Saturday, February 16, 2013

Things I noticed from my China trip

I just got back from China this past Monday. I haven't been there for almost 7 years, so it's really a good opportunity for me to be on the ground to see for myself the issues that China and its citizens are dealing with. I've taken some positions on Chinese economy and government, so I wanted to talk to people there to see how they feel about different issues.

First of all, I will just talk a little bit about the small number of military related stuff I noticed while I was there. It seems to me that a good number of Chinese citizens think that a war with Japan might happen. Watching TV, it was interesting to see the number of political/military show talking about possible conflict with Japan. I also saw programs celebrating Chinese heroes from the Sino-Japanese war of 1937-1945. There is certainly plenty of anti-Japanese sentiment in China right now. There is a lot of pride within China over the achievements of PLA in the past year. Certainly, the commissioning of Liaoning and the first takeoff/landing of J-15 have received the most press. The recent test flight of Y-20 transport has also brought a lot of excitement. Also, I took a flight from Yantai to Beijing while I was in China, so used the Yantai/Laishan airport. Luckily, this also happened to be a civilian/military dual use airport. As my plane was taking off on the runway, I actually saw the JH-7A fighter bombers outside of their shelters, so I took a couple of pictures. I'm pretty sure they were the reason my flight got delayed.



Secondly, let's talk about some of the good things that I saw while I was back there. Xi Jinping's call for curb to extravgance is really working. While I was in Beijing, everyone was telling me about the reduction in these excessive banquets, gift giving and extravagance. A lot of local officials are going overboard in frugality in public in order to impress higher ups. Even in state companies, banks and universities, end of the year banquets are not being held with the fund being reallocated to those who really need the money. The official call for less waste seems to even affect the day-to-day lives. It's definitely good to see this kind of change after years of over abundance under previous administration. The other thing I noticed was how much richer everyone has become since my last visit. While I was in Beijing, it seemed like anyone that has good education and registered in Beijing are very well compensated even by first world standard. The living standard has definitely gone up a lot in the recent years. Even in some of the secondary and tertiary cities, you can find most of the products that you can find in the West. There is definitely a large and growing middle class who are enjoying their new found wealth. I don't know if this is a good indication, but there was a proliferation of Apple product everywhere I went. That's a welcoming news in light of China's desire to shift from an investment based to a consumption based economy. Along with this, it's quite apparent that the amount of available cheap labour has decreased a lot in the bigger cities. In previous times I visited, there were a lot of excessive labour doing jobs which really were not needed. For example, there were more typically more employees in restaurants than people eating there. There were also a person paid to press elevator buttons in pretty much every residential building. Due to the rising living cost and reduced number of cheap labours, businesses have become a lot more efficient. Finding employment is still a big issue for most municipal government, so I think the entire talk of drying up of Chinese labour pool is started by people who have never been inside the country.

A couple of other things I want to address are issues that I saw before I visited. I think the housing market is not as inflated as people think. I have often read about how real estate is overly inflated based on the cost of housing to average salary. I think that overlooks the fact that the actual salary is a lot higher than the officially reported numbers. What I noticed this time back is that secondary income (gifts + bribery) for a lot of well off people are many times their regular income. On top of that, people who have retired from state companies often get the same salary as if they have never retired. When it comes to purchasing real estate, this extra secondary income in addition to support from retired parents allow most couples of purchase places that their regular income would never be able to support. There are also rich people that buy many apartments in big cities because they like to own excessive number of properties to show off their wealth. So while real estate is inflated from market speculation and excessive liquidity, the situation is not as bad as the raw numbers would indicate. The other issue is the so called hidden debts in China. The idea that many Chinese banks carry debt from bad investment/non-performing loans and would need to eventually be bailed out by the government. What I noticed was that the lending practice in China is no where near as bad as what I read about in Western news. Also while there are probably 2 or 3 banks that Chinese government implicitly guarantee, it will allow other banks go under for their bad decisions. Either way, the Chinese banks (like their American counterparts) are making a lot of money at the current time.

Having said all of the above, there are also a lot of things that were worse than what I thought. I think that the entire registration system in China creates two class of citizens. In Beijing, those who are born there generally have good jobs, own properties and live comfortably. They also have access to public education system and health care. These privileges are not extended to migrant workers who do most of the hard labour jobs, because the Beijing government can't afford it. In order to address employment issues, certain jobs (like driving taxi) are only available to residents of Beijing, so migrant workers are left with jobs that Beijing folks don't want to do. While I was there, business all shutdown because all the migrant workers went home for Chinese New Years. There are also 4 major issues that I think are problematic to China:
  • Pollution - This has to be the biggest problem. Most of northern China was under smog conditions for much of January. I wore a doctor's mask anytime I was outside and at least half of the people I saw were doing the same. During the first week I was there, it was uncomfortable to breathe when I was outside. Thankfully, wind from Mongolia blew away the smog for the second week, so things got better. I can see efforts by local government toward improving the environment, but it's hard to do so with increasing number of urban residents and cars. Most of the major cities in China are heavily polluted now. While my hometown improved since my last visit, Beijing was much worse this time around. People can't even do outdoor sports due to the bad air quality. There is no question this is a huge strain in the public health care system. China will also find it harder to attract foreign talents until they can clean this up a little bit.
  • Corruption - This is almost as big of a problem as pollution. I think everyone knows that corruption embeds in the entire Chinese political system. In Beijing, anyone associated to government probably get more under the table than their official income. What I found shocking was how wide spread this corruption level is in other facets of the society. Pretty much anyone that has any kind of leverage will get gifts, red envelopes and other form of bribery under the tables. For examples, doctors get gifts (sometimes demand that) from patients, kickbacks from drug companies and equipment manufacturers. Any kind of procurement result in a lot of gifts for middlemen and those giving out the contract. Schools get bribes for allowing students with lower grades into their school. I was told that even people who don't want to take bribes end up doing so because they would otherwise be hard pressed to live a regular less style on their regular salary. It has become a regular part of life. Many people who gain from this system send their children abroad because they are concerned about being implicated in one of the anti-corruption campaigns. As one of my relatives said, "Unlike America, China is not a law based society. All the rich people send their family abroad because they are worried this system will turn against them. They want to have the option to leave the country if things turn against them or if China goes back to its former communist system. If I can send my family abroad, I would do so too." One of the major reasons that China has such stringent capital flow laws is because it's worried that money from all of the corrupted officials and rich people will flow out of the country. Chinese public has no trust toward their government but do have very high regard for the American systems. One of the people I talked to was surprised that I also have no clue how my local government is spending my tax dollars. Even with all of the reported corruption in the American political system, it's still child's play compared to the complete black box of the Chinese system.
  • Piracy/Counterfeiting - While many people associate Chinese piracy/counterfeiting to Chinese copies of Western products or fake parts found in American military hardware, this problem is so much wider spread in China. I think many people have heard about the milk scandal in China from a few years ago, these problem of food/drink counterfeiting is everywhere. Brand name liquor like Maotai, Wuliangye and cigarette like Zhonghua are widely counterfeited due to their limit production and the rising income levels. In fact, it's very hard to find legitimate versions of these products. I was told that you can't find real Maotai in any of the restaurants in my hometown. Food counterfeiting has become so professional that even the lamb that people eat in hot pot are often pork soaked with lamb oil. The Chinese public have very low trust toward consumer products. When people buy brand name products, their biggest worry is not cost but fake products. This probably explains why brand name stores can charge outrageous prices for their products. One of the interesting part of this is Internet. While I was there, YouTube, Facebook and twitter were all blocked (Google services were inconsistent). According to the locals, there is a Chinese equivalent of every Internet service that I can find in the West. In the case of Weibo, it's probably even more popular than Twitter is here. While censorship is the official reason for the blocking of these Western websites, my feeling is that protecting local Internet industry is an equally strong reason. When counterfeiting is this far entrenched inside the country, it's not surprising that Western companies find their stuff getting copied in China.
  • Inflation - First of all, China isn't experiencing hyperinflation like Iran currently or Zimbabwe from a few years ago, but prices have gone up a lot. Similar to their American counterparts, the Chinese government has been printing money like mad in the recent years and that has triggered increased income levels and massive inflation. While outsiders generally think RMB is undervalued, most Chinese people think RMB is overvalued. While the skyrocketing real estate prices have been widely reported, grocery, restaurant and consumer goods prices have also gone up a lot. Prices for good restaurants in Beijing has not yet reached New York level, but would be comparable to most other cities in America. While I was in a famous mall in Beijing, I checked out some stores (including Coach, Swarovski and Espirit) just to compare them to American prices. They were generally anywhere from 2 to 5 times to how much these things cost in America. It's not surprising that when Chinese tourists come to America, they spend mass amount of money buying brand name products here. Looking at this, it makes me wonder how the poor people in China and the migrant workers can afford to live in this kind of environment. The only things that are still relatively cheap are transportation (which is subsidized by the government) and rental cost (due in part to lack of legal protection for renters).

These are the things that really stood out to me from my visit. I know that some of my readers won't like what I say, but I can only report on what I saw and heard from people I talked to.

35 comments:

Christian Brotherhood said...

I actually agree with your assessment on China. The corruption is the origin of all other evils you mentioned. The corruption and government monopoly in defense industry also underwrite all the problems we heard about regarding jet engines. It is a mess.

John said...

Corruption and piracy are burnt in Chinese genes; 40 years of Mao’s eradication didn’t put a dent on corruption, the root cause is Chinese are weak in respecting law. Piracy is a culture thousands years old. 金字招牌 was one of the way to fight imitators, piracy, copycats in the old days.

Thanks very much for the update with knowledge on the ground instead of hearsay. The report is a refrained one on the ugly side of China, as a Chinese I know what a real China is like. What I cannot stand is to see the West continuing their conquest for world dominance using Cold War against China despite China is cooperative with West.

DLF1977 said...

I agree with all of your comments, except for the admiration of USA part. Chinese people (Guangdong province at least) might consider the USA slightly better for fighting corruption, but that does not mean they admire USA. In fact I was in Guangzhou during the 2008 Olympics, and I clearly remember Uighurs threatening to blow up Guangzhou metro AFTER George Bush met (and quietly gave support) to Uighur separatist leader Rebiya Kadeer; all Chinese people remember this, and realise that USA democracy is nothing to admire. If anything the Chinese people, especially Guangdong, want the whole of China to be like Hong Kong and Singapore.

As for John's comment that corruption is engrained in Chinese genes, I strongly disagree with that statement, and I would consider it borderline defamatory. If one observes Chinese history it should be apparent that when a new dynasty takes over, the first 2 generations of the dynasty were idealistic, and virtually corruption-free. Furthermore, if Chinese people are "born to be corrupt" (to paraphrase John,) why is it that Chinese diasporas generally have low rates of criminality?

I believe we can all agree that Mao's eradication policies were too extensive, that eradicating everyone and everything, including Confucian ethics, meant that future generations would be corrupt.

Ozsteve53 said...

I was surprised to read you have not been in China for 7 years ! So much has happened in that time that it is hard to follow ,accurately, from the outside .
I would have liked to see a list of things that are admirable about today's China , other than people making more money . As a Westerner , I find China has much more going for it than is portrayed by a biased Western media .
I admire your commentary on military matters , but I think you need to spend more time IN china to comment accurately ON China in general .

It is all AMAZING said...

Thank you for your honest report on your experience in the part of China you visited.
China is a very huge country and there are many opinions.
Many would be surprised by the facts that local warlords or thugs in hideaway counties inside China today. And until civilization, railways or roads reaches these districts, they ruled all supreme.
Their misdeeds may be blamed on to the single ruling party CCP?
As for the Chinese people criticism against their government, it is a very natural development as the people gets more educated e.g. in Singapore, the citizen there are very critical of their government but yet years after years, they continue to elect back the same party into power. As long as the government listen to their citizen (nowadays netizens), the CCP is safe.
Back in the 70's, if you try to draw a comment from the people in the street in China, you would not get a reply. Today Chinese are so open. Imagine if you go back to China says in 10 years time, things will changed even more. China is evolving politically as more and more people are coming aware of their rights.

It is all AMAZING said...

@ John.
"Corruption and piracy are burnt in Chinese genes"
That is the results of thousands of years of feudalism in China.
Generally many Chinese believe that unless people are motivated, they will not grant you any favor.
How about the Western's culture of tipping,
can I says the same, "Corruption and piracy are burnt in Western genes"
Since you openly accused another race genetic pirate then read this:
According to statistic:
The total losses for companies due to IPR theft, etc. in 2004
USA - USD6.6 billion
China - USD3.6 billion
France - USD 2.9 billion
Germany - USD 2.3 billion
UK USD - USD 2 billion.
What is meant is the American themselves are the biggest thief of them all and is it in their genes.
1/2 of college student in USA uses illegal software.
In the case of Britain, it is making up for the losses to USA during the 18th century.


It is all AMAZING said...

@ John.
"Corruption and piracy are burnt in Chinese genes"

Looks like it is more implanted inside the Western genes. Hahahaha

India took the first steps to cancel a $753 million deal to buy helicopters from Finmeccanica SpA, as accusations bribes were paid to secure the contract fueled opposition attacks on Manmohan Singh’s government.
The defense ministry in New Delhi yesterday issued a notice giving AgustaWestland, the Anglo-Italian unit of Finmeccanica, seven days to explain why the Indian government shouldn’t terminate the agreement for 12 helicopters under a so-called integrity pact included in the deal.
Finmeccanica Chief Executive Officer Giuseppe Orsi was arrested Feb. 12 on accusations of corruption and tax fraud as authorities investigate alleged illegal payments tied to the contract for the sale of AW101 helicopters to India in 2010. The company has denied wrongdoing. Three of the helicopters have been delivered.
India’s defense ministry has asked the Central Bureau of Investigation to investigate the purchase and suspended further payments to AgustaWestland. “With today’s show-cause notice, the operation of the contract has been put on hold,” the ministry said in the statement.

Lei said...

It's always refreshing to hear someone's input on China after being away for so long. I had a 6 year gap before going back once- 1997 to 2003. That was a real eye opener. Memories of roads dominated by Volkswagen Santans turned into a sight filled with European, Japanese, and even some Chinese brands.

Anyways, just wanted to give my input on some of your observations. While that secondary income is a good point, I think it's important to weigh in that what really matters is how many people have those secondary incomes vs how much property is opened up. I don't doubt that people are able to buy and afford property. Otherwise you wouldn't get a bubble. The real concern is 1) whether purchases are being made by people who already own other property and are trying to make a profit, and 2) whether the financial system is packaging these purchases that are basically being leveraged for the buyer's profit, and trying to leverage them even more.

On an important side point, I have heard that this property bubble issue is actually a bigger problem in the second and third tier cities than the major ones. The same with "hidden debt" with regards to the banks. Both problems apparently have heavy regional variation (would be interesting to know why).

Lei said...

I also wanted to say that I noticed a lot of the same problems you have. With regards to corruption, it was interesting to note that in my last trip (2009), I basically had two different conversations about government officials within my extended family. One side of my family lives in a second tier city and has a lot of ties to their local government. One of my relatives on that side is a senior party member there. He was talking about all the great things the government and the party have managed to do for the region. The other side of my family is still in the countryside, and I had a conversation with my cousins about how corrupt government officials were, and how much they disliked them.

I'm glad to hear Xi Jinping's call to curb government extravagance is working but I can't help but wonder how long that will actually last. It's all too easy for people to fall back to old habits after they feel like they're no longer being watched or judged by their higher ups.

Also, on your last observation, I believe that many of the migrant workers purchase their goods in those small local stores where prices are still relatively cheap. I think I also heard somewhere that there is a secondary market for cheaper goods. It wouldn't surprise me if some migrant workers are solely there to move cheaper goods right outside major city borders to distribute within those cities. Unfortunately, inflation is a natural part of a developing economy, but I'm sure it's heightening the government's concern about inequality.

Jeff Head said...

Thank you Tphuang, for an interesting and enlightening commentary about your visit home to mainland China.

I found the comment by you relative highly intriguing,

"Unlike America, China is not a law based society. All the rich people send their family abroad because they are worried this system will turn against them. They want to have the option to leave the country if things turn against them or if China goes back to its former communist system. If I can send my family abroad, I would do so too."

Amazing insight and probably as clear a statement on the overall issues facing China today as could be made.

John said...

@Jeff Head,
May I expand the paragraph you found highly intriguing so that you would not read it too negatively against China. The paragraph said the Chinese would like to use USA as a safe haven to tuck away some of their new found fortune so that they are not going to put all eggs in a basket, it does not mean Chinese believe the USA has any moral authority. They still believe in China and want to build a better and stronger China, that’s why they are still in China despite the risk they are facing. Chinese are a pragmatic lot, they are just hedging against risk.

Lei said...

@John

Let's not overly generalize about Chinese attitudes towards the US. There is some variation to it.

It is all AMAZING said...

@ John

I entirely agree with you. The word is "hedging against risk" just like what many Hong Kongers did back in 1997 and many of them are now home in HK today.
I believe that is simply human nature, like what many American did when they hedges their resources to other countries.
What make foreigners think that the Chinese would behave differently.

Feng said...

Thanks guys, I think most people hope for our Chinese brethren to be able to live better lives as time goes on. I obviously only got to see Beijing and a couple of tertiary cities this time around. What I hear from Shanghai is that things are even more expensive, but maybe they have less corrupted officials. Real estate prices is a huge problem everywhere. Due to the gender gap and the way Chinese culture is, the man's family generally to own a home and a car before a woman's is willing to marry him. In some provinces, the case is reversed. But it really puts a lot of pressure and financial burden on families. I don't envy the lives of people there even though their lives are a lot better now. I hope they can sort some of these problems out. The pollution and inflation issues have to be fixed. Things like corruption and counterfeiting have existed for a long time, but when people can't breathe and can't buy stuff, you have serious problems.

As for admiration for America, I think it might just be the people I talked to. Some of them definitely had real admiration for the American society, law system and educational system. I think it's because they see the corruption in Chinese society and think that America must be better than that.

NICO said...

I am interested in hearing what you have noticed concerning recent attitudes towards Japan.

I don't really understand much Chinese but I always tried to watch their military TV channel with all the documentaries and more modern shows while there and was surprised to see how much they talked about Taiwan and especially India. There was very little mention of Japan, I guess the recent military advances by China and disputes with Japan have encouraged some changes in programming!

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Alyce Ann said...
This comment has been removed by the author.
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Established a decade ago, World Sight Journey has been specializing in providing premier trekking, expeditions, and touring packages in the various hotspot destinations of Nepal. Besides, we also have been organizing hiking, jungle safari, river rafting, bungee jumping and mountain biking packages successfully throughout the popular destinations of Nepal. Since the inception, World Sight Journey has been proudly showcasing the scenic beauty of glorious Himalayas, the grandeur of incredibly diverse and wonderful Nepalese culture, amazingly rich flora and fauna, some yet-to-be discovered landscapes and many more to its valued clients from around the globe. We are so proud to showcase Nepal to the world.
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Mt. Everest base camp Trek said...

Welcome To Nepal For Trekking In Everest, Annapurna and Langtang...
Dear Travellers,
!!Namaste and warm Greetings from Himalayan Country Nepal!!


My name is Sanjib Adhikari. As an independent trekking guide and tour operator in Nepal, I would like to introduce myself to you.
I was born and grown up in the rugged and remote district in the Central Himalayan region. I started my career in the adventure tourism at the very young age after completing my high school level studies, working for different trekking companies for seven years in different capacities sometimes as porter, assistant guide and now working as an Independent trekking guide. I have already obtained trekking guide license from the ministry of tourism, government of Nepal.

www.nepalguideinfo.com/index.php
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Anjan Tamang said...

Adventure Himalaya Treks is a Nepal Government registered dependable trekking in Nepal, Everest Base Camp Treks, Manaslu Trekking, Langtang Trekking, Annapurna Base Camp Treks, Annapurna Circuit Treks and more tourism related activities Company established by diplomatic knowledgeable tourism competent with over 11 years of perfect experience in the tourism sector. It has been well established as the prime service provider for excursion holidays in Nepal, Tibet and Bhutan. All of our team members are familiar with nature, mountain and the culture of Nepal with most having grown up in the Himalaya. We are committed on environmental friendly tourism activities and we take satisfaction in doing our part to preserve the natural beauty, respect the way of life of compare community, and their local culture and heritage.
Adventure Himalaya Treks
Lazimpat, Kathmandu, Nepal
G.P.O.Box:5981,
Cell No:(+977) 9841902116
Email:info@adventurehimalayatreks.com,
anjan7adventure@gmail.com
Skype:anjan.tamang7
Website:adventurehimalayatreks.com

Anjan Tamang said...

Nepal Everest Base camp Treks' s heartily welcome to you. Nepal Everest Base Camp Treks Pvt. Ltd. was established as a successful result of decade’s long involvement and long experienced in Nepalese tourism industry. Having had experience of operating and leading wonderful adventure Trips in some of the most captivating vistas of Nepal Himalayas successfully. we have been providing service with interesting trekking packages. i.e. Everest Base camp trekking, Everest three pass trekking, Everest trekking, Annapurna base camp trekking, Annapurna circuit trekking, Annapurna ghorepani poon hill trekking, Ghorepani poon hill trekking, ghorepani ghandrunk trekking, khayera ridge trekking, Annapurna sanctuary trekking, Poon hill trekking, Annapurna Trekking, Manaslu trekking, Manaslu circuit trekking, Manaslu Tsum valley Trekking, Langtang valley Trekking,Langtang Tamang heritage Trekking,Langtang Gosainkunda pass Trekking,Helambu Trekking,Helambu cultural trekking,langtang Ganja la pass trekking,Upper mustang Trekking,Mustang Trekking,Jomsom muktinath trekking,Upper Dolpa Trekking, Ruby valley trekking,Ganesh himal trekking etc to several kind of recreation loving tourist destinations since 2005 however we are keen of promoting our company service therefore.
Nepal Everest Base Camp Treks Pvt. Ltd.
Saat Ghumti Thamel, Kathmandu, Nepal
Mobile No:+977- 9841902116
info@nepaleverestbasecamptreks.com
anjan99nebct@gmail.com
www.nepaleverestbasecamptreks.com

Arjun Simkhada said...

Dear All My Valuable Client
Family Adventure Treks and Expedition Pvt. Ltd. is Professional Trekking Company in Nepal. It has been leading since 2000 to till regularly and Repudiate Trekking agency, The Family Adventure is Government Authorized known as Tourism board Certificate and fully trusted thousand of client has been high recommend.
We are Associate of Trekking Agency Association (TAAN), Nepal Mountaineering Association (NMA) and Tourism board (NTB) we operate as your desire all the requirement for filling the classic and various Trekking region as some touristic and none touristic are in Nepal as. Annapurna Ghorepani Poonhill Trekking, Annapurna Base Camp trekking, Annapurna Circuit Trekking, Muktinath Jomsom Trekking, Pokhara royel Trekking and Dhampus Sarankot Trekking of Annapurna Region. The Second Part of Popularity Langtang Region is Langtange Valley Trekking, Langtang Goshainkunda Pass Trekking, Langtang Ganjala Pass Trekking, Helambu Cricuit Trekking and Shivapuri Nagarkot Trekking .
The Third Part of highly popularity in the world Everest Region Trekking is Everest Base Camp Trekking, Everest Gokyo Lake Trekking, Jiri to Everest Base Camp trekking, Everest three Pass trekking is adventure type of moderate Trekking in Nepal.

Details Contact
Family Adventure Treks & Expedition
GPO 14445 Thamel, Kathmandu, Nepal
Phone: +977-1-4700663, 4700434
Hotline: +977-9841244957 (Arjun)
Email: info@nepaltrekkingtour.com
URL:- www.nepaltrekkingtour.com