11/04/2012 - 10:04

Lessons in a modern, enigmatic China

11/04/2012 - 10:04

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An insider’s view on China, that it is not always what it seems, challenges Western thinking.

An insider’s view on China, that it is not always what it seems, challenges Western thinking.

Consultant and English language teacher Joann Pittman has spent the past 28 years living in three major Chinese cities – Zhengzhou, Changchun and Beijing.

Pittman, who has written a book “Survival Chinese Lessons”, trains her pupils to prepare for the challenges of cross-cultural living in China.

Her insider’s view is revealing.

In a nutshell, in order to understand today’s China, she suggests a simple rule: nothing is as it seems.
This rule applies to nearly every segment of Chinese life, be it politics, the economy, social relationships and even religion.
Another way of putting it is; whatever China seems to be at any given moment, it is, in fact, the opposite.
This can be a challenge for Westerners, because we tend to be dichotomist in our thinking, wanting something to be either this or that.

It is difficult to comprehend the Chinese trait of this and that.

To illustrate her principle, Pittman highlights several myths or misconceptions.

Myth 1. China is a communist country.

While the Communist Party of China remains firmly in power, the reality is that China today is essentially a consumer society.

All human beings desire more stuff and the Chinese are no different in their pursuit of accumulating wealth.

Myth 2. China is a capitalist country.

While private enterprise flourishes in China, many key sectors such as education, media, resources and transportation systems remain firmly under state control. 

When the Chinese describe their system as “socialism with Chinese characteristics”, what they are really saying is, “it means capitalism, but we’re still uncomfortable with the word”. 

Myth 3. China is a wealthy, modern country.

Many Australians invariably only visit China’s cities, usually leaving them with an overwhelming impression of wealth and newness. 

However, excursions to China’s rural areas reveal a reality that is poles apart from any initial preconceptions and conclusions.

Despite the gleaming towers of Shanghai, the monumental glass and steel sprawl of Beijing, the massive airports and high-speed rail networks, China remains a very poor, developing land.

While it boasts many millionaires, more than a billion Chinese still earn less than RMB 2,000, about $305 a month.

“China is in the process of developing from a poor country to a rich country,” says Wen Hai, a Beijing University professor of economics.
“On the one hand you have the people on the coasts, and then you see the backwater.”

Myth 4. China is a poor, backward country.

The nation displays extreme wealth, with only the US exceeding the number of billionaires

With more than 900 million mobile phone users and an ambitious space program, these characteristics do not normally typify a poor nation.

Myth 5. People live under severe oppression.

The Chinese people have many choices that were unavailable 10 or 15 years ago, including university education, jobs, acquisition of a home and car and overseas travel. 

Citizens are allowed space and freedom so as to prosper, but they must not become politically active.

Pittman notes that the Chinese are a very patriotic people with a deep love for their country.

Niall Ferguson, professor of history at Harvard University, and author of “The Ascent of Money”, has just produced a television series that focuses on China entitled “Triumph and Turmoil”.

During a year of filming, Ferguson realised that, while managing to avoid a major recession, as experienced by the West, China has ended up with its own housing bubble that it is struggling to bring under control.

But, simultaneously, an unofficial Chinese nationalism has arisen among its young people.

Ferguson is of the view that China’s leadership, in order to deal with rising economic tensions, is fostering a combination of nationalism and expansionism to solve its perceived problems.

As a result, he has concluded that those waiting for an implosion or China crash are engaging in wishful thinking.

Myth 6. People live in freedom.

While recognising the many freedoms enjoyed by the Chinese today, Pittman emphasises that these do not extend to the political sphere. 

China’s leaders are appointed and selected by senior party officials, with the people unable to participate in their choice.

In conjunction with a weak legal system, and the Chinese government reserving the right to set the boundaries within which religious activities can be practised, people can be subject to the unpredictable whims of unaccountable local political leaders.

Where to next?

Ferguson asks where China will go politically.

He believes the real question is, will China move towards a form of representative government, like nations in the West, or will it use nationalism and expansionism to distract its people from domestic political change?

What is clear, is that a large Chinese presence can be seen in sub-Saharan Africa as part of its race to gain access to natural resources at bargain basement prices.

However, Ferguson observes that since 1978, the economic trend within China has continued to be away from the state, towards the market.  

Influential economists in Beijing, who appear to be having an impact on the leadership, believe China needs to engage in more market reform.

This could result in a fresh wave of privatisation, should the big state-owned enterprises be dismantled, including the People’s Bank of China.

Premier Wen Jiabao added to the calls for reform this week when he advocated breaking up the banking monopoly.

“Our banks are making a profit too easily,” he was reported as saying.

 “Why is this so? It’s because a few big banks are in a monopoly position. What we can now do to ease private capital flow into the financial system, fundamentally speaking, is to break this monopoly.”

Ferguson also notes that China is watching with concern as Europe lurches from crisis to crisis.

It is resistant to any kind of open-ended eurozone bailout and Ferguson believes it has been quietly buying European bonds on the London market.

It’s not in China’s interests for the euro to fall apart, because it is seeking to diversify its international currency reserves away from the US dollar.

China is increasingly keen to provide its own currency for the settlement of international transactions.  It views the US dollar monopoly as a significant security threat, which is why it has sought alternatives. 

China is cautiously promoting its currency for this role and is developing an offshore renminbi capital market in Hong Kong. 

On March 22, the Reserve Bank of Australia entered a $30 billion currency swap arrangement with the Chinese central bank, allowing convertibility between Australian dollars and Chinese yuan in the Chinese inter-bank market.

One of China’s key strategies through the Shanghai Cooperation Organisation is to build a pan-Asian security and trade bloc in partnership with Russia.  

It is thought that the last element of this 10-year-old plan is to settle cross-border trade without using the West’s financial system. 

To revisit my “factor X” prediction in January regarding Iran, for the first time in its near 40-year history, the global communication network, the Society for Worldwide Interbank Financial Telecommunication (Swift), was forced in mid-March to comply with European Union sanctions to totally isolate Iranian banks for their government’s failure to demonstrate to Western nations it was not developing a nuclear arsenal.

One can only wonder what China thinks about that.

 

Steve Blizard is an authorised representative of Roxburgh Securities.


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