Tale of ‘red’ village epitomizes China’s countryside remaking

By Zhou Zheng Source:Global Times Published: 2018/1/1 22:48:39

Illustration: Luo Xuan/GT

Almost 10 years ago, TIME published an article titled "The Richest Reds in China," which told the story of Huaxi village, East China's Jiangsu Province. Defining Huaxi and its residents as "reds" not only described their political beliefs; it also referred to the organizational model of the village.

How is the village doing now? Is it experiencing tremendous change along with China's economic growth and transformation?

An online uproar recently put the red village in the limelight again.

A few weeks ago, an article on the internet drew wide attention. It claimed that Huaxi Corp had debts of 38.9 billion yuan ($5.93 billion) and implied that the enterprise is at a crossroads. Huaxi CEO Wu Xie'en claimed the business was stable, but not everyone was convinced.

According to figures released by Huaxi Corp, its financial situation is not very optimistic, but it is not yet in the red. It gained 162 million yuan in profit during the first three quarters.

As of that point, debt stood at 38.7 billion yuan, up 6.96 percent from a year earlier, while assets totaled 55.8 billion yuan, yielding a debt ratio of 69.4 percent. Jiangsu Huaxicun Co, the listed subsidiary of Huaxi, revealed a 55.97 percent debt ratio in its latest financial report. Normally, a ratio exceeding 50 percent is a danger sign.

Another aspect of the Huaxi controversy is that observers can't agree on its development model. Some media reports have called it a showcase for socialism. These critics also said it lacks clear property rights and the rights of residents cannot be protected - those who leave the village lose everything. Others have argued that Huaxi's success was based on low interest rate loans provided under special government policies.

Still others questioned its organizational and managerial model, stating that the Wu family controls the corporation. People who back Huaxi argued that this new economic model did indeed benefit the residents.

To fully understand the Huaxi model requires a close examination of the relationship between the ownership and the managerial authority of the corporation.

Wu Renbao, a member of an older generation of Party secretaries, is a typical charismatic village leader. He received credit for making the village rich with his sensitivity to market opportunities and a unique understanding of policies.

In 2003, he recommended his fourth son, Wu Xie'en, as his successor. His relatives occupy nearly all the important positions of Huaxi Corp.

However, it is not self-evident that Huaxi is a family business. In June, 2016, Huaxi Corp changed its business type from collective ownership to that of a limited liability corporation with the village committee holding 99 percent of the shares. The distribution mechanism within the village is still unclear.

That said, the development of Huaxi village actually followed broader economic trends in China in recent decades.

Huaxi took advantage of the opening-up of China in early stage and went down the manufacturing path. As traditional industries encountered setbacks, Huaxi Corp had to seek an upgrading.

The corporation has been shifting from traditional industries such as steel and chemical fibers to emerging finance and the marine shipping and clean-energy sectors.

It is reported there were 21 companies in 2016 that were either set up by Huaxi's listed arm or were partly owned by the listed entity. The focus areas of the companies included telecoms, media and technology, new-energy vehicles, healthcare and education. The listed unit also launched a merger-and-acquisition fund in 2017 to boost the village's competitiveness in certain emerging sectors.

According to a report by the People's Daily in March, the corporation has registered a mining and forestry company in Mozambique. Its overseas investment team has developed projects across Europe, North America and Asia. 

Huaxi's story epitomizes the transformation of China's countryside. It is unlikely for the red village to change color. It will keep progressing along with the development of a revitalized rural landscape as the recently concluded annual Central Rural Work Conference outlines the road map for the country's rural revitalization.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn


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