Desmond Shum, Red Roulette: An Insider’s Story of Wealth, Power, Corruption, and Vengeance in Today’s China (Scribner, 2021); 310 pp. hardback.
Billed as a “tell-all” about the scandals of the Chinese Communist Party (CCP) as it leads China’s re-entry into the global system, I found this tale of business and personal deals quite rich. Shum’s main takeaway is that the CCP only cares about its power, and in the process, its children, who will be the ones to lead next while protecting the current leaders in their retirement. And especially the core of the Party—the original cadres that fought with Mao. Shum refers to this arrangement as the “red aristocracy.” China’s economic success, Shum argues, was achieved by connecting entrepreneurs to politicians, which served the interests of both. Today that arrangement has run its course, with President Xi leading the way back to Chinese socialist values while condemning western ones.
Shum was born in Shanghai 1n 1968 but then moved with his family to Hong Kong, which was not easy to arrange. Shum’s father fell on the wrong side of the “good” backgrounds that would supposedly support the CCP once they won the civil war in 1949. Shum’s grandfather had been a lawyer in Shanghai, which made his father a bad element. His father taught Chinese at a Shanghai teachers’ training school and met his mother there. But his mother had relatives in Hong Kong, which aided her emigration, followed by years of cajoling authorities to let his father also leave.
Ironically, once China began to reform, Shum’s mother and father willingly moved back to Shanghai to make fortunes. Shum’s father had a successful stint with Tyson Foods in Hong Kong, who then sent him to Shanghai to build its China market. Shum was also transferred by his company to China in 1997. He lived as an ex-pat in Beijing, gaining business experience but without much success.
Shum met Whitney Duan (Duan Weihong) in 2001Shum’s business career took off from there. They became business partners and eventually married and later had a son. The book opens with the fact that Whitney disappeared in 2017. As Shum writes, he had not heard from her or any news about her since. This book is the story of what happened leading up to her presumed detention.
Whitney was born in Shandong Province. She started a company called Great Ocean, originally based in Qingdao and later, Beijing. She was Christian, and for this and other reasons probably, she vowed never to get ahead by being corrupt. However, Whitney was adept at cultivating relationships with people at the highest levels of the Chinese leadership. She became especially close to “Auntie” Zhang (Zhang Beili), who was the wife of Wen Jiabao. In the meantime, Wen rose in the political ranks to become Premier from 2003 to 2012. Wen, however, was not interested in, and may not have known much about, his family’s business dealings, according to Shum.
Through their tirelessly cultivated connections, Shum and Whitney were able to obtain valuable pieces of land with permission to build major projects, including the cargo area of the Beijing Airport and a grand office-condo complex nearby. Through these investments and access to other, sure-bet, insider trading, they were able to make hundreds of millions of dollars over the years.
I was especially interested in three aspects of Shum’s story.
First, he clearly describes how connections (guanxi) work, and reward, in China. Not technically in the category of corruption, at least in the Chinese context, Shum argues (as do others) that to do any business in China one must curry favor with the Party.
Second, one can see how ways of conducting business changed over time after the reforms began. For example, regulations were established, infrastructure was built-out, incomes rose, and there was increasing interaction with global markets. Companies’ opportunities changed alongside this environment.
Third, Shum’s description of the changing environment matches nicely with a recent article by N. S. Lyons explaining the man behind the top leadership’s big ideas: Wang Huning. Lyons argues that Wang’s research at Fudan University concluded that a society’s lack of values and traditions leads to chaos. A 6-month visit to the U.S. in 1988 reinforced his views. Wang learned the downside of liberalism and capitalism from what he observed there. With the 1989 student protests in Tiananmen Square and elsewhere in China, Wang saw China heading in the wrong direction. As a result, Jiang Zemin chose Wang as an advisor. Wang then stayed in Beijing to work with Hu Jintao and now President Xi, to manage social messaging to keep China’s values and stability intact.
Jiang Zemin was President from 1989 to 2002. This period saw an initial pull-back on reforms but then a “re-opening” when Deng Xiaoping visited southern China in 1992. By the late 1990s, Shum describes China’s rapid changes with capitalism alive and well into the early 2000s. State-owned enterprises (SOEs) were listed on the New York Stock Exchange, private companies had some access to bank loans, the housing market had taken off, and the middle class was growing and spending. In addition, reformers like Wang Qishan had risen to power (Wang was vice-premier in 2008 under Wen Jiabao and a close friend of Whitney’s).
By 2006, however, there were signs that the leadership was cooling on the more capitalistic aspects of the economy, which only accelerated with the global financial crisis in 2008. Changes occurred, making it harder to do business for both Chinese and foreign companies. For example, private and joint venture firms were required to have Party committees, and new regulations gave SOEs advantages over private firms. Shum’s understanding was that all companies would be expected to spy for the state if asked. At that time, civil society also began to feel increasing pressure to conform to Party demands.
Overall, Shum argues that despite the seemingly capitalist “experiment,” the leaders never intended to end the system as it had been. Instead, the leadership saw listing SOEs on exchanges as a way to strengthen these companies to compete with the private sector and globally. The shift to reassert Party control over the economy and society had begun. Leadership changed too—less moving up the local ranks (as these people were difficult to manage) and more bringing in loyalists from other regions. Shum suggests that he and his business friends did not want to overthrow the Party—they just wanted a more open system. He and others willingly began to support education and other social improvements with their wealth. But Shum increasingly viewed private companies and entrepreneurs as used by the Party, and that long-term investment was not a realistic option. Get in, make money and sell out as fast as you can.
Shum argues that China’s successful economic growth and the rising competitiveness of state-owned companies meant the Party did not need the private sector as it did before. Hence it was no longer essential to relax Party control. Shum concludes that repression and control are the foundations of the Party, and this has not changed with the modernization of China under reforms. In 2012, Document No.9, “Briefing on the Current Situation in the Ideological Realm” appeared, which warned of dangerous western values such as free speech. The push back against the west and freedoms within China has continued to worsen since then.
Just before the launch of Red Roulette, Shum received a call from Whitney. As described in a segment of Australian 60 Minutes on September 26, 2021, she had been at least temporarily released from detention, where she had been cut off from all news of her family, China and the world. Whitney asked Shum not to publish the book, and if he did, he and their son would be in serious danger. She called a second time as well, but Shum chose to tell their story, as he says, to help the world understand what China is really like.
Shum’s is not the only valid view, but it adds perspective into the current policies and events happening in China today. If Lyons is correct, then Wang Huning is getting his way as President Xi leads the crackdown on popular sports and media stars, large tech companies, and speech overall, especially anything critical of the Party. For power politics in China, this means that it is highly likely that Xi will hold it for as long as he wants. Shum’s description of Xi’s calculated rise to power and victory over Bo Xilai to become the paramount leader is instructive. For businesses, both Chinese and foreign, Xi’s rule will mean they will need to pay close attention to the Party “winds.” Guanxi may play even more of a role in determining who has access to resources and projects if markets are reigned in and the private sector shrinks. Shum’s story about how China’s political economy works is far from over.