"How to Invest in China-To Ensure Their Economic Interests, Foreigners Should Make Political Investments First" published in United Daily, May 21, 1994 [Written December 29, 1993]

by Wei Jingsheng

Normally, whoever plans to do business should accumulate experiences, learn the knack from others, and, when he has some certainty of success, then proceed to risk his or someone else's money. Few people do business by following professors' guidance, and stir fewer businessmen consult politicians. This is because what professors can tell you and what politicians can help you with are already guaranteed and relatively fixed things in this society or economic environment; that is, the constants and invariable factors in economic activity. What really requires the talent and wisdom of entrepreneurs or, in other words, what contains both risks and opportunities are the variables that are relatively unfixed and that do not have or cannot have any element of security.

All talented entrepreneurs attain major successes by giving play to their foresight and judgment in the elusive fields, or by chance. To put this issue in a different light, the more security the economic system (not just the market) and the legal system of a country or society can offer, the fewer domains of risk and the smaller the risks. Such an environment gives more security not only to the income of wage earners, but also to the benefits of entrepreneurs and businessmen, because entrepreneurs and businessmen can concentrate their time and energy on a relatively small number of variable fields; their efficiency can certainly increase in direct proportion; and their luck will also improve in direct proportions, though not everybody will have good luck.

The history of the development of the developed countries illustrates this point very well. By lateral comparison, it might be hard to draw a simple, clear and revealing conclusion due to obscuring factors, such as culture, traditions, history, geography, resources and varying population quality of different countries. Some professors like to describe things in the most complicated way and take the least lucid approach, as it helps them publish voluminous monographs and reduce the number of critics (through making the readers confused and disorientated by lengthy and dull academic writings and therefore unable to make head or tail of what the critics are talking about). However, to avoid letting opportunities slip by, businessmen and those who administer a country must solve problems in the most lucid way and must take the simplest and clearest approach. Therefore, I just want to make this simple point on this issue: By longitudinal comparison, only when the authority and fairness of each country's legal system keeps improving can the rights and interests of the people (including businessmen) have increasing levels of security and can the people's business performance improve in direct proportion. I have always maintained that businessmen have varying talents which are not in direct proportion to their level of education, because those who have higher academic scores are not necessarily winners in the business world.

A review of how some countries became prosperous clearly indicates that economic environment and legal security are indispensable for each country or society to improve its economic performance and are also the first issue to consider for private investors. Whoever does not believe this can review or read the history of his own country's process of reaching prosperity again or can consult veteran businessmen who have gone through such a history. Most of them will agree with the simple conclusion I have drawn. But never consult professors who have voluminous academic publications to their credit. I am afraid that will not help you come to a correct conclusion, because not everybody can avoid being confused and disorientated by lengthy and dull reasoning like professors can.

China's investment environment happens to be related to our conclusion mentioned above: This is the very reason why China, a country with rich business experience, has failed to bring forth large numbers of entrepreneurs or successful businessmen, because China lacks the constants in its economic environment that Western countries possess and lacks an effective and fair legal environment - not because the Chinese lack the talent for doing business or do not want to become rich.

Some Western businessmen arrogantly claim: "China does not protect its people's property from being violated, but does protect the property rights of us foreigners." Some canvassers for the Chinese government (not just Chinese) would pledge to everybody by saying something like "though China's economic and legal environments are not good, the Chinese government will give the most favorable conditions to the foreign businessmen."

I think those who say such things are all liars or at least lack judgment and foresight. If you risk your money or others' money according to their prediction which reflects a lack of judgment, the risk will certainly be many times greater than that in your own country. Because ordinary people are used to judging situations by referring to the experience they have gained in their own countries, there are always people who will be duped, just as someone accustomed to the wealthy life-style in a Western country finds it hard to imagine how a Chinese person can live on an annual income of a few dozen US dollars, or a businessman who is used to operating in a Western society with legal security finds it hard to imagine what kind of risk is involved in a country like China, which has no legal security. In fact, if I were to give a list of risks that you may encounter, it will be as lengthy as a professor's monograph. I can only tell you this in the simple manner that we are accustomed to: When you have security, it is easy for you to know what kind of security exists; when you have no security, generally speaking, it is impossible for you to realize all the risks that will come up.

Moreover, by common sense reasoning, one can easily see that, for a government that is not prepared to create a good economic environment for its own people, the favors it extends to foreigners mean unfair treatment for its own people. Even if this policy truly can ensure the materialization of this kind of favor over a long period of time, the people of this country will not be able to tolerate such unfair treatment for very long. They will use all possible means to change such unfair treatment. As is well known, past history tells us that, whenever there is a major change in society, many extremely unfair things will turn to the other extreme. In other words, unfairness will transfer from the country's own people to foreigners. Many facts that have emerged since the beginning of this century have proved this, especially when foreigners participated in the exploitation and oppression of the country's own people and especially when this oppression and exploitation went so far as to cause the majority's hatred to override reason. Even the greatest politicians have had to give in to this widespread and profound retaliatory sentiment.

Though the Chinese are a very reasonable people, they require others to be equally reasonable. Furthermore, the Chinese have always despised businessmen who are solely bent on making profits or who are rich but cruel. Therefore, the main issue in the context of investing in China is the imperative need to make political investments first.

Helping the Chinese and creating a good economic environment for foreign businessmen themselves is the only way to provide security for everybody's economic interests. China's enormous market potential is very appealing, but if investors do not invest in helping China's most reasonable democratic reform forces, but instead allow reactionary autocratic forces or other forces that are hard to identify in advance to determine China's future, it will be disadvantageous not only to the Chinese, but also to foreign businessmen investing in the Chinese market. This is because, no matter what passport you hold, you become a member of the Chinese economic system once you start operating in China, and passports mean nothing in the market. Naturally, however, if you want to follow the example of many individual business operators in China and "make a fortune and slink off before the communists wake up to it, you can indeed make quite a lot of money against your conscience. But I want to warn you: You better get out in time, or you may land in a mire from which you will not be able to pull out your legs.