China, Inc.: How the Rise of the Next Superpower Challenges America and the World
By Ted C. Fishman
Scribner, 342 pages, $26
Here’s a scene from the dazzling Chinese economy I recently witnessed: In the darkened boardroom of a corporate high-rise in Beijing, an executive from a California-based venture-capital firm blows away his audience of American visitors with a slick presentation on new investments in China.
Not one is a factory that makes cheap plastic toys. That’s the old China. These are all post-industrial moneymakers: One is a company that operates video monitors displaying advertising in office-tower elevators. Another distributes radio programming via wireless Internet. These sophisticated start-ups, the executive asserts with nonchalance, will go public and return something like “10x,” meaning 10 times the initial investment.
Then comes another startling moment for me, when the soon-to-be-rich Chinese entrepreneurs behind the companies are introduced. They don’t look any older than 30.
So goes life in China’s fast lane, where the pent-up energies of a nation unnaturally held back by doctrinaire communism for decades have been let loose on the largest scale possible. China, the most-populous nation on Earth, is now an economic force to be reckoned with, one whose destiny–it has become popular to predict–will be to challenge America for global economic supremacy.
It is undoubtedly the most exciting business story of the decade, if not the most important geopolitical story, and it is the territory Ted C. Fishman examines in “China, Inc.: How the Rise of the Next Superpower Challenges America and the World.”
Anyone doing business with the Chinese, or losing market share to the Chinese, or stuck in traffic in Beijing or Shanghai looking up at their phantasmagoric skylines, has pondered China’s rise and what it means for the U.S. The same is probably true for shoppers at Wal-Mart when they recognize how many of their purchases were made in China.
It is astounding to realize. A country that 25 years ago was still reliant on collectivized farming and had just opened itself to outsiders is now factory to the world and potentially the single biggest market in the world for everything from semiconductors to airplanes. China is poised to take control of the global textile industry. It has ambitions to become one of the world’s biggest manufacturers of automobiles.
Given China’s population of 1.3 billion people, comprising a cheap, infinite workforce; its re-emergent entrepreneurial culture; and an authoritarian government that can manage industrial policy without the distractions of public opinion or politicians running for re-election, it’s hard not to get excited about China’s future–or fear it.
By one estimate, China’s economy–which today ranks as about the seventh-largest–could be 75 percent bigger than America’s by the year 2050.
Already, China’s size, ambitions and achievements have altered the gravitational forces of the global economy. This is no longer a tripartite world consisting of the U.S., Europe and Japan; there is now a fourth major player to be reckoned with.
“China still only makes one-twentieth of everything produced in the world, but on the world stage it plays the role of a new factory in an old industrial town,” Fishman writes. “It can spend, it can bully, it can hire and dictate wages, it can throw old-line competitors out of work. It changes the way everyone does business.”
Fishman, a Chicago-based freelance writer who was once a floor trader on the Chicago Mercantile Exchange and whose work has appeared in The New York Times Magazine and Esquire, among other publications, obviously is on to something.
One of the biggest American political stories of the past two years has been the economic rise of China and the concern that its low-wage factories are stealing U.S. jobs. This has led to accusations that China’s government is playing a game of unfair trade by manipulating its currency–keeping the value of the yuan fixed and therefore artificially cheap so it can underprice its goods and thereby run factories across the U.S. out of business.
“China, Inc.” isn’t a polemic along the lines of the “Exporting America” reports broadcast by CNN’s Lou Dobbs, who has waged a crusade against American companies that have outsourced jobs to China, India and elsewhere.
As a correspondent who has lived in Beijing for the past five years, I found “China, Inc.” to be a valuable account of how China got where it is and where it’s going. It’s full of fascinating observations based on some nifty research.
But it isn’t perfect, largely because it reads a bit more like a general survey or textbook than the gripping tale that China’s rise represents.
That’s because the book isn’t personality driven, which is a shame because there is extraordinary drama in the stories of China’s entrepreneurs and factory workers, from the “roller-bag capitalists” of Wenzhou who bought up Shanghai’s apartments with cash they kept stashed in their wheeled suitcases, to the peasants from the countryside working on assembly lines seven days a week, 12 hours a day for little money.
Fishman, who clearly made in-depth visits to China but apparently has not lived there, makes reference to these people. But he doesn’t meet many of them. He does spend time with the family who runs a curio shop in Shanghai–presumably for research and souvenir shopping–but he seems to have spent a lot more time reading economic reports.
This makes the story less interesting to read, which is a failing for a book dedicated to a subject all Americans–not just economists and corporate executives–need to grasp.
And by not delving more into the stories of China’s people, the book underplays a critical point. China is a country divided into haves and have-nots ruled by a heartless, paranoid regime that crushes all dissent. While millions in the cities are benefiting from economic development, hundreds of millions more are missing out on the boom because they remain trapped in the countryside or have lost their jobs in obsolete, communist-era factories.
Get out beyond the glitzy five-star hotels or cheesy karaoke parlors that an American executive might see while on a short visit to a Chinese supplier, and it becomes clear that China is a country not just full of factories but full of aggrieved people. The farmers feel they are overtaxed. The unemployed are bitter. Riots have become commonplace. Many factory workers have been mistreated.
These dynamics are crucial to understand because China’s future is not yet secure. For the moment, with China’s economy charging ahead at 10 percent annual growth, more people probably are happy–or at least patient–than are unhappy, but any unforeseen calamity that derailed progress–whether a banking melt-down or regional currency crisis–could lead to chaos.
There is another reason to consider more deeply the politics of authoritarian China. Anyone doing business there must understand that one-party rule without elections or a free press creates an uneven playing field in which the government can get away with lies. That doesn’t make for the best investment environment. While Fishman points out as a hopeful sign that China’s government has finally embraced AIDS-prevention programs, he overlooks the fact that the government has continued to cover up a tragedy in which thousands of farmers were infected with HIV through selling their blood.
What Fishman gets right, for starters, is the book’s title. “China, Inc.” is a play on Japan Inc., which was the last Asian nation set to challenge American supremacy. Japan overreached and fizzled, but its ascendancy taught American manufacturing managers valuable lessons about competitiveness.
There are critical lessons to be learned from China Inc. too. Among them is Fishman’s recognition of “the China price,” a term that he says “has . . . become interchangeable with lowest price possible.” The ability of the Chinese, with their huge domestic market and low wage structure, to produce goods at unbeatable prices is not just a competitive advantage–it’s a revolutionary phenomenon.
For example, Fishman tells the story of how China drove down the price of the DVD player–which debuted at $1,000 or more–to as little as $30. “If the average car dropped at [the] rate DVD players have, a Porsche 911 would now cost $1,500,” he writes.
As China’s economy progresses, it could set the standards and prices for one of the next consumer-electronics, computer-chip or bio-tech breakthroughs. Americans, Fishman argues, had better be prepared to compete against Chinese-made sedans. Japan should watch out for Chinese high-end electronics. South Korea’s shipbuilders will face competition, and Europe’s luxury-goods makers could find themselves squeezed.
“While all eyes turn to the so-called clash of civilizations between Islam and the West,” Fishman warns, “in the long run China will have the most profound impact on the world.”
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Michael A. Lev is the Tribune’s China correspondent, based in Beijing. He has reported from Asia for the newspaper since 1996.
mlev@tribune.com
