China, Inc.

Like the cuddly-looking panda, China has become something other than the image of the bellicose state fostered by the era of Khrushchev and Mao Tze Tung, more now like the light, urbane and sophisticated diplomatic touch of Chou En Lai, and the deft practicality of Deng Xiao Ping. The civilization that emerged from the river basins of the Chiang Jiang and the Huang He have spawned a corporate entity with tentacles reaching as far south as the icy waterways of Patagonia to the four seasons of Vancouver, British Columbia, from the oil fields of Sudan to the hamlets along Malacca Straits, from the Siberian tundras to the eastside of New York City. The sleeping giant has become a giant conglomerate.

The Jiangsu Province’s empty factory buildings I observed in Sheyang in 2008 also held true in the Hangzhou-Wuxi-Nanjing triangle, reflecting an economic reality not evident in the glowing reports of handlers of China’s capital market and financial management portfolios in the world’s stock markets.

The state of disrepair in Pudong on the westside of the Huangpo river in Shanghai last July 2008 may be explained as a project put on hold, playing second fiddle to the priority call of Beijing for the Olympics in August, but it also mirrored the global economic crisis that would come crashing down to welcome the new Obama administration.

The halted construction project evident in the excavated thoroughfare by the Bund, presumably now resumed in time for the Shanghai Expo 2010, is now the situation in China’s No. 4 city, Shenyang in Liaoning Province. Were one to view the city from the Great Proletarian Helmsman’s statue at the confluence of three thoroughfares on Zhongsan Square, a quadrant view in any direction would show, at least a dozen inactive building construction cranes.

The massive high-rise edifices of the Ibis Hotel and the Diamond House along Nanjing Bei Lu (north road) alone stand as a mute witness to a construction flurry put on hold on an economy so heavily dependent on servicing a global market. The number of condemned buildings waiting to be torn down is a blight in an otherwise optimistic building boom at the turn of the millennium; even the construction of the city Metro is evidently put on hold.

To counter the declining external demand for Chinese products, credit facility for personal loans up to five times a person’s annual income has just been decided and made available to ordinary workers to spur personal consumption. In a culture noted for its general frugality in personal expenditures, and a propensity to gamble accumulated savings in stock markets, a consumer society is being swiftly born, evidently assisted by the Caesarean method.

Mao Tze Tung’s statue in Shenyang looks into advertisements of Fendi and Armani products, and huge pictures of scantily clad models hawking all kinds of boutique and intimate attires. This is just like marketing DFS Galleria products to garment factory workers earning minimum wage before WTO rules kicked in 2005 on Saipan!

For a socialist state like China, the issue of distributive justice remains a deep social contradiction. The state’s decision to support massive construction of individual dwellings in suburban settings as well as high-rise edifices in the urban centers is admirable, and despite the fact that 25 percent of its population is projected to be able to afford such housing model, the reality remains that the hutongs (back alleys) in all the major cities nurse a social malaise of deep resentment over the access to consumer goods by a few as against the smoldering desire of the many.

Shenyang has become an electronics center of such products as iPods and iPhones. All the automakers in the world are present in the city’s Tiexi New District, hawking the latest in automobiles. But the minimum wage is still at .60 cents per hour in the factories that follow legal requirements. At 40-hours per week, a worker would earn less than 700 yuan per month, thus the common incidence of overtime to double that figure, which amounts to approximately $200 a month. What’s that in actual purchasing power?

A Made-in-China 8G USB flash drive (Lenovo brand, I think) was selling at a suburban Target outlet in New York City for $34 three weeks ago; the same is being sold at the WalMart store in Shenyang (Yes, WalMart!) for $38. The NY worker earns a minimum wage more than 10 times that of his Chinese counterpart but pays for the same product that his counterpart produces for less than the consumer cost at source. Talk about a double whammy—the Chinese worker is walloped twice at the production and distribution end!

Mary Kay is a neon-lighted sign atop one of Shenyang’s downtown buildings, and many group gatherings below in marketing and sales assemblies tote Amway bags. Is the pink Cadillac far behind? Not in Shenyang; the dealership is only a mile away on Beier Lu west of the city! From Porsche to Hyundai, Ford to BYD, the personal vehicle is coming into its own in China. Is the Chinese Los Angeles of two-cars in every garage, a chicken in every pot, and 2.5 kids in the nursery, so far behind as the state superhighway follows the Silk Road to the dry air of Wulumuqi on to Kyrgyzstan and beyond?

Spurring the local consumption is the current strategy. Judicious use of foreign investors will tax the communalism of China. Already, Carrefour, Gome and WalMart are dominant department stores that have encroached on the traditional domain of small storefronts and neighborhood stores. The contradiction is not just on the distribution end, but also the cultural end. Consumerism of the Western variety has not spared the remote villages of Xizang (Tibet). Almost 85percent of the value of purchased Adidas shoes flies out of the country.

Investment in any locale is desirable for the economy. Being able to hold that investment in a local bank, lending it to as many local merchants multiplies its value, circulating it rapidly to as many people as possible meets its raison d’etre. (We see why Japanese, Chinese and Korean investors utilizing alien labor does not whet the local Saipan pocketbook!)

China’s economy will survive the current crisis if distributive justice is followed. China’s communalism may actually serve its economic cause; it definitely has a lot to teach other economies.

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[I] Vergara is a regular contributor to the [/I]Saipan Tribune’[I]s Opinion Section[/I]