RONG YIREN was China's first “Communist tycoon”. However, his journey from a capitalist of the old school, to chief executive of what is today his country’s largest financial conglomerate, was marked by disgrace and family persecution before it led to vast personal wealth and considerable political prestige. As such, his career provides personal testimony of the virtual extermination of Chinese capitalism under Chairman Mao Zedong, followed by its state-sponsored revival at the hands of Deng Xiaoping. The fact that Rong eventually prospered mightily under Communist Party rule also says much about the nexus between politics and business in the People’s Republic, where the Party has substituted state capitalism for revolutionary ideology as an instrument of economic development and political control.

Rong was born into a nouveau riche Shanghai business family. His uncle, Rong Zongjing, had left the family home in Wuxi, Jiangsu province, at the age of 14, to seek his fortune in Shanghai. The city was the commercial hub of China, and Zongjing’s first job was in an anchor-making factory, but he soon moved on to greater things. He persuaded his brother, Rong Desheng, Yiren’s father, to join him, and they founded their first bank in 1896 and their first flour mill in 1902. Textile factories and other enterprises followed. The family firm managed to survive the Japanese occupation of China between 1937 and 1945, even though Zongjing was forced to flee to Hong Kong, where he died in 1938.

A year earlier, Rong Yiren graduated from St John’s University, Shanghai. One of the most prestigious modern universities in China, St John’s was an Anglican foundation, administered for much of its history by Americans. Located beyond the boundary of what by now had become Shanghai’s “international concession”, it was a training ground for the sons of the rich and powerful. Among its graduates were T. V. Soong, brother-in-law of Sun Yat-sen, and Wellington Koo, a leading diplomat. Rong Yiren graduated in history and promptly took over the reins of the family business.

China was at a critical juncture. The war with Japan was hardly over when civil war resumed between Chiang Kai-shek’s Nationalists, well established in Shanghai, and Mao’s Communist armies, who in 1947 began to move out of their rural fastnesses into the important cities of the north. It soon became clear that Chiang’s divided and corrupt regime would not be able to stop the Communist conquest of Shanghai and the rest of the country.

This was a matter of great moment for Shanghai’s capitalists. Should they flee with the Nationalists to Taiwan, move to British-occupied Hong Kong, or remain in Shanghai and take their chances under the new regime? The shipping business owned by the family of Tung Chee Hwa (C. H. Tung), later the first chief executive of Chinese-ruled Hong Kong, chose the British colony. Rong Yiren, however, decided to stay put. He took at its word the Communist Party’s promise that businessmen such as himself were “national capitalists” (as distinct from those tied to the interest of international firms) who would be allowed to continue to make money in the “new” China.

If Rong ever regretted this decision, he kept it to himself. In any event, in 1956 he was obliged to preside over the nationalisation of all of his firm’s assets as the party quickened the revolutionary tempo. He appears to have received financial compensation but saw fit to abandon the business world for the bureaucracy. In 1957, he became vice mayor of Shanghai and two years later was made vice minister of textiles, both of them fairly important posts for someone who was not a member of the party.

Rong might have passed the rest of his career in such mid-ranking positions had it not been for two of the most spectacular developments to occur in China under Communist rule: the Cultural Revolution of 1966-76; and the start of economic reform and opening of China to the rest of world in 1979.

The first of these brought disaster. Red Guards, Mao’s revolutionary auxiliaries who unleashed terror throughout the country against those the Chairman deemed to be counter-revolutionaries, attacked Rong’s family home in Shanghai. They destroyed the contents and forced Rong to keep watch over his own property as a caretaker. He passed the time gardening and reading. His son, Rong Zhijian, was sent to Sichuan to work on a hydroelectric project in order to improve his education.

Mao’s death in 1976 and the ascendancy of Deng Xiaoping two years later transformed the Rong family fortunes — as it did those of millions of others in China. Cautiously at first, but with gathering momentum, Deng and his younger allies redefined the party’s goals. The aim was not to make China revolutionary but to make it rich.

This meant a much greater role for the free market and a need for broad engagement with the global economy. Business experience, advanced technology and capital — all of them derided and denuded during Mao’s final decade in power — were suddenly at a premium. It was necessary to lure China’s capitalists out from the closets to which they had been unceremoniously confined and, as far as possible, return their confiscated property. Chief among those Deng so rewarded and brought back into the limelight was Rong Yiren, then aged 63.

With Deng’s backing, Rong formed the China International Trust and Investment Corporation (CITIC) to pioneer reform in the financial sector, lure foreign investment and technology to China and develop international business. By many standards it has been an outstanding success. An early symbol of this was the construction in the 1980s of the CITIC Tower on Chang An boulevard in Beijing. It was the city’s first modern business skyscraper. Curiously, it managed to avoid any collateral damage in June 1989, when tanks and troops opened fire at random in the vicinity during their suppression of the Tiananmen Square pro-democracy demonstrations.

CITIC’s business empire expanded dramatically during the 1990s as its interests spread from finance into real estate, raw materials and the media — both in China and far beyond. Today, it is China’s largest financial conglomerate with worldwide assets in the region of £40 billion. It has a strong presence in Hong Kong, where Rong’s son, Zhijian, better known in English language media as “Larry Yung”, is the senior figure. Several years ago, Yung purchased Birch Grove in Sussex, former home of Harold Macmillan.

The success of CITIC doubtless owed much to the acumen of Rong Yiren, whose personal riches often seemed a source of embarrassment to him, despite the Communist Party’s new endorsement of capitalism in most things but name. “I’m not a capitalist,” he would tell reporters intrigued by his personal wealth, which Forbes magazine said in 1999 made him China’s richest man. “Call me an entrepreneur. I work for the State not for myself. Our company gives all of its profits to the State.”

While there was some special pleading here, Rong was essentially correct. In common with many other large Chinese corporations whose fabulously wealthy chief executives have been lauded in the West as “red capitalists”, CITIC is state-controlled, however much its share ownership might suggest otherwise. Ultimately, it does the bidding of the Party and enjoys all the benefits that accrue from closeness to the Government. CITIC’s present chief executive is Wang Jun, son of the late Wang Zhen, a veteran revolutionary, and a man with even closer links with the party than Rong.

The hold that the authorities have over China’s tycoons explains why it was a safe bet politically for the party to appoint Rong Yiren as state vice-president in 1993, a position he held until 1998. The position was essentially a ceremonial one, and Rong, though by now an internationally known figure because of his success in business, lacked both the means and the motive to turn this into a source of independent political power.

He married Yang Jianqing in 1936. They had four daughters and one son.

Rong Yiren, businessman, was born on May 1 1916. He died on October 26, 2005, aged 89.