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Tea with Liu Chuanzhi

04-08 16:32 Caijing

Liu Chuanzhi describes his life as having had two distinct phases - before and after the creation of what is now Legend Holdings.

 

An aide brings tea; covered cups of hot water with bright green, tightly curled leaves floating on the surface. The leaves are a superior grade of Long Jing, China’s most famous variety of tea.

 

Mr. Liu seems confident that enough of China’s vaunted 4-trillion yuan stimulus package will seep down to the average Zhou in order for spending on computers to rise. But he cautioned that for a more fundamental shift to domestic driven growth, the Chinese economy needs structural reforms that will create wealth in the countryside and unleash consumption.

 

“If the government can raise wages and lower taxes, people will have more disposable income to buy food, clothes and TVs,” he said. “If they have greater purchasing power, Chinese factories now exporting products overseas can produce for the domestic economy.”

 

The twin stars in this constellation, he says, are relaxation of the household registration system and land reform.

 

While there is a huge floating population in Chinese cities, people remain tethered to the countryside by a registration system that determines everything from where their identity cards are issued to which schools their children can attend.

 

Not until this system is relaxed can there be a permanent population shift from the impoverished countryside to cities where jobs are more plentiful and wages are higher.

 

The second step needed is the privatization of land, which would allow those rural families that remain behind to buy and sell land or borrow against it, creating wealth beyond the near sustenance farming that now occupies their time.

 

“Land reform, if possible, will encourage urbanization, and therefore stimulate further consumption for our computers,” Mr. Liu said, lifting the porcelain lid off his tea cup and setting it on the table beside him.

 

Mr. Liu uses China’s beleaguered dairy industry as an example. One cow can produce up to 20 kilograms of milk a day, he explains. Dairy farmers sell their milk at around 2 yuan per kilogram to milk-collecting stations, so they get around 50 yuan per day for each cow they own.

 

“At this rate, one has to raise 20 cows to break even, and one needs 2,000 cows to really make a profit,” he adds. But with the small plots they have now, each farmer can only raise a few cows.

 

If entrepreneurs could amass land, he continued, they could industrialize dairy farming and smaller dairy farmers could become dairy workers and their incomes would rise. 

 

He lifted his cup and blew across the surface of his tea, scattering the leaves, before sipping.

 

Like many others who see the same solution, Mr. Liu pressed for such strategic reforms during the recent National People’s Congress. But China today does not have a Deng to force through such radical change.

 

“The next day, the National Development and Reform Commission came back to me with a reply,” he said blandly, adding that they “completely ignored the question.” He took another sip of tea.

 

It is easy for people outside of China to underestimate - or even forget - the impact of Deng Xiaoping’s rise to power. But for many Chinese, Mr. Liu among them, it was a watershed event in their lives.

 

“My friends and I were worn out by the Cultural Revolution and frustrated by the political struggles,” he said, remembering how Mr. Deng spoke promisingly of science and technology. “After Deng Xiaoping came onto the scene, we felt hope for China to become a nation, but we were still at a loss as to what we should do.”

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