In the first of a three-part series to mark the end of six months living in China, Fintan O'Toole visits Zhejiang province, where playing-card factory owners flaunt their wealth and low-paid workers are no longer content with the hand they've been dealt
Yang Guowen's silver BMW 760i, and his mother's red Mercedes, look a little incongruous parked outside the unmarked, down-at-heel building up a dusty lane that houses his office in Yiwu. There's just a ditch between the lane and the motorway that links this small industrial city to Hangzhou, provincial capital of Zhejiang. A big dog on a chain, fierce-looking but somnolent, guards the building, but, if it were not for the cars, you wouldn't imagine that there was anything here worth guarding.
But the cars are important. As he explains to me over lunch, the BMW cost him €70,000 but he settled on it only after he came to the reluctant conclusion that the €300,000 Bentley he wanted might be a bit impractical. "You see," he said, "business people in Yiwu often dress in cheap clothes, and we may eat plain food. But a flashy car is essential. The cars are the way we compete with each other." Yang Guowen is 25. He is also a member of the Communist Party.
The chances are that if you're sipping a Coke through a straw while playing poker, both the straw and the cards come from Yiwu. The city is the drinking straw capital of the universe, and a thousand containers leave town every day loaded with similarly inessential items: playing cards, sticky tape, biros, shoe laces, cheap jewellery, hair slides, picture frames, plastic sunglasses. It is emblematic of a China that most of us have been vaguely conscious of for 20 years now, even if only as the source of things we use but hardly think about. A China whose official Marxism does not prevent cheap labour from being its primary attraction in the globalised economy. A China that has taken over the business of mass manufacturing, allowing the rest of us to get on with the high-tech, high-skilled stuff. A China that is still largely anonymous: unless you're an importer of drinking straws, the chances are you've never heard of Yiwu. A China that doesn't appear in the guide books but whose functional, system-built apartment blocks, offices, and factories, all built in the last 20 years, are more representative than the Forbidden City or the Terracotta Warriors.
In many ways, Yang Guowen does embody that kind of China. He is chairman of one of Yiwu's 20 playing card companies, even though he is just two years out of Peking University, where he studied business administration. The company was established in 1987 by his father, who was then the mayor of Yiwu and is now a member of the People's Congress. Zhejiang embraced private ownership and Deng Xiaoping's economic reforms more quickly and more thoroughly than most of China, and the sudden shift of culture in which a Communist official could become a private businessman was an expression of the forces that have turned China into a burgeoning economic superpower with $1 trillion of foreign reserves and a trade surplus of $133.6 billion in the first 10 months of this year alone. Yang Guowen's inheritance of his father's company means that an economic and social upheaval that seemed likely to tear the world's most populous nation apart has now settled down comfortably into a second generation. After all the turmoil and dangers the father must have navigated, the son has arrived on the balmy shores of a global capitalism where your biggest worry is whether your car outshines your rivals' motors.
You can see its results for mile after mile of the fertile plains that stretch between Hangzhou and Yiwu. The land is densely packed with new, somewhat surreal three- and four-storey houses that seem to have landed on it from outer space. Their architecture is, to put it mildly, quirky, drawn in equal parts from traditional Huizhou merchant housing, 19th-century Lutheran churches from northern Europe and a 1930s fantasy of what the future would look like. They have old-style Chinese horse-head gables, wooden steeples topped with weird, spacey spires, and big windows of reflective glass. This is not an individual idiosyncrasy: virtually every house looks like this. And in their attempts to combine China, the West and the future they are, for all their strangeness, oddly authentic.
Yet the economic miracle that transformed Yiwu in 20 years from an overgrown village to a city of 600,000 people that sends its goods all over the world has its limits. Yang Guowen's BMW cost most of a lifetime's salary for his workers, who typically make between €80 and €150 a month. Those workers are migrants from all over China, and their earnings, supplemented by free accommodation in small but clean and relatively decent apartments on the factory site, are perhaps twice what they would make as peasants. Yet they aspire to much more for their children: education, opportunity, an element of ease. Playing card factories, and the kind of economy they represent, can't give it to them.
QINFENG LOU, CHAIRMAN of a bigger card factory in which Yang Guowen's father is also an investor, told me that "cards are not a high-tech product - anyone who buys the equipment can make them. So we turn out 200 million packs of cards a year, and there are 19 other companies doing the same thing in Yiwu. With this kind of competition, there's a very low profit margin: 5 to 7 per cent." The mathematics doom the workers to low wages, and even the bosses can't see a great future. "Those of us who started these businesses are entering middle-age now," said Qinfeng Lou, "and there's no great excitement about doing this anymore. Young people want to get out of this kind of career. I told my son to look for another career, to acquire a good education, get new knowledge and set out on his own path." A generation on from the opening up of its economy, the novelty of China's industrial revolution is wearing off.
This is not the way we tend to think of the Chinese. In some ways, western perceptions of the new post-reform Chinese tend to mirror Communist Party perceptions of the old, pre-reform Chinese. They are worker ants, teeming, largely undifferentiated masses, dour, disciplined, willing to endure spartan conditions and endless privations. Their hardness undercuts our western softness, our pursuit of the good life. Western bosses may admire them and western workers may fear them, but both tend to start from the premise that they are not like us. In fact, the most startling thing about the Chinese is the most banal: they are like us, only poorer. The more they move out of poverty, the more that qualification disappears.
In 1987, Li Ruihan, the oldest and most proletarian member of the current Communist Party leadership, upset a group of conservative teachers of Marxist theory by telling them that, "We often talk about the laws of economic relationships. I think we first of all have to talk about the laws of the feelings of the masses. When they've had a kid, they want to put it in a nursery school; when the kid gets older they want to give it a desk in school; when he or she graduates, they want to see that there's a job; when he or she gets married, they want to be sure there's housing - these kinds of things are all people want . . . But if you get on their wrong side, it doesn't matter who you are, you're done for. As the saying goes, 'the water can carry the boat, but it can also sink it.'"
Li Ruihan's point was as explosive as it was simple: Chinese people are ordinary. They want education, jobs, houses and, he might have added, health care. They like to have money in their pockets and the leisure to spend it. And, if the Communist Party's hegemony is to survive, it will have to supply those things or at least the reasonable expectation that they are on the way. Otherwise, it will be "done for". What he was spelling out was a new social contract: if the government delivers, it stays in place. If it doesn't, it's sunk.
For the first two decades of economic reform, delivering was relatively easy because public expectations were relatively low. In a society where there had been mass famines even in the early 1960s and in which the pleasures of life were hard to come by during the puritanical years of the Cultural Revolution, a little could go a long way. But as the process enters a second generation, and the basics of survival - food, clothing, some kind of house - are increasingly taken for granted, people are less easily pleased. And it is increasingly obvious that a China which is simply a place where cheap labour mass-produces goods for export cannot meet those higher expectations.
CHINA SHOWS UNEQUIVOCALLY that global capitalism increases wealth. Since 1985, China's economic reforms have lifted 100 million people out of absolute poverty, an achievement unprecedented in human history. Last year alone, average wages in China increased by almost 15 per cent. But China also shows unequivocally that, left to itself, global capitalism increases inequality. In the late 1970s, China's levels of inequality were among the world's lowest. Now, they are higher even than those of India, Bangladesh or Indonesia. In less than 30 years, China has become as unequal as the United States. Even in the cities, the richest 10 per cent of the population owns 45 per cent of the wealth, the poorest ten per cent just 1.4 per cent. There are still 76 million rural people living in absolute poverty.
The rich, like Yang Guowen and his fellow industrialists in Yiwu with their big cars, flaunt their wealth. And the poor can see it. Even in the remotest rural areas I've visited, people watch television and some have access to the internet. They can see what the good life is, and they want it, if not for themselves, then for their children. We know they want it because they're going in search of it: China has a floating population of 140 million migrants on the move from the countryside to the cities, looking for a better life.
Even those who stay behind in the villages know very well that there are places in the world where ordinary people have a safety net of basic social services that they can rely on. Talking to people in Chang Xi, a mountain village which had never had a foreign visitor before, I was struck by how much of what they said they wanted was absolutely familiar: pensions for the elderly, free education for the young, access to affordable health care. What they want, in other words, is a European welfare state.
For all its benefits, economic reform has driven China further away from that goal than it was before. The basic pension scheme covers only 16 per cent of the working population. The medical insurance system covers less than half of the urban population and just 10 per cent of rural residents. An official report last year noted that the health care system has become "unbearably expensive to patients and many dare not go to hospital when they fall ill". And education, so strongly stressed in Li Ruihan's definition of the "feelings of the masses", has become perhaps the biggest single issue for most ordinary Chinese people. In a survey last year, urban adults for the first time listed the cost of their child's education as the number one household expenditure. Among rural households, an astonishing 33 per cent of annual expenditure now goes on education. An increasingly common story in the Chinese press is a child committing suicide because she is ashamed of the burden her education is placing on her parents, or fathers killing themselves because they are ashamed that they can't afford the school fees for a bright child.
The big question for China, then, is whether the combination of a raw capitalist economy with a largely unreconstructed Communist system of governance that emerged in the 1980s can continue to fulfil the aspirations towards the good life of the majority of its vast population. China's leaders know that they are in a race against time. They know that cheap labour in a land of conspicuous affluence is a recipe for resentment and instability. They need to change course before the water of rising expectations that has carried the boat of China's progress tips over the sides and sinks it.
Editorial comment, main paper, page 15
On Monday: Can the Chinese system survive success?