Mr. China Page 28
I often think of that valley in Shanxi. Every day, mine workers go through that tunnel. Every day, they breathe the polluted air and the diesel fumes and scrape the coal dust from their eyes. There’s nowhere else to go; no other employment. Many have to serve a life sentence in those horrible mines. When I got back to Beijing, I saw in the papers that fifty-two miners had been killed in an underground explosion the day after I had been there.
The vast majority of rural Chinese, like those miners in Shanxi, are still yoked to the land, mired down in the daily struggle, stuck out on the yellow earth. Their lives are also improving, but slowly, too slowly. And the others, the ones who have just emerged from that five-thousand-year tunnel to face the oncoming logs, the people with their mobiles in the smart restaurants along the coast, they know that they’re just one step ahead. That’s why they fight so hard for what they’ve got. To understand that context – the ancient country with its archaic but beautiful writing system, its burden of five thousand years of history where for hundreds of millions of ordinary people the iron tree might finally blossom – to understand all that is to see the Chinese for what they are. Then the Shis and the Chens, the Changs, the Ais and the Lis become people just fighting for a better life. The illusion is broken and our differences melt away.
If by writing this book I can make the Chinese people seem more human, less mysterious or threatening, just flawed and beautiful like us, then the troubles of the past ten years will all have been worthwhile.
Author’s Note
We live in a monopolar world but this state can’t last for ever. Unless, by some bizarre turn of events, the people of Europe opt for real political union the key global power balance in the next hundred years will probably be between the United States and China.
The Americans and the Chinese have a lot more in common than they think. Acutely aware of their current disadvantage, many Chinese have consciously gone out to educate themselves about America. Their conclusions tend to be balanced and favourable. But, so far, not so many Americans have shown an interest in China or made much effort to understand it. As the effects of the steady migration of jobs and manufacturing across the Pacific to China start to hurt in Middle America, a slow realization is dawning that Washington is going to have to deal with Beijing increasingly as an equal over the coming decades. I hope there might be a short cut in the process of misunderstanding, conflict and reconciliation that I have described here. If these two great peoples can develop a relationship underpinned by their similarities and where differences are respected and enjoyed, that would be a source of great hope for everyone.
* * *
My thanks go to Jenny Lawrence, who ploughed through early drafts with a sharpened pencil and an enthusiasm that was quite unwarranted by the contents. I wish that her other students would realize how lucky they were. James Kynge was a constant source of ideas and encouragement and is as close to a real live zhongguo tong as any of us can get. Jasper Becker, Rowan Pease, Ian Maskell, Susan Watt and Paul Cartwright all helped with changing a mass of jumbled papers into something resembling a book. Michael Cronin is a rock in stormy seas, a great friend and colleague in difficult times. Jung Chang had the kindness to remember a student from a decade earlier when she introduced me to Toby Eady. As she said years ago, he is the best agent that anyone could have. Nick Robinson and Gary Chapman were brilliant with their new ideas and images and I am grateful to them for providing me with a much clearer direction. I also want to thank Ludwig Meier for giving me a break early on, Catherine Pugnat for her great kindness in France and Lizzie Hicks for suggesting a trip up to China in the first place.
As always, my love and gratitude go to my mother who set us out on our own paths to happiness. And, of course, those same feelings go to Lorraine. She was there throughout all the ups and downs. Despite the odd moments of exasperation, she unfailingly filled the lives of four marvellous children with love and hope and never lost her nerve.
Tim Clissold
Beijing 2003,
Postscript
You Only Get to Know Someone After a Huge Exchange of Blows
From ‘The Water Margin’,
an unattributed Ming Dynasty Novel
Just before Chinese Spring Festival, almost twelve years after I first went to meet Old Shi, Ai Jian and I retraced our steps up into the bamboo groves of central Anhui. We were trying to buy a company in Europe that made the same products as Old Shi, so we went to see if we might work together again. I knew I’d have to be careful, but the rumour was that Old Shi was thriving down in the valley and there was no denying that he was one of the best operators around.
All those years earlier, I’d arrived at Hangzhou in a small propeller plane in the fog and the rain. But this time, under a clear wintry sky, Ai Jian and I sped along the raised expressways westwards from the coast. We brought a new business partner, a UK industrialist who had ended up as CEO of a big engineering group, but who still preferred a good argument on the shop floor to sitting around in board meetings. I felt a lot safer now we had someone who knew how to run a large company.
The driver wanted to take the new expressway through Wuhu, but I insisted on going through the hills – just for old times’ sake. I loved the journey through the villages, past the houses with sloping roofs and the courtyards of beaten earth with the thicket fences around. And, besides, I was excited about seeing my old adversary again. It had been nearly five years.
We lost our way in Hangzhou but eventually found the familiar road that wound up through the tea bushes towards the bamboo. On that first trip, the driver stopped for a cigarette at the high point where the road crosses the border between the two provinces of Anhui and Zhejiang. Over the years, it had become one of my favourite spots in China. I used to stop there on my weekly journeys down to Zhongxi during the Battle of Ningshan. I never tired of the scene: the valley with its stone bridges and little streams, the winding paths between the little embankments, the farmers scraping about with their hoes; and in the autumn, after the harvest was in, the odd lonely tree waving its golden branches out above the sea of rustling bamboo.
The muddy, potholed section of the road that falls towards Thousand Autumns Pass is just the same as it was; but shortly afterwards, the old road disappears off to the right into the undergrowth. Blasted through the rock, a new four-lane highway roars down the valley. Further on, the valley floor widens and the highway now sweeps around in a broad arc bypassing the long stone causeway that leads to Zhongxi Village.
Of course, I couldn’t resist stopping for a look. It had been more than six years since we kicked Old Shi out of his factory. After I left the company, Pat soon got fed up with Chang Longwei’s earthy ways and booted him out a few months later. I didn’t know the new management team so I stood outside for a few moments. I gazed through the new factory gates that Chang had installed before his famous firework display, out across the river to the factory buildings on the other side. There was a slight air of neglect; the factory certainly needed a coat of paint. I searched for the familiar signs of smoke rising from the chimneys, but the boilers must have been cold. Old Shi’s lawn in front of the factory had been dug up and planted with a few ornamental trees, but they looked lank and brown. Although it was January and I knew I couldn’t expect the luminescent green of the summer, I felt that the place looked battered and unloved.
The village had hardly changed; in the run up to Spring Festival, the road had been turned into a street market. There were red paper-cuts, Chinese pastries and ornamental shadow puppets set out on temporary stalls along the pavements. Occasionally the air was split apart by the roar of Chinese firecrackers and there were rows of coal-fired braziers with stacks of bamboo steamers filled with dumplings on the top. But it was damp and muddy under foot. The same bored young men sat loafing about on broken bamboo chairs; and no one had fixed the drains.
The road down the valley from Zhongxi to Ningshan had changed completely from the pitted, winding road I remembere
d so well. Occasionally I could catch sight of a familiar section winding through the countryside in the distance, but it was clogged with thorns and bushes. After a while, it disappeared completely.
Perched on a hilly mound just outside the town, Shi’s factory dominates the whole area. Just inside the main gates, there were the familiar rows of fruit trees and signs with quotations from the old philosophers, Lao Zi, Confucius and Mencius. Old Shi kept us waiting for a while, just like the old days. I thought he looked a bit tired when he arrived. But I found out that he had only got back from Shanghai at two o’clock the previous morning. He’d been at the celebrations for a new joint venture he’d just signed with a big German multinational.
Old Shi still has the magic touch. His business is now six times the size of the old factory up the valley. Everything about the place is immediately recognizable: the straight lines of machines in the workshops, the clipped box hedges outside, the neatness of the workers’ uniforms and the slight hush that falls as Shi walks into the machine shops. He’s feeling successful again these days and I found that we could talk about the fight without rancour. He told me that he very nearly went under but the tables have turned again; he thinks he could put the old factory out of business just by cutting prices in a few of his older competing lines. But ‘What would be the use of that?’ he said adding an old Chinese idiom; bu yao ba shiqing zuojue le, ‘We should never take things to the extreme.’ ‘If the old place went under,’ he said, ‘I’d just end up having to take care of more workers.’
For me, that new road through the hills of central China symbolizes a change that has swept over the whole country. Just like the road, the world has bypassed joint ventures and now beats a path straight down the valley to the low cost labour and the successful Chinese entrepreneurs that Shi so perfectly typifies. Shi’s business has grown from about six million bucks in sales when we kicked him out, to more than a hundred and fifty million, much of it in exports. He has factories in Shanghai, Shandong and Shenzhen and dreams of buying a business abroad. This encapsulates the biggest change in China; successful businesses no longer need money in the same desperate way as they did in the early nineties.
I remember, back in 1994, when we wired the fifteen million dollars to Su’s gearwheel factory down in Sichuan, the bank held the cash in a special escrow account. It was the biggest transaction they’d ever handled so they assumed that there must have been a clerical error with the amount. They worried that they’d have to send it back. Later on, when Mr Su decided to grab the cash and build a gearbox factory without telling us, he did it because he was absolutely convinced that he’d never, ever get another chance like that in his entire life.
As capital poured into the country and the domestic banking system gradually started to fund private businesses, Chinese entrepreneurs seem to have overcome the extreme short-termism of the early nineties. As their businesses move up the value chain, Chinese entrepreneurs are more preoccupied with accessing markets outside China, developing new products and establishing brands than they are about raising their next hundred thousand. Many are contemplating acquisitions abroad. It may be that the Chinese will make as many mistakes investing outside their country as the foreigners did coming in. Whatever the outcome, Chinese businessmen, and Government officials, now see the benefits of long-term cooperation with foreigners; and the crucial result of that change is that they’re much more inclined to play straight.
But don’t be fooled; there are still plenty of opportunities to lose money in China and the old problems are still there. Anyone who doesn’t believe it should read the recent New York Stock Exchange filings of China Yuchai, an SEC listed company which has invested in a big diesel engine business in China, run by the redoubtable ‘Chairman Wang’. The accounts, which are written by lawyers but read like a farce, explain that the company had:
‘repeatedly reminded Mr Wang of his duties as CEO to ensure that the . . . dividend be paid to . . . shareholders . . . (but) Mr Wang has nonetheless continued to withhold payment’. They go on to explain that ‘the recent action by Yuchai management to lock out the Company’s representatives is improper and contravenes resolutions of Yuchai’s board of directors’. When the Board eventually tried to sack Mr Wang he declared that ‘termination of his employment as CEO can only be effected by a board resolution’. And guess what! ‘Mr Wang is refusing to hold a board meeting . . .’
You can imagine the rest. Wang was eventually forced out years later when the local government finally tired of the fighting. So while problems remain, China has tidied up its act. But how about the foreigners? Are there still adventurers out there who want to be Mr. China?
There seems to be much more realism than in the glory days of the early nineties and foreigners have more options now over how to invest. The Government has relaxed the regulations so most multinationals set up wholly owned businesses, often for export, and insulate themselves from local hazards that way. Service industries have developed so now there are accountants who count and even lawyers who’ve read the odd statute. And there are plenty of smart young Chinese returning from abroad clutching MBA certificates. Even so, fifteen years on, some are still chasing that illusive ‘China Dream’. Billions lost and they still keep coming.
Take the banking industry, for instance, which in 2005 absorbed billions of foreign capital despite a series of well-publicized scandals. Towards the end of that year, the China Construction Bank raised eight billion dollars on the Hong Kong Stock Exchange, which was, according to the Financial Times, the world’s largest IPO ever for a bank. The shares were oversubscribed forty times in the retail market even though the Chairman had been forced out six months earlier because of a corruption investigation by the Central Disciplinary Committee. Even he had been in the job for only two years after the previous Chairman had been convicted of taking bribes and was jailed for twelve years. Investor confidence wasn’t even dented by the sixty-four frauds mentioned in the prospectus that occurred in the year, or the storm that erupted the day before the offering when the Chairman of the SEC said that the bank wouldn’t have been able to list in New York because it couldn’t have met ‘regulatory requirements’. Meanwhile, the Industrial and Commercial Bank is busily preparing for an even bigger listing with plans to raise ten billion dollars.
There’s even the occasional regression back to the 1990s with foreigners paying stratospheric prices in traditional industries. In the epic battle for control of the Harbin Brewery between two testosterone-crazed multinationals in 2004, one of them eventually agreed to pay nearly $750 million for the brewery; three-quarters of a billion dollars for a medium-sized brewery up in Harbin’s old rustbelt, in a non-core market with high unemployment, where it’s well below freezing from late October to April so no one drinks beer! The valuation was reported as being equivalent to a price/earnings ratio of nearly fifty; a dot.com price for a brewery.
So the business environment is improved but what about the more general picture? In the past twenty years, the Chinese Government has presided over the longest sustained period of wealth creation in history. Set against the background of the past two centuries, the achievements are even more impressive.
China in its present form has been a unitary state only for less than the average human lifespan. Before that, there was more than a hundred and fifty years of chaos as the Qing Dynasty slowly buckled under the weight of a corrupt court, colonial invasion and repeated rebellions. As early as 1775, cracks started appearing in the edifice when Wang Lun, a martial arts expert and herbal healer, supported by a motley collection of peasants, bean curd salesmen, travelling actresses and money-lenders, led the White Lotus Rebellion. This was the first in a series of huge uprisings against the Qing court and was put down only after the Qianlong Emperor ordered the mobilization of almost the entire army. Wang was eventually cornered and met his death, according to contemporary accounts, ‘wearing a purple robe, cross-legged and motionless, his clothes and beard aflame’.
&n
bsp; After that, there were several Muslim revolts until, in the middle of the nineteenth century, a massive rebellion erupted when insurgents set up a rival state known as the Taiping Heavenly Kingdom. Orchestrated by a young Chinese who, after failing the Imperial Examinations for the third time, emerged from a delirium convinced that he was the younger brother of Jesus, the Taiping rebellion lasted twelve years and, together with other civil disturbances, was the main cause of a decline in China’s population of fifty million people. In four out of five of the worst affected provinces, it took a hundred years before the population returned to the same level.
During the same period, in a scenario strikingly relevant today, foreign trade imbalances between China and the West eventually led to war. The Qing tried to stop the importation of opium from British-controlled India, because of the appalling effect on the local population. Britain launched the Opium Wars. Defeated and forced into a series of humiliating treaties with foreigners, the dynasty eventually collapsed completely in 1911 and central authority dissolved. China descended into a state of warlordism in which the lives of millions of ordinary people were dominated by the threat of famine or an immediate violent death.
Over the next few decades, the variations of suffering were endless: in 1931, flooding in the Yangtse inundated an area the size of New York State and left fourteen million homeless; a few years later, the Japanese invasion culminated in a frenzy of killings at Nanjing that saw off three hundred thousand civilians in seven days. In a desperate attempt to halt the Japanese advance towards central China, Chiang Kai-shek ordered the blasting of the ditches along the Yellow River. The giant flood destroyed four thousand villages and changed the course of the river by hundreds of miles. Then, when Japan fell in 1945, China slid into full-scale civil war.