Capitalist Chameleons

Capitalists in Communist China? In deed yes, says Barry M. Richman, a professor at U.C.L.A.'s Graduate School of Business Administration and a vet eran Sinologist. Writing in the Harvard Business Review, Richman describes Mao's country as "a land where some 300,000 capitalists still receive interest on their investments, and where many of them are still serving as managers of their nationalized enterprises." Striking a Bargain. Richman, a Ca nadian citizen, toured China for two months last spring, found that many businessmen had not only survived but thrived on Red soil. Though small-stuff storekeepers are included in Richman's 300,000, many are members of China's once-great landowning and industrial families. One textile tycoon, Richman reports, still receives $400,000 a year in dividends from his family holdings. Another, in the match business, pulls down $320,000.

Mao's clique of capitalists emerged soon after the 1949 revolution, when many wealthy Chinese fled to Taiwan or Hong Kong in fear of their lives. Those who stayed struck a bargain with the Reds. In desperate need of old-fashioned expertise to run China's newly nationalized industries, the Communists allowed factory owners to stay on as managers. They were guaranteed their regular salaries, plus 5% annual interest on the value of their former holdings--as assessed by Communist party bureaucrats.

One such manager interviewed by Richman is Wu Tsung-i, who with his family once owned 30% of the Sung Sing Textile Corp.'s nine Shanghai mills. Wu now draws a $160-a-month salary as a top Sung Sing manager. Because his holdings were valued at $640,000 when Sung Sing went into "joint ownership" with Peking twelve years ago, he has also been receiving $32,000 a year in dividends.

Freaks on Display. Though ineligible to be card-carrying Communists, the changeling capitalists were even allowed their own state-tolerated political organization, known as the Democratic Party. After so many years with the Red Dragon, the changelings have become more chameleons than capitalists. Increasingly less important as managers, they remain, Richman says, valuable as "freaks put on display for the local population as well as for visiting foreigners." Wu still keeps his family, servants and Jaguar in East Shanghai, but quietly banks most of his income (at 3.3% interest) in a conscious effort at inconspicuous consumption. Japanese newsmen who visited Wu recently found him warily proclaiming that life under Mao is "far better than the old way," when "we used to dance madly, gamble and play around with women."

The capitalists' future is highly problematical. During the current Red Guard rampage, angry wall posters have demanded an end to "high salaries, interest and dividends on investment." Carrying the slogans to the streets, youthful mobs have paraded men in dunce caps hung with placards reading "Dirty capitalists."

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