Shakedown at High Honesty Plaza
(Mobocracy update II)

Well, our favorite restaurant has finally given up. They, along with every other business in the plaza that used to be home to the High Honesty Supermarket, have closed and are looking for new locations. A little more information and some pictures after the jump.

The small businesses had shown some fight against the attempts of the landlord to close them down so the plaza could be renovated. The landlord wired shut all the gates to the plaza, but the businesses opened them again. The landlord shut off their electricity and water, so they pooled their money and bought a generator. They also hired a lawyer to contest their case, and hung protest banners on their storefronts. But they had made a crucial mistake in not insisting that their rental contracts include the landlord’s oral assurances that the property would not be redeveloped until the end of 2008. They also felt that they could not count on help from the government because the plaza is owned by the Railroad Bureau, which the High Honesty Supermarket group is a subsidiary of. Still, they were determined to fight it out.

legal noticeBut their fight didn’t last very long. Little more than a week after our last update, we found that all but one of the gates to the plaza had been closed again, this time with chains accompanied by a notice from the Public Security Bureau. The notice did not say anything more than that everyone should obey the law and settle disputes peacefully, but it seemed like the police’s stamp of approval on the gate closings. Some parts of the buildings attached to the former supermarket and the old warehouse have already been reduced to rubble and picked over by recyclers. Some stubborn business owners had not yet emptied their shops of their inventory, and protest banners still hung from many storefronts, but none of the shops were open. A few vegetable sellers remained in the old warehouse, where they sleep as well as vend, so we went there to buy something to cook for dinner. They seemed surprised to see a customer. ‘How’d you find us?’, one woman asked.

A few days ago we went back for some vegetables, and found not much changed from our previous visit. The vegetable sellers were still there in the warehouse, sleeping and selling amidst broken walls and piles of bricks. The business were still closed, though demolition had not proceeded much. A new notice was pasted on the doors of some of the businesses. It was from the manager of the High Honesty Supermarket, inviting the owners to one last meeting in an attempt to resolve the dispute. If they did not come, said the notice, then the manager was not responsible for anything that happened after that.

demolition at High HonestyIn my first post on this topic, I linked this local dispute to one involving a Western magazine entrepreneur and used them both to characterize the current political and economic situation as neither capitalism nor socialism, but rather a ‘mobocracy,’ where political connections were paramount in determining business success, and where any profitable private concern, especially a small business, was vulnerable to poaching by government officials or those well-connected with them. China Law Blog wrote in the comments on Lumpenlogocracy posts (here, here and here) to correct that view, saying that in his experience the courts in China are more fair than unfair to private litigants, and that though Chinese law is needlessly complicated, it can be safely navigated through with a good lawyer as a guide, making businesses in China not as insecure against the state or bands of stick-wielding thugs than I had suggested. Reason binds me to privilege his interpretation of the situation in China over my own, as I lack knowledge of and experience with the law, though I am not as bullish on China as he.

I could not resist the overblown rhetoric of the title, but it might be more accurate to describe this situation as a legal dispute settled peacefully more-or-less within the confines of the law: if the restauranteurs are to be believed, the landlord did not have the legal right to shut the gates and turn off the power, but because of their poor contract negotiating, the business owners did not have much recourse beyond their protest banners. It’s not a fair that the landlord misled them about when the demolition would begin, but it appears to be legal. It is their perception that the cards were stacked against them, regardless of the contract, because of the landlord’s connections to the government. Whether this was a factor in determining their case I cannot say.

What I can say is that the perception of unfairness in the Chinese economy is widespread among the Chinese I have discussed the issue with. Our social circle is mainly among university students and professors, but also includes some working in private business and the law. One young computer programmer had his own business close some years ago, and still bitterly resents the interference of government officials that he blames for the failure. A Chinese law student I met with recently said the law was changing slowly, but that still, money and connections to the state mattered a great deal in business matters. A Chinese lawyer I spoke with had recently lost his Chinese investments, and blamed the inadequate regulation of companies in China for his losses. He wanted to invest in foreign markets from now on because, he said, ‘there is no security here.’ I don’t know anything about the details of these cases. It could be that the government, an inadequate legal system and an unfair system of connections make a convenient scapegoat for personal or professional mistakes. Taken together, though, I think these individual perceptions indicate that though China is improving its legal and economic structures, it has a way to go.

Our former favorite restaurant