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High-Tech Star Falls From Grace

Communist Party keeps computer companies on `Silicon Street' under its thumb. CHINA'S `IBM' STONE GROUP COMPANY

FIVE years ago, Wan Runnan emerged from his office tucked away in a vegetable store with the design for a computer printer that quickly made him China's high-technology darling. With a Japanese firm, Mr. Wan and his backyard company, Stone Group Company, produced and marketed the printers in China. Profits soared.

Wan conceived and sold other computer gear and flourished despite the constraints in a command economy that runs more on ox carts than disk drives. With much official fanfare, Stone became the model of entrepreneurship and innovation for the country's fledgling high-tech industry.

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Today, Stone has fallen from grace. Wan is in exile. And Beijing has launched a campaign against Stone that shows the limits of state tolerance for the independence of China's upstart business class.

Beijing calls Stone a ``fighting fortress'' for liberal dissent, condemning it for providing student leaders last spring with tactical advice, money from abroad, and equipment ranging from portable telephones to trucks.

Since brutally ousting protesters from Tiananmen Square on June 3-4, China's leadership has dispatched a ``work team'' that uses coercion and threats to force Stone employees to denounce the democracy movement, according to a Chinese source connected to Stone. The source requested anonymity.

The state ``rectification'' team has impounded Stone's foreign currency, fired Wan as president, and quietly begun to purge the firm's employees.

The fall of Stone shows that despite a decade of limited economic freedoms, the Communist Party is inclined to keep under its thumb the sort of free-wheeling innovators who pioneered the rush to computers in developed countries.

In a warning that maverick entrepreneurs should stay out of politics, Beijing has accused Wan of seeking to overthrow the party, foster a capitalist system, and establish a ``bourgeois, parliamentary democracy.''

Wan ``jumped to the front stage, bare-chested, with a `Stone' in his hand and fought desperately'' against party leadership, says a recent article in the party newspaper People's Daily.

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Wan acknowledges that his company gave the liberal cause hefty material and moral support. But he denies the party's claim that he sought to overthrow the communist regime.

``We never had the goal of toppling the Communist Party - that's a concept and slogan that the party has created itself,'' Wan said. He spoke by telephone from Paris, where he is organizing a democratic movement in exile.

Instead, student activists, workers, and intellectuals last spring sought political reforms promoting multiparty politics and a market economy, Wan says.

``China needs a system that allows the economy to flourish and creates a democratic government so that people can spend their days happily. It doesn't matter what that system is called,'' Wan says.

While helping to organize activism in the streets, Stone tried to spark a change in China's political principles. Days before the first student march last April, the Stone Social Development Research Institute sponsored a conference on constitutional reform in which scholars called for a radical constitutional revision making the party accountable to the citizenry.

Cao Siyuan, director of Stone's think tank, and Zhou Duo, an assistant to Wan, were arrested soon after the June massacre, Wan believes. Yin Bujiu, an executive at Stone, says the two employees are missing. Beijing will probably close the company's think tank, he says.

The crackdown on Stone also parallels a larger campaign by China's resurgent, conservative leadership to constrain businesses that have eluded direct state control.

In an attempt to quell worker unrest and high inflation, Beijing in recent months has tried to direct more funding toward large, state-run industries and to strengthen central controls on the economy. As part of this effort it has stepped up tax collection and has begun closing thousands of companies it deems wasteful, redundant, incompetent, or merely unnecessary.

Beijing would be hard pressed to justify shutting down Stone on any of the above counts. The company is widely viewed as China's most influential and successful high-tech firm, and one of the most accomplished companies in China.

Indeed, Wan fled the inefficiency and waste at a state electronics institutes to launch the company with six other computer technicians in 1984.

Exploiting a contact with a Beijing party official, Wan secured a $5,400 loan from the Evergreen Township near Beijing and opened the company's first office in the former commune's vegetable shop. Amid crates of cabbages and peas, the former researcher at China's Academy of Sciences and his colleagues wrote the software and blueprints for the printer.

With profits from marketing the printer with Mitsui and Company, Wan quickly moved out from among the produce and built the company's headquarters in Beijing's university district.

Stone and Mitsui renewed their lucrative alliance in 1987, joining to make and market an English-Chinese electronic typewriter in China. Today Stone employs about 900 salesmen and technicians at 15 subsidiaries nationwide and in Hong Kong. It plans to open offices soon in Sydney and San Francisco, says Yin, the Stone executive.

Beijing has not shut down Stone because its name is synonymous with high-tech innovation and enterprise in China, according to the managers of computer stores near Stone headquarters.

About 150 computer companies and retailers have followed Stone's lead and opened offices on either side of the Stone headquarters along Zhongguancun Avenue in Beijing.

As at many hubs of high technology, the companies on China's ``Silicon Street'' have flourished by drawing on the fresh ideas and youthful energy of graduates from nearby universities. The verve that distinguishes Stone is reflected in the companies' flashy aluminum storefronts and in names like ``Hope,'' ``Victory,'' ``Vanguard,'' and ``Revitalize China.''

Although party officials recently said they cherish the fledgling computer firms, the crackdown on Stone and a severe cutback in state credits for purchases of high-tech equipment has sharply reduced sales at companies along ``Silicon Street,'' say company managers in the area.

Since the spring, revenues at some stores have dropped as much as 80 percent, according to the Sept. 7 issue of the official journal China News Analysis.

``Everyone has been hurt since the demonstrations were ended,'' says Song Tao, a manager of the BOTE Electronics Company.

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