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ICG Risk Blog - [ Stone Corporation, SERI and the brief window when China’s political and economic 'doors' were open ]

Stone Corporation, SERI and the brief window when China’s political and economic 'doors' were open



The Chinese research community and business sector are the focus of this 20th anniversary note on the events of May-June, 1989, culminating in the military’s expulsion and dispersal of demonstrators, later their parents and sympathizers, from Tiananmen Square on 4 June. As the Chinese place added importance to anniversaries at a multiple of five to the event, I hope to do justice to themes and outcomes now largely lost to western readers.


James Miles’ The Legacy of Tiananmen: China in Disarray is recommended for a traverse of the events leading to 4 June, as is Goldman’s The Twentieth Anniversary of the Democracy Wall MovementThe events of June 1989 can reasonably be said to rise from the Democracy Wall of 1978-1979: 

Beijing democracy activists [were] encouraged to criticise the Gang of Four and failed government policies. But the [Chinese Communist Party (CCP)] became dismayed as more and more posters began to call for a complete overhaul and even the abolishment of the CCP. As the current leadership and policies came under fire, a new wave of party intolerance at political dissent began.

One might think that this should have come as no surprise as: 

Most of the participants were ex-Red Guards and workers, who might have been students but for the suspension of their education from 1966 to 1976. They used the methods and strategies they had learned in the Cultural Revolution forming unofficial groups, putting up large-character posters, writing and printing pamphlets, and setting up their own networks to achieve their own political goals. In the Cultural Revolution, they had employed these practices initially to purge party officials and the intellectual establishment in response to Mao's summons to "rebel against authority."

Elements of this note rose from a discussion with colleagues who were involved in construction technology transfer to and through a series of joint ventures in China in the early 1980s. One was working with the founders of Stone Corporation of China prior to the May 1989 uprising. Stone Corp was highly regarded as the new symbol of Chinese capitalism before 1989, but condemned by Li Peng as “counter-revolutionists” days after suppression of the uprising and fall of Zhao Ziyang, then general secretary of the Communist Party.


As some of the early documents are not easily available in electronic text, I have tried to site enough for readers to pursue.


Never underestimate your enemies


From If you want food, find Ziyang"; If you want Ziyang, pierce the Golden Shield:

An administrator given to revisionist thinking or pragmatic solutions depending upon your political viewpoint, Zhao was tapped by Deng Xiaoping to revitalize the economy. Zhao created much of the 1980s economic package credited to Deng Xiaoping:

  • Coastal development with special economic zones, drawing investment and creating exports
  • Agriculture reform that disbanded communes, returning private plots to farmers while assigning production contracts to individual households.
  • Industrial reform that included expanded self-management for peasant farmers and some industries
  • Price reform allowing farmers and factories to set prices for their products

Zhao threaded the policy needle with a 1987 speech that declared China to be in a stable, "primary stage of socialism" that could afford to experiment with approaches to stimulate economic production. In a stroke, market economics appeared within the evolution of socialism.

Zhao's pragmatism led to his stepping on the third rail of political reform, thinking the "goal of Chinese political reform was to build up democracy and rule of law." Having acquired a legion of old school enemies, Zhao was said to have doomed himself by making public (to Mikhail Gorbachev, already a tainted reformer in communist eyes) that all major Central Committee decisions had to be approved by the nominally retired Deng, which implicitly showed Deng to be the stonewall of reform...

Without approval of conservative elements of the Chinese Communist Party (CCP), Zhao commenced to simultaneously open what would later be called the political and economic doors to a dissatisfied citizenry.


The nascent RAND: Beijing Social and Economic Sciences Research Institute (SERI)


Independent of government, Chen Ziming set up his first think tank, the China Political and Administrative Sciences Research Institute, to fulfill a “long cherished dream.” (Wang Juntao joined Chen's second think tank in the late 1980s the Beijing Social and Economic Sciences Research Institute (SERI) and was "deputy editor of SERI's newspaper, Economics Weekly, at the time of the 1989 demonstrations): 

“[Chen] said that he wanted to turn his organization into something like the U.S. Rand Corporation, doing consultancy work for government decision-making bodies, providing top-level advice and strategies for reform,"... Among the group's founding members was Wang Juntao. [Both Chen and Wang had activist histories dating preceding the Democracy Wall.] The two men quietly built up an organization of extraordinary sophistication, quite independent of party control. Unlike more conventional dissidents they did not seek out the Western media, preferring instead to cultivate good relations with radical reformers working for the government. Their groundbreaking efforts thus went almost entirely unremarked by the outside world. “The two men’s long-term aim was not to pursue scholarship... If they'd wanted to do that they could have done it in the Chinese Academy of Social Sciences. Their aim was to change the socialist system." It was only after Tiananmen [that] most Western journalists and even many Chinese intellectuals learned their names.


[In 1987] Chen founded a new [group] called the Beijing Social and Economic Sciences Research Institute [SERI, whose] activities ranged from conducting public opinion surveys - a science then in its infancy in China - to publishing books on social and political issues. Within two years, the institute had nearly 50 employees and more than 100 associate researchers. It had office space consisting of 60 rooms. sophisticated computer equipment, and dozens of cars. By the time the Tiananmen Square protests erupted, it had launched nearly 40 research projects, organized 14 academic conferences, and published more than 100 books on the social sciences... Hardliners were deeply suspicious of the institute's activities, but thanks to the relative strength of reformist leaders at the time, the Chinese media gave the institute considerable encouragement by publishing some of the results of its surveys...

It is a testament to the strength of the reformers that the shock of hardliners could be restrained when Chen was publishing polls such as this 1987 item: 

[M]ore than 3,000 respondents answered questions about their attitude toward highly sensitive political issues. A book based on the results contained what for China were embarrassing revelations about people's political views. It said, for example, that more than a quarter of private entrepreneurs surveyed believed that it was right to rebel against the state “if the state caused you to lose hope.” More than 15 percent of peasants gave the same reply and nearly 10 percent of intellectuals and officials. Even asking such a question would have been unthinkable a few years earlier.


[F]ewer than 45 percent of peasants felt proud of living in a socialist country and only just over 50 percent of intellectuals. Officials showed the greatest enthusiasm for socialism, with more than 65 percent expressing pride in the system. Nonetheless, more than 10 percent of cadres replied that “there is nothing to be proud of.” Asked whether they trusted the government, nearly 40 percent of peasants surveyed replied “No.” Most respondents expressed dissatisfaction with the behavior of civil servants, including nearly 70 percent of officials themselves. A similar proportion agreed that “problems in the political system are the main reason why China is developing slowly.” Fewer than half expressed satisfaction with the amount of freedom of speech and belief they enjoyed...

 In retrospect, with such political explosives in hand it is a marvel that Chen and Wang were not silenced prior to being accused as the "black hands" behind the 1989 movement. The thirteen-year prison sentences imposed on both “probably had more to do with what they represented - the emergence of an organized, independent intellectual force - than with anything they actually did in 1989.” Wang’s wife said, “I cannot but respect the Communist Party's insight, their ability to see at a glance who are their real adversaries.” Think tanks and research institutions henceforth curtailed any social commentary not acceptable to CCP interests.


China’s 'first IBM'


Wan Runnan was the business equivalent to Chen Ziming and Wang Juntao in the research community:

Wan said his aim was to create China's answer to IBM [just as] Chen wanted his company [SERI] to become China's Rand Corporation... “When Wan established [Stone Corporation] with 20,000 yuan [$5,400] in a two-room office provided by a rural factory, nobody could imagine this humble 'Stone' would become a computer empire with 30 million yuan in fixed assets and a turnover last year of 300 million yuan," gushed Xinhua in 1988, when Wan was still a model entrepreneur lionized by the official media. “Some People call these new entrepreneurs China's 'red capitalists' of the 80's," the agency said.


Unlike Chen and Wang, Wan, who was in his mid-forties by the time Tiananmen erupted, was not a man with a long record of political activism on the wrong side of the party line. Wan was, in fact, a party member. But that did not stop him from sharing some of Chen and Wang's interests. When one of his employees proposed setting up a think tank, Wan readily agreed. In 1988 he established the small but influential Stone Social Development Research Institute, appointing the well-known political and legal scholar Cao Siyuan as its head. Cao, a former researcher in one of Zhao’s think tanks, had extensive contacts in the official world thanks to his role as the chief drafter of China's first law on bankruptcy, the most fiercely debated piece of legislation ever considered by China's normally docile parliament. The law was adopted in 1986 and went into effect two years later, providing a legal framework for the winding up of loss-making, state-owned industries that for decades had been propped up by massive state subsidies.


One of Cao's jobs as director of the Stone think tank was to do consultancy work on the new law, But his activities also strayed into the more sensitive realm of politics. Cao had long been an outspoken advocate of giving the National People's Congress greater clout and removing overtly political jargon from the constitution. In March 1989, not long before the student protests erupted, Cao's institute organized a large-scale conference on constitutional reform attended by many of the country's radical intellectuals. Among the constitutional amendments Cao wanted to see were provisions that those brought to trial should be presumed innocent until proved guilty and that the secretive proceedings of the National People's Congress should be broadcast live and published in full. Cao wanted ordinary members of the public to be admitted to the Great Hall of the People to observe the meetings. His suggestions fell on deaf cars. The only part of the congress the government was prepared to broadcast live was the carefully scripted opening address by the prime minister. This was not a concession to Cao. Such broadcasts hid been introduced several years earlier. The government was not prepared to take even the remote risk of a dissident voice being heard by publishing a full record of debates, and it certainly did not want members of the public observing the sycophantic behavior of the “people's representatives” close up.


By the time of Tiananmen, Wan's Stone Corporation employed more than 700 people, many of whom eagerly joined the demonstrations. Unlike Chen and Wang, who preferred to stay in the background, Wan threw himself and his company into the movement, donating large sums of money to the students and organizing meetings of protest leaders. As the People’s Daily put it, -Wan Runnan picked up a big stone - 'the entire company' - and threw it at Beijing.” Cao Siyuan and his think tank helped Hu Jiwei, a liberal member of the National People's Congress Standing Committee, collect the names of fellow members on a petition calling for an emergency session of the Standing Committee to discuss the unrest. The authorities later accused Hu and Stone of including the names of people who had not agreed to give their support and of plotting to use the Standing Committee to dismiss Li Peng and rescind martial law. Hu was stripped of his post and expelled from the party. Cao also lost his party membership and was imprisoned without trial for nearly a year.

The Chinese Communist Party’s clear and present danger


While the events of May-June 1989 have been assiduously scrubbed from Chinese media and contemporary histories by the CCP, they have also fallen from Western minds by the passage of time. To many, only the image of the Tank Man, stripped of context, remains in Western consciousness:

Tiananmen Square was a war zone [in June 1989]. An army 300,000 strong - that's almost twice the numbers we sent into Iraq - the People's Liberation Army, fought its way into Beijing from four directions, with orders to converge on the square. Unarmed citizens and students faced armored personnel carriers, tanks and soldiers armed with semi-automatic weapons. By 5:30 A.M. on June 4th, 1989, the army's mission had been accomplished...


The protests [had] begun five weeks earlier with a mass student demonstration, and in most Western media, continued to be treated as a student phenomenon... The students had touched a nerve, and soon everyone seemed to be out there protesting against hardship, government corruption and 40 years of repression. In Tiananmen Square and on the streets of Beijing, in cities right across China, there were tens of millions of Tank Men. Whole swathes of the country were in open revolt...


In Beijing, one in ten of the population was joining in, and that includes all the old people, all the little children. So it was massive... There were people in heavy earth-moving equipment. Honey bucket collectors and a tank truck came in. There were pilots. There were hotel workers... It was just a carnival of protest. All the groups were out there with their own banners, saying, "We are the Beijing journalists. We demand press freedom. We demand the right to tell the truth." ... You had doctors and nurses and scientists and army people demonstrating. The Chinese navy was demonstrating. And I thought, this is extraordinary because who's left? It's just the top leaders who aren't out there...


For the very first time, press and television were reporting freely and truthfully. The virus of freedom quickly spread... Uprisings occurred all over China, in at least 400 cities - we know this from the Chinese press and from their own military museum - all the way from Mongolia in the northwest down to the southeast near Hong Kong... And from these cities, hundreds of thousands of supporters converged on the capital. The students had started the protest, hoping to cleanse the party of graft and corruption and encourage free speech. They sought reform, not revolution. After all, they were, by and large, the children of the elite. But as their movement spread outwards to the middle classes and then to the workers and peasants, attitudes hardened...

It is instructive to revisit the threat perceived by conservative politburo members to the continued existence of the Chinese Communist Party (CCP):

The move from student uprising, if you will, to a worker uprising is what really scared the Chinese government. They felt that they could deal with the students. After all, students had been involved in uprisings for many, many years. But where it became dangerous to the stability and to the survival of the Communist Party was when ordinary workers became involved...


After all, the Chinese Communist Party had originally used the workers' movement to gain power for itself. Now those in government were terrified that we'd take it back from them... In fact, the government was paralyzed by infighting between those who advocated peaceful negotiation and hard-liners who demanded a crackdown. On May the 19th, Zhou Ziyang, the reformist general secretary of the Communist Party, suddenly appeared in Tiananmen Square to appeal for compromise. It would be his last public appearance. That night, before an audience of party faithful, hard-line Premier Li Peng showed the way forward. "We must end the situation immediately. Otherwise, the future of the People's Republic will be in grave danger." He completed his address with a declaration of martial law. Troops would occupy the city and put an end to the protests in Tiananmen Square...


Never before in the 40-year history of communist rule had China put its citizens and its army in this situation... It was a massive display of force, 300,000 troops by most counts... all converging on the city... Four days after [this] attempted entry, the army withdrew to bases outside the city. Beijing was euphoric... But it also was an enormous humiliation for the leadership. They had been thwarted and they had lost face, and they weren't going to let it happen again... The party elders feared that the whole edifice of communism was going to collapse, like it was collapsing in the Soviet Union and in other parts of Eastern Europe. They needed to make a stand - and a bloody stand - to show their population, in effect, to cow their population back into submission... Over the next 10 days, Supreme Leader Deng Xiaoping hatched a new plan. Troops armed with semi-automatic weapons and backed by tanks were drawn from military districts across China [rural units with no attachments to the urban center]... On the night of June 3rd, a huge invasion force [came in again] from all directions but mostly from the west, this time with live ammunition, this time strict orders: the square must be cleared by dawn on June 4th...

The end of nascent political reform came quickly:

Angry citizens were everywhere. People just couldn't understand why this country and its army, the People's Army, would slaughter its own people, the Beijing citizens... People still pour into the streets... People were just so angry, so furious at what was happening in their city that they were not going to step back and let the army do what it was doing... Troops began to fire in all different directions... Everybody was frightened by this overwhelming use of force... What was amazing was that the army used battlefield weapons...


[It] was a one-sided pitched battle all the way from the western suburbs until [the PLA], about 1:30 AM, began to arrive at Tiananmen Square... [The] troops had orders to clear the square by dawn [of 4 June]. That was the deadline... And it was clear to everyone from that point on that we were absolutely trapped. You had the military coming in from the west with their tanks. We knew there were tanks coming in from the south of Tiananmen Gate. And now on both sides of the square, you had hundreds, if not thousands of soldiers... And then the firing started. Even at this late stage, many couldn't believe the army was using live ammunition, and they stood their ground... And there was this continual announcement of, "Under the martial law regulations, no one should be on the street. If you stay on the street, you will be responsible for what happens to you"...

Firing on civilians recommenced later in the morning as parents came to search for their children:

The tactics of overwhelming force that were used had a point. They were meant to shock, terrify and awe... No one knows for certain how many people died. The Chinese Red Cross initially reported 2,600 and immediately retracted under intense government pressure The official government figure is 241 dead, including 23 officers and soldiers, and 7,000 wounded... In the aftermath of the Beijing massacre, tens of thousands all across the country were arrested. Unknown numbers were executed. Some are still in prison today. China television portrayed these people as counter-revolutionaries, hooligans and agents of foreign powers...

By the close of 4 June, the People’s Liberation Army was again in complete control. Readers can now understand the velocity of retribution directed against firms such as Stone: 

SOLDIERS of the People's Liberation Army are occupying the offices of China's most successful independent computer company, the Beijing Stone Group. Wan Runnan, the software engineer who founded the company, is in hiding and officials have issued a warrant for his arrest as the government continues to crack down on supporters of democracy.


The authorities have pinpointed Stone as a symbol of the 'counter-revolution'. The company, founded five years ago, rapidly became the vanguard of China's computer industry and, in its management style, established itself as a model for economic reform...


Stone owed its success and its downfall to the prominent position it played in China's reform and to the associations it had forged with prominent politicians. Wan had been a confidant of Zhao Ziyang, the reformist general secretary of the Communist Party, and his supporters. But with Zhao's fall from grace, Stone lost its [influence and protection]...

Stone’s founder and president, Wan Runnan, had overplayed his hand, likely due to his having been a privileged child of the establishment: 

Because the government did not imprison leaders of the 1985-86 democracy protests, many of them became important figures in the 1989 movement. The voices of Fang Lizhi and Wang Ruowang were openly heard, and Liu Bin Yan became a key organizer. Other leaders emerged as spokesmen and organizers for the movement, most having privileged backgrounds and associations with their supposed enemies:


• Sun Hui, a Beijing University student, helped found the Autonomous Students’ Federation to organize the demonstrating students. Sun’s parents were Communist Party members, but his death at the Tiananmen massacre suggests that he may not have fully understood the dialectic he was a part of. Nevertheless, Sun’s ties to the regime made him vulnerable to manipulation.


• Wan Runnan has been married twice, both times to daughters of high Communist Party officials. According to one undisclosed source in the student democracy movement, Wan closely associated with members of the inner circle of control in the Communist Party of China. These connections helped him financially, since he was allowed to own and build the Stone Corporation, the largest private corporation in mainland China and its main producer of computers. Wan supplied public address systems, walkie-talkies, and other equipment to help the student leaders organize. Given his contacts, he probably knew Communist Party Secretary Zhao Ziyang rather well; Zhao was purged after the June massacre for supporting the democracy movement. Wan Runnan was quoted in a July 1990 Reason article as insisting that “we are not counterrevolutionaries.” After hinting that he supported free market reforms in addition to democracy, he qualified himself by noting, “The transformation must take place in stages… the communication, transportation, and energy sectors will remain in government hands.” Wan now heads the Paris-based Federation for a Democratic China, one of the two largest organizations in the currently exiled Chinese democracy movement…

Wan at least escaped the blade that befell many of his peers, ultimately making it to the US: 

Wan Runnan: former Chairman of FDC (the second and third Congress). He was the founder and Chairman of Stone Corporation which was the first private company in China. He was on the wanted list of CCP, because he had supported the democratic movement of 1989. After June 4th Massacre he escaped abroad and has settled in the USA.

Without this background it would be hard for Wan to think that he could get away with providing financial and logistic support to the democracy movement. With backing from hard liners, Li was happy to root out Wan and his counterparts as part of bringing the private sector to heel under party control:

Despite its importance, in a system that is still largely owned and controlled by the government, the role of the private sector is limited: Even today [2002], as management responsibilities have been passed on to managers and local officials, and as industrial output has shifted to the private sector, the government still owns about 70 percent of the industrial assets... Yet, this sector has played a significant role in encroaching upon state sovereignty in two ways. First, in times of crisis, this sector has played a role of outright resistance. During the Tiananmen movement, it was the private entrepreneurs of Beijing that provided the students with fax machines, radio equipment, televisions and other perishable goods that became a staple of the movement... The Stone Corporation was the largest and most famous of these behind-the-scenes participants, but there were many others. It would be a stretch to argue that private businesses in China are predisposed to resistance. However, it is the case that these organizations are structurally the ones that hold the greatest degree of independence from the state, and therefore have the greatest latitude in protesting when the opportunity presents itself.

Continuing the theme of lawful suppression of "counterrevolutionaries," the Communist Party staged an exhibition in September 1989 containing images of "burned out tanks and armored personnel carriers, photographs of soldiers who had been burned to death or hanged from overpasses, and photos of burning buses and clashes between students and police in riot gear." On the 5th anniversary, Li Peng announced "new security regulations defining political discussions outside the Party line as sabotage." On the 10th anniversary, the government released a lengthy documentary on the "counterrevolutionary rebellion."


Termination of modest entrepreneurial support for liberalism


Political dissidents placed too great a faith in private entrepreneurs to spur democracy. (Note: geti are individual entrepreneurs, often in consumer services, while siying are larger privately owned businesses or enterprises.): 

It is in the interest of entrepreneurs to cooperate with local cadres. Cooperation allows private-sector businesses to operate more smoothly, and sometimes just to get started in the first place... "Capitalist entrepreneurs see capitalist growth as possible because of, not in spite of, the involvement of officials." Rather than the larger siying enterprises being most autonomous, moreover, ties to officials matter tremendously for the development of the largest and most profitable enterprises. Even a large and innovative private enterprise like the Stone Corporation had to depend upon strong bureaucratic connections to succeed...


Some commentators have pointed to banners of support hung by geti entrepreneurs and to monetary and material donations made by entrepreneurs, such as managers of the Stone Corporation to demonstrators in 1989, as evidence for growing activism and political consciousness among entrepreneurs. But as a rule [members] of the business elite in the private sector have shown strong inclinations toward neither political activism nor the formation of strong horizontal ties. Stone's actions and supportive banners cannot be used to proclaim the existence of a politicized, much less democratizing, class. Donations by the Stone Corporation were not exceptional and, as noted previously, most entrepreneurs [did] not actively support the student demonstrators. More generally, entrepreneurs' participation in politics outside of state-sponsored organizations has been unusual, and has not been sustained...


The enthusiasm that reformers were expressing in the mid-1980s for the growth of "interest groups" and "social pluralism" was accompanied by the growth, immediately prior to and during the Tiananmen demonstrations, of what appeared to be an autonomous Chinese associational life. Examples of new organizations included the Beijing Autonomous Students' Union and the Capital Independent Workers' Union, which were founded during the 1989 protests. Similarly, the Beijing Institute for Research in the Social and Economic Sciences [founded] by Chen Ziming and Wang Juntao, both of whom had been active in the 1979 Democracy Wall movement and, later, the publication of Beijing Spring. These organizations were perceived by some to be harbingers of a second "golden age"... Yet these liberalizing trends of the mid-1980s, along with many others, were reined in by the 1989 Tiananmen protests. The autonomous organizations proved to be highly vulnerable and failed to become enduring features of post-Mao state-society relations. The [independent] unions were crushed by the government, while the Institute saw much of its autonomy undermined subsequent to the arrests of Chen and Wang for their role in the 1989 events.

Altering the education system to produce a new patriotic citizen


Beyond wounded national pride and primarily anti-US and anti-Japanese resentment:

Chinese nationalism in the 1990s was also constructed and enacted from the top by the Communist state. There were no major military threats to China's security after the end of the Cold War. Instead, the internal legitimacy crisis became a grave concern of the Chinese Communist regime because of the rapid decay of Communist ideology. In response, the Communist regime substituted performance legitimacy provided by surging economic development and nationalist legitimacy provided by invocation of the distinctive characteristics of Chinese culture in place of Marxist–Leninism and Mao Zedong Thought. As one of the most important maneuvers to enact Chinese nationalism, the Communist government launched an extensive propaganda campaign of patriotic education after the Tiananmen Incident in 1989. The patriotic education campaign was well-engineered and appealed to nationalism in the name of patriotism to ensure loyalty in a population that was otherwise subject to many domestic discontents. The Communist regime, striving to maintain authoritarian control while Communist ideology was becoming obsolete in the post-Cold War era, warned of the existence of hostile international forces in the world perpetuating imperialist insult to Chinese pride. The patriotic education campaign was a state-led nationalist movement, which redefined the legitimacy of the post-Tiananmen leadership in a way that would permit the Communist Party's rule to continue on the basis of a non-Communist ideology. Patriotism was thus used to bolster CCP power in a country that was portrayed as besieged and embattled. The dependence on patriotism to build support for the government and the patriotic education campaign by the Communist propagandists were directly responsible for the nationalistic sentiment of the Chinese people in the mid-1990s.

From Beijing moves to preempt flash mob behavior for any purpose, be it civil, commercial, nationalistic or anti-state...:

The authorities are highly attentive to young nationalists known as fenqing, or the 'angry youth' among other translations:

"These people have been trained in an authoritarian system. They are at the same time victims of an authoritarian system, but they also behave in an authoritarian way towards others and are incredibly self-righteous... We should be more tolerant and respect the right of people to disagree with us but these people do not understand such values."

The definition of fenqing has morphed:


Cultural Revolution: urban-dwelling students who were sent to the countryside to toil with peasants and became embittered towards a society that had stolen their futures.

1980s: students and intellectuals who shaped the movement for greater social and political freedoms that ended when the tanks rolled into Tiananmen Square

2000s: patriotic, xenophobic, nationalistic and, in some cases, violent in their defence of the motherland. This latest incarnation has partly emerged as the result of government policies implemented in reaction to the events of 1989, after which "patriotic" indoctrination became an even more important element of the education system.

Fenqing are tailor made to meet CCP needs for sustained legitimacy.


Closing the political door; expanding the economic door


From "If you want food, find Ziyang"... 

Confined to house arrest, Zhao remained "steadfast that his views are correct, and their views were wrong," and he remained a remembered, if unheard, symbol that demonstrations were not a "counter-revolutionary rebellion" and that Tiananmen must be reassessed. Even in death, Zhao is a lightning rod of accountability.


Whereas Zhao and his generation made enormous contributions to individual wellbeing and thus much gratitude, e.g., "If you want food, find Ziyang," he is said to be less well known to younger generations either focused on wealth generation on the coast, or cut off in rural isolation.

Deng reasserts himself:

What the Party has relied on to prevent [public] pressure from building up is to allow people to exercise all of their ambitions and urges to be able to advance themselves and to have lives on the economic side of the ledger. This was Deng Xiaoping's great moment of genius. After the massacre of 1989, he in effect said we will not stop economic reform; we will in effect halt political reform.


What he basically said to people was: "Folks, you are in a room. There are two doors. One door says 'Politics'; one door says 'Economics.' You open the economic door, you are on your own. You can go the full distance to basically whatever you want: get wealthy, help your family have a bright future, move forward into a glorious future. If you open the political door, you are going to run right into one obstruction after another, and you are going to run into the state." People logically being practical -- and Chinese are very practical -- opened the economic door. They wouldn't open the political door. It was foolish to do so.

Private companies and research groups proceeded to chose the economic door, avoiding the political:

In retrospect, it seems extraordinary that the leadership of such an authoritarian state should allow the emergence of large, wealthy, independent institutions such as those operated by Chen Ziming and Wan Runnan. It is particularly remarkable given that, at least in the case of Chen Ziming and Wang Juntao, the authorities had been keeping [both under surveillance]...

The leadership would almost undoubtedly have meted out similar punishment to the private businessman Wan Runnan [as they had to Chen and Wang] had [Wan] not fled the country after Tiananmen.

Wan Runnan wrote a reflective retrospective of the CCP, Why The Chinese Communists Are Not Doomed To Finish Yet, in 2006. Recommended. Idealism and compromise are now absent: 

During the 1989 democratic movement and the Russian/Eastern European changes, the Chinese Communist became even firmer in the will and determination to suppress the opposition... How did the Communist Party defeat the Nationalist Party to win the country? One point was the will and determination to sacrifice. By sacrifice, they mean sacrificing the lives of their warriors in large and systematic ways... The Communists won the nation by this rule and they governed the nation by this rule. What is political power? Lin Biao understood: Political power is the power to suppress. To maintain political power is to maintain the power to suppress... That was the will and determination to suppress that the Communists exhibited during the June 4th massacre...


Deng Xiaoping said: "Development is the only solid reason." This should actually read "Getting rich is the only solid reason." The reason is solid, but the words are soft. According to Comrade Zhang Chunqiao's critical opinion: "This is a capitulation to the national capitalist class." On this issue, I have the right to speak. I started the company Stone (四通), which had sales of over 1 billion RMB in 1988. I accounted for half of Zhongguan village. I was called by the western media as the "most outstanding result of the ten year flirtation between Deng Xiaoping and capitalism." At the time, a western reporter asked me: "Do you think that Deng Xiaoping is on your side?" I answered without hesitation: "Of course, because I am on his side." After the June 4th massacre, I could no longer be on his side and therefore I parted ways with the Communist Party.

Wan summarizes the CCP as follows:

  1. From the lessons of the former Soviet Russia and eastern Europe, the Communist Party is more firm and clear about suppressing the opposition;
  2. After forming alliances, the Communist Party has established a relatively stable international environment;
  3. The continuous economic development has provided adequate resources for improving their ability to govern;
  4. Under the pretext of "we won't argue," the Communist Party has actually totally abandoned their former ideology;
  5. The Communist Party has become a political party that represents wealthy people and the social elite.  This newly created middle class is the foundation of stability in Chinese society today;
  6. The confirmation of their model for power succession has eliminated the concerns about their ability to maintain government.

Keep this in mind when you read Drezner’s “wishful thinking” about the capacity of the pro-democracy petition Charter 08 to induce a new popular rebellion. Drezner’s piece is valuable solely for the reader comments that gently but firmly correct him. China will still grow at about 6% per annum; not enough to keep everyone happy but enough for the CCP to sacrifice what it must to keep the political door closed and the economic door open, at least for the privileged, cooperative business class.




Stone and SERI were part of a remarkable flowering that, along with far less adventuresome firms, quickly learned that in order to survive they had to work with the CCP and PLA as opposed to operating in relative independence.


In the same period, the PLA was disgorging its money losing firms onto provincial government and was expanding its overt and covert subsidiaries tasked with capturing needed foreign Intellectual Property (IP). When that network proved to be insufficient at capture an entrepreneurial bounty system was instituted by which Chinese firms otherwise unrelated to the PLA could capture IP and share it in return for various means of reward.


Americans continue to overlook the extremely high degree of nationalism among Chinese, a characteristic sharpened by post-1989 education reforms. (I do not impute anything negative to the Chinese; my point is that Jingoism is not purely an Occidental disease.) Had this flowering continued, Stone and its peers would have become technical powerhouses that would have become even more efficient at foreign IP collection as foreign firms flocked to partner with Stone et al.


Firms such as Stone were perfectly positioned to be both attractive to foreign government and corporate assets while being able to absorb and transmit the IP on offer into the Chinese economy. If Wan could have even remained an international democrat, there would have been many in the firm that would have supported IP diversion to Chinese national interests.


Thus this analyst is left to wonder if Li Peng’s retrenchment slowed rather than accelerated foreign IP collection. In other words, the crushing of this technical flowering may have slowed IP collection. It is interesting to consider the implications if Zhao had bested Li.


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