China 2.0: The Transformation of an Emerging Superpower ... and the New Opportunities

Chapter 4

The Mix of China's Capitalism

“Red capitalists” is a well-known phrase in China. Capitalism experienced a boom period in the 1920s in Shanghai, the financial center of China now, and then one of the financial centers of Asia. After the Communist Party of China (CPC) took power in Beijing and established the People's Republic of China in 1949, capitalism, together with feudalism and imperialism, was swept into the dustbin of history. Subsequently, China underwent large-scale nationalization, under which private capital and assets were confiscated and integrated into state-owned organizations. There was a group of patriot capitalists who provided financial aid to the CPC-led forces, which defeated the Japanese invaders, and Chiang Kai-shek's National Party (Guomindang or Kuomintang) from the end of World War II through 1949. This group of capitalists was transformed into an internal force, which was welcomed by the Communist Party and its people to join in the construction of a socialist China after liberation. Chen Yi, one of Mao Zedong's comrades, became the mayor of Shanghai and the minister of foreign affairs of the newly established communist China; he praised this group of capitalists for their patriotism, calling them “red capitalists.” Rong Yiren was one such example. Under Rong's leadership, the state-owned China International Trust Investment Corporation (CITIC) was established, which opened the first window of cooperation between Chinese and international capital ...