Tuesday, April 04, 2006

Eye on China: Big cost to business success

By Dan Slater

Once in a while you come across a book about China that deserves to be made known to as wide an audience as possible. Rise of a Hungry Nation: China Shakes the World by James Kynge is such a book.

Kynge is the former Beijing correspondent of the Financial Times and he makes an excellent guide.

Unlike many writers on China, he has cast-iron credentials. He studied Chinese at Edinburgh University in the late 1980s and has spent most of his time since then living in China and writing about it. He has since left the FT but continues to live in Beijing.

Anyone who has met Kynge will confirm he is man of great charm and presence. Those qualities, plus a little cheekiness, have enabled him to access a wide range of Chinese people. His linguistic ability is priceless.

It's shameful to report but many Western journalists in China can't speak anything but the most brittle Mandarin. An inability to speak the language makes it impossible to get a real feel for what's going on.

But Kynge is able to supply the reader with a stream of anecdotes which tell you more about China than any host of news reports or dodgy statistics. Sly officials, peasant champions and insane entrepreneurs all appear before the reader in their own words in a way that brings them vividly to life.

In the first part, Kynge's skills enable him to provide an unusually empathetic description of the ambiguity of life in the new China. New mobility permits farmers to flock to the cities and find salaries dozens of times what they earn back home, but such movements make them vulnerable to a harsh and capricious environment and cut them off from their families for years at a time.

Kynge interviews girls hired as nannies who live for years in the West hoarding every penny to send back to their families and the bold souls who join the snakeheads in making the risky journey abroad. The stories of these people striving for human dignity are very moving.

The heroes are new, but the villains haven't changed. Government officials routinely abuse their powers. One case Kynge describes is an official stealing the identity of a working-class girl who had succeeded in making the difficult leap to university.

Yet she is told she has failed and the official's daughter, who really had failed, takes her place.

One has to surmise that human beings don't have souls, because if they had, there would be a record of a Chinese official stealing one.

This part of the book provides important balance to the second part of the book, when Kynge shifts his sympathetic gaze to the small, long-established communities in the West withering because of impossibly cheap imports from China.

The rise of Wal-Mart (which sources an enormous amount of goods from China) is an ironic part of the story: As working-class United States citizens get poorer, the only place they can afford to shop is, indeed, Wal-Mart.

Economists will, of course, argue that China can't have a comparative advantage in everything. That cuts little ice with people facing a value chain increasingly migrating over to China.

As one specialist car component manufacturer in the US puts it, his only advantage will soon boil down to his distribution.

Kynge's conclusion is pretty radical. He sees a state-driven and heavily subsidised capitalism (in the sense that energy is underpriced, pollution unpunished and companies don't make any meaningful social security contributions) pouring out of China and on the way to suffocating economic activity in the West.

It's a capitalism which is causing not just many victims in China, but increasingly degrading the lives of other nations. And one reason it's spreading so fast is that multinationals have a huge vested interest in the status quo, whatever the cost to the nations they originally sprang from.

It's an interesting fact that books written by Britons compare rather well to those written by Americans.

Americans will collect reams of statistics and interview all sorts of people. The result is all too often a book which ends up misleadingly authoritative: Punchy, well-written and wrong.

Kynge's book is more subtle. He clearly possesses a natural and lively curiosity about China.

The fact that he's from Europe also provides the readers with some valuable insights that would not be garnered otherwise.

He visits Italy to examine the devastation wrought on the local clothing industry by Chinese competitors.

It's valuable because the United Kingdom has been relatively untouched by the rise of China - after all, we began handing over the manufacturing industry to the Japanese in the 1960s and have never looked back.

* Each week, the Business Herald's columnists track the latest developments in the world's two emerging economic superpowers. Dan Slater is a Beijing-based journalist.

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