Wen Sees Billionaires in Congress as Gap in Wealth Widens

As Chinese Premier Wen Jiabao this week opens the annual gathering of the National People’s Congress with a pledge to shrink China’s wealth gap, his challenge will be reflected in the makeup of the assembly itself.

The richest 70 of the 2,987 members have a combined wealth of 493.1 billion yuan ($75.1 billion), and include China’s richest man, Hangzhou Wahaha Group Chairman Zong Qinghou, according to the research group Hurun Report. By comparison, the wealthiest 70 people in the 535-member U.S. House and Senate, who represent a country with about 10 times China’s per-capita income, had a maximum combined wealth of $4.8 billion, data from the Washington-based Center for Responsive Politics show.

The presence of billionaires in the Congress, which is the highest state legislative body and meets to approve government economic and fiscal plans, is one consequence of the Communist Party’s opening to capitalists to join it a decade ago. The step now risks hampering efforts to tackle inequality, such as higher taxes on upper-income earners, financial disclosures and real-estate levies, said Huang Jing of Singapore National University.

“The biggest problem to passage of the property tax is the People’s Congress,” said Huang, a professor at the Lee Kuan Yew Center for Public Policy. “How can you expect those rich people to represent the interests of people who need help?”

Outstripping U.S.

Data compiled by Hurun, a Shanghai-based group that tracks China’s wealthy, indicate there are at least 38 NPC delegates with more in assets than the wealthiest U.S. Congress member, Representative Darrell Issa of California. Issa had maximum wealth of $451.1 million in 2009, according to congressional disclosures compiled by the Center for Responsive Politics. Issa’s office didn’t respond to an e-mailed request for comment.

The ranks of wealthy in China are swelling as the nation experiences the fastest expansion of any major economy, with gross domestic product increasing on average about 10 percent annually in the past two decades. The benchmark Shanghai Composite Index of stocks climbed 124 percent in local-currency terms in the five years through February, compared with a 3.6 percent advance for the U.S. Standard & Poor’s 500 Index.

Zong, 65, a Communist Party member whose wealth Hurun puts at $12 billion, told reporters in Beijing March 1 he believes higher taxes and extensive welfare-benefit programs, such as those in Europe, sap energy from entrepreneurs. Nations with those policies will “have problems when all their money is spent,” he said.

‘No Jobs’

“Rich people are investing their money, creating more jobs,” Zong said. “If rich people all get killed, nobody is going to invest or build factories, there will be no jobs.”

Wen, 68, said Feb. 27 that the government would push to narrow a growing wealth gap which Credit Suisse Group AG said in an August report was at levels not seen outside of Africa. Wen pledged to tackle surging property prices that have put home ownership out of the reach of many, control inflation and crack down on official corruption.

“We should not only make the cake of social wealth as big as possible, but also distribute the cake in a fair way and let everyone enjoy the fruits of reform and opening up,” Wen said Feb. 27, according to state-owned Xinhua News Agency. Wen’s opening address to the Congress tomorrow, scheduled for 9 a.m. in Beijing, is set to detail the government’s latest Five Year Plan for China, focused on bolstering domestic demand and household spending.

Rural Incomes

China’s leaders have embraced higher wages as part of their campaign, with all 31 of China’s provinces and regions likely to increase their minimum wages in 2011 for the second consecutive year, according to Credit Suisse. Rural incomes rose 10.9 percent in 2010 to an average 5,919 yuan, government data show.

Even so, accelerating inflation and rising property prices have undermined households’ spending power. Consumer prices have exceeded the government’s 4 percent target for 2011 in each of the past four months. Slums have emerged in the suburbs of cities from Beijing to Guangzhou as migrant workers and cash-strapped urban youth seek an affordable place to live.

China’s Gini coefficient, an income-distribution gauge used by economists, has climbed to near 0.5 from less than 0.3 a quarter century ago, according to Li Shi, professor of economics, School of Economics and Business at Beijing Normal University. The measure ranges from 0 to 1, and the 0.4 mark is used as a predictor by analysts for social unrest.

Risk of Unrest

Chinese activists inspired by the pro-democracy movements in Tunisia and Egypt have called for nationwide protests, which led to an increased police presence in Beijing, Shanghai, Guangzhou and other cities last month. The activists say the Communist Party should give up power if it doesn’t address the wealth gap, promote an independent judiciary, curb inflation and property prices, and crack down on corruption.

Zong, who founded the third-largest soft-drinks maker in China in 1987 with a 140,000 yuan loan, typifies the billionaires on the NPC, who like him are self-made. Others include Lu Guanqiu, 66, the Chairman of Wanxiang Group, China’s No. 1 auto parts maker, who also employs more than 5,000 people in 14 U.S. states. He met President Barack Obama at the White House in January. Hurun puts his wealth at $4.4 billion.

“Our biggest competitor is ourselves,” Lu said in a Jan. 21 interview in Chicago.

Tax Opponents

Zong and Lu said last year they were against the property tax, as did Wang Jianlin, a real-estate developer and China’s seventh-richest person. Wang is on the legislature’s advisory body and was a member of the 2007 Communist Party Congress that selected Hu Jintao as their leader.

In January, China instituted a trial property tax in Shanghai and Chongqing that Goldman Sachs Group Inc. analysts led by Yi Wang said was of “limited scope and moderate” and would have “limited” affect on the real-estate market.

While U.S. lawmakers may be on average poorer than Chinese counterparts, they tap wealthy fundraisers and companies for donations to finance election campaigns. Interests of the rich aren’t unrepresented: In December, President Barack Obama agreed to extend tax cuts for the highest-income Americans enacted by predecessor George W. Bush, after Republican Senators opposed Obama’s earlier plan to let them expire.

Unlike the U.S., China doesn’t require members of its legislature or government officials to make public disclosures of their assets. A rule to have government officials and Communist Party members reveal their wealth is still being debated in the Congress.

Financial Disclosure

Zhao Qizheng, who heads the foreign affairs office of the Chinese People’s Political Consultative Conference, an advisory group to the NPC, which convened yesterday in Beijing and also includes many of China’s richest people, told reporters March 2 that implementing a rule on asset disclosure is complicated.

“We must do this thing step by step,” Zhao said in Beijing. “There are close to 10 million public servants in China.”

Rupert Hoogewerf, the director of research for the Hurun Report, said there are likely more dollar-billionaires in the NPC that his staff missed. For every one among the 189 the company identified in all of China, mainly through company filings, he estimates there’s another whose wealth remains hidden from the public. For every yuan billionaire, he estimates they’ve missed two.

“There will be individuals on the NPC that just haven’t come to the surface,” Hoogewerf said. “There’s a lot of hidden wealth in China.”

Li Zhaoxing, a former foreign minister who is now the NPC’s spokesman, said he had no idea that so many delegates were richer than the wealthiest U.S. lawmaker.

“We hope that there will be more rich people in China, but these people must get rich by legal means,” Li, 70, told reporters today in Beijing’s Great Hall of the People. “I have found around me many good citizens who have gotten rich through their own hard labor and intelligence.”

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