- shang Jingji Shiliao Congkan (Series of Industrial, Commercial and Economic Historical Records) (Beijing: Wenshi Chubanshe, 1984), pp. 123–124. 24 In addition to the three manuscripts by Li Kangnian, for more detailed abstracts about Li’s proposals see Shanghai gongshang (Shanghai Industry and Commerce Journal), 20 May 1957, p. 10. 25 ‘Li Kangnian xiang Shanghaishi di’erjie renmin danbiao dahui diyici huiyi guanyu dingxi de jianyishu’.

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Many of the problems that Li Kangnian pointed out—the underestimated assets of joint factories, the value of intangible assets such as brand and reputation, the rights and profits of the directors, the dispersion of shares, the complicated formalities necessary to receive the redemption indemnity—directly or indirectly reflected his own experience. To some extent, it was a huge project for the state to carry out the socialisation of private industry and commerce through redemption in 1956, since the country faced the reintegration and redistribution of social resources. Under strong political and ideological pressure, businessmen had no options other than to participate in the process, but they were very concerned about the profits they would receive after handing over their businesses. Regardless of the size of businesses, manufacturers and merchants were always prepared to negotiate through various channels to protect their own interests. But few people acted like Li Kangnian, who questioned the amount of redemption indemnity and the modality of fixed rate interest set by the state. It was a matter of general policy that no business management administration or local government could address. Li’s nephew, Lin Bingwei (1912–?), and Pan Yangyao (1894–?) strongly supported Li’s proposal. Both were members of the cdnca and educated business owners. Pan once served as the principal at the Shanghai Zhonghua Vocational Education School, then as editor of the newsletter of the Chinese Goods Man- ufacturers Association, and later as deputy director of a raincoat factory in Shanghai. Lin Bingwei graduated from Shanghai Hujiang University and served as deputy director and a member of management at the Cuizhong Towel Fac- tory.He actively supported his uncle in writing the proposals and even provided the editorial published in Renmin Ribao (the People’s Daily) on 22 November 1955 to give political ground to his argument.26 Compared to Li Kangnian, Lin was much better at using political discourse and he was more active in politics. He also asserted that the proposals would have international significance. Li Kangnian adopted many of his views in the proposal.27 Li devoted consider-

26 Editorial: ‘Tongyi renshi, quanmian guihua, renzhen zuohao gaizao zibenzhuyi gongshangye de gongzuo’ (Unify the understanding, plan in all directions, earnestly fulfil the transformation of capitalist industry and commerce), Renmin Ribao (22 November 1955). 27 The ccp Jiangning Committee reported that Lin was ‘sly and shrewd. He is actually Li Kangnian’s chief of staff and has become the [Cuizhong Towel] factory’s “diplomat” who specifically deals with the Zhongbai Company, the tax bureau and the trade unions. With the aim of preserving his status, he behaves positively to support joint ownership, but he is politically very complex’; see ‘Jiangning quwei: guanyu cuizhong maojinchang heying renshi anpai de chubu yijian’, p. 2. In 1957, Lin Bingwei was labelled as rightist. After the

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 228 xiao-planes able energy to drafting his text, often debating in all kinds of forums in Shanghai and Beijing with many people who disagreed with him.28 In late March 1957, the office in charge of public–private ownership in Shanghai transmitted Li Kangnian’s proposal to the executive committee of the cdnca for discussion, but its members unanimously opposed the proposal. The director of the study bureau of the cdnca, Yang Xishan, considered there was a real concern about business personalities speaking on formal occasions. He suggested to Li Kangnian that he should find a few supporters to help pre- pare the debate. Li invited a few manufacturers and bankers he was familiar with to a discussion meeting. Yet, apart from Lin Bingwei and Pan Yangyao, who proposed the motion, most people were careful and did not express opinions. With the encouragement of Yang Xishan and Wang Zijian, deputy secretary- general of the Shanghai Municipal Committee, Li Kangnian submitted two supplementary drafts to the municipal cdnca committee at the end of March and in late April, but the results were overwhelmingly negative. Then, on 29 April, in Shanghai, Premier Zhou Enlai called on people from all circles to air their views and help the Party to correct itself. The silence was finally broken. On the following day, the Xinwen Ribao published an interview with Li Kangnian and the whole discussion of Li’s proposal by the Shanghai committee of the cdnca. The newspaper sought public opinion on the proposal and published papers by Lin Bingwei, Pan Yangyao and others who agreed with Li’s scheme or who approved his courage to ‘air views’. In early May, Huang Yanpei, the vice chairman of the National People’s Congress and chairman of the cdnca, came to Shanghai to conduct an inspection. He encouraged the commercial and industrial circle to express its views bravely and publicly praised Li Kangnian for his daring spirit. Abstracts of Li Kangnian’s proposals were published in Minxun, the newsletter of the Shang- hai cdnca, and Shanghai Gongshang, the organ of the fic, with discussions and reports.29 On 17 May, the Renmin Ribao published an article entitled ‘Is the 20 years of redemption a good method?’ in which it reported on the discussions Li Kangnian’s proposal had triggered in the Shanghai business community. In Beijing, the central United Front Work Department held meetings where busi-

rehabilitation of 1979, Lin wrote a few articles in memory of Li Kangnian’s enterprises and introduced Li’s operation style and management methods. 28 Li Kangnian, ‘Dui dingxi jianyishu de jiaodai’ (Confession concerning the fixed interest proposals) (title by the editor), Xinwen Ribao (18 September 1957). 29 Shanghai gongshang (20 May 1957), p. 10. This issue published abstracts of Li Kangnian’s proposals as well as various opinions about the proposals.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 229 ness circles were invited to state their opinions. The leaders of the cdnca—Hu Zi’ang and Zhang Naiqi—and the chairman of the National Federation of Industry and Commerce, Chen Shutong, were the first to ‘air their views’. At this time, the Shanghai cdnca officially transmitted Li’s proposal to the Central Committee. The text was reprinted four times and distributed in 17 provinces as material for discussion.30 At the end of May, Li himself was invited to Beijing by the United Front Work Department as a capitalist representative to attend a meeting of businessmen. The Renmin Ribao even published the full text of his speech in the debate on 6 June 1957. ‘The 20 years of redemption’ became the object of a national debate in the spring of 1957, something completely beyond Li’s expectations. The mingfang campaign provided an opportunity for the united front organisations to strive for an autonomous space under the ccp.

‘The 20 Years’ Redemption’ and the Legal Interests of the Bourgeoisie

The publication of Li Kangnian’s proposals and related debates in the newspapers came as a great surprise to the Shanghai business community. The discussion on the redemption standard triggered off a series of questions about calcu- lating assets and income. After entering public–private joint ownership, many small and medium-sized enterprises had seen their revenue decrease consider- ably. In some families, various members used to participate in the work of the enterprise, but now only one person received a salary. There were also capitalists who had accepted the government’s advice to reduce their own wages when their business was in difficulty, but who were now not allowed to restore their original wages. Because of their difficulties, it was quite common for small and medium-sized public–private joint enterprises to misappropriate funds. If the state were to pay back the redemption indemnity to small and medium-sized businesses in one go, these problems would be mainly solved. Some people argued that seven years of fixed interest was enough for the large businesses, but that the state should pay back the capital stock of small and medium-sized businesses in order to reduce their debts. Those with little capital should be paid in one to two years and those with a large amount of capital in 20 years. In short, many contributions advocated a differentiated set of measures, not a ‘one-size-fits-all’ policy, to take account of individual situations. From a politi-

30 Li Kangnian, ‘Wo song bieren de liwu’ (My gifts offered to others), Autumn 1957, Li Kang- nian’s private archives.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 230 xiao-planes cal perspective, many doubted that 20 years of fixed rate interest would abolish exploitation from ideological discourse and remould the capitalists into wage earners.31 Some members of the business elites suggested that the country’s redemption policy could not be equated with the sale and repayment of capital because, in addition to the payment of a fixed rate of interest, the state had to take responsibility for all employees and assign jobs to former members of private management, who retained their original wage. Some people also thought that the fixed interest rate should be calculated from the founding of the Peo- ple’s Republic of China and that the amount should include all private profit receipts, with high wages for management personnel as well as leading positions in the public–private joint enterprise. Li Kangnian and his supporters strenuously opposed these arguments, feeling that there should not be any con- fusion between government policies in different periods and the 1956 redemption policy.High wages and leading positions were available only for some management staff, but this did not concern most shareholders, who could hardly enjoy such political, social and economical advantages themselves. Many owners of small and medium-sized enterprises supported Li Kangnian’s position.32 What Li Kangnian raised were universal questions, because in Shanghai more than 80 per cent of companies were small and medium-sized enterprises with dozens, hundreds or even thousands of shareholders in one enterprise.33 For example, the total assets of Li Kangnian’s China Clock Factory amounted to 360,000 yuan in 1954. However, the total number of shareholders was as high as 754. Li Kangnian himself was the largest shareholder, but his capital did not exceed 20,000 yuan.34 Because of the large number of small shareholders, it was difficult to distribute the fixed rate interest when the amount was limited and the formalities were complicated.35

31 All the relevant information in this section was collected from Shanghai Gongshang (20 May 1957), p. 10. 32 ‘Gongshangjie zhengfeng yundong cankao ziliao’ (Reference materials on the rectification campaign in industrial and commercial circles) (October 1957–March 1958), 1, 37–44; 8, 35–38, c48-2-1882, sma. This collection contains a variety of speeches by industrials and commercials during the mingfang campaign. 33 In 1956, the number of public–private factories reached 25,000, of which only 444 were large factories with more than 100 workers, but there were over 20,000 factories with fewer than 16 employees. Zhongguo Zibenzhuyi Gongshangye de Shehuizhuyi Gaizao, Shanghai (Socialization of Chinese Capitalist Industry and Commerce, Shanghai) (Beijing: Zhong- gong Dangshi Chubanshe, 1993), Volume 1, p. 776. 34 Shanghai Municipal Archives, b163-1-394, 13 September 1954. 35 According to the National Statistics Bureau, for the first half of 1956 the government

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The key element of Li Kangnian’s proposal was to restore the redemption policy as a genuine economic operation. The fixed rate interest was renamed ‘redemption indemnity’, to be calculated on the basis of capital, and the payment by instalments complied with the rules of a commercial transaction. However, for the Chinese authorities, peaceful redemption meant taking back the private means of production that had served for economic exploitation and paying a fixed rate of interest only, to take care of the needs of shareholders and to remould them into workers.36 This concept was hardly conceivable from the perspective of the small and medium-sized enterprises. A private business owner wrote that

the national bourgeoisie mostly comprised small commodity producers and merchants most of [whom] … took part directly or indirectly in production and the operation of the enterprise … Thus it is untrue to assume, without a comprehensive analysis, that they held capital through exploit- ing the workers. And it is also untrue to ignore that … the accumulated profits [may have] resulted from legitimate operations.37

A lot of businessmen believed that private industrial and commercial enterprises contributed largely to the recovery of the national economy after 1949. As a result, they felt that the proposed extension of the fixed interest rate and payment of 110 million yuan each year would not cause difficulties to the country, but would instead mobilise the enthusiasm of private management. Li Kangnian’s proposals also revealed the worries of businessmen concerning state redemption. The lack of rigorous legal rule and the unpredictable policy changes led many businessmen to doubt the complete implementation of the redemption policy. They also feared that the authorities would cancel the payment of the fixed rate interest because of political campaigns or for

should have paid 44.53 million yuan of industrial fixed rate interest, but the amount actually paid was 38.266 million yuan. The reason for the discrepancy was, first, that some entrepreneurs were abroad and did not register their property; second, some shareholders did not want to receive the fixed rate interest since they had only made a small investment. See 1953–1957 Zhonghua Renmin Gongheguo Jingji Dang’an Shiliao Xuanbian (gongye juan) (1953–1957 Historical Records of Economic Archives of the People’s Republic of China (Industry Volume) (Beijing: Zhongguo Wujia Chubanshe, 1998), pp. 343, 346–347. 36 Jianguo Yilai Zhongyao Wenxian Xuanbian (Essential Documents since the Founding of the prc) (Beijing: Zhongyang Wenxian Chubanshe, 1992), Volume 8, p. 156. 37 Yan Zhenya, ‘Zancheng “yici shuqing, fenqi changfu”’ (In favour of ‘paying off the redemption in one go and reimbursing by instalment’), Xinwen Ribao (10 May 1957).

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 232 xiao-planes other reasons. For Li Kangnian and many others, the amount and duration of the redemption indemnity embodied the contractual relationship in commercial exchanges, and they hoped that this principle would also become the basis of government policy. However, for Mao Zedong and many Party leaders, the request to extend the redemption period revealed the exact nature of capitalist exploitation. On 12 May 1957, after the lively debate over the mingfang campaign, Mao Zedong made a private comment to his secretary, Lin Ke, that ‘the business community is the most active [in the campaign] … The bourgeoisie seeks nothing but profits, and it has exposed its nature of pursuing fame and gain. [Those who suggested] 20 years of fixed rate interest calculated since 1956 are typical.’38 Mao once promised complete redemption to industrial and commercial representatives, but he never clarified the procedures and forms. According to the 1954 Constitution of the People’s Republic of China, the state protected the legal income of citizens. But there was no discussion about what constituted legal income and the state’s rights over individual assets.

The Contentious Issue of Fixed Rate Interest and Class Status

In 1956, all public–private joint enterprises adopted the unified fixed rate interest system, which perforce became the symbol of bourgeois status. According to the official statement, fixed rate interest was defined as a special form of exploitation and surplus value. In public–private joint enterprises, capitalists who received fixed rate interest had the double status of state employees and capitalist exploiters. In addition to work relations, there still existed class conflicts between private management staff and workers and representatives of the state. The members of the bourgeoisie should continue to undergo transformation until they had totally abandoned the ‘bourgeois style’ and ‘bourgeois ideology’, in order to become workers who lived off their own earnings.39 The so-called ‘bourgeois label’ originated in the Five Antis Campaign. It was a ‘weapon’ used to discredit businessmen. After the initial shock, many entrepreneurs believed that once they handed over their enterprise they would

38 ‘Lin Ke riji (1955–1964)’ (Lin Ke’s diary, 1955–1964) (manuscript), 12 May 1957, p. 37. Quoted from: Shen Zhihua, Zhonghua Renmin Gongheguo Shi, (1956–1957): Sikao yu Xuanze—Cong Zhishi Renzi Huiyi dao Fanyou Yundong (History of the People’s Republic of China (1956– 1957): Reflection and Choice—From Intellectuals’ Meetings to the Anti-rightist Cam- paign) (Hong Kong: The Chinese University of Hong Kong, 2008), Vol. 3, p. 554. 39 Jianguo Yilai Zhongyao Wenxian Xuanbian, Volume 8, p. 156.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 233 quickly lose the bourgeois label, but the actual situation was just the opposite. Li Kangnian wrote:

However, after adopting the joint enterprise, the public personnel remained public and the private personnel were still private (in the recent personnel arrangements in Shanghai, each time it is written as ‘public managers’ and ‘private managers’). At the beginning of the joint venture, public opinion admitted that private personnel had become public by half, but does that mean that the other half was private? Moreover, it is said that everyone was happy after eliminating the bourgeoisie, but it is also said that although the bourgeoisie was eliminated, class conflicts still existed and the conflicts became more and more fierce and intense; it is said that the material basis of the bourgeoisie was almost eliminated, but it is also said that the two-sidedness still existed politically and economically. Therefore, the present situation shows a huge gap between labour and management, as well as a clear distinction between public and private personnel. It is quite difficult in this period to work for unity and turn negative factors into positive. In fact, the crux of the matter is exactly the fixed rate interest that still implies exploitation. So I think the controversy will never end if the fixed rate interest still exists. It would be harmful to the improve- ment of overall production and socialist construction.40

During United Front Department meetings in Beijing, several provincial representatives of the fic suggested that the two-sidedness of the bourgeoisie should not in principle apply to the small or medium-sized business owners who were involved in work production and whose income was limited. Argu- ments about bourgeois status and class conflicts had created tensions in the public–private joint enterprises. The private leaders were rejected, while most public representatives were recently promoted employees, demobilised sol- diers and ordinary administrative cadres who often lacked professional leadership and management skills.41 Hu Juewen, deputy director of the Shanghai Federation of Industry and Commerce, said,

40 ‘Li Kangnian xiang Shanghaishi di’erjie renmin danbiao dahui diyici huiyi guanyu dingxi de jianyishu’, p. 7. Li himself underlined the original text (these sections are presented here in italic). 41 In 1956, Shanghai the Municipal Government appointed more than 10,000 representatives of the state as joint public–private enterprise directors and managers. More than 60 per cent were promoted from the ranks of workers. See Zhongguo Zibenzhuyi Gongshangye de Shehuizhuyi Gaizao, Shanghai, Volume 1, p. 259.

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The biggest complaint of Shanghai industrial and commercial circles is that they feel despised. At present, many people still cannot see any changes from the era of the bourgeoisie and they retain the idea of the Five Antis Campaign that capitalists are all villains. I think now that only a handful of bourgeois still want to live under capitalism. In fact, most of them are willing to take the road to socialism … but their efforts are often denied.42

Bi Mingqi, director of the Tianjin fic, could not understand why the concept of class was still important when joint ownership had announced the end of class conflict, and why people still concentrated on class relations and two-sidedness.43 Zhang Naiqi, the deputy director of the cdnca and minister of food, also sustained the idea that there was no essential difference between a bourgeois and a worker. Each class had two sides and bureaucracy was more dangerous than capitalism.44 As for labour insurance and welfare benefits, the government fixed the limit at 2,000 yuan. If the original shares of the private owner were beneath this level, he or she would enjoy the same treatment as a worker, but if the shares exceeded this amount the business owners and their family members would be excluded from welfare benefits.45 In order to uphold worker status, private personnel could only receive 30 per cent of sick pay while seniority counted only from the starting date of joint ownership. There were also cases where

42 Renmin Ribao, telegram from the Xinhua News Agency, Shanghai (19 May 1957). 43 ‘Bi Mingqi bu zancheng Li Kangnian de yijian’ (Bi Mingqi does not approve Li Kangnian’s proposals), Renmin Ribao (17 May 1957); ‘Weishenme haiyao bao jieji guanxi he liangmianx- ing zhuazhu bubian? Bi Mingqi bu tontyi Qian Jiaju de yijian’ (Why should we insist on class relations and two-sidedness? Bi Mingqi does not agree with Qian Jiaju), Renmin Ribao (1 June 1957). 44 ‘Zhang Naiqi renwei dingxi bushi boxue, ershi bulaoerhuo de shouru’ (Zhang Naiqi thinks that fixed interest is not exploitation, but an income not derived from labour), Renmin Ribao (2 June 1957). On Zhang Naiqi’s views, see Zhang Lifan (ed.), Zhang Naiqi Wenji (Zhang Naiqi’s Essays) (Beijing: Huaxia Chubanshe, 1997), Volume 2, pp. 530–607. Zhang’s remarks brought him down during the anti-rightist campaign. 45 For relevant discussions, see the reports in the Renmin Ribao (16 May to 9 June 1957). See also ‘Guowuyuan guanyu dui saying gongshangye, shougongye, siren yunshuye de shehui zhuyi gaizao zhong ruogan wenti de zhishi’ (Instructions of the State Council on several issues concerning the socialist transformation of private industry and commerce, handicraft industry and private transportation), 28 July 1956, in Jianguo Yilai Zhongyao Wenxian Xuanbian, Volume 8, pp. 459–460.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 235 private personnel received a very low wage.46 Many people deeply resented discrimination that was based on class status, not on how much capital they owned. Wu Jincui, deputy director of a public–private joint motor factory in Beijing, took his own situation as an example:

I am a capitalist with a share of 4,000 yuan and my annual interest is 200 yuan. Besides the 40 per cent that I pay for bonds47 and 10 per cent I contribute to mutual aid, I can only receive 50 per cent of the interest, which is 100 yuan. That is to say, I only have 8 yuan per month. For these 8 yuan, not only I am labelled bourgeois, but also I have no sick pay, no personal medical insurance and no family medical insurance … So is the fixed rate interest an advantage or a punishment? Does it make us feel at ease or flustered? So I prefer get rid of the label!

He suggested not prolonging the period of indemnity payment, which would maintain the label for ever.48 In December 1956, Mao Zedong explained to leading members of industry and commerce that the principle of resolving the issue of the redemption period would do nothing to harm the capitalists’ interests, especially those concerned with large enterprises because they contributed more to the national economy than did small and medium-sized capitalists. In fact, the senior leadership of the ccp was very well aware that there were many differences among the entrepreneurs on the issue of fixed interest. It had already considered removing the capitalist label from those who did not want the fixed rate interest, but it finally decided to implement this measure several years later. Because the small and medium-sized capitalists accounted for 90 per cent of the total number of capitalists, once they were allowed to voluntarily give up the fixed rate interest and the capitalist label, it would be difficult for the remaining 10 per cent to continue to receive the fixed rate interest and the redemption

46 Views reflected in the fourth preparatory meeting of the First Plenary Session of the cppcc, 3 June 1957, a54-2-43–48, sma. 47 According to the authorities’ regulations, capitalists were expected to buy government bonds with part of their fixed interest. Li Kangnian, Chongshenshumai20niandezhuzhang (The reclaim of 20 years’ redemption), RenminRibao (6 June 1957). A report of the Planning Commission on 24 February 1957 explicitly pointed out that the measure aimed to cut off the income of capitalists and to deprive them of political capital. See 1953–1957 Zhonghua Renmin Gongheguo Jingji Dang’an Shiliao Xuanbian (gongye juan), p. 735. 48 ‘Gongshangjie daibiao jixu piping dangde quedian’ (Business representatives continue to criticize the Communist Party’s failings), Renmin Ribao (1 June 1957).

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 236 xiao-planes policy would cease to have any meaning. Mao Zedong tried to persuade the representatives of the fic that

if we do not take good care of big capitalists, once 90 per cent of small and medium capitalists take off their labels, the big capitalists will feel embarrassed because they will still be ‘in white’ while the others are already ‘in red’.49

However, in the debate on Li Kangnian’s proposal in Beijing in spring 1957 the representatives from all FICs said that most medium and small-sized businesses were opposed to extending the redemption period: seven years was already too long and they felt they were the victims of big capitalists’ interest. Under pressure, the fic representatives asked the government to allow the removal of the capitalist label from those who gave up the fixed rate interest and to provide them with labour insurance and the right to participate in labour unions. In 1956, a total of 1,141,864 shareholders in the country received the fixed rate interest, of whom 171,278 were in Shanghai, accounting for nearly 15 per cent of the total. According to Xie Guoxing, 77.6 per cent of shareholders in Shanghai and 80 per cent of shareholders throughout the country had invest- ments of 2,000 yuan or less. All of these people were labelled as capitalists and lived under this status up to 1979. Moreover, the fixed rate interest was not the only criterion determining bourgeois status. The original owners and management staff members of the public–private joint enterprises were called ‘private management personnel’ and were treated as bourgeois. This included small traders, shop owners and craftsmen incorporated into public–private joint enterprises because of mergers and restructuring. These people did not receive any fixed rate interest, but they were categorised as bourgeois. In 1979, the Chi- nese authorities announced that the national bourgeoisie no longer existed and many former manufacturers and merchants insisted on a reclassification of their status. According to the official definition, the ‘labour’ status implied working by oneself, hiring fewer than three people with capital of less than 2,000 yuan and having no important responsibility in the enterprise. The relevant departments reclassified 700,000 private management personnel (81 per

49 Mao Zedong, ‘Tong gongshangjie renshi de tanhua’ (Conversation with representatives from industrial and commercial circles), 8 December 1956, in Mao Zedong Wenji (The Collected Works of Mao Zedong), 7 (electronic version: http://cpc.people.com.cn/GB/ 64184/64185/189967/11568182.html) (last accessed: 23 October 2014).

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 237 cent) as workers out of a total of 860,000 people. The remaining 160,000 people (19 per cent) retained their capitalist label.50 In Shanghai, the authorities reclassified 61,600 people (64 per cent) as workers out of 95,700 people involved in public–private joint ownership.51 Obviously, for nearly three decades so-called bourgeois status was no more than a title imposed upon a large number of ordinary people who were treated unfairly and criticised severely during political campaigns. Their bourgeois status had a real impact on their families as it was handed down to their children, causing serious social inequality as well as countless tragedies.

Conclusion

The anti-rightist campaign temporarily put a stop to controversies about the fixed rate interest. In 1958, the Shanghai business community was accused of sheltering 2,704 rightists, including Li Kangnian and his nephew, Lin Bingwei. Li was removed from all his positions. Yet probably owing to his age and bad health, he was authorised to live on in Shanghai up to his death in 1964.52 There- after, fixed rate interest became a symbol that continued to swing between revolutionary discourse and economic interests. Industrialists and businessmen changed their opinions under different political situations. They wanted to give up fixed rate interest once and for all to show their revolutionary spirit and to protect themselves, but they later asked to readopt it with the permis- sion of the authorities to fulfil their legal economic interests. In 1962, the seven years of redemption ended. Following Chen Yun’s and Zhou Enlai’s suggestion, Mao Zedong agreed to extend the payment for three years. In 1965, Chen and Zhou suggested another two years and Mao again approved the proposal, but

50 Xie Guoxing, ‘Zai shehui zhuyi gaizao de jintou zhefan’ (Turning back at the end of the socialisation period—the fixed interest and its sequels), in Xie Guoxing (ed.), Gaige yu Gaizao, p. 400. 51 Yang Shuming, ‘1978 nian zhi 1979 nian luoshi dang dui minzu zichan jieji zhengce’ (Policies implemented on the bourgeoisie from 1978 to 1979), Zhonggong Dangshi Yanjiu (Research on Chinese Communist Party History), Vol. 11 (2011) p. 93. 52 On the number of rightists among Shanghai merchants and industrialists, see http:// www.shtong.gov.cn/node2/node2245/node4538/node57040/node57045/node57047/ userobject1ai45461.html (last accessed: 23 October 2014). On Li Kangnian’s punishment as a rightist, see Shen Zhihua, Zhonghua Renmin Gongheguo Shi, (1956–1957), pp. 684–685, and Li Kangnian’s private archives.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access 238 xiao-planes the decision was abolished a year later with the Cultural Revolution.53 As for the specific background to these decisions, we still lack more detailed information. However, Xue Muqiao, an economist and the director of the National Bureau of Statistics in the 1950s, indirectly admitted the economic deprivation that befell industrialists and businessmen under public–private joint ownership. He pointed out that ‘with the 5 per cent fixed interest rate, the main income of private enterprise owners was significantly reduced’. Moreover, from 1956 to 1966, ‘the distribution of fixed interest lasted for ten years in all and the amount was only 50 per cent of the original share value’.54 This number was almost exactly the same as the calculation in Li Kangnian’s proposal. In 1953, the Communist Party adopted the principle of peaceful redemption of private business, based on Lenin’s theory of state capitalism and the new economic policy of the Soviet Union. This also tied in with Chinese nationalism and the urgency to establish an independent and complete industrial system. Aside from the socialist economic model, it was very common around the world for the government in developing countries to play a dominant role in the inte- gration of economic resources and the process of industrialisation. In China, this was also an objective most industrialists and businessmen approved. Both Li Kangnian and many businessmen who actively participated in the debate were willing to approve the national goal of industrialisation. With technical expertise and rich experience in management, many entrepreneurs were par- ticularly eager to contribute to economic construction. However, instrumen- talisation was evident in the policy of the ccp. Politically, it sought to debase the bourgeoisie, while economically it strove to buy them over in order to make use of the knowledge and skills of the ‘capitalists as well as the democrats and intellectuals in contact with them’.55 This seemingly revolutionary stance led to a narrow concept and a labelling routine that in practice categorised all the people engaged in industry and commerce as belonging to the bourgeois camp.

53 Xu Dixin, ‘Ququ zhezhe de ziben zhuyi gongshsangye gaizao’ (Twists and turns in the transformation of capitalist industry and commerce), Zhonggong Dangshi Ziliao. Qinli Zhongda Lishi Shijian Shilu (Chinese Communist Party History Archives: Witness to the Major Historical Events) (Beijing: Dangjian Duwu Chubanshe, 2000), pp. 490–492. 54 Xue Muqiao, Xue Muqiao Huiyi Lu (Memoirs of Xue Muqiao) (Tianjin: Tianjin People’s Publishing House, 2006), p. 167. See also Li Weihan, Huiyi yu Yanjiu (Memories and Research) (Beijing: Zhonggong Dangshi Chubanshe, 1986), p. 777. 55 Mao Zedong, ‘Zai shengshi zizhiqu dangwei shuji huiyi shang de jianghua’ (Speech on the meeting with secretaries of the Party in provinces, cities and autonomous regions) (January 1957), Mao Zedong Xuanji (Selected Works of Mao Zedong) (Beijing: Renmin Chubanshe, 1964), Volume 5, p. 337.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access ‘buy 20 years’ 239

Revolutionary discourse became the modus operandi of government and Party bureaucrats in sidelining private management personnel and instigating public opinion in discrimination against business owners. This led to a waste of hundreds of thousands of precious human resources and serious violations of their rights, as well as those of their families. The debate over Li Kangnian’s proposals also reveals the other side of society during the Maoist era, when a status-based society took shape. In its political programme, the ccp claimed that, except for a few class enemies, the majority of the population would enjoy equal civil rights in the socialist country. How- ever, the socialist transformation of private industry and commerce shows how the authorities played the role of patriarchal authoritarianism. Using political objectives, the authorities labelled each stratum and individual and distributed different social resources to each, resulting in the shaping of the bourgeois status of manufacturers and merchants and the forming of a status-based urban society. The authoritarian political culture was incongruous with the spirit of entrepreneurship and the covenant culture that industrialists and businessmen had developed in the late Qing dynasty and the Republic of China. In fact, the latter was a potential political and social challenge to the former.

European Journal of East Asian Studies 13 (2014) 214–239 Downloaded from Brill.com10/02/2021 07:45:03PM via free access