Have you recently opened the Financial Times? Headlines such as “The four biggest China Banks are raising capital”, “Chinese developers slash home prices in desperation to shed unsold homes”, and “KKR invests in Chinese chicken producer” were dominating its news coverage at the time of writing.
At least five articles in every possible version of the Financial Times are about China – every single day, and you can trust me, I have been counting.
China here, China there, China everywhere. Even when the planes are falling from the sky, and ebola is killing a few more people every day in Africa, China is at the top of everyone’s mind.
But what is the truth about China?
I lived in Hong Kong for about three years but, trust me, that does not really count. The city, a special administrative region of China, bears little resemblance to its mainland ruler. So I crossed the ocean to talk to a westerner who has become an insider.
Chris Ruffle, a distinguished Yorkshireman, has worked in the people’s republic and the region for over 30 years. Imagine a time, 30 years ago, when Shanghai’s skyline saw its first modern skyscraper, the Union Building, and hutongs were still everywhere in Beijing.
Chris has first-hand experience in the way of doing business in the region. He has built up the China business of the investment company Martin Currie, which was at one point the largest foreign investor in the domestic stock market. Yes, Chris is a finance guy, but, as we like them, a finance guy with a twist.
A visionary architect, he has built a full-scale Scottish castle and a vineyard in the middle of the Shandong province – for everyone a bit green on Chinese geography, this is one of the coastal provinces, at the eastern hedge of the north China plain, or more prosaically several hours drive east of Beijing.
A prolific writer, his last book – China: An Insider’s Guide – is about to be published.
With such a pedigree, you can only imagine the billions of questions I could have asked him and how hard it was to settle on a couple.
What has changed in China in the past 30 years and what impact has it had outside and inside the country?
Chris laughed.
“This is a loaded question. What has changed? I am tempted to say everything has changed. In every part of one’s life – food, communications, architecture, relationships with foreigners – pick any theme, and I can probably articulate two or three main changes. Actually it is the purpose of China: An Insider’s Guide to give the full scale of changes in the region.
“The most striking change, as far as I am concerned, is the impact China is starting to have on the outside world and the underlying social changes that come with it. Pause and think for a second. Despite its massive size, China had a remarkably small effect on life in the west for many decades, mainly because of its poverty and isolation. In the past 25 years, the change of economic direction has in many ways enabled the ‘Great Prosperity’ and allowed western consumers access to affordable goods while avoiding inflationary consequences.
“Today, China’s economy represents about 12% of global gross domestic product, and the share is still increasing. Flocks of Chinese are now travelling abroad as tourists of course, but also as investors. They are observing, understanding, comparing and contrasting. They are developing their own mind, and building their influence.
“As a knock-on impact, a current of social changes is emerging. These travellers are coming home with different views and awareness. They start to think differently and that will inevitably have an influence on Confucian values. The concepts of filial piety, or the Tiger Mothers, might be challenged. At a deeper level, it could trigger a questioning of the current ideological model in China.
“There are more democratic elements in Chinese politics than we tend to think or see. Chinese politicians are increasingly forced to act like western ones, pressing hands, attending at disasters. The blogosphere is very active in China, and politicians are fully aware of what people are concerned about. Actually, outing via the web has been a key elementof the current campaign against party corruption and conspicuous consumption. I think that underneath, China is aiming towards a Singaporean model of what I would call regulated democracy.”
Singapore still rules and we can encounter yet another sign of the power of technology. I cannot help wondering about the possibility of a Chinese Spring but this is for another time. Actually, it led to my second question, about innovative capacity in the country.
Chris said: “Innovation is one of the imperatives of the Chinese government. A long period of double-digit wage inflation, together with currency strength, are already causing huge changes among China’s exporters. A lot of the low-end labour intensive products, such as garments, shoes, toys, have already been moved offshore to Cambodia, Vietnam, Indonesia and Bangladesh. China is now starting to export telecoms equipment, construction machinery, trains and buses, and it is being forced to innovate to remain competitive.
“How this innovation translates is still a bit patchy, but we have started to see significant changes in the healthcare sector, where we are particularly active. We have seen a big shift towards the development and protection of intellectual property within China, with increasing numbers of multinational companies shifting elements of their research and development budget to China.”
A myth just crumbled, China does not only copy, it innovates. Maybe this is truly the end of US domination? But what does it then mean and how can we ride this wave? That triggered my last question. If China is still the ultimate Eldorado, what advice would you give to anyone serious about doing business in China?
Chris paused for a second and then said: “First of all, invest time to learn some Mandarin. It is a bit of an ordeal to be able to read and write Mandarin, but it is not about being fluent, it is more about understanding the psyche and trying to connect. I remember one of my very first visits to one of our prospects, a TV manufacturer based in Sichuan run by ex-military people. They were not the most friendly and very sceptical of the white man. I showed up on my own, and I can tell you they were both surprised and unhappy to have to answer to me personally.
“Second, always take the long-term view. If you think you are going to make quick money, China is not for you and you are better off elsewhere.
“The Chinese system usually imposes a ‘learning fee’. The Chinese business mind and even society are based on a different temporality. ‘Too early to say’ is what Chinese premier Zhou Enlai is supposed to have answered US President Nixon when asked about the implications of the 1789 French revolution. Wait and see is the best mantra. Much of my experience with Chinese businessmen has been about the dangers of impatience in the rush to make money before conditions change. Patience and perseverance are certainly the pillars of business success in China.
So, what should you conclude, from an insider’s insight?
The reality of China is much more nuanced and complex than normally presented in the western media. It is not the voracious villain trying to grasp all it can, from commodities to consumer goods and technology. It is not the scary superpower come out here to get the west, but maybe simply a nation in the process of reinvention, a nation in turmoil trying to find meaning and reconcile history and traditions.
Chris Ruffle painted a sketch for me of a giant country, attempting to embrace progress while respecting history, and trying to shape a different kind of future. He brought to life the real people – people in the middle of the countryside – where the real issues and psyche of the country are, where the country’s heart really beats, and I cannot wait to dive into the 300 pages of his well-illustrated book. For now, time to go and read the Financial Times – and its new crop of articles about the Red Dragon.