Recent Trip to China

[A.West 0]

I recently returned from a 2-week trip in China, visiting Beijing,

Chengdu, & Shanghai.

Here are the things that struck me the most:

In Beijing, thanks to wife's former college classmates at People's

University, (all now businesspeople/Party members in the upper

echelons,) each day we had a full-time driver and were shuttled to

tourist destinations in a Buick Regal - most likely all at State Owned Co.

expense. We were treated to expansive banquets for lunch and dinner in

private rooms - again at taxpayer's expense. Life can be pretty good

in Beijing when you can access expense accounts. Driving is atrocious

and anarchic. Drivers seem to think that a car's usable RPM band is

500 to 2,000 and they universally drag the engine and set the parking

brake at stop lights. Toilets are still a problem, and even

extravagant restaurants with silken finery, warm handtowels, AV

centers, and Remy VSOP, offers one as a toilet a hole in the floor (no

seat). What one sees driving around town are neon lights, skyscrapers,

advertisements for numerous consumer products and company brand

building exercises, and construction projects. When you can see through the smog.

One does not need to look far to find people living in small and

distressed hovels, however, with tin roofs held in place by bricks,

etc. Bookstores hold very impressive long aisles full of English

instructional materials and software, as well as large sections on

management, finance, & leadership. I believe these titles are more

avidly sought after by the urban aspirers. Jack Welch's book was the

hot title of the moment. It's very clear that a great many people in

Beijing (and the rest of China) are working hard to advance themselves

educationally and materially.

In Chengdu, there was a lot of new construction finished over the past

10 years, but there, I also got to stay at a traditional company

complex - a miniature self-contained community owned by 2 state owned

aerospace companies, with maybe 50K people. We stayed at a 3 star

hotel owned by one of the companies (had a 2 room suite for about

$60/day for nearly a week, thanks to a friend of the family, it ended

up all being on the house.) Chengdu is the home of spicy and numbing

cooking, and is a great place to dine if you like spicy food. We

shopped and dined for a week. People there are hardworking too -

some people were living in what looked like garages, their homes doubling

as stores or machine shops. I saw multiple machine shops at work at

11pm Sunday night. Newer middle class apartments are pretty good, and people are investing a great deal to buy new upgraded apartments and nicely furnish existing ones. On the sidewalk among apartments, there would be outdoor tables set up with someone selling paint & small home appliances, for example, and there were also megastores selling furnishings. I happen to like the modern style of furnishings popular in China compared to the stuff typically sold in the U.S. that copies 200 year old designs.

In Chengdu I met with a group of people from the securities and

futures exchange of Sichuan, they seemed quite pessimistic about real

structural improvement of the financial system, due to whom it is

benefiting and the political system. Minority shareholders are the

lowest man on the totem pole, and are the last people most Chinese

companies think of. The moral - I wouldn't invest anything in China

passively.

One person from this meeting mentioned that Tiananmen changed his entire attitude to the state, and from then on he has tried to avoid working for state owned companies or depending on the government (though I don't see how this is remotely possible given the current connections-based system in place).

I got into a philosophical discussion with the group about the fundamental purpose of securities markets, and the necessity objective rule of law to support it. One of the members made a comment that surprised me, saying something to the effect that the U.S. didn't need heavy regulations because the popularity of religion was what stopped people from taking advantage and defrauding other people, while in China there was nothing morally that stopped people from wanting to hurt others.

I countered by pointing out that far more religious countries than the U.S. have massive strife, and that it is the principle of individual rights and individual self-sovereignty that lead people to cooperate in harmony, and to respect the rights of others, and that most of the U.S.'s financial system development came with relatively few regulations other than common law.

Chinese securities firms appear to operate mostly as gambling halls, except

they lack the profitability of gambling halls, because they almost all

illegally borrow money to buy and ramp up various stocks. Now the

market and the securities firms are in big trouble, because the

brokerages have collectively borrowed money to manipulate the

A-shares, and now the market is near multi year lows, leaving a bunch

insolvent. In typical Chinese fashion, the government is extending

more new loans to the biggest brokerages to keep them afloat and avoid

stock market collapse. One guy from the association said that the

market in China was like 1929 US, and didn't think there would be much

improvement in market structure anytime soon, because he doesn't

expect the political system to change, and those in power have a

vested interest in the current market structure. Some people who have

failed in stocks have now moved on to Chinese copper futures.

Considering the official banking system is a fraud, and the securities

market is a fraud, and given the crappy old apartments most people

have had, I can appreciate why people would be interested in putting

their life savings in properties.

The trouble I continue to have with China's business development is

that most seem to think business and ethical behavior is incompatible,

and with government influence even on semi-private actions,

corruption, rent-seeking, and resource mis-allocation, is inevitable.

It's as if, after being taught for years that capitalism was

exploitation, they now assume that the way to be a successful

capitalist is to exploit people. The concept of individual rights and

mutually beneficial, ethical exchange, is just too foreign. It seems

that the dominant belief is more like "eat, or be eaten." No doubt

that the history of China and its statist government (which continues)

has taught them that this is the case.

Overall, I left feeling short-term negative, long term positive. The

financial system subtracts value, but there are so many new small time

businessmen working in their shops till midnight who are probably

creating economic value. I have no idea what the ratio of

value-creation to value-destruction is, but Chinese enterprise has clearly overall

been a net value creator over past years. That's because the

government relaxed some of its wealth-destroying policies - the

government should be given no credit at all - all should be given to

the millions of individual hard-working Chinese people. All the

government has done is reduce its negative burden, - unlike the

comments from some sloppy commentators (like Fortune) who write

idiotic things like "China has pulled 300 million people out of

poverty," which both includes a false premise about what and who

creates wealth and drops the context of what created the poverty in

the first place.

That's all I have time for now, feel free to ask questions.

Here are some pics of the trip:

http://athena-realm.blogspot.com

[ChristopherSchlegel 0]

1. Thanks for taking the time to write & post this. It was extremely fascinating. I've read/heard a great deal about China recently. It's a great treat to hear an objective source relate first-hand experience.

2. I followed the link to your blog. Your kid is absolutely adorable! Beautiful little girl you & your wife have there, congrats!

Christopher

[A.West 0]

Thanks Christopher,

My main regret was that I ran out of storage space in my camera and thus really only took touristy shots. I would have liked to have shown more pictures of highways, factories, shopping malls, apartment buildings, to provide a better picture of what daily life looks like for people in Chinese cities.

[Betsy Speicher 0]

I followed the link to your blog.  Your kid is absolutely adorable!  Beautiful little girl you & your wife have there, congrats!

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I'll second that. Your daughter Athena is gorgeous.

[A.West 0]

Thanks Betsy,

Athena got a lot of attention during our two week trip. From friends and family of course, but when we went out, people were constantly commenting to us or their friends how pretty she was, sometimes even secretly taking pictures of her. Sometimes it was too much, though, and sometimes people were rude by being too vocal in their comments (one should not yell in a park to one's friends - "So Pretty! And she speaks both Chinese and English") and eventually Athena made a game of hiding from her admirers.

Another interesting recollection - when we walked by vendors, Shawna wanted Athena and me to walk separately from her, because the vendors would ask for higher prices for things if they saw us together with her (the general rule is that foreigners will be asked for and generally pay more for almost everything in China - this includes rates at major hotels.) Even on websites, I've seen prices on the English pages higher than the Chinese pages.

Another thought. There are a massive number of street vendors operating carts and tiny stores in China. People don't appear to be staying home collecting welfare in China. Even in Chengdu, people would go out and pick special fragrant flowers, tie them on a string, and sell them on streets and at traffic lights for about $0.12. They actually do work for food, rather than falsely claiming on a sign that they will (as panhandlers do in the U.S.). I saw very little outright and direct begging in China, except at a couple of major tourist destinations.

[Guest ElizabethLee]

One of the members made a comment that surprised me, saying something to the effect that the U.S. didn't need heavy regulations because the popularity of religion was what stopped people from taking advantage and defrauding other people, while in China there was nothing morally that stopped people from wanting to hurt others

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hi AWest, thank you so much for the story and pictures!

FYI, the %atheists per population is greatest in Asia. I was surprised to find that out, but it is true by a wide margin.

[Betsy Speicher 0]

FYI, the %atheists per population is greatest in Asia.  I was surprised to find that out, but it is true by a wide margin.

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I wonder if Buddhists, Taoists, etc. -- and Marxists -- were counted as atheists? Not all mystics are theists.

[A.West 0]

My guess is that Asia may have among the highest percentage of social metaphysicians.