T
Shenzhen riot over shares.
Over a million people flooded
Shenzhen in August this year to try their luck in getting hold of a piece of the reform cake - the application form for buying shares. This appears to many as a swift way to wealth; share prices in Shenzhen have risen spectacularly in recent years, some rising over 40 times in the past 18 months (see table).
When the Shenzhen authorities suddenly raised the fee for an application form from one yuan to 100 yuan it had the effect of
(misleading the people to think that if they were successful in the lottery for the forms they would reap considerable profits from
Potential shareholders rushed to Shenzhen from all over the country and queued for two hot days and nights; many were beaten up by police - Min Pao reported that on August 9 about 200 people from the queues were admitted to hospitals in Shenzhen.
However, soon after the application forms started to be sold, the banks announced that it was over, that all the forms were sold out.
People who had obtained forms through backdoor relationships were on the spot selling the forms at several times the original fees. It was widely believed that many of the forms had not been sold on the open market that it was a "big swindle" and "a huge case
Such blatant corruption drove the frustrated masses mad. On the evening of August 10, some took to the streets waving banners "Against corruption, for justice" against the fraud of officials". More and more people joined the demonstration which swelled to tens of thousands. The peaceful parade was met with water cannon and teargas. A riot began. The crowd burnt cars and police vans and broke the windows of banks, financial institutions and shops. The confrontation lasted a couple of hours. When the government announced that an additional half million exchange coupons would be released for sale the next day, each costing 1000 yuan and the odds would still be ten to one, the incidents subsided.
Though the official version was that the riot was incited by a small number of criminals, in fact this was a mass protest against the corruption of officials. The incident shows several things:
• The government takes the lead in scrambling for profits. Just by selling the application forms, the government earned a
• Officials and law-enforcement personnel are deeply involved in corruption.
• In the early stages of experimenting with the shares system a lot of upstarts gain uge profits without expending any labou he desire for speculation and profiteerin governing the trying out of the shares system in enterprises".
The ordinance states that the first objective of issuing stocks is "to change the operating mechanisms of the enterprises, facilitating the separation of politics from the management of the enterprises and realizing the autonomy of enterprises and their selfrestraint". Yet the government still intervenes in and profits from the issuance of the application forms and shareholders, instead of restraining the activities of enterprises are interested only in speculative dealing in
The second objective of the ordinance is to "open up new channels for pooling capital, gathering the funds for construction and channeling consumption funds into productive construction funds". It might be true that funds are attracted to enterprises when stocks are issued, but much larger amounts of money are also withdrawn from banks to engage in stock speculation. Indeed, a lot of capital has flowed from the hinterland to Shenzhen and Shanghai for speculation.
As for the third objective of the ordinance "to promote a rational flow of the key factors of production to facilitate a fair allocation of social resources" - the flow is by no means rational when profiteering is the
Insider dealings
Liu Hongyu, deputy director of the State Economic Reform Committee wrote in the
People's Daily of June 23 about problems around the pilot share system. He pointed out that "one rather conspicuous problem is over the issuing of stocks - how to increase transparency and prevent internal alloca tions and backdoor dealings which will give rise to new injustices in distribution and hence social instability. The second problem is that of the transfer of stocks - fea sible procedures must be stipulated; before this is done, we should not hastily start new
Rise in stock values in Shenzhen (all the stocks of collective corruption"
below started at value of one yuan on issuance).
The semi-official China News Agency reported on September 10 from Hong Kong that "the staff of banks, insurance companies
Name of stock Date of issue and stock companies, the police and security officers and the staff of industrial, commercial and monetary bureaus had by various means appropriated over 50% of the applica-
* This article is taken from the October 31, 1992, issue of October Review, a revolutionary Marxist journal published in Hong Kong.
the process of economic reform. The
Shenzhen riot is the largest demonstra-
Zhong Guan
• The corruption and incompetence
Value on
August 12, 1992
43.90 yuan
30.80 yuan
27.35 yuan
30/3/1992
25
18.00 yuan
20.30 yuan
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share riot
International Viewpoint # 239 • November 23, 1992
CHINA / POLAND
STON LANE
ISHAN stock issues". A few weeks later his fears
In his article, Liu Hongyu stressed that the shares system in China is guided by political policies that uphold the socialist public ownership system and is not a step on the road to privatization.
However, the ordinance stipulates that, apart from two categories of state enterprise, the rest of the stocks can be owned either by their staff workers or put on sale on the open market and hence owned by individuals or foreign capital.
The first category is not included in the stocks experiment; these are enterprises related to state security, defence technology or strategic minerals.
The second category can experiment with stock issues, but the state-owned assets stocks must remain in control; this applies to key development enterprises in energy, transport and communication.
Liu Hongyu maintained that the socialist orientation of the country would not change so long as the state ownership system remains dominant.
However statistics reveal that state entershare of industrial output was decreasing throughout the 1980s and continued to decrease at a rate of 2-3% a year in
By the year 2000, it is estimated that this share will be down to 25% - the same as private enterprises, the other 50% being taken up by collective enterprises. (This latter category can also be private.)
At the same time, when the shares experiment was launched, the authorities issues "Interim regulations governing the management of labour and wages in enterprises experimenting with the shares system". The regulations demand that the increase in total wages must not be higher than the increase in the economic efficiency of the enterprises; that the increase in the average 26 higher than the increase in the labour pro- actual wages for workers must not be
FAST LANI
SOKPH ... THE SKYSTE LIMIT!
ductivity of the enterprises.
Under the above premises, the enterprises have the autonomy to decide the purchase of equipment, the conditions of employment, the terms of the labour contract and the internal system of distribution (which means wage differentials can
As ever, holy scripture has been used to justify an empirical turn. Liu Hongyu quotes from Marx to the effect that "capitalist stock enterprises like cooperative factories should be regarded as the transitional form in the transfer from the capitalist mode of production to combined modes of production" (Collected Works of Marx and
Engels, Chinese edition, Vol. 25, p. 498).
However if we look at the entry on stock capital in the 1983 Concise Dictionary of
Political Economy, put out by the People's
Press, we find that such capital is "an advanced form of capital, which, on the one hand, causes capital to concentrate more and more in the hands of the few, and, on the other hand, strengthens the exploitation of wage labour hence causing a further aggravation of the basic contradictions of capitalism".
No arguing
In fact, the shares system experiment has no theoretical backup or guidance. When party leader Deng Xiaoping toured the south this year, his comments on the stock market were "observe it while firmly experimenting with it. If you think it's correct, let it develop. If it's incorrect, just rectify the mistake and close it down." Deng was against controversies over the capitalist or socialist nature of the shares system. He said "My one intention is to stop controversies. Not arguing will give us time. When arguments start, things turn complicated This empiricism is today the guiding principle (or lack of it) of the Communist Party's rule over China. *
Attacks on women
A new step has been taken towards the criminalization of women in Poland.
CYRIL SMUGA
N October 22, a special commission set up to study the proposed law on "the juridical protection of conceived children" voted 12-6 to recommend that the proposal be adopted as law.
This is the most reactionary version of the law - one that had been drafted by the