Red Roulette, by a Billionaire Chinese Crybaby

Introduction

After it all, “I thought that China wasn’t as bad as Americans tended to think.” (182)

That’s the conclusion of billionaire Desmond Shum, author of Red Roulette* – his autobiographical account of how he and his wife, Whitney Duan, rose from rags to riches in the go-go years of China’s developmental miracle.

Whitney and the Road to Wealth

Born in the late 1960s, during the Cultural Revolution, both Whitney and Desmond received a normal education as children. She then enrolled in a military university in 1986. (73) As an outstanding student, she obtained employment as an executive’s assistant in “a real estate development company run by China’s military.” (74) At the time, the People’s Liberation Army (PLA) had numerous business interests, and Whitney started making connections with the elite among them. Later, the PLA was ordered to divest itself of these businesses as an anti-corruption measure by CCP General Secretary, Jiang Zemin in 1997. (75) The year before that, perhaps exercising shrewd foresight based on inside information, Whitney set out on her own and founded a real estate development company, which in English is called “Great Ocean.” (75) Using her connections she soon had her first $1M investor. (75)

Indeed, the main reason why the couple got so rich is that Whitney was a brilliant networker among the political elite of China. She made and used her political connections to receive free land grants, inside information on government development plans, fast tracks in the permit issuing processes, and social introductions to fruitful investors. Whitney had hit the Jack Pot when, in 2001, she shrewdly befriended the wife of Wen Jiabao, a powerful member of both the government and the Party. The relationship between the two ladies was so warm that Whitney and Desmond called her “Auntie Zhang.” (81f.)

The three made a pact that Auntie Zhang would use her connections with the top echelons in the Chinese political system to help Whitney and Desmond become superrich. In return, they would pay her 30% of their profits. (107) Shum suggests that such “influence peddling” was practiced widely in China at the time.

With Auntie’s influence, Whitney’s construction company, and the knowledge of modern business practices Desmond had acquired from his American education, the trio undertook, and profited handsomely from, numerous business ventures. For one, they developed the largest airport freight hub in China. (129f.) Just for that, their profits were in the $100s of millions.

Their Relationship

In 2001, Desmond met Whitney while his employer was in negotiations to merge with her company. Out of the blue, she came up to him in a conference room and instructed him, “don’t speak until spoken to.” (65) That both ignited the spark and set the pattern for their relationship. Says Shum, “I allowed her to mold me.” (67)

In China’s male dominated business environment, single women were often harassed by men who assumed they were easy. So, Whitney needed a husband for appearances. (67-70) She made that clear to him, and he agreed. “It felt like an arranged marriage,” Shum says. (67) “Within a year of meeting, we’d moved in together.” (69)

One characteristic they had in common was that, like many other Chinese entrepreneurs during China’s economic boom, they both “wanted to leave something behind, to make a mark on China and the world.” (67) They would work together towards that end.

Both parties felt that they were getting what they wanted from the relationship, so they officially married “on January 17, 2004.” (119) Through her, he learned, among other things, how exploiting insider connections with the political elite of China could lead to great success in business. (67f)

Their only child, Ariston, was born “on April 21, 2009,” in NYC. (156) However, not long thereafter, the relationship started to deteriorate, and in August 2014, Whitney demanded “a divorce.” (267)

There was no community property law in China at the time, and Desmond, as subordinate partner, had always allowed Whitney to put their property in her name, or the name of her company. (268-269)

Although he had lived the life of a billionaire, she threatened to leave him destitute. He counter threatened to expose her questionable business dealings to “the Chinese authorities.” (270) Shum reports that, eventually, they reached “a settlement that provided me with enough to live comfortably.” (270) The divorce was finalized “on December 15, 2015.” (270)

The Disappearance

Whitney disappeared, says Shum, on September 5, 2017, while he was at his “home in England.” (2) “She was last seen the day before” in her office which is located in a Beijing “development project she and I built worth more than $2.5 billion.” (1)

Shum supposes that Whitney was swept up in the anti-corruption arrests ordered by Xi Jinping, who was then, and is now, President of the People’s Republic of China, and Secretary General of the CCP.

Shum is outraged at the unfair treatment of a person who has contributed so much to the economic improvement of China. For example, besides all their other construction work, in 2007 he and Whitney donated $10M for the construction a new university library. (187) This is the “thanks” she gets?

Shum, of course, is more aware than most people of the widespread corruption in his country. He is one of its wealthiest benefactors. He is also aware of how the Chinese law enforcement system works in its stepped up campaign to uproot corruption. Indeed, he compares it to “America’s extraordinary rendition of terrorists suspects.” (2)

That’s why the word “Roulette” is in the title. Anyone who plays the corruption game is fully aware of what it means to lose. (3)  Party investigators will take a corruption suspect into custody and interrogate them extensively so as to map out all the connections the person in custody made in their career. Whitney is still alive, but still in custody.

Shum’s beef isn’t with the new anti-corruption policies. (253) Indeed, he recognizes how zealously they are being conducted, not only against civilians, like Whitney, but against Party and government officials. “By 2020, Chinese authorities had investigated more than 2.7M officials for corruption and punished more than 1.5M, including seven national level leaders and two dozen generals.” (253)

Perhaps suffering from Law Breaker’s Remorse, Shum takes a few pot shots at the guy responsible for the new policy and its enforcement, Xi Jinping. Shum says he doubts that Mr. Xi is really concerned with cleaning up corruption, (257, 259) and he blames Whitney’s arrest on Xi’s vindictive efforts to punish his “political rivals.” (259) Anyway, Xi’s investigators are “being far too aggressive.” (252) Despite Xi’s career-long critique of corruption, Shum boils it down to “grandstanding.” (253) Furthermore, Xi is undemocratic, and ever since he came into office in 2012, his administration has been “taking a nasty hard-line turn.” (254) (For a more objective view of Mr. Xi, see Kerry Brown’s 2016 book, CEO, China. The Rise of Xi Jinping.)

Shum’s Political Reform Agenda

From his travels to more “democratic” countries, particularly the United States, Shum “learned how people with money had always participated in the political process. China’s system was the outlier in that sense, denying its capitalist class a say in the direction of the country. But those of us who identified as capitalists wanted a voice.” (182)

So, besides more leniency in law enforcement, Shum wants to see more “democracy” in the governance of China. These democratic reforms should enable more entrepreneurs, like himself, to have a say in the policy making process. In fact, Shum has tried to become more involved in the political process. He joined the Chinese People’s Political Consultative Conference (CPPCC) in 2007. (187) This is a group within the CCP that enables various private citizens to express and discuss their opinions about policies with government and Party officials. Shum notes that several members, like himself, are worth more than “$10M.” (188) Giving this group actual voting power in the policy making process would be an excellent democratic reform, in Shum’s view. (188)  Shum likes the thought “of using China’s entrepreneurial class as a force for wider changes.” (180)

Committed to reform, Shum even used his own money to fund a “think tank” to study how the Chinese political system could become more democratic. (189)

Ideally, Shum would have the CCP, like every other institution, subject to the Rule of Law, rather than be a law unto itself. (182) Of course, that would be the end of an autonomous CCP.

Perhaps that is why, in 2013, a year after “nasty” Xi Jinping came into office, a Xi official told Shum’s CPPCC group that their dreams of democracy will never happen. (254)

Shum’s Failure to Understand the Chinese Political System

While a brilliant businessperson, Shum fails to comprehend that the entrepreneurial freedom by which he, and the whole class of new rich in China, created their wealth, was not the kind of laissez-faire environment envisioned by Adam Smith and later “free market” economists. The modern CCP has created an alternative to Smith’s The Wealth of Nations approach.

After Mao’s death in 1976, CCP leadership agreed that the “command economy” Mao learned from Stalin had resulted in disaster for China. Perhaps 50M people died of starvation because of Mao’s ill-informed and rigid economic policies.

The new policy of the CCP economic reformers, following the thought of Deng Xiaoping, puts in place a Middle Way between Smith and Stalin. The intent of this policy is to free the entrepreneurial spirit in China just enough so that the resulting modernized economy could become the basis for a “common prosperity.” To that end, Mr. Deng declared such maxims as “it is glorious to be rich,” and "Let a part of the population get rich first,” which were statements of a policy that was meant to be followed for as long as it was useful to the Party.

CCP leadership in the initial period of economic reform had understood what it was doing. It gave limited free reign to private enterprises established by both domestic and foreign capitalists. It purposely allowed Chinese investment in foreign companies, and foreign investment in Chinese companies. Thus, China’s wealthy class is the intended result of what I call, Enlightened Economic Planning. In the spirit of “Socialism with Chinese characteristics,” the CCP has sought to use government power to maximize the benefits it can engender for the Chinese people.

The Visible Hand of the CCP has recently begun to curb the selfish excesses of the nouveau riche and start reducing inequality. Xi Jinping’s crackdown on corruption curbs the privileged use of government that the rich have enjoyed, and which they used to become rich. Mr. Xi’s practices are a continuation of the original intent of the Deng Xiaoping generation of economic reformers to work towards the “common prosperity” of China.

The opening of China, led by the CCP, was never intended to be a suicide pact. The Party did not intend to allow a class of super rich to emerge and then swallow up the Party that allowed it to come into existence. Shum’s anemic calls for more “democracy,” while cheered on by anti-China capitalists in the USA and other Western countries, are a thinly veiled camel’s nose trying to get under the tent. Once in, it could recklessly bring down the whole structure. But the CCP won’t fall for that gambit.

Finally, what right does Shum have to complain that Whitney was arrested? They knew they were playing with fire when they got into their game of “Roulette.” He likely would have been arrested too, had he not been safely lounging about in his English Estate.

So, stop whining, Desmond.

*A review of the book, Red Roulette: An Insider’s Story of Wealth, Power, Corruption, and Vengeance in Today’s China. Desmond Shum. Scribner. 2021. 310 pp.

William J. Kelleher, Ph.D.

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@InterpretivePo1