China’s ‘utopia village’ has gone bust

A showcase socialist ‘Animal Farm’ is exposed as a multi-million-dollar myth

HONG KONG: One of the last outposts of Communism in China, a village whose 3,500 residents lived in a Mao Zedong-era time warp, has gone belly-up, and is being dragged kicking and screaming to the free market, which other parts of China embraced exactly 30 years ago.

Nanjie village in Henan province in central China, which was showcased for over a decade as a modern-day symbol of Chairman Mao’s dream of socialist utopia and an “economic miracle” where the collective spirit prevails, has today been pushed deep into bankruptcy.

Its critics now say that the mountain of debt it is buried under reflects the price of dolling up a fraudulent Orwellian ‘Animal Farm’, with its veneer of “equality” hiding a sordid tale of corruption and ideological posturing.  In Nanjie’s heyday, life in the pseudo-socialist bubble drew truckloads of admirers, who came to gaze in wonderment at residents who lived in the cocoon of a ‘commune’, singing revolutionary songs and chanting Mao slogans. 

In an era where social safety nets disappeared all across China, which embraced the market economy under Deng Xiaoping and successive leaders, Nanjie stood out because everything in the village was collectively owned and everyone enjoyed cradle-to-grave welfare.

True, everyone in the village, including the village head, drew only a small honourarium, but residents enjoyed free food, housing, healthcare, schooling and even free weddings and funerals. 

Home to some agricultural and food processing industries, Nanjie came to be known as the ‘wealthiest village’ in Henan province, and its economic model became the subject of research by scholars the world over.

In particular, there was an eagerness to understand how Nanjie overcame the “free-rider problem” — where the security of a safety net and the absence of incentives to perform may lead some workers to shirk their responsibility to the collective. 

Cui Zhiyuan, an Associate Professor of Political Science at the Massachusetts Institute of Technology, concluded after a game theory study that Nanjie’s experience “demonstrates that the free-rider problem can be overcome” in a collective economy. 

But it now turns out that Nanjie wasn’t an “economic miracle” so much as a house of cards built with a limitless credit line from state-owned banks as part of an elaborate effort to showcase the “correctness of the Mao Zedong Thought”.

In particular, after the 1989 Tiananmen Massacre, an ideological battle broke out in Beijing between reformists and conservatives within the Communist Party.  Nanjie, which was a shining symbol of Maoist principles at work, was actively cultivated by the conservative faction and given virtually limitless access to funds from the Agricultural Bank of China. 

Feng Shizeng, an associate professor in sociology at Beijing’s Renmin University, says Nanjie’s  supernormal growth was a result not of “efficient capital accumulation but of excessive reliance on bank loans, put to inefficient use”.   Worse, when the village head, who drew the same honourarium as everyone else in the village, died in 2003, over $2 million in cash — and documents listing several property in his name — were recovered from his safe. Clearly, in this Animal Farm, some were more equal than others.

Today, Nanjie finds itself saddled with a 1.7 billion yuan ($250 million) debt; with the Agricultural Bank of China now preparing to list its shares, it is calling in its outstanding debts. The official newspaper Wen Wei Po calculated recently that it would take Nanjie over 200 years to repay the debt. 

Faced with this mountain of debt, the village committee has now reluctantly embarked on a privatisation effort.  On the 30th anniversary of China’s embarking on economic reforms, its last Communist outpost has bowed to the gale winds of market forces.