23

Wheeling and Dealing

Whatever their position in the social hierarchy, virtually everybody, from top to bottom, subverted the system of distribution, covertly giving full scope to the very profit motive that the party tried to eliminate. As famine developed, the survival of an ordinary person came increasingly to depend on the ability to lie, charm, hide, steal, cheat, pilfer, forage, smuggle, slack, trick, manipulate or otherwise outwit the state.

But no one could navigate the economy on his own. In a nation of gatekeepers, obstacles were everywhere, as anybody could obstruct anybody else, from the cantankerous caretaker in an apartment block to the dour ticket seller behind the window in a railway station. So prolific and complex were the rules and regulations that ran through the system that discretionary and potentially tyrannical power was vested even in the lowliest of bureau functionaries. The simplest of transactions – buying a ticket, exchanging a coupon, entering a building – could become a nightmare when faced with a stickler for rules. Petty power corrupted petty people, who proliferated at the lower levels of the planned economy, making arbitrary and capricious decisions over goods and services in short supply which they happened to control. And higher up the chain of command, the greater the power the more dangerous the abuse.

A network of personal contacts and social connections was required to get even the simplest things done. Asking a prominent friend to help was always easier than approaching an unknown official who might be devoted to the details of administrative procedure and see no reason to bestow a benefit on a stranger. Any connection was preferable to none, as a former neighbour, an erstwhile colleague, a school friend or even a friend of a friend was more likely to accommodate a request, turn a blind eye, skirt the law or bend a rule. In the higher reaches of power, influential colleagues could help one to secure state funds, avoid paying taxes or gain access to scarce resources. At every level people expanded their social network by trading favours, exchanging gifts and paying bribes. They looked after their own. Mu Xingwu, head of a storage unit in Shanghai, recruited nineteen relatives to work under him. Half the workforce were related: here was a solid basis for wheeling and dealing in the goods he was supposed to safeguard.1 Everywhere people were pressurising those below them to protect and further their own interests. The planned economy, with its dedication to the greater good, spawned a system in which the individual and his personal network prevailed.

But people in the party were in a better position to use the system for their own personal benefit than those outside it. And they showed endless entrepreneurial guile in devising ways to defraud the state. A common practice for enterprises was to bypass the plan and trade directly between themselves. In Wuhan the Provincial Highway Transportation Bureau agreed to move goods for the Jianghan District Number Two Commercial Office in exchange for food. The operation was worth well over a tonne of sugar, a tonne of alcohol and a thousand cartons of cigarettes as well as 350 kilos of canned meat in the first months of 1960. The Wuhan Oil Purchasing Station, on the other hand, traded hundreds of tonnes of oil, gas and coal to provision lavish banquets for its cadres.2 In the north the Qinghe Forestry Bureau bartered hundreds of cubic metres of timber for biscuits and lemonade from a factory in Jiamusi. Others exchanged pigs for cement, or steel for timber.3

These practices permeated the entire country, as a parallel economy was created by travelling representatives sent to circumnavigate the rigid supply system. Purchasing agents built up social contacts, wining and dining local officials, and traded their way through a shopping list provided by the enterprise for which they were working. Bribes were common. The director of the Bureau for Goods and Materials in Shanghai regularly received presents, from deer antlers rich in velvet to white sugar, biscuits and lamb. More than 6 million yuan in goods were ‘damaged’ or ‘lost’ under his auspices in less than a year.4 In Guangzhou, the Bureau for Transportation was accused of ‘wasting’ over 5 million yuan in the three years following the Great Leap Forward.5 In Heilongjiang province alone one investigation estimated that some 2,000 cadres were shopping for timber on behalf of their units in late 1960, offering watches, cigarettes, soap or tinned food in return.6 Dozens of factories in Guangdong sent agents on acquisition tours to Shanghai, cutting out the state from their business deals.7People’s communes were no exception: the Seagull Farm in Guangdong sold some 27 tonnes of citronella oil to a Shanghai perfume factory rather than deliver it to the state.8 Nobody knew how much trade took place in this shadow economy, but one investigation team put the quantity of goods shipped out of Nanjing to other units without any official approval at 850 tonnes for the month of April 1959 alone. Hundreds of units were involved, some actually counterfeiting shipping permits, using false names, printing fake certificates and even shipping in the name of the army in order to make a profit.9

Barter exchange, sometimes considered a very primitive form of trade, became one of the most efficient ways of distributing goods where they were needed. And it could be a very sophisticated operation, moving along a nationwide network, cannibalising state structures, shadowing the planned economy and yet managing to remain invisible thanks to creative accounting. Goods became currency. In a detailed study of a famed dumpling shop in Shenyang, investigators showed that food was routinely exchanged for goods from more than thirty construction units in the city, ranging from iron pipes to cement and bricks. A steady and cheap supply of ingredients was also secured by exchanging the dumplings directly with state providers. The Municipal Aquatic Products Company, suffering as much as any other distributor from severe shortages in the midst of famine, handed over its entire supply of shrimps, normally earmarked for consumers in the suburbs, to the shop for the promise of dumplings. The cadres went on shopping sprees in the best department stores in Shenyang, paying with dumpling coupons. They took care of their employees, who feasted on the produce. The traffic police and the fire brigade were bought off, while even services such as delivery of coal, water supply, toilet cleaning and hygiene inspections were all carried out against an agreed amount of the shop’s speciality.10

Creative accounting could hide misappropriation of funds. Accountants would invent expenditures which were never incurred, in some cases claiming funds of up to a million yuan. Another trick consisted of moving state investments away from industry towards fixed capital, as state units treated themselves to new buildings, dance halls, private toilets and elevators. This happened in the Zunyi region, where a raid revealed that 5 million yuan had been embezzled since the Great Leap Forward.11 In Heilongjiang, one quarry entered all the capital expenditure on offices, canteens and even kindergartens into the production costs, thus passing on the bill to the state. In many other enterprises administrative and operating expenses were added on to the production costs. In Beijing alone some 700 administrative units, complete with salaries and expenses, thus vanished into a black hole called ‘production’.12 Other costs could be disguised and passed on to the state. In Luoyang, Henan province, a ball-bearing factory built a 1,250-cubic-metre swimming pool, sending the bill up as a ‘heat lowering device’.13

Endless borrowing from state banks was also a common ploy. As Li Fuchun pointed out when he noted a deficit of 3 billion yuan in the summer of 1961, many units borrowed from the bank to feast.14 And when a city or a county was in the red, it simply stopped paying taxes. This started in 1960, as a number of provinces passed regulations stipulating that all profits be kept. The Finance Department and the Trade Department of Liaoning province thus dictated that profits from enterprises under their control should be removed from the budget and distributed locally instead. In Shandong, Gaoyang county unilaterally determined that profits should fall outside the budget and be retained locally. Losses, on the other hand, were entered into the budget and billed to the state. Not only did collective enterprises and urban communes routinely fail to raise taxes, but entire cities decided to forgo tax collection.15

And then there were those who simply stole from the state, dispensing with clever accounting tricks altogether. Local factories along the Shanghai–Nanjing railway line pilfered, embezzled or smuggled well over 300 tonnes of steel, 600 tonnes of cement and 200 square metres of timber in less than a year. The New China Lock Factory from Xuzhou, for instance, hired a lorry systematically to steal all the material it needed from railway depots. Most of these activities were directed by top cadres. A large assembly hall in Nanjing East Station, entirely built from stolen material under the direction of station manager Du Chengliang, was a monument to organised theft.16

Another way to defraud the state was to inflate the ration roster. A macabre trade in dead souls flourished in the countryside. Just as families tried to hide a death in order to get an extra ration of food, cadres routinely inflated the number of farmers and appropriated the surplus. This was common too in cities, where the state was committed to feeding urban residents. When a team of investigators pored over the accounts of one county in Hebei, they discovered that the state handed out an average of nine kilos of grain a month in excess of the prescribed rations for each of the 26,000 workers. Everybody massaged the figures, one small brickyard being bold enough to declare more than 600 workers where only 306 could be found on the ground. Some factories classified all their workers as involved in heavy duties because that entitled them to a larger ration, even if most of the employees were engaged in light work.17 In the construction industry in Beijing, up to 5,000 workers who had died or had returned to the countryside were kept on the books. Even in the more rarefied atmosphere of the Chinese Academy of Social Sciences, well over a third of the 459 workers who claimed their daily allowance in the Institute of Geophysics were not regular members entitled to food rations.18

The obverse of this practice was to hire people outside the approved plan. A black market in labour appeared in which supply and demand determined the salary. Top workers and promising apprentices were lured away with fringe benefits or monetary incentives. Thousands, according to a report in the summer of 1960, had been hired away in Nanjing in the first half of the year.19 Such was the competition that, when factory bosses refused to let good workers pursue better opportunities elsewhere, they would complain about lack of ‘employment freedom’ and try to get dismissed. A few exploded in a violent rage, directing their ire at the cadres who stood in their way. Of the 500 apprentices in the commercial sector of Baixia District, 180 had absconded. Part and parcel of the black market in labour were ‘underground factories’, which popped up in every city, including Nanjing. Some people took on night shifts on top of their regular jobs, others worked two shifts to make ends meet. This was the case for two-thirds of all workers in one construction unit near the centre. Students, doctors and even cadres abandoned their posts to make money on the black market, working on docks or moving goods on flatbed tricycles.20

One of the many paradoxes of the planned economy, therefore, was that everybody traded. People speculated by buying in bulk, betting on the fact that shortages and inflation would push the price up. An entire operation was run by Hubei University, with telegrams instructing agents to buy or sell specific commodities according to the fluctuating demands of the black market. A research centre at the Chinese Academy of Social Science in Shanghai employed twenty students from East China Normal University to buy goods which were traded for scarce commodities with other units.21

Party members were well placed to undertake speculative operations, some of them on a full-time basis. Li Ke, a cadre from the Jianguomen commune to the east of Beijing, wrote himself a certificate for sick leave for nine months and started trading in sewing machines, bicycles and radios, investing the profit in a bulk acquisition of electric bulbs and cables. These he sold in Tianjin, purchasing in turn furniture which he unloaded in the suburbs precisely when the market contracted: he thus acted in a commercially astute way, all the while being in the pay of the state. Many others did the same.22

But most cadres had bigger fish to fry, and petty trade was left to ordinary people. In Shanghai, a once freewheeling treaty port, trading habits died hard. Zhao Jianguo, a woman entrepreneur with little money, dealt mainly in small commodities such as light bulbs, but she also made a good profit on a prestigious Phoenix bicycle. Li Chuanying, also a petty trader, bought goods in Shanghai and sold them in Anhui province. Hu Yumei travelled to Huangyan, Zhejiang, to deal in straw hats, mats, dried fish and shrimps, often doubling her money. Ma Guiyou made about 100 yuan a month buying up jewellery and watches from wealthy families downtown and dealing in ration tickets in the countryside: ‘I am not a counter-revolutionary! I don’t steal and I don’t rob, and I don’t have a job, so who cares if I do a bit of business?’ The officials who compiled the report with the help of neighbourhood committees in August 1961 were taken aback not only by the range of goods on offer, but also by the quality of information about market conditions. Despite all the economic information gathered by the machinery of the central planners, petty traders were more in touch with popular demand than the party. The phenomenon was widespread, drawing participants from all social backgrounds, ranging from old rickshaw puller Chen Zhangwu, who sold fruit from the countryside to make ends meet, to influential managers who used official trips to distant places such as Inner Mongolia and Manchuria as a cover for private deals.23

Factory workers also traded goods. The Federation of Trade Unions was alarmed by workers keen to pursue a ‘capitalist lifestyle’ by spurning the principles of the planned economy and speculating on scarce commodities, carefully comparing prices in different shops and buying for profit. Some would join a queue wherever they spotted one, regardless of what was being sold. A few brought family members along to take turns. Li Lanying, a female factory worker, spent five yuan on carrot jam, hoping to resell it at a later date. A colleague acquired persimmons by the sackload. These were not exceptions but rather ‘a way of life’, as the report put it, because workers widely believed that ‘saving money is not as effective as saving goods’. Savings were eroded by several percentage points a month.24 In Shanghai fear of want prompted people to queue up and hoard any and all goods still available from the shops.25

When workers lacked the capital for speculation they resurrected a practice common before 1949, called dahui. Poor people would mutually borrow from a circle of trusted friends, each lending five to ten yuan a month to a different member every month, and each acting in turn as a banker about once a year. In the Dongcheng district in Beijing, some seventy such deals were struck every month among factory workers. Some splurged on luxury goods. Zhao Wenhua, a postal worker, treated herself to a watch, a bicycle, a fur coat and wedding gifts, all seen as durable objects that would keep their value. The practice spread on the understanding that, in times of dearth, goods were a safer bet than money.26 Even children traded. Roughly one out of ten primary school children in Jilin speculated in cakes, meat, eggs, vegetables or soap.27

A few rolled the dice. In Lantang commune, Guangdong, two cadres gambled away a thousand kilos of grain belonging to the village, as well as several hundred kilos of vegetables. A few kilometres away a woman who lost fifty yuan gambling sold sex to meet her debts.28Gambling was an ingrained habit the authorities were unable to stamp out in Guangzhou, where factory workers played poker for food rather than for money. Some risked astronomical sums, up to 3,500 yuan.29 In Liuhe, just outside Nanjing, gambling occurred almost everywhere, involving groups of up to twenty people.30 Gambling was endemic during the famine, as people staked everything they had in sheer desperation. In the midst of the catastrophic winter of 1960–1, gambling was rife in Hunan too, with some players literally losing their trousers.31

As cash lost its purchasing power, ration coupons became a form of surrogate money. They were required for most essential goods, ranging from oil, grain, pork and cloth to thermos flasks, furniture and even building materials. Designed to ensure equitable distribution of basic commodities, they also tied the population into the household system, through which they were distributed. Each household was issued with a certificate or ration book on which all the family members were recorded, and this document in turn entitled the household to a monthly supply of ration coupons. Coupons were often valid for only one month. Their use was sometimes restricted to their place of issue, which could be a local canteen, a commune, a county, a city or occasionally an entire province. A rice coupon from one county had no validity in the next, forcing people to stay in their place of residence.32

Coupons were traded, just as goods were bartered. In some communes, for instance in Jinghai county, Hebei, coupons became a substitute for salaries, as money was all but phased out. A huge variety of coupons for goods and services from pumpkin seeds to haircuts was issued in lieu of payment, ranging in value from one fen to five yuan.33

One of the purposes of coupons was to preclude hoarding. But as the Guangdong Provincial People’s Congress discovered in February 1961, over a third of all coupons, distributed since September 1959, had not been exchanged, meaning that paper worth some 20,000 tonnes of grain was circulating as surrogate money.34

Forging coupons, which were often hastily printed on poor-quality paper, was much easier than counterfeiting money. In the East China Hydraulic Institute a dozen forgeries circulated in the canteens.35 The phenomenon must have been common. A police raid in Shantou brought to light some 200 separate cases involving pirated coupons. As a report to the provincial People’s Congress indicated, more than a third of social infractions were related to ration coupons; the security forces even blamed ‘enemy speculators’ for releasing a flood of fakes in Qingyuan in the autumn of 1960.36

Where buyers and sellers met, a black market emerged. As trade moved from the shop on to the street, markets appeared on street corners, outside department stores, by railway stations, near the factory gates. The black market ebbed and flowed in a legal twilight zone, receding with each crackdown only to reappear as soon as the pressure abated. Sellers would furtively accost buyers and pull goods from paper bags or coat pockets, while others sat on kerbs, spreading out their wares on the ground, from foodstuffs and second-hand bric-a-brac to stolen goods. The public security services would conduct regular sweeps, chasing away the black-marketeers. But they kept returning. And when the local authorities turned a blind eye, makeshift bazaars emerged, with people gathering at an agreed time to barter goods, until the whole affair grew into a more permanent market with buyers and sellers flocking in from the neighbouring villages.

In Beijing black markets appeared in Tianqiao, Xizhimenwai and Dongzhimenwai, where hundreds of traders offered goods that could fetch up to fifteen times the price fixed by the state. This did not deter an enthusiastic throng of housewives, workers and even cadres from shopping around. As bemused agents from the Public Security Bureau noted, people actually liked black markets.37 They were tolerated but not allowed to flourish in the capital, unlike in Guangzhou, where buyers came from all over the region. In the southern city hundreds of buyers from Hunan province alone could be found specifically buying sweet potatoes in the summer of 1961, many of them having been sent directly by their home units.38 Trade was openly conducted, and many of the sellers were children, including some who were only six or seven years old, and older ones who smoked and haggled with prospective buyers.39

In Tianjin local officials uncovered around 8,000 cases of black-market activity in the first weeks of January 1961. On some occasions more than 800 people were selling goods in one market alone, surrounded by thousands of customers examining the goods and generally blocking the traffic. ‘There is nothing that the black market does not have,’ according to one investigator.40 The police who patrolled the streets were fighting a losing battle, and in July 1962 the authorities finally decided to legalise dozens of markets they had never quite managed to eradicate. By the end of the year half of the fruit and a quarter of all the pork sold in Tianjin came from more than 7,000 pedlars. They made almost double the money a state worker earned.41 Thousands of people travelled to Tianjin from Beijing each day, such was the reputation of its market.42

As the famine gained ground and hunger gradually eroded the social fabric of everyday life, people turned inward. Everything was on sale. Nothing escaped the realm of trade, as bricks, clothes and fuel were bartered for food. In Hubei a third of the workers in big factories survived on loans. Some were so deeply in debt that they sold their blood to survive.43 In a unit in Chongqing, Sichuan, one in twenty workers sold their blood. The percentage was even higher in Chengdu, as working men and women exchanged their blood for a morsel to feed their families. Construction worker Wang Yuting was known in all the hospitals, having sold several litres over a period of seven months.44

But the situation was infinitely worse in the countryside. From a single district in Huangpi, Hubei, 3,000 families took their spare clothes to sell in Wuchang, where they also begged for food.45 In Cangxian county, Hebei, a third of villagers sold all their furniture, some even the roofs over their heads.46People bartered all they had in Changshou county, Sichuan, including the clothes from their backs.47

Before they died they sold their offspring, more often than not to couples who could not have children of their own. In Shandong, Yan Xizhi gave away his three daughters, and sold his five-year-old son for fifteen yuan to a man in a neighbouring village. His youngest son, a ten-month-old toddler, was sold to a cadre for a pittance. Wu Jingxi got five yuan for his nine-year-old son from a stranger, a sum which covered the cost of a bowl of rice and two kilos of peanuts. His heartbroken wife, an inquiry discovered, cried so much that her swollen eyes were losing their vision. Wang Weitong, mother of two, sold one of her sons for 1.5 yuan and four steamed dough buns. But many, of course, never found a buyer for their children.48

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