Sun Dawu: A Chinese Agricultural Entrepreneur’s 36-year Dream in the Era of Reform and Opening Up

Sun Dawu: A Chinese Agricultural Entrepreneur’s 36-year Dream in the Era of Reform and Opening Up

Yaxue Cao, March 30, 2021

About the sources 

The main sources for this profile are Mr. Sun Dawu (孙大午)’s speeches, articles and interviews over the years, especially during 2003-2012. They are embedded throughout the text and a fuller list will be appended at the end of Part Two.  — Yaxue Cao

Part One

One day in March 2003, as Sun Dawu delivered a speech in the crowded Shennei lecture hall of China Agricultural University, he was as though the Roman god Janus — at once reviewing the past and peering into the future. “Xushui County [in Hebei Province] is a storied place. You may not be aware of this, but the storm of communization that started up in 1958 began up there. I was born in Xushui, and I lived in the place where the communization was carried out most radically.”  

A little over an hour’s drive from Beijing via the new highway, Xushui (徐水) was a star county of the Great Leap Forward at the end of the 1950s. Mao Zedong and Liu Shaoqi both toured Xushui and promoted the community nationwide. The fantasy that a single mu of land could produce 10,000 catties of wheat (亩产万斤), that there was so much food it couldn’t be eaten up, and Mao’s telling the members of the people’s communes that they would all have to eat five meals a day — all this came from Xushui. The tragedy that transpired following the Great Leap Forward is well known to history. 

For Sun Dawu, who was born in 1954, his first memory was the memory of starvation. At first, there was still porridge to eat, even though it was “so thin you could see your reflection in it”; then, even this kind of porridge had run out as well; then were reduced to eating the stalks of cotton and corn softened up by soaking them in lime water. People in the village started succumbing to hunger. Sun found it hard to believe that only 30 million people had perished in the famine coursing through China after the Great Leap Forward campaign. 

Sun Dawu was a prominent figure in the reform and opening up of Chinese agriculture. He was called to Zhongnanhai twice to consult with policymakers and provide advice. The day before lecturing at Agricultural University, he delivered a speech at Peking University. He was a sensation in Beijing. The Dawu Agriculture and Animal Husbandry Group, which he founded, had at that point already grown nearly two decades to encompass planting, breeding, and processing. It was valued at around 230 million yuan, making it one of the 500 largest private enterprises in China at the time. Sun believed that the country had hope for a bright future. He had two dreams for China: that it become a peaceful and prosperous society, and that it become a democratic republic.

2003 seemed like a good time to look back on the past and hope for a better future, not just for Sun Dawu, but also for many other Chinese people. China had come far from the Great Leap Forward of 1958 and the great famine that ensued, as far from hell as is heaven. The future, undoubtedly, was full of greater hope, which seemed to be at one’s fingertips.

From the audience, laughter and applause erupted now and then. 

But two months later, in May 2003, Sun was arrested on suspicion of “illegally receiving public depositions.” The news shocked the nation. That October, he was convicted and sentenced to three years in prison with a four-year reprieve. Sun was released and allowed to continue running his company. The company has grown rapidly since, and by 2020, Dawu Group encompassed planting, breeding, processing, tourism, hot spring resort development, private education, and hospital. It utilized some 5,000 mu of land (more than 800 acres), employed 9,000 people, had a market capitalization of around 2 billion yuan, and an annual turnover of around 3 billion yuan.

On November 11, 2020, Sun Dawu was again arrested, this time for the “crime” of “provoking quarrels” and “disrupting production.” Arrested with him were his wife, two sons and daughters-in-law, Dawu Group’s senior executives, and nearly the entire management of Dawu’s 28 subsidiaries. The company’s assets were promptly frozen.

Following his arrest, Sun was placed under residential surveillance at a designated location (指定居所监视居住, or RSDL), and funneled into the black hole of the extra-judicial system. He has not been able to meet with a lawyer, and no information is available on his case.

A company built from eggs

In 1970, Sun, who had only graduated from middle school, joined the People’s Liberation Army. In that era of little or no social mobility, joining the army was almost the only way for a rural youth to climb. He progressed quickly in the army, and joined the Communist Party two years later at 18 years old, quickly climbing the ladder to become a field-grade officer. During this time, after a dispute with a political officer over troop discipline, he was demoted to platoon leader. After demobilizing in 1978, he was assigned to work at the Xushui County Agricultural Bank.

Reforms came to China’s rural regions in 1984. Communes were dissolved, and land was contracted to individual farmers to cultivate. In 1985, Sun Dawu encouraged his wife Liu Huiru (刘会茹), who lived in their home village Langwuzhuang (郎五庄), to team up with four other families to rent around 100 mu of uncultivated land at 6 yuan a mu per year. This land was remote, far from town and even farther from the county seat, with no water, electricity, or roads. When it rained, their bicycles would get stuck in the mud and couldn’t be pulled out. In the first year, they planted sunflowers and fruit trees, raised pigs and chickens, and lost money. The other four families clamored to end the partnership. Sun was still working at the bank at the time. After compensating each of the other households 2,000 yuan for their losses, he and his wife contracted for the land on their own.

In the second year, they raised 1,000 chickens and a few dozen pigs; each chicken turned a profit of 20-30 yuan, turning the loss into gain. Over the next few years, they raised 3,000, 5,000, 10,000, 30,000, and then 100,000. In 2003, Dawu Group’s poultry breeding group had three hatcheries that could hatch 20 million high-quality chicks per year. Its feed factory produced 60,000 tons annually.

Hard work aside, Sun invested in training skilled workers and quality management from the start and establishing ties with the provincial research institutes. This can be seen in an anecdote Sun told: When the chicken farm had just started in 1985, the Shijiazhuang Feed and Breeding Institute published a recruiting drive in a newspaper in Hebei. The tuition fee was 1500 yuan; Sun sent a student to the class where he was the only student to two teachers. 

In 1989, Sun officially resigned from his position at the bank, and devoted his full efforts to Dawu company’s development. “My business was created by bringing land under the plow,” Sun told his audience at Peking University. “It is a company built from eggs.” 

Trials on the road to development: poison, arson, sabotage, assault, and unwinnable lawsuits

While Dawu’s numbers may seem dazzling and magical, the journey was anything but. In the early years when the business took off, a village cadre wanted to invest in the business. Sun Dawu didn’t agree, so to spite him, the cadre hired someone to poison Sun’s (2,000 yuan per head) pigs, set fire to his equipment, cut his telephone wires, destroy his machinery, and take revenge on any occasion possible. One day, this village cadre sent his nephew to see Sun at his home. As Sun was pouring tea for his guest, the latter struck Sun in the head with a hammer. Sun protected himself with his hands, but his fingers were smashed and his legs injured, forcing him to spend three months in the hospital. He resolved these sorts of conflicts privately.

When Sun Dawu became rich, the town party secretary asked him for a car. Sun didn’t give him one, so the secretary sent henchmen to the area built up by the Dawu Group to break up the roads connecting it to several nearby villages. Sun Dawu went to each village to negotiate. This village said, “give us a bridge”; that village said, “connect us to the national highway”; a third: “donate to our school and help us expand the temple.” He knew he needed to keep peace with the villagers, and met their demands. He also invited the town party secretary to dinner, because the latter needed to save face, and Sun Dawu would need to maintain good relations with the township as well.

Things were just starting to look up for the company when the township’s land management office claimed the Dawu Group had violated the law and slapped it with a fine of 10,000 yuan. Sun didn’t pay up, then the county land bureau raised the fine to 50,000. Sun remained adamant. The dispute was referred to the Baoding City Land Bureau, which levied a 100,000-yuan fine. He defended himself, saying: “I started using the land in 1985, how could I violate a land use law that came into effect in 1987? Even so, according to the Land Law of 1987, farmers may engage in agriculture, forestry, animal husbandry, and fishery production on contracted land. I am engaged in raising chickens and pigs, which falls under agriculture and animal husbandry, so it is not a violation of the Land Law.” The land management official said, “If we say you’re not allowed to build, you’re not allowed to build, and if we say you’ve violated the law, then you’ve violated it.” He then threatened to demolish the Dawu Group’s property. Sun Dawu asked him for an official document, and he said, “You want a document? I’ll go back and write one for you!”

In 1993, Sun Dawu and the Bureau of Industry and Commerce clashed (BIC). At that time, fertilizer was still sold exclusively by the state supply and marketing agency. Dawu Group contracted a lot of land, planted a lot of crops, and was a big consumer of fertilizer in the area, always going to the supply and marketing agency to pull fertilizer, taking a lot each time. Later they wanted to sell fertilizer on behalf of the local supply and marketing agency, and got the agreement of the local branch, so that the surrounding villages could go to Dawu Group to buy fertilizer at their convenience. When officials from the BIC saw them selling fertilizer on the roadside without a dealer’s license, they confiscated more than three tons of urea. After that, officials from the BIC sold the fertilizer and split the money among themselves. 

The supply and marketing agency asked Dawu to pay for the fertilizer, and Dawu asked the BIC for the fertilizer money. The government stepped in to coordinate and asked the BIC to at least refund the money from the fertilizer sale to the supply and marketing agency. But the money from the sale of fertilizer was no longer available. One day, the BIC’s enforcement team, six or seven people, drove a jeep to Dawu to impose a fine of tens of thousands of yuan, probably to pay the supply and marketing agency. In a fit of anger, Sun Dawu told his workers to detain their jeep, and turned them away. After the incident, a deputy director of the Public Security Bureau, who knew Sun from their shared service in the military, came to Sun Dawu to reconcile the matter. Finally Dawu company paid a token fine of 2,000 yuan to settle the issue.

In 1996, Sun Dawu got in a row with the tax bureau. Dawu Group was no stranger to tax audits, which occurred at least three times a year, with each inspection lasting three months, that is, the tax bureau officials were reviewing Dawu’s finance all year long. That year, as in previous years, the books were checked thoroughly, and no tax evasion problems were found. But after the Mid-Autumn Festival, the tax bureau issued a notice of tax arrears to Dawu, to the tune of 1.35 million yuan. The notice did not say why Dawu needed to pay 1.38 million, nor did it identify a corresponding discrepancy. Sun Dawu went to the tax bureau director, who ordered him to pay up before resolving the matter. Sun Dawu refused, so the tax bureau had the Dawu company’s bank accounts frozen. Sun Dawu sued the local tax bureau. At this time a deputy county chief interceded, and to resolve the matter Sun Dawu agreed to withdraw the lawsuit.

But two weeks later, a higher level tax department, Baoding City Tax Inspection Bureau, came to conduct an audit. The audit lasted three months and scrutinized the activities of several Dawu subsidiaries, from 1998 going back to 1992. Finally, the inspectors ordered the Dawu Group to pay 165,000 yuan in back taxes. Sun Dawu argued that the tax law only called for three years of back-dated investigation, to which the tax investigation officials countered that major cases could be investigated up to a decade back, and that by their interpretation, the Dawu Group’s situation was considered a major case. Sun Dawu was prepared to fight this, but the deputy director urged him to simply accept the loss and move on. Thinking that would be the end of it, Sun begrudgingly agreed to the humiliation.

He thought the matter was over. Instead, on top of this 165,000 yuan, the Baoding City Tax Inspection Bureau fined Dawu Group 365,000 yuan in late payment fees for a total of 550,000. Sun retaliated by issuing complaints to all levels of the tax bureau, the State Administration of Taxation, the discipline inspection committee, and the procuratorate. The company’s bank accounts were frozen again. He took the Baoding Tax Inspection Bureau to court, and the Baoding Municipal Court ruled against Dawu Group. Sun Dawu appealed to the Hebei Provincial High Court. Even though nobody from the defending side appeared as the trial opened and a lawyer representing the defendants arrived late, the court suspended the trial. Finally, the Procuratorate decided that the tax bureau should not count the taxes of five separate legal entities together, and the case was resolved inconclusively.

Dawu Group spent five years and one million yuan on this legal fight. Some people advised him that it would have been more efficient to just spend 50,000 yuan on gifts to “smooth things out.” Sun Dawu was not ignorant of these unspoken rules, but he was not willing to be cowed to them, as he was determined to take the legal route even at vastly greater cost. But he was well aware of the bleak practical reality: for the common people to sue the government and win was nothing more than a fantasy.

At that time, Sun Dawu was still a deputy to the municipal people’s congress, a famous entrepreneur in Hebei Province, a dignified citizen, and his enterprise was engaged in the causes of the “vegetable basket” (菜篮子) and the “rice bag” (米袋子) which the state had been supporting to revitalize the countryside. If this was the case for Sun Dawu, imagine how much worse it could have been for others who did not have the same advantages he did.  

Chinese rural society at the turn of the millennium; Sun’s first trip to Zhongnanhai

Agriculture, rural areas, and farmers (i.e., the “three rural issues”) were hot topics of discussion from the government to society at the end of the 1990s. In fact, China’s economic reform and opening up began in the countryside when, in 1978, peasants of Xiaogang (小岗村) — a village in Anhui Province where every family was so poor that they went out to beg — secretly decided to break the shackles of communalism and distribute the land to each family for cultivation. When the 18 families in the village made their handprints in cinnabar ink on the contract of responsibility for the land, they did so not knowing what dangers and punishments they might face for this move. As it turned out, a year or so later, Xiaogang village experienced a significant increase in food production, which was noted and recognized by Deng Xiaoping.

After that, from 1982 to 1986, the Communist Party issued the No. 1 document for five consecutive years, focusing on the “three rural issues,” making specific plans for rural reform and agricultural development, including the introduction of the “family joint production contract responsibility system” (“家庭联产承包责任制”) which stipulated that the contract period for land should be 15 years or longer, and the abolition of the system of unified purchase and distribution of agricultural and sideline products, which had been in place for more than 30 years after the establishment of Communist China, to promote increased income for peasants.

What was the situation in rural China around 2000? Li Changping (李昌平), a cadre who had worked in the countryside for 17 years, was then-secretary of the Party Committee of Qipan Township in Jianli County, Hubei Province (湖北省监利县棋盘乡). In 2000, he wrote a letter to Premier Zhu Rongji titled “The Farmers Are Truly Suffering, the Rural Areas Are Deeply Impoverished, and Agriculture Is in Dire Straits” (《农民真苦，农村真穷，农业真危险》). The letter was not long, but he effectively described the current situation in the countryside.

He described how the rural population — men, women and children — were fleeing the countryside in large numbers and went out to work in the cities, whether there were jobs in the cities or not, and that as much as 65 percent of the land was deserted.

Li said that farmers, whether they cultivated their land or not, must pay the head fee, residence base fee, and self-reserved land fee, making “the farmers’ burden as heavy as Mount Tai.” Eighty percent of farmers lost money. At the same time, the township deficit was getting bigger every year, while the size of township bureaucracy supported by taxpayers had increased exponentially compared to the early 1990s.

In actual practice, the hallmark of rural reform, the “household joint production contract responsibility system,” amounted to “full payment to the state and to the collective, then keep whatever remains.” Li said that while the joint production contract responsibility system once worked for hundreds of millions of farmers, it was now seen as a shackle around their necks, because farmers must pay back their hard-earned money to work outside the countryside in order to fulfill “full payment to the state and to the collective.”

In the years leading up to the late 1990s, the state did not issue loans to farmers and did not collect crop orders at protected prices, Li wrote. “Instead, the state collected grain and asked farmers to pay for the storage.” Meanwhile, grain not collected by the state was subject to fines and even confiscation if farmers managed to sell it on their own. “Hundreds of millions of farmers do not have confidence in the central government’s rural policy,” Li observed. The higher leaders listened to reports and were pleased to hear that farmers have increased grain production, but criticized people when they heard that farmers were making less. People who told the truth were seen as “politically immature” and “unreliable.” 

Sun Dawu’s first visit to Zhongnanhai was in December 1998. He went to the State Council located at the northern end of the leadership complex to attend a seminar for cadres to develop rural markets. Participants were 20 to 30 people from three cities — Weifang in Shandong Province, Mianyang in Sichuan Province, and Hebei’s Baoding — mostly county and municipal cadres, plus a few entrepreneurs, one of whom was Sun Dawu, brought along by the Baoding mayor. At that time, China’s exports were falling sharply, the national purchasing power was declining, and the government was eager to develop the rural market.

At a symposium held in the third conference room of the State Council, Wu Yi (吴仪), then-State Councilor, asked the people present straightforwardly: What is the situation in the countryside? What do farmers need? What policies should the central government implement? She named a town secretary from Shandong to speak, but he broke into a fit of nervous sweating, and stammered severely. Sun Dawu handed a note to Wu Yi, saying, “I come from the countryside, I understand the rural situation, if you want to hear the real voice of the farmers, allow me to speak.”

Then an official from Mianyang was called to speak about their experience of rural urbanization, and also began stuttering nervously. However, he received the praise of the leaders present when he spoke about the local government’s sale of township residence permits to farmers, 6,000 yuan per family, to turn rural areas into towns.

Eager to speak, Sun Dawu again handed up a note. This time, Wu Yi granted his request.

Sun Dawu spoke mainly on a few points. “In order to develop the rural market, the first thing should be to let farmers increase their income, and that the way to increase income lies in production plus business.” He identified the problem as being that the leading agricultural products were all state monopolies, and that producers have no right to operate: those rearing pigs had no right to slaughter them, those who grew cotton had no right to run the cotton business, those who grew grain had no right to operate the grain business. Because they couldn’t entreprenuerialize what they produced, he said, the truth about the countryside was that people were severely restricted in what they were allowed to do and thus had little ability to generate income. 

Secondly, he advocated that the government should break up the complicated bureaucracy of the planned economy era and merge agriculture, forestry, animal husbandry, water conservancy and land into a single agricultural service bureau to avoid exposing farmers to the overbearing and often contradictory interventions of enforcement officers from one department after another. He proposed that rather than prohibiting farmers from borrowing money, the state should allow private lending, “so that farmers and rural areas have a mechanism they can use to put in their own sweat equity, which is conducive to the industrialization of agriculture.” Finally, he said that many figures about rural areas were misrepresented; for example, that farmers’ income was not as high as reported; and that the fantastic claims of Hebei Province having 500 million egg-laying chickens were simply impossible.

The meeting lasted two hours, and Sun Dawu spoke for 40 minutes. “I cherish this opportunity, a rare one to make a direct report to the central leadership,” he said, concluding his speech, “so I can’t wait to speak and ask the leaders to take note.” 

But on the way out the door, a secretary asked him if it was his first time to Zhongnanhai. Hearing Sun reply in the affirmative, the man said, “Then this is also your last time here.” Sun Dawu replied, “I didn’t ask to come here, but you requested that I come.” The man simply repeated, “This is your last time here.”

Upon his return to Dawu Group and meeting with the workers, Sun described his experience speaking to the highest leaders of the Chinese state: “As I exited Zhongnanhai, I felt no sense of pride, only a feeling of sadness. This was not just because of the dense array of checkpoints and sentries, but the intuitive feeling I got from the talks: that there is still a long way to go to revitalize the rural economy and liberalize the rural economic market.”

Sun Dawu’s dreams; speeches at Peking University and China Agricultural University 

During the first few years of the 2000s, China’s agricultural policies focused on reducing or exempting the rural population’s taxes and fees, increasing farmers’ income. They were distilled in three phrases: “Give more, take less, and liberate further.” After piloting it for some time, it became the CCP central committee’s No. 1 document in 2004. 

On March 13, 2003, Sun Dawu gave a speech, titled “The Pathetic State of Chinese Farmers” (《可怜的天下农民》) in a packed hall at Peking University library that attracted students of all levels and disciplines, professors as well as government policy makers. (I should note that Xu Zhiyong, a PhD candidate in law, was in the audience and would soon become a defense lawyer for Sun Dawu.) The next day, Sun gave a speech, titled “A Voice From the Bottom — Eighteen Years Experiencing the Three Issues of Rural China” (《来自底层的声音——十八年感受三农》) at China Agricultural University to a similarly enthusiastic audience. 

In his speeches, he expressed candid disagreements with the rural policies at the time. To “adjust the structure of agricultural production and increase farmers’ revenue,” the government encouraged farmers to grow vegetables and fruits for urban consumption. The result, Sun Dawu said, was “a hundred chefs cooking meals for one person,” and the supplies vastly exceeded the demand. Farmers had to leave vegetables and fruits to rot in the fields because the sales couldn’t even cover the cost of picking them.   

As for the rural small township development encouraged by the government, Sun Dawu said, they were mostly the local governments’ “achievement projects” consisting of building flower beds, expanding roads, and constructing buildings. After the projects were completed, the local governments devised various ways to extract money from the people to pay for debt. Sun believed that farmers were not willing, and did not need to live in these small towns.      

The government also encouraged the rural population to move to cities, believing urbanization was the way to improve farmers’ livelihood. Sun Dawu asked: “China has 1.4 billion people, and 900 millions are farmers. What do they do in cities except for low-paying hard labor? There aren’t other jobs for them.” 

Is reducing rural taxes and fees the way to make farmers richer? By 2003, Sun said, 40 percent of these taxes and fees had been reduced or eliminated, but paying the government 100 yuan less a year in taxes and fees was not going to be much of a help for farmers. 

These were good policies but very limited, he pointed out. Chinese farmers were not hungry anymore, but they had little disposable money to spend. He pointed out that the fundamental reason was that there were too many and overly strict regulations against the farmers, so much so that they had no jobs to do to create income. He summed up the situation as “eight uniformed caps scrutinizing a shabby straw hat.” He gave an example. If you wanted to sell boiled eggs in the market, you had to meet requirements by the health bureau on clothes you wear, tools you use, the place you cook, the tests of microbes, bacteria, heavy metal in the eggs; the commerce bureau required you to have a market license, production permit, and tax registration; the technology supervisory bureau required that your products be labeled with name, address, trademark, weight, and production date; the tax bureau taxed you based on your sales, not your profit, and you had to pay tax even if you had lost money; the land bureau could charge you with illegal use of land if you didn’t bribe them, and if you did you could build anywhere you wanted. That was not all. The water resources bureau and animal husbandry bureau had their own regulations too. Banks and rural credit unions didn’t give loans to farmers; not even Dawu Group, a large and healthy enterprise with profits, could get a loan from the bank unless it paid a high percentage in kickbacks. Sun Dawu called it “financial oppression.” All government entities, all laws, layers upon layers, worked to constrict farmers from working, he said. 

Rural China did not lack money, he said, but rural savings, even though only a very small fraction of the national savings, had been directed to those “achievement projects” and Potemkin towns. Rural China did not lack talent either, he said, as young people with nine years of education were a very good labor force. Finally, rural China didn’t lack markets, but farmers didn’t have money to consume. 

He concluded in both speeches that, “the essential problem rural China faces is that the power and the capital are depriving farmers of their right to work, and farmers don’t have the right to work freely. They can’t open shops, they can’t build buildings, they can’t operate factories, and they can’t establish a bank. They can’t do anything.” 

Sun Dawu called for a law that he named “Interim Rural Law” (《临时乡村法》) to protect farmers, keep regulations at bay from all sorts of bureaucracies, and give farmers the space to thrive. “To hell with unified purchase and sale of crops, monopolized pig slaughtering, commercial permits, technology approvals, financial oppression, and land control. Let each rural family be a sovereign civil entity that assumes responsibility for its actions.” “As such, farmers can voluntarily choose what they do for living where they are, and whose labor supplements each other. They can work in a factory, grow crops, or be a boss, as they choose.”  

He hoped that rural China could implement real elections, abolishing or merging communist party branches in villages, and grant autonomy to farmers. 

He said, “Farmers need a third liberation.” 

But wasn’t Sun Dawu himself an example of a farmer’s spectacular success? How did he do it? He was very much aware of this contradiction. He said to his audience that there was nothing congratulatory about his example; instead, it was a sad story, a story of “narrow escaping from death, something that can be lauded but not emulatable, certainly not representative.” And he told stories of how other rural enterprises succumbed. 

Sun Dawu dreamed that people could live prosperously and peacefully, and the country could become a democractic republic. He said he was a staunch “Marxist” and believed in communism, but it seems that the “communism” he had in mind was more like Europe, and the life he observed in the Netherlands on a business trip left a deep impression on him. While he hoped for a constitutional democracy in China, he rejected the notion of a multi-party polity. He feared that democracy would bring instability. He was encouraged by the new Communist Party General Secretary Hu Jintao’s speech about “respecting the authority of the Constitution,” hoping that the Communist Party would accomplish this “great mission.” 

(To be continued)

Yaxue Cao edits this website. Follow her on Twitter @YaxueCao.

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