China Inc.

Two Inc. writers look at China's new embrace of capitalism and its impact on the future of global economics.

By Joel Kotkin | 
 

In the 1990s the world's most populous nation will emerge as a global economic empire -- that's the big picture, argues Joel Kotkin in commentaries on these pages. Meanwhile our man in China, Bo Burlingham, chronicles his firsthand view of a country embracing capitalism

Welcome to the new China.

This is not exactly what my wife and I had in mind when we signed up for the tour of southern China in mid-June. Like most Americans, we viewed China through the prism of two gloomy events: the crushing of the prodemocracy movement, in 1989, and the impending takeover of Hong Kong, in 1997. We had followed the repression of the dissidents, the controversy about China's export of goods produced by prison labor, the debate over most-favored-nation status for the People's Republic. We expected to find fear and loathing everywhere we went. What we didn't expect was to witness a revolution in progress, a market economy being born right before our eyes.

* * *

A scene from another century. Relaxing on the train from Shenzhen to Guangzhou, my wife and I gaze out at rice paddies, water buffalo, and peasants in straw hats who carry enormous watering cans suspended from wooden yokes across their necks. We can sit here and imagine we are traveling back in time to a different era, until we're startled by a sound behind us, brrrrn-bbrrrnn, followed by a voice jabbering in Chinese. The voice stops. We return to our reverie. More buffalo. More peasants. Brrrrn-bbrrrnn. Again the man starts yakking. I peer back, and there he is with a portable phone to his ear, doing what people usually do on portable phones -- making deals.

This morning we took a tour of Shenzhen, the special economic zone across the border from Hong Kong. I'd been here once before, in 1985. It's hard to imagine how a place could grow so fast. Shenzhen was like a frontier town back then -- a few assembly plants thrown together, dirt roads and clouds of dust, a pathetic gift shop, a restaurant swarming with flies. Less than seven years later, it's almost the size of Chicago, with 2.6 million people, most of whom appear to be under 30.

Forty-three years after the Chinese Revolution, it turns out that the New Socialist Man is . . . a consumer. Everywhere you go in southern China, billboards advertise Japanese electronic products -- watches, televisions, VCRs, fax machines. The American presence is mainly in the form of cigarettes, soft drinks, and food. There is a McDonald's in the center of Shenzhen, as well as a bustling pizza joint and air-conditioned hotels with revolving restaurants on top. They seem to be our primary contribution to architecture in the new China.

What overwhelms you is the sheer volume of trading going on. The streets are lined with shops and stalls. Their proprietors hawk cameras, video recorders and players, boom boxes, CD and cassette players, portable phones, watches, clothing, toys, plastic flowers, lingerie, pictures of Chairman Mao, parasols, you name it. Their main customers are the 25-year-old factory workers from up north who suddenly find themselves with more money than they know how to spend.

* * *

Can't seem to find any Communists here in the People's Republic of China. "The first thing everyone always asks me is, 'Are you a Communist?' " says our guide in Shenzhen, a sharp young fellow with a sunny disposition and a pair of expensive aviator-style designer-label sunglasses. His name is Wu. "No. I am not a Communist. OK? That is all I will say on this subject. I am happy to talk to you about anything else -- anything except politics."

Aside from the sunglasses, Wu's pants are Levi's and his shoes Nike Air. He wears a Seiko watch. A new Volvo passes our tour bus. "There are all kinds of fancy cars here," Wu says. "Volvos, BMWs, Mercedes, all kinds. I don't know where people get the money to buy them. I wish I did, because then I'd buy one, too." The New Socialist Man.

"That's the stock exchange," Wu says, pointing to a line of people waiting outside a nondescript building in the middle of town. "A lot of people have gotten rich by buying stock in companies, so now everyone wants to own some."

China doesn't have stock markets in the Western sense. From 1949 through 1990 it didn't have stock markets at all. Then the first one was created in Shanghai, but under a bizarre set of rules whereby would-be investors had to purchase applications to buy shares. The applications, costing about two weeks' wages, are entered into a lottery, from which 10% are chosen at random. The lucky 10% can buy up to 1,000 shares. The others go home empty-handed. This ingenious system has turned Chinese stock offerings into scenes of mayhem. People have been maimed, even killed, trying to get in on initial public offerings of construction companies and wire manufacturers. But you'd never know it by looking at the scraggly line at the Shenzhen stock exchange on a warm day in June.

* * *

Rain. A real downpour. In some parts of China rain brings the entire economy to a standstill, or so says one of our fellow travelers, a tall, muscular young German named Derek. He's spent the past three months in a remote corner of the Hunan province teaching aluminum-factory workers to use welding equipment manufactured by his German employer.

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