Public–private joint management
The public–private joint management () was an economic model used in China as a transitional means for the Chinese Communist Party (CCP) to merge capitalist industrial and commercial private property. The CCP described it as a policy and movement for socialist transformation targeting national capitalists and private individual laborers in 1956, after the founding of the People's Republic of China and the confiscation "imperialist, feudal, and bureaucratic capitalist" property.
History
In June 1953, based on an investigation by the United Front Work Department, the Chinese Communist Party (CCP) drafted the Opinions on Utilizing, Restricting, and Transforming Capitalist Industry and Commerce. In October, the All-China Federation of Industry and Commerce convened a congress of its members, conveying the CCP's general line during the transition period and its policy on the socialist transformation of capitalist industry and commerce. On 2 September 1954, the 223rd meeting of the Government Administration Council passed the Provisional Regulations on Joint Public-Private Ownership. In the latter half of 1955, a trend of public–private joint management of all capitalist industries emerged in many large and medium-sized cities. In November, the Central Committee of the Chinese Communist Party convened a meeting of leaders of provincial, municipal, and autonomous regional Party committees to strengthen leadership over the joint public-private ownership of all industries.
In early 1956, a nationwide upsurge of socialist transformation occurred, and capitalist industry and commerce underwent joint state-private ownership across all sectors. The state's buyback of private capitalist shares was replaced with a fixed-interest system, uniformly stipulating an annual interest rate of 0.5%. The means of production were centrally allocated and used by the state; capitalists, apart from receiving fixed interest, no longer exercised authority as capitalists and were gradually transformed into self-reliant laborers through their work. In September 1966, the fixed-interest period expired, and the joint state-private enterprises were finally transformed into socialist state-owned enterprises. This can be summarized as follows:
- Enterprises changed from being owned by capitalists to being jointly owned by the public and private sectors.
- Capitalists began to lose control over the management of their businesses.
- The company's profits are distributed according to the principle of "four horses sharing the spoils".
On 10 January 1956, Beijing was the first to announce the realization of joint public-private ownership of the entire industry. Subsequently, major cities such as Shanghai, Tianjin, Guangzhou, Wuhan, Xi'an, Chongqing, and Shenyang, as well as more than 50 medium-sized cities, successively announced joint public-private ownership of the entire industry. During the process of joint public-private ownership, Guangzhou, represented by Wong Lo Kat and other national industrial and commercial enterprises, showed a cooperative attitude: after the joint public-private ownership, the pharmaceutical factory would pay a fixed interest of 5% to the private shareholders such as the Wong family as dividends every year for a period of 20 years. However, this fixed interest was a one-size-fits-all approach, regardless of the profitability of the enterprise or the wishes of the private shareholders. In fact, according to the situation at that time, this fixed interest was not only far lower than the profits of the pharmaceutical factory, but also lower than the interest rate of fixed deposits at banks at that time.
The 1956 Regulations of the State Council on Several Major Issues Concerning the Property Inventory and Assessment When Private Enterprises Undergo Joint Public-Private Ownership covered machinery, buildings, mineral resources, finished products, raw materials, and public funds, but made no mention of intangible, virtual assets. According to the same year's Resolution of the Central Committee of the Chinese Communist Party on the Transformation of Capitalist Industry and Commerce, the policy for the means of production privately owned by the bourgeoisie was not confiscation, but rather redemption. There are differing opinions on whether trademarks, goodwill, and company names constitute means of production, leading to current questions about the legitimacy of the government's unreasonable and forceful seizure and appropriation of brands and other legitimate assets originally belonging to descendants.
In September 1966, the Chinese government decided to stop paying fixed interest to capitalists after the original period of fixed interest payments had expired. As a result, the joint public-private enterprises became state-owned enterprises with a completely socialist nature. It has been reported that, according to the current concept, overnight, shareholders' stocks and mortgage holders' properties became state-owned. Without any legal procedures, private shares were confiscated and became state-owned, and all joint public-private enterprises became state-owned enterprises. In January 1979, the CCP Central Committee issued the Proposal on the Party's Policy Towards the National Bourgeoisie, which stipulated that the distribution of stock dividends during the period of joint state-private ownership ended in September 1966, and that existing bourgeois industrialists and businessmen could request to receive the dividends they should have received before that date. However, the Ministry of Finance issued a document that year, confirming that private stock dividends would no longer be refunded.
In February 1983, the United Front Work Department and the Ministry of Commerce jointly issued a document stipulating that the state had paid fixed interest at an annual rate of 5%, and that the payments had been made up to the third quarter of 1966. The assets of the public-private joint venture (including the approved investment houses) belonged to the state and should not be returned to the individuals. Subsequently, many lawsuits involving fixed interest or equity of private shares occurred throughout the country, and all of them lost due to the aforementioned policy document. Some scholars have questioned this policy of non-refund. Since fixed interest was paid to private shareholders, it means that the state recognized the ownership of the joint venture property by the private shareholders. The fact that fixed interest was no longer paid after September 1966 does not mean that these properties were nationalized overnight.
Interruption of succession
Public–private joint managements led to the disappearance of many traditional businesses and brands. Those brands that survived to this day are held by various levels of government in the People's Republic of China, losing their family lineage. Some businesses, having established branches (shops) in Hong Kong in earlier years before the establishments of the PRC, have been able to continue their lineage. This has resulted in situations where two identical Chinese brands exist in Guangzhou and Hong Kong, but belong to different companies (e.g., Hong Kong Li Zhong Sheng Tang, Chen Li Ji Pharmaceutical, Tai Ping Koon Restaurant, etc.). Generally, the Hong Kong manufacturers are the authentic lineage holders; product packaging typically features the founder's portrait, and instruction manuals are usually printed in traditional handwritten script (Traditional Chinese). The factories and brands in Guangzhou have been seized by the Chinese government, which has leased the brand to other companies to produce products inconsistent with the brand's history.
Some enterprises also left mainland China and moved to Hong Kong after the establishment of the People's Republic of China or after being forced to join the state-private partnership, and have survived to this day, such as Poon Ko Shou Pharmaceutical Factory, Tai Wo Tung Pharmaceutical Factory, Wai Yuen Tong, etc. At present, Guangzhou Baiyunshan Zhongyi Pharmaceutical Co., Ltd. under Guangzhou Pharmaceutical Group still marks itself in the history column as being formed by the merger of dozens of private pharmaceutical factories of all sizes, such as Po Tsz Tong (founded in 1669), Ma Pak Leung Pharmaceutical Factory, Tai Wo Tung Pharmaceutical Factory, etc., and claims that its history can also be traced back to 1669. But in fact, it only confiscated the real estate of these pharmaceutical companies. In fact, the organization and personnel of these pharmaceutical companies have long been moved to Hong Kong. For example, Po Tsz Tong Poon Woo An Co., Ltd. is still operating in Hong Kong.
Many enterprises lost their market competitiveness after nationalization and were eventually merged and disappeared, such as Li Zhongshengtang (Zhongsheng Pharmaceutical Factory) in Guangzhou. In addition, there are many more old brands, large and small, that went bankrupt before or during the restructuring in the 1990s and 2000s due to poor management of state-owned enterprises, such as outdated management and sales models and lack of employee enthusiasm. These include Da Sanyuan Restaurant, Chengzhulou, etc. Some people have pointed out that after the operating rights of many old brands are leased out, the brand ownership still belongs to the state. The separation of ownership and operating rights makes it difficult for operators to operate freely, which has also caused many bankrupt old brands to be left unattended.
The Sanduoxuan restaurant in Guangzhou, after being confiscated, began to decline in the 1990s, with its product quality deteriorating, leading to frequent criticism from the old neighbors for the descendants of the original owner. As a result, the descendants of the original owner of Sanduoxuan opened "Lao Sanduoxuan" and resumed their old business. The state-owned Sanduoxuan eventually went bankrupt in 2000. In order to "protect the time-honored brand", the Guangzhou Municipal People's Government contracted it out, turning it into a shareholding Sanduoxuan.
Trademark battle
In Shanghai, Wu Liangcai Glasses Company was founded in 1719, its predecessor being Chengmingzhai Jewelry and Jade Shop. After being passed down to Wu Liangcai in 1806, it was renamed Wu Liangcai Glasses Shop. Following several changes after the public–private joint management, it became a subsidiary of Shanghai Sanlian Group, and the intermediate business name was temporarily discontinued. In March 2001, Wu's descendants opened the Jing'an branch of Shanghai Wu Liangcai Glasses Co., Ltd. in Wuxian City. However, Sanlian Wu Liangcai Glasses Company filed a complaint with the industrial and commercial department, alleging infringement of their exclusive right to the Wu Liangcai trademark, forcing the Wu family's glasses shop to close. The Wu family descendants subsequently sued in court, demanding that Sanlian Company cease infringement and issue an apology. The Shanghai Intermediate People's Court held that the name "Wu Liangcai" has a dual nature: it is both an individual's name and a company's trade name, becoming part of the company name and attached to the company. The company enjoys the right to its company name. Unless the transferor and transferee have a special agreement on this, the right to the company name is transferred along with the transfer of the entire company. The plaintiff could not prove that the Wu family reserved the name of Wu Liangcai during the public–private joint management, therefore the plaintiff lost the case.
Some argue that the error of the judgment lies in the view that the public–private joint management refers to the capitalist transferring the entire enterprise to the state. In fact, as mentioned above, the capitalist only transfers, pays over, or donates the means of production. Under this premise, based on the redemption policy and the role of fixed interest in the entire public–private joint management and related cases, it should be the evidence provided by Sanlian Company that includes the trade name in the fixed interest payment, rather than the evidence provided by the descendants of the Wu family. In addition to the use of the law itself, the legal meaning behind the judgment is more important. If the Shanghai High Court regards the trade name and other non-material private property as part of the enterprise's assets, it is equivalent to recognizing the trade name, trademark, goodwill, and logically, it must also recognize the entrepreneur's talent. This provides a different source for surplus value, which directly contradicts the theoretical basis of the public–private joint management— Marx's political economy. That is, political economy is cited when seizing, and Western economics is cited when defending ; those who forced Wang Laoji and the descendants of Wu Liangcai back then can now legally occupy their trade names to make money.
Hengdeli, a watch shop that had branches in various locations, ceased to be affiliated with any of these businesses after the public–private joint management. In July 1985, the "National Hengdeli and Hengdali Watch Federation" was established. Subsequently, in 1993, Hengdeli in Beijing and Tianjin filed trademark registration applications for "Hengdeli" for watch timepieces and watch repair services, respectively. The Beijing application was subsequently registered. In June 1999, members of the two Hengdeli branches filed for the cancellation of Beijing Hengdeli's registered trademark, citing improper registration. In September 2000, the Trademark Review and Adjudication Board ruled that the registration was improper, marking the beginning of a trademark dispute. The two Hengdeli branches then filed another trademark registration application for "Hengdeli," but Beijing Hengdeli filed an objection in 2002. In 2005, the two Hengdeli branches decided that the "Hengdeli" trademark would be jointly owned by multiple rights holders, and selected Tianjin Hengdeli as the representative. In 2011, the Beijing High Court and the Trademark Review and Adjudication Board determined that "Hengdeli" "should not be exclusively owned by a certain enterprise or organization." This means that "Hengdeli" is a shared trademark, and there are no watch retail and repair shops that have registered and used the trademark under the name "Hengdeli." However, trademark disputes between "Hengdeli" and "Liangheng" branches in various places have continued to occur since then. In particular, in 2020, Jinan Hengdeli was given a yellow card warning by the Shandong Provincial Department of Commerce for failing to complete the trademark authorization process.
Fight for property
In the early 21st century, there have been questions on whether or not to return property to the descendants of the original owners.