China’s ‘Richest Village’ in Financial Crisis

Huaxi Village in Jiangsu Province, which was once touted by the Chinese regime as “China’s richest village,” is in financial trouble. Experts believe the situation reveals the corruption among the elite.

Huaxi Group, the company which is collectively owned by the village and its residents, and has many sub-companies and listed companies, has a debt load of 40 billion yuan (about $6.17 billion) and some Chinese media claim that it is bankrupt.

On Feb. 25, a video went viral, showing a large number of residents waiting in several lines in the village square to withdraw their money from Huaxi Group. Some residents told Chinese media that since Feb. 24, the dividend of Huaxi Group’s shareholding has suddenly dropped from 30 percent to 0.5 percent. Since the 30 percent dividend has lasted for several years, many villagers have bought shares.

According to mainland Chinese media portal Sina, Huaxi Village’s Communist Party Committee said that Huaxi Group had sufficient funds. But it did not alleviate the shareholders’ concerns and many continued to withdraw money. Some said that they were lucky to be able to get back their principal, as they were afraid of not getting any money out.

After the Chinese Communist Party (CCP) rolled out the “reform and opening up” policy in 1978, it promoted Huaxi Village as an example of its “collective economy” model under the campaign of “building a new socialist countryside.” Huaxi was dubbed as “China’s richest village” and “the first village in the world.”

Mainland Chinese media reported that the A shares of Huaxi Group were listed in Shenzhen stock market in 1999. Huaxi Group became China’s first listed company that was named after and owned by a village and was hailed as “the first rural stock in China” by state-run media.

WHEN HAVE WE HEARD SIMILAR STORIES BEFORE?

Beijing-based scholar Rong Jian revealed on Twitter: “Huaxi Village’s enterprises are claimed to be collectively owned by the village, but they are actually controlled by the Wu family—they are the head of Huaxi’s Communist Party Committee. The son inherits the father’s position and business, and the grandson succeeds.

The miracle of Huaxi Village, to put it bluntly, is that it totally relies on loans from the government and currently has nearly 40 billion yuan (around $6.17 billion) in debts. However, it only has 7 billion yuan (around $1.08 billion) funds. How could they pay off the debt? It’s a huge irony that these private family businesses under the banner of ‘collective economy’ have been long-established by the government as a model of collective economy.”

Rong pointed out that this is a typical example of crony capitalism under communism. “This kind of enterprise will collapse sooner or later. It is now acquired by the State-owned Assets Supervision and Administration Commission of China, using state money to fill the holes hollowed out by them. It can be regarded as a safe landing [for them].”

Communist governments never fail because of an inability to control the population. History has proven how easy it is to control the people: take away their guns, and implement strict martial law.

Communism fails because of corruption. Government cannot create wealth, it can only confiscate it. In doing so, poverty and corruption always follow. It never fails, the only question is “How long will it take”?

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