“Completely private transactions are impossible between citizens of a largely market economy and of a collectivist state,” they continued. “One side is necessarily represented by government officials. Political considerations are unavoidable, but friction would be minimized if the governments of market economies permitted their citizens the maximum possible leeway to make their own deals with collectivist governments. Trying to use trade as a political weapon or political measures as a means to increase trade with collectivist countries only makes the inevitable political friction even worse.”21
In the late 1970s and early 1980s, Washington wasn’t imposing many rules on the Chinese regime when it came to the treatment of U.S. companies operating there. But many American firms were eager to dive into the formerly closed market anyway. And some firms were happy to sign up for another China adventure even if they’d been badly burned in the past.
Longtime employees at the American financial giant Citibank might have recalled that when the communists seized the bank’s assets in 1950, they didn’t do so nicely. “When the Communists broke into a bank-owned staff residence in Shanghai, one Asia hand, Ray Kathe, had to roll himself up in an oriental carpet to protect himself from ricocheting bullets,” writes Phillip Zweig. Upon taking over Citi’s branches, the Chinese demanded that the bank return all deposits at the exchange rate that was in effect at the time they were made. “Because of inflation that would have been disastrous,” adds Zweig, and so Citi left China without settling the issue. The new communist regime responded by essentially holding three bank employees hostage, barring them from leaving the country. Citi ransomed two of them for $500,000 and continued for decades afterward to pay the salary of one employee who was a Chinese national.22
Given this history one might think that Citibank would have been the last American company eager to reenter the Chinese market. But one would be wrong. In the late 1970s Citi CEO Walter Wriston was so eager to take another crack at China’s nearly one billion potential consumers that he was willing to travel there without knowing exactly how he would return—and over the objections of his wife. The couple was in Hong Kong preparing to visit the Chinese mainland when their travel plans got complicated. Zweig reports: “Kathy Wriston had not been enthusiastic about this trip. Iran Air was the only carrier flying out of China and it was then on strike.… She said, ‘I’ll do anything for Mother Bank, but I don’t want to go into China with no way out.’ Wriston put his foot down. ‘We want the Chinese business,’ he said.”23
Wriston got the business, striking a deal with the Bank of China in 1979. The Chinese government paid Citi just 41 cents on the dollar for the assets it had seized nearly three decades earlier. The timing was appropriate. Wriston’s triumph of hope over experience occurred at the dawn of an era of global growth, communist retreat, and Chinese revival. Who could avoid becoming an optimist?
By the mid-1980s, the communists were still running China, but the country had budding young entrepreneurs sprouting up all over the place. “In a tiny bedroom that also serves as an office, Hu Peiyi spreads his hands wide and tells friends how he is going to build his fleet of five secondhand cabs into an empire,” reported the Wall Street Journal’s Julia Leung and Vigor Fung from Shanghai in 1985. “Mr. Hu is one of hundreds of ambitious businessmen who are shaping up as China’s first batch of capitalists since the Communist takeover in 1949. They are venturing into fields such as property, industry, consultancy and trade.”24
Reformers within the increasingly permissive regime were hoping the new competitors would force state-owned enterprises to be more efficient. Chinese leader Deng Xiaoping was willing to abandon communist dogma and acknowledge that some of the ideas of Marx and Lenin had become outdated. Encouraging ideological flexibility and pragmatism, he observed that “it doesn’t matter whether a cat is black or white as long as it catches mice.”25
But there were potholes along the way for the aspiring taxi magnate and every other new business owner, “with bureaucratic delays and hostility from orthodox Communists suspicious of capitalism. Also, some Chinese leaders worry that the growth of the private sector will embarrass the state, which is still largely committed to collective ownership,” according to the Journal report.26
Still, regardless of the difficulty of dealing with old-line apparatchiks, the long waits to get telephone service, and the possibility that the regime could once again turn on a dime and seize their assets, the new capitalists were determined to chase their dreams. “This job ages me fast, but nothing is like being your own boss,” said one business owner. Another new capitalist, a thirty-nine-year-old woman named Hu Diqing, had quit her job as a newspaper reporter to form a trading and investment company. “Suppressing one’s ambitions is the most painful thing on earth,” she said.27
Entrepreneurial ambition, finally allowed to express itself, was creating the fastest-growing economy on earth. Symbolic of the zest with which subjects of the communist regime were embracing their new freedom to be capitalists, the classic American board game Monopoly became a huge hit in China.28
There was just one problem, which foreshadowed the experience of many American companies with the Chinese market. The skyrocketing sales across the Pacific came as news to Parker Brothers, the U.S. maker of the popular game. China’s Monopoly boom was being fed by an unauthorized knockoff version produced at a factory in Shanghai by a local company. Questions about rights to intellectual
