Mr. China (39 page)

If by writing this book I can make the Chinese people seem more human, less mysterious or threatening, just flawed and beautiful like us, then the troubles of the past ten years will all have
been worthwhile.

We live in a monopolar world but this state can’t last for ever. Unless, by some bizarre turn of events, the people of Europe opt for real political union the key global
power balance in the next hundred years will probably be between the United States and China.

The Americans and the Chinese have a lot more in common than they think. Acutely aware of their current disadvantage, many Chinese have consciously gone out to educate themselves about America.
Their conclusions tend to be balanced and favourable. But, so far, not so many Americans have shown an interest in China or made much effort to understand it. As the effects of the steady migration
of jobs and manufacturing across the Pacific to China start to hurt in Middle America, a slow realization is dawning that Washington is going to have to deal with Beijing increasingly as an equal
over the coming decades. I hope there might be a short cut in the process of misunderstanding, conflict and reconciliation that I have described here. If these two great peoples can develop a
relationship underpinned by their similarities and where differences are respected and enjoyed, that would be a source of great hope for everyone.

*   *   *

My thanks go to Jenny Lawrence, who ploughed through early drafts with a sharpened pencil and an enthusiasm that was quite unwarranted by the contents. I wish that her other
students would realize how lucky they were. James Kynge was a constant source of ideas and encouragement and is as close to a real live
zhongguo tong
as any of us can get. Jasper Becker,
Rowan Pease, Ian Maskell, Susan Watt and Paul Cartwright all helped with changing a mass of jumbled papers into something resembling a book. Michael Cronin is a rock in stormy seas, a great friend
and colleague in difficult times. Jung Chang had the kindness to remember a student from a decade earlier when she introduced me to Toby Eady. As she said years ago, he is the best agent that
anyone could have. Nick Robinson and Gary Chapman were brilliant with their new ideas and images and I am grateful to them for providing me with a much clearer direction. I also want to thank
Ludwig Meier for giving me a break early on, Catherine Pugnat for her great kindness in France and Lizzie Hicks for suggesting a trip up to China in the first place.

As always, my love and gratitude go to my mother who set us out on our own paths to happiness. And, of course, those same feelings go to Lorraine. She was there throughout all the ups and downs.
Despite the odd moments of exasperation, she unfailingly filled the lives of four marvellous children with love and hope and never lost her nerve.

Just before Chinese Spring Festival, almost twelve years after I first went to meet Old Shi, Ai Jian and I retraced our steps up into the bamboo groves of central Anhui. We
were trying to buy a company in Europe that made the same products as Old Shi, so we went to see if we might work together again. I knew I’d have to be careful, but the rumour was that Old
Shi was thriving down in the valley and there was no denying that he was one of the best operators around.

All those years earlier, I’d arrived at Hangzhou in a small propeller plane in the fog and the rain. But this time, under a clear wintry sky, Ai Jian and I sped along the raised
expressways westwards from the coast. We brought a new business partner, a UK industrialist who had ended up as CEO of a big engineering group, but who still preferred a good argument on the shop
floor to sitting around in board meetings. I felt a lot safer now we had someone who knew how to run a large company.

The driver wanted to take the new expressway through Wuhu, but I insisted on going through the hills – just for old times’ sake. I loved the journey through the villages, past the
houses with sloping roofs and the courtyards of beaten earth with the thicket fences around. And, besides, I was excited about seeing my old adversary again. It had been nearly five years.

We lost our way in Hangzhou but eventually found the familiar road that wound up through the tea bushes towards the bamboo. On that first trip, the driver stopped for a cigarette at the high
point where the road crosses the border between the two provinces of Anhui and Zhejiang. Over the years, it had become one of my favourite spots in China. I used to stop there on my weekly journeys
down to Zhongxi during the Battle of Ningshan. I never tired of the scene: the valley with its stone bridges and little streams, the winding paths between the little embankments, the farmers
scraping about with their hoes; and in the autumn, after the harvest was in, the odd lonely tree waving its golden branches out above the sea of rustling bamboo.

The muddy, potholed section of the road that falls towards Thousand Autumns Pass is just the same as it was; but shortly afterwards, the old road disappears off to the right into the
undergrowth. Blasted through the rock, a new four-lane highway roars down the valley. Further on, the valley floor widens and the highway now sweeps around in a broad arc bypassing the long stone
causeway that leads to Zhongxi Village.

Of course, I couldn’t resist stopping for a look. It had been more than six years since we kicked Old Shi out of his factory. After I left the company, Pat soon got fed up with Chang
Longwei’s earthy ways and booted him out a few months later. I didn’t know the new management team so I stood outside for a few moments. I gazed through the new factory gates that Chang
had installed before his famous firework display, out across the river to the factory buildings on the other side. There was a slight air of neglect; the factory certainly needed a coat of paint. I
searched for the familiar signs of smoke rising from the chimneys, but the boilers must have been cold. Old Shi’s lawn in front of the factory had been dug up and planted with a few
ornamental trees, but they looked lank and brown. Although it was January and I knew I couldn’t expect the luminescent green of the summer, I felt that the place looked battered and
unloved.

The village had hardly changed; in the run up to Spring Festival, the road had been turned into a street market. There were red paper-cuts, Chinese pastries and ornamental shadow puppets set out
on temporary stalls along the pavements. Occasionally the air was split apart by the roar of Chinese firecrackers and there were rows of coal-fired braziers with stacks of bamboo steamers filled
with dumplings on the top. But it was damp and muddy under foot. The same bored young men sat loafing about on broken bamboo chairs; and no one had fixed the drains.

The road down the valley from Zhongxi to Ningshan had changed completely from the pitted, winding road I remembered so well. Occasionally I could catch sight of a familiar section winding
through the countryside in the distance, but it was clogged with thorns and bushes. After a while, it disappeared completely.

Perched on a hilly mound just outside the town, Shi’s factory dominates the whole area. Just inside the main gates, there were the familiar rows of fruit trees and signs with quotations
from the old philosophers, Lao Zi, Confucius and Mencius. Old Shi kept us waiting for a while, just like the old days. I thought he looked a bit tired when he arrived. But I found out that he had
only got back from Shanghai at two o’clock the previous morning. He’d been at the celebrations for a new joint venture he’d just signed with a big German multinational.

Old Shi still has the magic touch. His business is now six times the size of the old factory up the valley. Everything about the place is immediately recognizable: the straight lines of machines
in the workshops, the clipped box hedges outside, the neatness of the workers’ uniforms and the slight hush that falls as Shi walks into the machine shops. He’s feeling successful again
these days and I found that we could talk about the fight without rancour. He told me that he very nearly went under but the tables have turned again; he thinks he could put the old factory out of
business just by cutting prices in a few of his older competing lines. But ‘What would be the use of that?’ he said adding an old Chinese idiom;
bu yao ba shiqing zuojue le,
‘
We should never take things to the extreme.’ ‘If the old place went under,’ he said, ‘I’d just end up having to take care of more workers.’

For me, that new road through the hills of central China symbolizes a change that has swept over the whole country. Just like the road, the world has bypassed joint ventures
and now beats a path straight down the valley to the low cost labour and the successful Chinese entrepreneurs that Shi so perfectly typifies. Shi’s business has grown from about six million
bucks in sales when we kicked him out, to more than a hundred and fifty million, much of it in exports. He has factories in Shanghai, Shandong and Shenzhen and dreams of buying a business abroad.
This encapsulates the biggest change in China; successful businesses no longer need money in the same desperate way as they did in the early nineties.

I remember, back in 1994, when we wired the fifteen million dollars to Su’s gearwheel factory down in Sichuan, the bank held the cash in a special escrow account. It was the biggest
transaction they’d ever handled so they assumed that there must have been a clerical error with the amount. They worried that they’d have to send it back. Later on, when Mr Su decided
to grab the cash and build a gearbox factory without telling us, he did it because he was absolutely convinced that he’d never, ever get another chance like that in his entire life.

As capital poured into the country and the domestic banking system gradually started to fund private businesses, Chinese entrepreneurs seem to have overcome the extreme short-termism of the
early nineties. As their businesses move up the value chain, Chinese entrepreneurs are more preoccupied with accessing markets outside China, developing new products and establishing brands than
they are about raising their next hundred thousand. Many are contemplating acquisitions abroad. It may be that the Chinese will make as many mistakes investing outside their country as the
foreigners did coming in. Whatever the outcome, Chinese businessmen, and Government officials, now see the benefits of long-term cooperation with foreigners; and the crucial result of that change
is that they’re much more inclined to play straight.

But don’t be fooled; there are still plenty of opportunities to lose money in China and the old problems are still there. Anyone who doesn’t believe it should read the recent New
York Stock Exchange filings of China Yuchai, an SEC listed company which has invested in a big diesel engine business in China, run by the redoubtable ‘Chairman Wang’. The accounts,
which are written by lawyers but read like a farce, explain that the company had:

You can imagine the rest. Wang was eventually forced out years later when the local government finally tired of the fighting. So while problems remain, China has tidied up its act. But how about
the foreigners? Are there still adventurers out there who want to be Mr. China?

There seems to be much more realism than in the glory days of the early nineties and foreigners have more options now over how to invest. The Government has relaxed the regulations so most
multinationals set up wholly owned businesses, often for export, and insulate themselves from local hazards that way. Service industries have developed so now there are accountants who count and
even lawyers who’ve read the odd statute. And there are plenty of smart young Chinese returning from abroad clutching MBA certificates. Even so, fifteen years on, some are still chasing that
illusive ‘China Dream’. Billions lost and they still keep coming.