Postcards From China: Observations From A Recent Trip
Your correspondent has just returned from an 18-day odyssey through China, with the aim of having an adventure, but also with an eye for economic developments. China did not disappoint on either front. Anecdotal observations should always be taken with a large grain of salt when it comes to confirming economic assumptions, and this is particularly the case in a country the size of China. Still, I had a few thoughts. Basically, I’d say China is some time away from reaching its full potential, but stay tuned.
- My itinerary took me a long way around, from Beijing – Great Wall – Xi’an – Chongqing – Yangze River – Yichang – Wuhan – Huang Shan – Shanghai. I can report that the transport infrastructure along that long, long route was more than adequate, although you got what you paid for. The passenger train system was more comfortable and more comprehensive than that of the US, for example, at least if you paid top dollar, er, yuan. Taking the non-reserved seat option for a 15-hour train ride overnight is obviously not as comfortable. But not far off from the US’s Amtrak, which in my experience is an unmitigated disaster.
- The highway system was actually quite impressive, and having driven across the US a few times, I can only say that I would compare it to what the US interstate system must have looked like in the 1950s when it was newly built. The service stations were clean and new, if nearly empty. I didn’t see much traffic either, which bodes well for the increasing propensity of the Chinese to take to the roads.
- Three Gorges Dam = very impressive. The 18,000 megawatts it will soon be capable of generating would in many instances power entire countries (let alone the 22,500 or so it will provide by the time it is finished). By the look of things on my four-day Yangze River cruise, the locals are ready for the raising of the water level. Entire towns and historical sites (e.g. temples) have been moved dozens of metres higher along the river banks.
- Fixed investment is still going strong. In each of the cities I visited, and in the surrounding areas, new buildings were going up apace. This contrasted with my visit late last year to Dubai, where construction cranes remained, but stood idle. Occupancy rates may be another question, however. The productivity of the construction sector appeared pretty low to me, with manual labourers working 12-plus hour days, seven days a week on some projects. In one Beijing ‘hutong’ (neighbourhood alley), a massive group of workers managed to dismantle a two-story building with their bare hands in a period of about 24 hours between my passing by, with nothing left but a pile of bricks (which was clearly going to be reused to build something else). Even the Great Wall of China — which started getting built in the 5th Century — was getting a facelift this month.
- Urban pollution is terrible in China. A year after the Olympic Games, during which the government ensured that factories were shut down, the smog is as bad as ever — or at least, I couldn’t imagine it being any worse. For five days in Beijing, the sun could not be seen through the smoggy clouds, despite temperatures nearing 40 degrees celsius. Even outside the urban areas, pollution was rampant. My travelling companion, who had been to Egypt already this year, said that Beijing’s pollution was (at least to him) even worse than Cairo’s. I’m not sure about that, but I can assure you, anecdotally, that there was plenty of coughing as I sped around Beijing by bicycle.
- It should be no surprise, but China is scared to death of swine flu. Upon landing in Beijing, the health authorities kept the plane on the tarmac while officials passed by every passenger on the plane to get a temperature reading. Further inspections awaited in the terminal. And there were other random checks mid-trip, including at the marina as we got onto the boat for the Yangze River cruise. Good thing I didn’t show up in China with a fever.
- On that note, the villages were devoid of pigs for the most part. One villager told me that this is because they have simply been too expensive this year, owing to higher feed prices last year.
- I wouldn’t have even noticed the existence of riots in the west of the country during my visit, were it not for the government’s (never officially announced) blocking of key internet sites, including Facebook and some email utilities, probably because rioters were using these sites to communicate. It seemed a bit much to block access to these sites for the hundreds of millions of internet users outside of Xinjiang, and was a reminder that the government was not quite as hands-off as you might have been lulled into believing by observing the multitude of people who were engaged in their own independent, small-business activities across the country.
- So vast is China that several cities with populations in excess of 4 million people failed to make an appearance in my trusty 800-page travel guide. Population density is a major problem in urban areas, including Chongqing, which was easily on a par with Sao Paulo on my travels in terms of pure overwhelming size.
- The rise of the Chinese middle class was evident, if the tourism industry is any indication. The number of domestic travellers hitting the sights with brand-new digital cameras was impressive, and the sheer volume of tour groups was overwhelming. Plus, many of the suburbs of Shanghai and Beijing looked more to me like residential areas in, say, Colorado or Florida, with many US-style housing developments. Although these were only for a small minority, seeing these developments was an eye-opener.
- Did China actually grow by 7.9% in the second quarter of this year? Hard to tell, but three of the Chinese people I asked said they didn’t believe it. One Shanghai resident said that 90% of people didn’t believe any of the economic statistics. That assessment may be a little over the top, but there was definitely some scepticism.
- The food is great, and the Chinese have a great love for all things culinary. After all, instead of asking ‘how are you?’, the Chinese ask, ‘have you eaten?’ And with food being not only tasty, but plentiful and cheap, I couldn’t help but think that it is time to buy and hold soft commodities for my long-term portfolio.
- Given the widespread disparities between urban and rural areas, rich and poor (often in very narrow areas), and massive domestic issues, I can’t imagine that the yuan is about to become the reserve currency anytime soon. I also realised on the trip that I’d seldom seen the currency before I hit the ground in China. Still, maybe people were saying the same thing about the US dollar at the turn of the 20th century, and we know how that one turned out.