Capitalism Thrives in Chinese Commune

Public loudspeakers in the central square blare the village anthem hourly: "If you want to see a miracle, come to Huaxi." Not that any reminders are needed.

Down the wide, tree-lined boulevards, rows of nearly identical red-roofed villas sit side by side. Manicured lawns and two-car garages are on every block. Each family has a house and at least one car, awarded by the community.

Welcome to the richest village in China. Average family assets total $150,000 in a nation where annual per capita income hovers around $2,000. The village's major enterprises in steel, iron and textiles brought in 50 billion yuan ($7.3 billion) in sales in 2008. They belong to the Huaxi Group, the first commune corporation to be listed on a Chinese stock market.

Yet this corporate enclave of 30,000 people also remains essentially a commune, with land owned jointly and wealth divided among all.

Huaxi, though an extreme example, is emblematic of China 60 years after the Communist Party came to power on Oct. 1, 1949. After decades of denouncing free markets and then embracing them, the country is a distinctive patchwork of capitalism with communist characteristics - all anchored by a strong dose of practicality.

That combination lies at the heart of Huaxi's success under Wu Renbao, its 82-year-old patriarch and steward. The village is feted by the Communist Party as a model for transforming its poor peasants into wealthy corporate citizens within one generation.

"What is socialism? What is capitalism? We only wanted the things that are good for our people. We wanted people to get rich," Wu said during an interview in the two-story house he's lived in since the 1970s, a modest home compared to the larger, lavish ones his villagers prefer.

He doesn't mention another way Huaxi reflects 21st-century China: the 30,000 migrant workers here who get a much smaller piece of the pie, a reflection of the inequality that has come with free market growth.

Wu's agnostic approach to economic development - using whatever method works to make his village rich - resonates well in the China of today, where success is measured by wealth.

It wasn't always so.

Six decades ago, China was struggling to survive, a battered nation recovering from a century of foreign invasion, dynastic collapse, famine and a brutal civil war. Under revolutionary leader Mao Zedong, China lurched between industrialization drives and violent political campaigns that left tens of millions dead before he died in 1976 and his successors began their free market experiments.

Deng Xiaoping, the leader who launched the reforms, called it "crossing the river by feeling the stones." His pragmatic approach produced the economic power China is today. Life expectancy has risen from 41 years in 1949 to 73 today. Incomes have soared, even as the population has more than doubled from 500 million to 1.3 billion. In 30 years, GDP per capita has grown tenfold from $200 in 1979. China is now the world's largest auto market and has more Internet and mobile phone users than anywhere else.

The hamlet of Huaxi, created on 0.6 square miles (a square kilometer) of rocky land in eastern Jiangsu province, was like hundreds of poverty-stricken villages around the country. Founded in 1961, it was a hard-scrabble farming community made up of a dozen smaller settlements - "work brigades" in communist parlance - that banded together.

Housing was primitive and paved roads were scarce. Worse, the village emerged in the midst of a disastrous famine brought on by rapid collectivization of farmland. For a decade, villagers recall, a meal with meat was a rare luxury. They followed Mao's dictums and were named a model commune.

Wu, who served as the village Communist Party secretary from the start, realized that residents would never prosper as farmers. He encouraged a return to household farming, away from collectivized work, and wanted to contract out the communally managed bamboo grove. The ideas were dangerous during Mao's call to purge all remnants of capitalism during the 1966-76 Cultural Revolution. Younger villagers paraded Wu in the village square for being a "capitalist roader" and detained him for six months.

Still, he was determined to try his ideas. He set up a small hardware factory in 1969, hiding its existence from higher government officials when they visited.

"The factory was a secret. If the leaders came to visit, we called all the workers to go out to the fields. But when they left, we would go back to work," Wu said, chuckling in remembrance. "On the outside, we criticized capitalism but on the inside, we were doing it."

"At the time, it was a fight. They called me the enemy. Why? Because I did capitalism," he said. "But I wanted local people to become prosperous so I was not afraid to take risks."

Known to villagers and his children alike as "Lao Shuji," or Old Secretary, Wu has a genial, grandfatherly demeanor that belies a hardheaded steeliness. He shook off questions about which ideology he followed to accomplish his modern-day rags-to-riches story.

"Communism has its good points. Capitalism also has good things so we can learn from that. I'm not afraid of capitalism. I'm afraid of only choosing one way," he said.

By the time China officially warmed up to entrepreneurship and private enterprise in the late 1970s, Huaxi was ahead of the game. It used its factory revenues as capital to expand and set up more companies. From those humble origins, Huaxi's peasant industrialists have exceeded their wildest dreams.

"When I was young, we never even had three meals a day. I had too many brothers and sisters. My dream was simply to get an office job because I hated farming," said Zhu Zhongliang, 48, now a senior manager at the local steel factory.

He lives with his wife and one grown daughter in a 5,000-square-foot (460-square-meter), two-story, red-brick home, complete with big-screen TV and marble floors.

"We all drive our own car to work every day - my daughter, my wife and I," said Zhu, whose family owns a Honda Accord, a Toyota Corolla and a domestic Dongfeng sedan. "Our relatives are kind of jealous of us when we drive to visit them during Spring Festival. They envy us for the fortune brought by Huaxi."

Blue tin-roofed factories, with belching smokestacks, line an industrial section of the village.

The prosperity is visibly striking, not only for its lavishness relative to surrounding areas but also for its uniformity.

The 400 original households are entitled to a 4,300- to 6,500-square-foot (400- to 600-square-meter) "European-style" villa, along with one car. Residents get a basic salary, but the bulk of their pay comes in annual bonuses, of which they are required to invest 80 percent in company stock.

In a throwback to Mao's days, all residents receive free health care, education and pensions - something many other Chinese have lost in the transition to capitalism.

Wu, who has retired as the local Community Party secretary in favor of his youngest son, enthusiastically touts his vision for a "new socialist countryside." Huaxi holds regular training sessions for village officials from across China.

With 57 percent of the population - about 737 million people - living in the countryside, Wu believes China's leaders need to refocus their attention on rural areas. Most of China's growth has come in the cities.

Wu, whose home office is plastered with photos of Mao, believes the founder of Communist China would have supported Wu's choices once he saw they worked. He constantly spouts an axiom associated with the reformer Deng: "Seek truth from facts."

Yet Huaxi's claim to egalitarian fairness masks great disparities between residents and the migrants who increasingly make up the factory work force in the village, as well as the rest of the country, says Wang Fei-ling, a professor of international affairs at the Georgia Institute of Technology in Atlanta.

Huaxi reflects a Chinese society that is fracturing into haves and have-nots, he said.

"If Huaxi is a model, it also suggests something troubling in the ways the Chinese economy is developing," said Wang, who has studied Huaxi's development. "It's like when you go to Beijing or Shanghai, you see that locals enjoy the fruits of China's success much more than hardworking outsiders. It's similar to the glamorous Olympic stadiums that were all constructed by migrant workers, who then left town before the Games began."

Like elsewhere in China, migrants are drawn to Huaxi because they can't find work at home.

"I wish I could be a resident, but I can't so I don't even bother to dream about it," said 27-year-old Liu, a steel worker from central Anhui province who moved here a year ago. He would only give his family name. "At least I have a job so life is better here."

He's not the only one who believes that. Busloads of tourists arrive every day, all curious to catch a glimpse of a village that has attained such visible success.

The visitors gawk as they troop through one of 10 distinctive pagoda-shaped high-rises at the center of the village, taking in the surreal view from the balcony on the top floor.

Afterward, in a giant auditorium modeled after the Great Hall of the People in Beijing, they listen as Wu holds court, sharing jokes and giving a few words of wisdom in a thick local accent that requires a young, red-gowned translator beside him.

That's followed by a musical performance, which includes actors portraying visitors from around the world praising Huaxi. One, dressed as an American tourist, belts out the final verses, ending with: "If this is socialism, we want it too."