Saturday, April 22, 2006

Mobocracy Update

Courtesy of Third Party Dreamer, who talked to a restaurant owner:

The restaurant owners (see ambiv’s post, below) are fighting back, but it’s clearly a losing battle. In front of each of the restaurants now hangs a protest banner, white with black characters: “High Honesty Supermarket, give back our blood-sweat money!” “You illegally cut off our electricity, and treat tax-paying people like convicts!”, and so on. Next time we go we’ll try to remember to take the camera so we can post some photos on the website.

Today, when I was ordering some take-out from our usual restaurant (and, just like the last two times we ate there, there were no other customers), I asked one of the owners who it was that wanted to tear down the buildings. The protest banners all accuse the High Honesty Supermarket, but that folded (or moved out, anyway) a few months ago, so I was confused. Well, it turns out that the land belongs to the railroad bureau, and is managed by a company (High Honesty) that is a subsidiary of the railroad department. When they signed the contract to rent the property all the business owners were told that that row would be torn down, but not before the end of 2008. There are about six restaurants on that row, plus a bunch of other small-scale shops clinging to the edges of the old warehouse that was the High Honesty Supermarket, now just an empty shell. Well, the business owners took that assurance in good faith and signed a contract, but apparently one that didn’t specify in writing that the buildings would be useable until the end of 2008. Something (perhaps the skyrocketing prices and, presumably, profits in the area) made the company change its mind and decide to develop the property into luxury apartments NOW rather than later.

Unforunately, in the contract there is no stipulation that matches what the business owners were promised orally, and “we didn’t tape-record what they said at the time; we trusted them,” the owner of our usual restaurant says. So the lawyer they’re consulting says they don’t have much of a legal leg to stand on.

The lawyer did inform them that there is nothing illegal about snipping the bailing wire that closed off the main gates to their compound, though, so they went ahead and did it, and now we can go through the gates nearest our apartment, just like before. Another of the railroad company’s underhanded tactics had been to shut off the electricity all over the compound; in response, the restaurant owners have banded together and bought a generator.

So far the situation has not brought out the most typical and dramatic feature of China’s mobocracy, namely stick-wielding thugs. But it may only be a matter of time. I have read plenty of newspaper articles that begin with a dispute such as this one– developers want a family or a small business to get off of profitable land so it can be made into housing for rich people– and end with a gang of stick-wielding thugs (sometimes in the hundreds) scaring the little people off if they prove insufficiently malleable.

When we first arrived in Beijing there was an article about a family-run pheasant farm outside of Beijing that developers desperately wanted to remake. They offered the family some paltry compensation, but not nearly enough to pay for them to move the entire farm to a new location. The family refused, and the developer refused to offer more compensation. Both sides dug in their heels. Then one October midnight, out of nowhere 100 guys with lead pipes showed up at the pheasant farm. They broke in to the yard, bludgeoned every last one of the pheasants to death, and left. No one claimed responsibility, and no one seemed to know where the thugs had come from or who they were, but conveniently, they family no longer had a pheasant farm that would require extra compensation.

Anyway, fortunately this hasn’t devolved to that level yet, but it certainly has the makings of an ugly and all-too-typical conflict between small business owners and big companies backed (or entirely owned) by the state. 

Thursday, April 20, 2006

Comment on previous post

I'm unable to post any comments on Blogspot sites when accessing them through an anonymizer proxy, as I must do in China. But in a comment to the previous post, China Law Blog said...
I think you are going to far in making it seem that what happened to Kitto in China is common. I blogged on that here: [link].

The reality is that Kitto's magazine was being run illegally and he was in partnership with the state. Both of those things make what happened to him far more likely than a WFOE that has been set up properly in China.

My understanding from reading about Mr. Kitto's case is that it would be impossible to set up a media outlet without some sort of state partnership, due to the inavailability of the appropriate licenses. But in matters of law, I will of course defer to the experts. I agree, though, that Mr. Kitto took risks and got burned, and that his case is more instructive as an example of how not to set up a business rather than as representative of all businesses experiences in China. But as the CLB post linked to in the comment points out, China's superfluity of laws makes it far too easy to run afoul of legal requirements, even if one is more careful about such things than Mr. Kitto.

And, as my original post noted, for those who cannot afford expensive and time-consuming legal processes, China's excess of laws is of little use. I don't have any statistics on the number of business or property disputes settled by gangs of stick-weilding thugs, but it seems like every paper we've read (that is, read to me by my wife, because I can't read Chinese) during our stay here contains at least one such story--a pheasant farm blocking a development destroyed, a bunch of senior citizens hustled away from a park to be turned into a parking lot--which suggests such tactics are fairly common. Some of our Chinese friends are cynical enough to believe that any private business that begins to show a considerable profit will in some way or another be coopted or shut down by the state officials. I don't have any way to confirm their suspicions, and I think they're probably too cynical, but their perception corroborates my feeling that doing business in China is an exceedingly tricky business.

Mobocracy, with Chinese characteristics

China is still nominally a socialist country, and still definitely an authoritarian state. But it's economy thrives as a result of market reforms and an opening-up to foreign investment. Over $60 billion in foreign direct investment was spent here last year, as companies from all over the world sought to stake out early claims in the newest land of opportunity. The Chinese are struggling to maintain an image of their economy as open and accessible, a place where entrepreneurs--foriegn and Chinese--can strike it rich as China transitions from a socialist to a market economy. It is at the moment, however, something like a 'Mobocracy,' where profitable businesses can be built, but on a constantly shifting semi-legal basis, always vulnerable to poaching by government officials, by people with better government connections, or some security guards with bailing wire.
A case in point is the story of Mark Kitto, founder of the highly popular 'That's' magazines in Beijing, Shanghai, and other cities. After working for years to build a chain of successful magazines, Kitto was ousted from the company he had founded by his Chinese government 'partners.' It's a very enlightening story of how the Chinese economy works these days, and Mr. Kitto tells it himself in this Prospect article.
Kitto is a fairly well-funded and savvy foreigner, who is fighting the usurpation of his magazines in the Chinese courts (or at least fighting to get the rights to his brand name back). Smaller businesses are not likely to have such resources, and can be highly vulnerable to the petty tactics of the better-connected. Like, for instance, some security guards and some bailing wire.
Near where we live in Beijing, for example, is an oddly shaped concrete plaza surrounded by an abandoned warehouse and a small strip of down-market restaurants. Our favorite grocery store--the High Honesty Supermarket--was here too, but closed down at the beginning of winter. But we continued to visit the plaza, to go to our usual restaurant there, and to buy vegetables from the farmers' market set up in the abandoned warehouse. Yesterday, though, we found that the gate leading from our apartment complex to the plaza had been wired shut. We had to walk all the way around the block to use another entrance.
According to employees at the restaurant, and sellers at the vegetable market, the owners of the plaza want the businesses to shut down and move away so that the plaza can be redeveloped into a housing high-rise. By closing the gates off, foot traffic through the plaza has been dramatically reduced, and by slowly strangling the businesses around the plaza, the landowners don't have to pay them any compensation to move them elsewhere. We'll make a point of walking the long way 'round from now on, but the toll on the businesses seems evident already. Some have already closed or are putting their merchandise on sale. Our favorite restaurant is usually packed at lunch times, but yesterday we were the only customers.
For more coverage of Kitto's case, see the Danwei web log and this Daily Telegraph story.
For more on our favorite restaurant and the farmers' market, stay tuned.

Saturday, April 01, 2006

The press piles on

A quartet of stories from the New York Times this morning demonstrate the continued unraveling of the Bush administration's fa├žade of competence, and how the US press is now more willing to cover, even give prominence to, information embarrassing to the administration and its members. The first is a piece by Eric Lipton on the Bush administration's futile search of a new FEMA director. As the White House and its apologists watched in horror during the Katrina disaster, bad press poured from the nation's media like water into the ninth ward. Formerly docile reporters were suddenly showing teeth, and the White House swung into action to rebuild the barriers of spin and manipulation that no one had imagined would ever fail. High on the agenda was to find someone with actual disaster management experience to take over FEMA.

Reaching out to the reality-based community for a political appointment was an unusual step for the administration, especially when there were so many cronies and underskilled political hacks lacking appropriately cushy jobs. But desperate times call for desperate measures. Unfortunately, as Lipton's article shows, none of the nationally-known disaster management experts the administration contacted wanted the job. The administraion's systematic disempowerment of federal regulatory agencies, its sandbagging of scientists and experts, its gutting of laws and regulations, its installation of political hacks in key offices to ensure that the Republicans' corporate pals get breaks wherever possible, and that no critical report or attempt at oversight emerge to distract agencies from this, their true mission, had become too well known. Actual experts have little desire to be a token egghead at FEMA, and can see that the administration, Chertoff at DHS, and the Republicans in Congress are not really serious about repairing FEMA. It's hardly surprising that, after six years of rampant political hack-work and cronyism, when the administration finally decided it needed a department head skilled at more than puckering and stooping, no highly regarded experts were willing to serve as the administration's beard at FEMA.

Two other NY Times stories show why regulatory or management experts might want to put some distance between themselves and the Bush administration's 'loyalty to the president and corporate interests above all else' campaign. Felicity Barringer updates readers on how the Interior Department under Gale Norton has successfully increased the number of Potemkin wetlands in the nation, counting as a 'wetland' anything that's wet, including water hazzards at golf courses or temporary ponds left over from construction excavation. Meanwhile, actual wetlands--shallow bodies of water, with plants such as reeds and water lillies, that are home to many species of amphibians and birds, and that perform important roles in the absorbtion and filtering of water runoff--have decreased by 523,500 acres since 1998. Over at NASA, meanwhile, a bit of better news: the agency has strengthened its free speech policies after complaints from several agency scientists that political appointees had attempted to quash speeches or reports critical of administration policies. If the White House thought that its cronies could head FEMA and Interior, because after all, disaster relief and resource management are hardly rocket science, it's good to see that at one of the agencies responsible for actual rocket science, some effort is being made to protect the jobs of those scientists who have not already quit or been driven out by Bush's political commissars.

Finally, Secretary of State Rice is visiting Britain--our staunch ally in the coalition of the willing. Rice was once the darling of the US press, which fawned over her after her appointment at State, notwithstanding her complicity in the administration's disasterous foreign policy (even leaving Iraq out of it, if you insist). It's always been more difficult for members of this administration to escape public protests and tough questioning by reporters in Europe, where they have yet to enshrine 'free speech zones,' carefully screened audiences, and sound-bite reporting to the extent that we have here in the US of A. On her latest trip, Condi has run into more than Europe's usual intolerance of the differently-adept. She has run afoul of the US media's penchant for pushing the dominant meme. A couple years ago the meme was how tough, visionary, and steadfast was the White House and its policies. Today, alas for Condi, it's how incompetent the administration is. In his account of Rice's visit to the hometown of British Foreign Secretary Jack Straw's hometown of Blackburn, reporter Joel Brinkley picks out the telling details that communicate the media's theme-dejure, such as the hapless Secretaries waving enthusiastically to a "handful of people, many holding shopping bags, who had stopped to gawk."

For those of us who have been mad at this administration for a long time, and aghast at the media's ability to ignore or explain away anything critical of Bush, reading a description like Brinkley's is music to the ears. In it's confirmation of our long-held belief that this administration is perhaps the worst in modern history, it has the ring of authenticity that so much previous reporting has lacked. The way the tone of US political reporting has changed since Katrina has been dramatic. 'Finally,' I think to myself, 'the press gets it. But what they've got is not really a commitment to accurate reporting, but rather a different manifestation of the slavishness of the US press to whoever and whatever is popular at the moment. Once it was that Bush could do no wrong; now he can't do anything right. Sad that it is so, even when it happens to people who really deserve it.