Ronnie Chan is an outspoken, friendly Chinese-American tycoon and philanthropist. When you go to Hong Kong, he is a man you are told to try to meet. Although a U.S. citizen, he has high contacts in Beijing, and it usually turns out that he has just had lunch with Henry Kissinger.
I had the good luck of spending a fortnight with him recently on a trip in China, and was able to collect his views on conditions in that country.
JT: First, what is the good and the bad about investing in China?
RC: Foreigners make two big mistakes when they think about China. They can’t believe its tremendous growth, and they don’t realize how lousy its economic and social system is. As to growth, by early this century China will consume half the world’s raw materials and produce half the world’s goods. Already China has become much more hi-tech than most people abroad realize. The cell phone is at least as ubiquitous, even in the most remote areas, as in any Western country. There are about 160,000 Chinese students studying abroad, 80,000 of them in America, and domestically, English is gradually becoming a second language. It is often taught in schools, and is appearing in commercial establishments.
In past years foreigners were an object of curiosity in the street, but today, thanks to a flood of tourists, that’s no longer true. Even ten years ago, when there was a zone of prosperity along the coasts, much of the interior was impoverished. China’s tremendous growth rate means that the really poor area is constantly shrinking, and today comprises probably no more than ten percent of the population. Remember, 250 years ago China was the richest and most advanced country in the world. It may well join that club again.
JT: And what has brought about this turnaround?
RC: I give tremendous credit to Deng Xaoping. Thanks to the vertical — Confucian — structure of Chinese authority, when he decided that Maoism was ruining the country he could change course very fast. Of course, the country was ready for the decision. Mao’s crazy and disastrous experiments, notably the so-called Great Leap Forward — which was actually a leap into an abyss — and the Cultural Revolution — which was a war against culture and, indeed, civilization — not only cost us ten or fifteen million lives but set back our development by decades. As it was, though, when Deng said, “Enough,” and turned the country toward free enterprise, he improved the livelihood of more people in a shorter time than anybody in history.
JT: How well can China maintain this course? There are constant demonstrations of one sort or another around the country, I understand.
RC: There are bound to be setbacks and reversals, but the long-term momentum of growth seems unstoppable. The energy and the savings — and investment — rate is almost unbelievably high.
JT: You mentioned as the second thing foreigners didn’t understand, how “lousy” — your word — the economic and social structure was. I gather one should write into any contract an arbitration clause providing that disputes should be settled in Singapore, for instance. On the other hand, there is a problem of getting this clause enforced! So, the choice of any Chinese partner, if that is contemplated, must be extremely careful.
RC: Yes. The courts don’t deliver justice.
Also, the enormous oversupply of bureaucrats is essentially parasitic. Only the strong and extremely skillful can flourish here. But given these qualities one can indeed succeed.
JT: Like you? [He smiles.] How much of a problem is it that the banks are bust?
RC: Their bad debts are tremendous, perhaps $800 billion, but private and corporate savings are much more — perhaps $2.5 trillion. And the Chinese banking system isn’t like the U.S. banking system. Think of the Chinese banking system as the “cashier” of the Chinese government, the way the U.S. Post Office is the government’s courier.
JT: People like to compare China’s prospects with those of India, often to India’s advantage, on the grounds of India’s democracy, its use of the English language, and of the Anglo-Saxon legal system.
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