The Rong Century: How China's Flour-and-Cotton Kings Became Its Red Capitalists

On the morning of May 25, 1949, a Shanghai court convened to hear one of the stranger cases in the annals of Chinese justice: prosecutors had contrived to blame the Nationalist army’s collapse in the Northeast on moldy Rong flour. That same day, the People’s Liberation Army reached the city’s edge, and the regime that had brought the case ceased, for practical purposes, to exist. The absurd prosecution dissolved with it.

The family in the dock was no ordinary defendant. From a village called Rongxiang outside Wuxi, the brothers Rong Zongjing and Rong Desheng had risen from money-house apprentices to command a dozen flour mills and nine cotton mills — “the Flour King” and “the Cotton Yarn King,” clothing and feeding, as the saying went, half of China. In a country where “wealth never survives three generations” is close to proverb, the Rongs managed something almost unheard of: each of three generations dominated its own era, under three different regimes. Rong Desheng’s son Rong Yiren became the “red capitalist” who handed the family’s entire industrial empire to the new People’s Republic, founded CITIC at Deng Xiaoping’s behest, and rose to vice president of China. His son Rong Zhijian topped the Forbes China rich list. The story of how — and of the bill that eventually came due — is one of the most instructive family sagas of modern China.

Swearing Off the Mandarins

The family’s founding decision was a renunciation. Their ancestor, a Ming-dynasty official, had seen enough of court intrigue to move his descendants to the Wuxi countryside with a standing instruction: live by farming and study, keep your virtue hidden, and stay out of officialdom. For three hundred years no Rong sat the imperial examinations; they farmed, ran boats, and traded.

Catastrophe nearly ended the line. When Taiping armies swept through Wuxi, the Rong men were slaughtered almost to extinction; Rong Xitai survived only because he happened to be apprenticed in Shanghai. He rose from ironmonger’s boy to bookkeeper and drew from the late-Qing world a second founding judgment: petty office corrupts, and high office was beyond their gifts — commerce was the honest ladder. He set his two sons, Rong Zongjing, born in 1873, and Rong Desheng, born in 1875, to apprentice at a Shanghai money house. In 1896, with their father’s backing, the brothers opened a small bank of their own, Guangsheng.

Banking taught them where China’s money actually moved. Zongjing noticed that remittances flooding through Shanghai traced back to cotton and flour; during the foreign invasion of 1900, when every market slumped, northern wheat and flour alone sold briskly. Desheng, keeping accounts for a tax bureau in Guangdong, worked out that the necessities of Chinese life were matches, coal, flour, and yarn — and that imported flour, absurdly, entered duty-free into a bottomless market. Fired by the industrialist Zhang Jian’s creed of saving the nation through enterprise, the brothers sold the bank around 1900 and went into manufacturing: “clothing and food” would be their empire. The Maoxin mill’s “Warship” brand flour, launched in 1902, won its market on quality; the Shenxin cotton mills followed in 1915. In 1917 they did something almost without precedent: they bought a Japanese-owned spinning mill and renamed it Shenxin No. 2 — a Chinese firm reverse-acquiring foreign capital in an industry foreigners dominated. “Foreign flour comes in at ten million sacks a year,” Zongjing said. “Better to mill it ourselves.”

Accelerator and Brake

The brothers were opposites welded into one machine. Zongjing was the accelerator: audacious, expansionist, a natural gambler. Desheng was the brake: prudent, methodical, rooted in the home base at Wuxi while his brother worked Shanghai. For nearly thirty years the partnership ran on a simple constitution — the elder led, the younger balanced, and disagreement was tolerated rather than suppressed. Desheng deferred without servility: “That the enterprise grew so large was all my brother’s doing.” When they differed on strategy, each was free to develop his own ground; when either stumbled, the other closed ranks. The arrangement even converted disagreement into insurance. Before the war, Desheng’s son-in-law Li Guowei insisted, against most of the family’s judgment, on moving some plants deep inland; when Japanese bombs later wrecked the coastal mills, those inland factories in Hubei and Sichuan held the enterprise up.

Zongjing distilled his method into four imperatives — build fast, equip new, run full, expand wide — and a motto: make one coin do the work of three. Each new mill was mortgaged to build the next, a rolling snowball financed by bankers who, as family memory has it, trusted the Rongs because “they did not live by deceit.” Zongjing himself sat as a director of the Bank of China and held major stakes in Shanghai banks. Quality secured the leverage: American milling machinery, moldy wheat culled without mercy, no adulteration. During the First World War, when Europe’s grip on Asian markets slipped, foreign buyers ordered Warship flour tens of thousands of sacks at a time; in 1926 it took a grand prize at the Philadelphia world’s fair, and the Shanghai flour exchange adopted it as its standard grade. By 1931 the family held twelve flour mills and nine cotton mills across Shanghai, Wuxi, and Hankou. “Eat Rong Zongjing’s flour,” people said, “wear Rong Desheng’s cloth.”

What the money was for had been settled a generation earlier. Their father’s deathbed instruction became the family’s charter: “If you have strength to spare, spend it on society — from one family to the clan and the village, then to the county and beyond.” Desheng lived it: bridges and roads for Wuxi, a commercial school, and the founding of Jiangnan University, which recruited scholars of the first rank — Qian Mu, Mou Zongsan, Tang Junyi — men later honored as founders of modern New Confucianism. Wealth, the children were taught, arrived freighted with obligation.

The Price of Refusal

The Japanese invasion put the family creed to its severest test. After Shanghai fell in late 1937, most Rong factories in the Yangtze delta stood wrecked or idle. Zongjing rebuffed the collaborationist regime’s offer to head a “maintenance committee” and died during the war, in 1938. Desheng, past sixty, returned to occupied Shanghai in May 1938, announced his withdrawal from all public business, and shut his door — passing the occupation among old books and paintings while quietly supporting resistance.

The occupiers wanted Shenxin, the family’s largest textile group, folded into a Japanese combine. In 1941 the puppet government’s foreign minister summoned Desheng to a banquet at the Park Hotel to press the sale; Desheng pleaded illness and sent his second son, who refused outright. The host, the story goes, exploded: “Half of China already belongs to Japan — and you cannot let go of two little mills? He who refuses the toast drinks the forfeit.” Desheng’s answer came back: “I would rather die than sell the mills.” On his wall he hung an eight-word couplet that became the family’s motto: with the heart upright, no thought is crooked; with intent sincere, every word strikes true. The Japanese, wary of the scandal his death would cause, never dared touch him. The price was paid in property instead — mills seized and looted, losses immense.

Victory brought no relief; the family’s persecutors merely changed uniform. The Rongs had collided with Nationalist power before: in 1927, Zongjing refused to buy 500,000 yuan of Chiang Kai-shek’s forced bond issue, and Chiang answered with trumped-up charges, sealed his Wuxi properties, and a warrant that drove him briefly into hiding. Now the squeeze became systematic. Desheng raged that the taxes were “fiercer than tigers” — the state was “killing the hen for the egg, draining the pond to catch the fish” — while army and government requisitions arrived like clockwork. In 1946 Desheng was kidnapped by men carrying a military-issued “arrest warrant” and driving a garrison-command car; he was held a month and ransomed for half a million US dollars. When the case was cracked, the mastermind proved to be Mao Renfeng, chief of the secret police — and the family still had to pay some six hundred thousand more in “gratitude” to its official rescuers. In 1948 the currency-reform campaign prosecuted Zongjing’s eldest son on foreign-exchange charges; then came the moldy-flour indictment of 1949, halted only by the PLA at the gates.

By then the family had split along the fault line of the age. Some went to Taiwan — one daughter’s husband, Wei Daoming, served as the island’s governor — others to Hong Kong, the United States, Brazil. The web of the family enterprise tore, though the scattering banked embers abroad. Desheng stayed, with a sentence that summarized seventy years: “I have never in my life done evil. Why should I flee abroad?”

The Red Capitalist

The pivotal decision fell to Desheng’s youngest son. Rong Yiren was thirty-three in 1949, educated in history at Shanghai’s St. John’s University, fluent in English, heir to a broken empire. While most industrialists of his class shipped capital to Hong Kong or Taipei, he stayed in the family’s Shanghai house. His logic, compressed later into one line: better to stay in New China and make something than to drift overseas, living off capital until it ran out. Beneath it lay something harder: he had watched the old regime kidnap his father and prosecute his brother, and he was prepared to gamble on the new one.

He played the hand with precision. He restored the family’s battered mills, donated conspicuously to the Korean War effort, and grasped early that the new state needed a model capitalist to prove its united-front policy could work — a role the Rongs could fill better than anyone. Mao Zedong praised him in inner councils; Mayor Chen Yi called at the family home. Then, in 1956, as socialist transformation crested, Rong Yiren did what stunned his class: he handed the family’s entire industrial holdings — Maoxin, Fuxin, Shenxin, all of it — into joint state-private ownership. The state paid the family roughly six million yuan, modest against the assets but weighty as a symbol, and he accepted it publicly, declaring that the government had “done right and done well.” Half a century of Rong private enterprise ended; in exchange, the family became, in effect, a partner of the state. He was named vice mayor of Shanghai, then vice minister of textiles — the owner turned steward, managing under a red flag the mills his family had built.

The Cultural Revolution showed the limits of that bargain. Not a Party member, insufficiently shielded, he was denounced as a “representative of the bourgeoisie,” stripped of every post, his home raided, his wife pressured to renounce him; for a time the former industrialist swept floors in a factory. What saved the family was Zhou Enlai, who ordered: “Rong Yiren must be protected — he is a representative figure with influence at home and abroad.” Unable to shield a non-Party man through Party channels, Zhou had the textile ministry station a sympathetic work team in the Rong residence under the guise of military control — one rebel faction deployed to block all the others. It worked. So did the quieter capital of decades of modesty: old workers spoke up for him, and a sister in Taiwan wired living money through Hong Kong. The family that had banked goodwill for two generations survived on the interest.

Third Ascent, and the Bill

Rehabilitation came swiftly after 1976, and then something larger: Deng Xiaoping, hunting for a man who could face Western capital on its own terms, reached for the red capitalist. In 1979, at sixty-two, Rong Yiren founded the China International Trust and Investment Corporation — CITIC — a State Council “special zone” licensed to operate outside the planned economy. He courted skeptical foreign investors with his personal reputation as collateral, opened offices in Tokyo and New York, issued the first overseas bond by a Chinese enterprise, and became, to the Western press that put him in Time and Fortune, an architect of China’s opening. Colleagues noticed that CITIC — efficient, trust-based, decisive — ran rather like an old Rong family firm, except that it belonged to the state. From 1993 to 1998 he served as vice president of the People’s Republic; he died in 2005.

He had no private empire to bequeath — only influence, and he used it subtly. In 1978 he staked his only son, Rong Zhijian, with about a million Hong Kong dollars to try his luck in the colony. The son, a Tianjin University engineer, built an electronics business worth some four hundred million by 1984, then joined CITIC’s Hong Kong arm in 1986 and built CITIC Pacific into a red-chip powerhouse spanning infrastructure, energy, telecoms, and property. In 2002 Forbes crowned him China’s richest man, worth nearly a billion US dollars. He was candid about the arithmetic of his rise: “If I were not Rong Yiren’s son, I could not have done what I have done today.” It was succession by platform rather than by property — a family transmitting position through the state’s own architecture.

The bill arrived in 2008. CITIC Pacific disclosed losses of 15.5 billion Hong Kong dollars on leveraged Australian-dollar accumulator contracts; the shares collapsed, erasing more than three-quarters of the company’s value, and regulators opened investigations. The failure was diagnostic: one man had dominated decisions for too long, his own daughter sat as a senior finance executive, and no one was positioned to say no — the third generation, raised at the summit, had lost the founders’ terror of ruin. Rong Zhijian resigned in 2009; in 2014 the state folded CITIC’s assets into the listed platform, diluting the family’s special place in the system to nothing.

Yet the house did not fall. The fourth generation regrouped quietly around a private vehicle, Longyuan Enterprises Holdings — property, resources, investments — with one son running it and chairing the Hong Kong Wuxi chamber of commerce, a daughter advising on technology and infrastructure, another branch working in Macau’s education and philanthropy. Mao once remarked that the Rongs were the first household of China’s national capitalists — scarcely another Chinese family, he said, counted internationally as a true financial group. What remains is smaller and quieter, held together less by assets than by the operating code Desheng left his children — “each of you must live by your own labor; none may sit and eat off the ancestral estate” — and by the eight words that hung on his wall through the occupation: heart upright, thoughts uncrooked; intent sincere, words true. Regimes took the mills, the banks, even the model company. The couplet crossed every border unconfiscated. It is the one asset the family never had to surrender, and the reason there was always a next act.