China: Mass protests erupt in Shenyang

Thousands of people in Shenyang, capital of north-eastern China’s Liaoning province, took to the streets over several days recently.

They surrounded government offices to demand government help in recovering money from a pyramid-style financial scheme to farm ants for the manufacture of an aphrodisiac drug.

Reportedly at least 1,000 anti-riot troops and police have been deployed in Shenyang, to quell the protests and shield the headquarters of the provincial government and CCP (China’s supposedly ‘communist’ ruling party).

Life savings threat

According to eyewitnesses, the protests swelled to several thousands in the roads near the provincial government offices on Wednesday 21 November. Sporadic clashes with police broke out, according to the same witnesses.

Many of the protesters are laid-off workers or farmers from across Liaoning, the province with the highest proportion of laid-off former state-sector workers. They were lured by the company, Yilishen Group, to put their life savings into a scheme according to which they raised ants to provide ingredients for a health tonic promoted as an aphrodisiac.

The company’s main product was banned from sale in the United States, as it contained the active ingredient in Viagra, while being sold as a ‘health supplement’ rather than a drug.

For every 10,000 yuan (920 euros) they paid the company as a ‘deposit’, investors were promised a dividend of 3,250 yuan. Last year, a businessman behind a similar ant scam was sentenced to death for embezzling billions of yuan.

But Yilishen company bosses were seen as enjoying good contacts with the provincial ‘communist’ leadership, leading many to believe the scheme was a legitimate investment. But Yilishen Group has twice delayed payment of dividends in the last two months, fuelling speculation that it was on the brink of bankruptcy or that the government might have frozen its funds.

A mind-blowing three million Liaoning residents are believed to have deposited money with the company enabling it to rake in more than 10 billion yuan, according to Chinese media.

While suspicions have run high that this was nothing other than an illegal scam, the company has survived several probes in the past eight years. The group’s good relations with the provincial government and its commercials on state television had reassured many investors that Yilishen was a legitimate operation.

“It has been out there for eight years and the government has given the company and the manager so many honours. We thought there mustn’t be any problem,” investor Li Dechun told Reuters.

Anti-government mood

As the mood of panic spread in recent weeks, protesters seem to have turned their anger against the government. The central authorities – ever jittery – have now ordered a complete media blackout on coverage of the scandal. This merely raises popular suspicions of official negligence and corruption.

“We strongly demand the government offer a way out for Yilishen!” read a banner held by protesters as they marched along a Shenyang street. The same basic demand – government intervention to rescue Yilishen and guarantee investors’ savings – was written in posters visible in photographs on the internet.

“If Yilishen goes bankrupt, the government will be the chief culprit,” read one message on a domestic Chinese website (soon removed by the censors). “The government will be drinking our blood.”

“Most of the investors are from the lower class of society. Some have threatened to take more radical actions, such as blocking trains at the railway station,” a Shenyang resident told Reuters.

One woman investor told The Scotsman newspaper that many ant farmers had been beaten and were now under surveillance. She said police in Shenyang were yesterday breaking up groups of more than ten people.

Mass movement

This latest social flashpoint shows how precarious the situation in China is despite its turbo-charged economic growth.

The north-east of the country, including Lioaning, has suffered enormously in the last decade and a half as a result of de-industrialisation, capitalist re-structuring of state-owned industries and shift of economic power to the south-eastern coastal exporting cities.

Liaoning was the epicentre of the massive working-class backlash against downsizing and privatisation ‘reforms’ in 2002, in which more than 100,000 ‘xia gang’ or laid-off workers took part. This movement, briefly, saw the development of independent trade unions on a significant scale, before it was suppressed by the CCP at provincial and national level.

Events in Shenyang are also a glimpse of what could happen when a much bigger pyramid scheme – the one that poses as a stock market – experiences a collapse, which is only a question of time given an almost fivefold rise in share prices since 2005.

This episode underlines the crazy speculative nature of capitalism and its criminal genius for ‘money-making’ schemes of this type that prey on many of the poorest, most desperate strata in society.

Revolutionary socialists fully support the demand for government guarantees to compensate those who stand to lose from the Shenyang Yilishen affair. But this demand on its own is not enough. Confidence tricksters can always strike again with new schemes in a situation where most ordinary workers and poor farmers are desperate to maximise their meagre savings to meet the high cost of retirement and debilitating medical costs.

Chinaworker calls for:

  • Nationalisation of Yilishen Group, the immediate seizure of all assets and arrest of its owners. For an independent and open public enquiry into the company’s affairs and its links with local government.
  • For a national statutory pension for all of no less than 2,000 yuan a month and free health care to be financed by massively increased central government spending – spend the money on affordable heath care instead of overseas stock market deals!
  • Reverse the privatisations and destruction of China’s state-owned sector. For state ownership under democratic workers’ control and management.
  • Continue the struggle started in 2002! For independent and fully democratic trade unions to fight for workers’ interests, and organise retired workers, the unemployed, farmers and exploited layers which are highlighted by the Shenyang Yilishen Group affair.
  • Fight to abolish capitalist injustice.
  • Fight for democratic socialism in China and internationally. (new window)

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December 2007