Then and Now, a China Watcher’s Tale, John Pomfret.

These are my notes from a speech by John Pomfret today.  I got just a moment afterwards to talk...so many more questions that I wanted to ask.  It was a nice talk but I wanted more on his book and more on his personal experiences in China.  I tried to ask questions that were directed toward practical business issues (rather than academic/political leaning questions).I  hope that you can follow the note structure.  There are a couple of highlights that I've highlighted.John PomfretI've tweaked the outline today to include Why Things like Egypt haven’t happen in China.  There are a number of reasons that what’s happening in Egypt have not happened in China.  Yet.First economic reforms.1980-2011 has seen HUGE changes in the lives of average Chinese.1989-- When China had it’s “Egypt” moment and subsequent crackdown, Deng and the other leaders in his camp gave three options to China’s elite:1. They could remain involved in politics (Basically they could go to jail.)2. They could go abroad, leave China and live elsewhere.3. They could stay and keep quiet and get rich; but their future is their own responsibility from their on out.This “self responsibility” option was a serous mental change for many.Also, at this time was the opening for FDI which China realized that it had to have.  And this led to the employing of the lower classes (which Egypt has not done).Second, housing reforms.1990s was start of housing reform and now about 60% of urbanites own their own home and car.  This is linked to #3 as well.  In the past people couldn’t divorce because they couldn’t move out!  NO houses for rent or sale, so one slept on the couch and one in the bedroom.  Of course, now the divorce rate is much higher than it used to be.Third, personal freedoms.It’s gone from 1980’s and all having assigned jobs to today, personal choice, freedom from bosses/teachers etc.  Jobs are easier to get (and lose).  Passports are not as tightly controlled.  Of course that’s let to other social ills such as: mistresses, fake contracts, divorces, overpriced rental units, polluting cars, etc...Fourth, Expansive Educational opportunities.In the last 30 years there has been a quadrupling of educated Chinese. You’ve now have the first college graduated generations who are making much higher salaries than their parents or grandparents ever dreamed of.  Of course they all have had serious “Patriotic Education” via the CCP’s post ’89 campaign.  After ’89 all were considered “too western.”  Since then the govt has actively taught that the West is NOT China’s friend and that only the CCP is the answer.  Partly this is justified through the growth of the past 3 decades but it’s also partly a manufactured political tool.Fifth, the Security Bureau in China is as tough and more of a significant presence now than it’s ever been!  NO political dissent is tolerated at all. Religious and media repression are worse than the 80’s.  The “Golden Age” of Chinese media was 15 years ago, and getting worse.  The major misconception about China is that it’s getting freer as well as richer. The reality is that it is NOT becoming freer politically.  Economic growth has not equated to political development.SO.....Can China avoid what’s going on in Egypt?Medium term, it’s unclear--there are some serous problems coming up. Demographic issues--fastest aging poorest country in the world. They are old and not yet rich and have no health care system to speak of.They face HUGE environmental problems, like lower crop yields, lack of water (dust bowl concerns), major pollution.  Yes, they are investing in green tech, but they are not solving their current problems fast enough.There is no moral compass in China. Tradition was destroyed in the 1950-1976.  Then Deng told them to forgot communist ideology and thought reform and they went straight into making money.  This back and forth tradition-money-values now (confucian tradition  now) has served to disenfranchise generations of Chinese and now people are tired of being told what to think.Q&A.Gender imbalance? Military is shrinking in size and increasing crime and cross boarder wife stealing/sales is a very worrisome trend.How does the new freedoms and the political controls work together?  Where’s the line?  Are business cases different than criminal and political cases? (my question)I think that independence of the Chinese legal system is a dream of western lawyers and its clearly NOT a priority of the party.  All decisions are, to a degree, political.  So the party monitors everything.  And fewer and fewer Chinese want to be defense lawyers because they can be arrested at the desecration of the prosecuting attorney!Yes, indeed, foreigners are using business law to a larger degree than Chinese are.  And whither they like to admit it or not, the business decisions are still political decisions and are tracked and later used for political purposes by the government with the US embassy or others--like having a “chit” that you can toss into the ring and ask someone to pay up or to help us out later.What’s the health status in China?Heart disease is rising quickly, cancer is growing and lung cancer is HUGE.  Tobacco is a source of major state revenue so stop-smoking policies have been half hearted, at best.Also there are major pollution problems.  They’ve made huge efforts to clean up in BJ, for example.  But now auto is replacing coal as the major pollutant.  We’ve all heard that 17 of the 20 most polluted cities in the world are in China.  It’s becoming a priority for local govts and even the national govt.  But still not as important as growth.There is still a get-rich-quick mentality and a State with a serious lack of resources and that means that China is VERY UNSAFE.What about income disparity? As bad as in the US?  The economic disparity is MUCH wider now than in the 80’s and now even greater than the US and just getting wider.  They’ve lowered taxes in the countrysides and have starting to set up medical systems--but it’s still slow and mainly urban.  Inflation is HUGE now too.What is the view of Tiananmen?Teens won’t even know anything about it.  BJU students had never seen the “tank man” photo before.  People that know and tell are fired from jobs and/or imprisoned so a whole generation does not know.People that know and are rich are very cynical (too much skin in the game to be radical anymore), they say: “Chinese morals are so week that we can’t have political change now in China.”  If you have  money you’re less revolutionary.  People today mostly say: “Maybe in the future.  ’89 was bad, but less bad than chaos.”What people forget is that the reality is that the CCP is the SOURCE of the instability, not the cure.  People weren’t crazy and then the Cultural Revolution started--the CCP lost control and allowed it to happen.Do you see a change coming in moral freedoms?Historically, there were not a lot of real christians in China.  Pre-49 not many christians at all.  But in the 80-90s there was a christian explosion!  Other sects too (falungong) and the traditional Chinese religions too--it's obvious that people are looking for something to believe in.  Estimates are that there are 60 million Christians in China now.  And they are not really rice-bowl christians anymore either but rather something homegrown, a Chinese version of Christianity.But the Party is very schitzo about religion.  A few years ago they thought that you could believe in God and the Party.  Jiang Zemin had a much mellower view of religion.  But now with a weaker leader they are backing off of this; the party is trying to mollify this change with a return to confucian ideology (of course, respect the State is the #1 value).  How this will work will be difficult, to say the least.Most important thing to remember is that China is not static.  CHINA IS RAPIDLY TRANSITIONING and it’s hard to tell where it’s going.Why Mao still so revered?Well, the constant state sponsored propaganda is the main reason but also he was successful in unifying the country.  There is a ton of really good scholarship coming out of HK right now--better than the research into Mao that’s being done in the US.Explain about the China’s foreign policy, specifically with Brazil but also with others.Brazil exports the most Soy, iron ore, and a few other things to China;  their largest suppliers in the world.  10 years ago B and C were high on their relationship, China wanted to bring money and workers--B said no to the workers plan (“not another Africa”).  So then China hired away all the mid managers from shoe companies in B and gutted their industry.  But they C is buying iron-ore and soy, and those are  billion dollar deals so the relationship is strained.  Also, in manufacturing, C is not B’s partner, rather their competition.  C is taking over B’s relationships in Africa too.B now sees C as both a competitor and partner--this is the same as with other developing countries.  African poorer countries with experience with C they are not as hot on China as they were in the past.  Both corruption and development of the economics will all hurt China’s relationships--New Colonialism.How is the freedom within arts and film industry.  Are they a source of morality teaching?  How tight are the controls?First, there is still massive censoring going on. But in some areas (kissing) there is more freedom.Second, in the 70‘s and 80’s dissident painters were big in China and they also became popular in the West--so much of Chinese dissent was commodified.  Now it’s reached art-house movies and visual art too.  For example, Fengxiaogang has a new movie, Let the bullets fly, it’s a coeh brothers-esque movie and it pushing the boundries.  Fortunately for him, humor allows him to get away with it.  He’s still relatively independent.  But Zhangyimo is now a totally co opted “state” filmmaker.  Chinese culture is the most retarded in terms of development.  Culture is still viewed as a tool of the CCP.The CCP, flexible to survive and able to prosper--how do you explain the ability of the CCP to be effective and reexamine itself?First, yes, in 1989 they killed a lot of people, but then the USSR collapsed and those two things were a GREAT negative example. So they printed up a study guide and EVERYONE could read all 12 volumes of the study--and they all did, for years.Second, since then they’ve also looked at other color revolutions (and Egypt now for sure too).  They’ve adapted their strategy according to the mistakes of others.  The fall of the USSR was fundamental to their development, Deng switched instantly in the mid 90’s from the Stalinism of the ’89 reactions and went for econ development--that probably saved them.  They bought off the business elite and academic elite too.  ALSO 1000’s of Chinese have studied in the US, more than 1mil total and about 20% have gone back to China and are in the govt.  They brought western tech and management skills.What is the status and restrictions of foreign correspondents?You can go to events and places but they control the info tightly.  They bug apartments and phones still.  They don’t directly threaten foreigners any more, instead they threaten your assistants and friends (Chinese).  They’ll take out the Chinese friends to “tea.”  Friends pay the price for foreign press “mistakes.”What’s the future of Tech coming from China?They are pouring massive amount of money into this.  Uof Biotech (sp?) is the only Uni not controlled by CCP.  But the question is, will it spark innovation?  UofSD is studying the rise of innovation.  China is a 2nd level and moving to the 3rd level of innovation now.  They are not at the 4th level where it the US has been for decades.  But UofSD thinks that they will be there soon.  I DON’T THINK SO.  The system structure is still top down and so controls resources.  For example, the State mandated the development of 40 marketable pharma products in 5 years--you just can’t do that.  China’s only had 1 in the last 60 years!  So it’s still a top down system--but that said, there is desire to focus on tech.  They do NOT wan to be a low cost labor country any more.I had more questions that I didn't get to ask.1.  How does the Hukou system still limit housing/bennefits etc?  Will it ever be abolished?2. Is there a housing bubble?  All the excess building--will there be a crash like '97 in Thailand and South Korea?3. Investment and increased education has lead to both increase in corruption and scholarship?  How is this affecting the rest of the world?4. How is business being changed by China?  Or is China being changed by western business standards?5. Does the combination of corruption, pollution, the lack of brides, the age demographic and lack of health care and a slowing of growth result in "Egypt" in China in the future?