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RC: I don’t buy that. Unlike China, India has not got its population under control. By 2050 they’ll have more people than we will. Illiteracy stands at 42%, compared to our 21%. Women are kept down by inadequate education and poor job opportunities. And as to the legal system, it’s Dickensian. An Indian court case can drag on for decades.
JT: Napoleon said that each of his soldiers carried in his knapsack the baton of a field marshal, and it seems to me that in the pocket of most Chinese is the handheld computer of an entrepreneur. But I’ve noticed that to many Indians there’s still something unsavory about getting rich.
RC: Yes. Their general point of view is still quite antipathetic to private enterprise. India’s progress is based largely on its thriving software and call center outsourcing, but to prosper, India needs a lot of heavy and light manufacturing, which I don’t see happening. And India’s infrastructure is terribly antiquated.
Here’s a paradox: India is a democracy, which helps hold it together. However, the great Asian success stories — South Korea, Taiwan, Hong Kong and Singapore — achieved their astonishing takeoffs under autocratic government, while India and the Philippines, the most democratic countries in the region, have made unsatisfactory progress. Maybe a country, like a company, needs a lot of control at a certain point to get going even though that opens the door to bad mistakes, the way Mao plunged us into disastrous troubles. The Chinese Communist Party, five or six percent of the country, may no longer be Marxist, but it still controls all the key elements of the government, so when Deng turned the party toward economic freedom he had in effect turned the whole country around. You can’t do that in India.
JT: And how about Tibet?
RC: The incorporation of Tibet is probably irreversible. China sees its presence as a liberation from theocratic servitude, rather than an occupation. A tiny part of the whole population — nobles and lamas — gave orders to huge population of illiterate serfs and indeed slaves. That couldn’t last. The Dalai Lama accepts that Tibet is part of China, and its independence was never recognized by the U.S. or Britain, for example. Over time an appropriate degree of a cultural and religious accommodation will have to be worked out, not only in Tibet but for the more numerous Tibetans in the neighboring provinces. In the meanwhile, China is pouring development money into the region and developing a modern infrastructure.
JT: And Taiwan?
RC: Nobody wants dramatic change.
JT: How, then, should an investor hope to make money in China? I gather that below about a hundred million dollars, a project cannot assemble the influence, resources, skills and staying power required for success.
RC: Yes. The first thing is, as always, not to lose money. And the way to lose money is to believe what you read in the Western papers — the New York Times, or whatever. The current news cannot give you a real insight into the big picture. It has been rightly said that China is a civilization masquerading as a country. There is so much to get your arms around! To grasp the underlying reality you need to understand Chinese history, Chinese culture, and the background and organization of Chinese communism. That’s the totality the investor is working in, and he won’t get it from news stories.
Incidentally, one thing you must understand about Chinese communism is that the leaders never respond to foreign pressure. They simply stonewall. Then, when the issue has dropped off the front page, they may give a little, and then a little more. But not under immediate pressure.
JT: Thanks Ronnie. A useful reminder!