Hello and welcome to the So What podcast, in which political economic analyst JP LanDman
discusses the issues uppermost in the minds of South Africans. You can find a written
version of this content on JP's website, jplandman.co.za. I am Ruda Landman and I am your host.
This episode goes with the newsletter dated the 9th of November 2023, which you can find
on the website under the title, Thoughts After a Visit to China. JP, getting off the plane,
first impressions that evening, you landed at what, 11 o'clock at night?
Yes, first impression, incredible social organisation. The efficiency with which people and your
luggage and everything else gets processed is simply unreal. That was noticeable throughout
our visit. I just want to make it clear, Ruda, just like one swallow certainly doesn't make
a sw- summer, one visit to China doesn't make one an expert. Certainly not. But these are
just my initial impressions as I experienced them. And the first one is the incredible
level of social organisation. But the flip side of that is security.
Absolutely, there are cameras everywhere. You've got to show your passport wherever
you go. If you take a train trip, you show your passport or if you're a Chinese citizen,
your ID card, when you enter the station and again when you are on a platform and you want
to enter the train. Yes, security is very strict, no question about it.
You were also impressed by infrastructure. Yes, again, you know, nothing really prepares
you for it. One hears about these things, one hears about 40 and 50 and 60 storey residential
buildings and so on. But nothing really prepares you for the physical infrastructure, for the
buildings, the roads, the highways, the trains, the power lines. Wherever you go, you see
power lines. We took a train from Beijing to Qijian in the Shanxi province. That's
where the Terracotta soldiers are. It's a distance more or less from Johannesburg to
Cape Town. The train covered it in four hours and seven minutes. It is simply unreal. Six
years ago, seven years ago, that train line did not exist. It simply wasn't there. So
what they've done in terms of infrastructure is incredible. What they're busy doing in
terms of digital infrastructure is also incredible. You can move around the entire Beijing and
never use any cash. Everything is on a cell phone, a smartphone. And people who know say
that WeChat is much better than WhatsApp. So it's not just physical infrastructure,
it's also digital. And all of this happened, all of this changed in 40 years. 40 years
ago, it looked very different, one would assume. Absolutely. When Ding Xiaoping launched these
reforms in 1978, now 45 years ago, India, China rather, was a backward, poor country.
There's no question about it. The photographs show it, documentaries from the time show
it, people who live show it. People who are alive can testify to it.
Well, it was just after the Cultural Revolution.
Yes, absolutely. It started in, as I said, in 1978. And I want to tell you two anecdotes
that I think illustrate the point best. The first one is from a gentleman who's now 48
years old. 40 years ago, he was eight years old. He went to school in Baozhi. Nobody in
school had shoes. There was simply not enough money around for parents to give shoes to
the children. Today, 40 years later, he runs a business with 10 primary schools or kindergarten
schools as he calls them. He charges 10,000 renminbi per month per child. That's about
25,000, 26,000 rand per month per child. And he's got 10 of these schools in Baozhi. So
from a level of income where people couldn't have shoes to a level of income where parents
could afford to pay that amount of money, it is simply transformational. It doesn't
matter how you look at it, it's transformational.
Those schools are, this is a private enterprise.
Completely private enterprise, completely privately run, belongs to him. The properties
where the schools are belong to him, completely private.
He found his name in South Africa.
Well, that he find his name was South Africa, that we copy it. He calls his schools the
Kuro schools. Some people say indeed everything is made in China.
And the other person you met whose story also struck you?
The other gentleman is about 45 years old and he recalls how as a young child, his mother
sent him on a bicycle to a neighboring village to go and buy some paraffin for use in the
house in the kitchen. There was no paraffin available in their village. And secondly,
they needed a ration card. There were rations on all products. So he needed a ration card,
take that with him on the bicycle, go to a nearby village, buy a bit of paraffin, come
back. He is simply amazed that today there's no limit to the consumer goods that he can
buy. There's no shortage of electricity, of gas, of food, of clothes. He can buy whatever
he can afford, which is available in abundant supply.
And it tells you what happened in 40 years. And what struck me most was that nothing that
I read, nothing that I tried and investigated beforehand prepared me for the sheer quantum
of what they've done in 40 years. It's really incredible.
Well, all of this was possible because of economic growth. What's the recipe?
Very, very interesting. I think it seems to me it comes down to two things, local government
and embracing the private sector, or as Chinese prefer to call them, entrepreneurs. They don't
really talk about private sector, but they do use the term entrepreneur as a substitute.
The first point is local government. After 1978, Deng Xiaoping started with experimentation,
allowed different local governments, different provinces to do different things. And they
basically set up an incentive and reward scheme to reward city leaders, town leaders, to generate
economic growth.
But it sounds as if it's on both those levels, local government and provincial.
Absolutely, absolutely. Strong national guidance, provincial governments and then local government.
China, you know, is a big country, 1.4 billion people. So you have a structure of government
throughout. And because it's a one-party state and very strong centralized political control,
the political rewards for local leaders and provincial leaders who could generate growth
were indeed quite substantial. So there was a competition between local governments for
attracting business, attracting entrepreneurs, attracting capital and getting economic activity
going. So that played a big role. That and implicit in that embracing the private sector,
those two things made the difference.
You came across that provincial government that you visited, you said that they were
boasting about having business relationships with more than 100 countries in the world.
So that province has reached out far beyond its own borders.
Oh, absolutely. The Shanxi province, which is more or less in the middle of the country.
So it's far to the west of Beijing. So it's not part of the prosperous eastern seaboard
of China, not at all. It's in the middle of the country. Yet they have established businesses
and as you've said, they established relationships with businesses in more than 100 countries.
For a provincial government to do that, it's quite astonishing. Likewise, we went to a
local city, about 3.3 million people, Baozhi, which is also in the province of Shanxi. Similar
kind of story there. They reached out, they received us very generously, very hospitably
because they want to. They want to have relations. They want to establish commercial ties. The
one experience we had throughout was that the businessmen are very, very hungry for
business. Back here in South Africa, I've received a couple of emails from people who
said, we met you, these are our products. You find anybody who would like to buy these
products, you know, please put us in touch and so on. They're the very aggressive business
people. And in Baozhi, it sounds as if titanium made all the difference. It's a fascinating
story. It is on a river, but it's not a navigable river. It's inland, so there's no ocean, there's
no deep harbor nearby. Yet, they imported titanium from Mozambique, from Australia,
from North America, and they smelt it in Baozhi. And they built up a titanium industry around
that. It's simply incredible. They produce a range of titanium products and there again,
there's a drive to innovate and to move up the value chain. So, they're now developing
all kinds of products to go into electric motor cars, to go into spacecraft, that sort
of thing. They're moving up the value chain. And because you had titanium factories, other
industries also followed. They are currently in Baozhi, 13 motor car manufacturers, manufacturing
or assembly complete motor cars, and more than 300 spare part manufacturers for motor
cars. It is just big. 3.3 million, that's about half the size of Johannesburg, of the
greater Johannesburg? Yeah, probably about half the size, yes. You say that the growth
model is changing. What do you mean? China, based on to the world scene, as an export
led economy, they manufactured cheap goods at cheap prices and cut that out onto the
world markets. Over time, of course, they moved up the value chain and they're now the
world's biggest manufacturer of electric motor cars. Tesla's biggest factory for electric
vehicles is to be found in China. What is happening now is that they're focusing on
three things. They're focusing on health and health services. They're focusing on green
energy products. For example, China is the world's biggest solar panel manufacturer.
And they're focusing on digital infrastructure and digital products. Call it advanced manufacturing.
So they still want to manufacture, but it's much more advanced than just making toys or
the simple products that they started off with. And there's a lot of money going into
that. Provincial and local governments and the national government give incentives to
companies who innovate, who experiment, who come up with new ideas and new products. So
the growth model is switching from just export led to much more advanced manufacturing and,
as I've said, health services as well. The population is also changing, growing older.
There will be in future, maybe already, fewer people of working age. Did you see whether
they are adapting to that? Very much so. We went to the Geely Auto,
Geely car company in Bauri. They started the factory there in 2016 with 1000 people. They
now have 350 workers in the factory. Yet they produce more than what they produced seven
years ago. Why? Robots. They've installed the whole production line. You almost don't
see people. You just see these robots working and arms and legs of robots moving around.
Some of those robots they bought on the market, some they've developed themselves. The price
varied from about 2.6 million to 26 million rand per robot. There's no question that they're
moving up the technology spectrum. That's one of the ways in which they want to handle
the fact that the demography, as you point out, is changing quite dramatically. This
year is the first year that I think that China's population actually was stagnant. Its population
now is marginally smaller than India's population, no longer the world's biggest population.
This trend will continue over the next 50 years or so. The population will over time
get smaller. Employing robots and, of course, encouraging more people to urbanize would
still be good big growth drivers for China. That's one of the ways in which they're trying
to adapt. They focus on robotics to developing new layers of robots. Oh, yes. After I had
returned, there was an article in the South China Morning Post with some very interesting
statistics indicating that in 2022, 50% of all the robots installed in the world were
installed in China. It is, again, just mind boggling. The same article says that according
to some survey done by a Western Institute, there are now 8,000 smart factories, robotic
factories in China. The scale is just incredible. When they decide to do it, they do it and
they implement. That's really the story that we've had for long now, but certainly in the
last 40 years. That actually leads me to my next question. You, as we've said, visited
local government and provincial government. Impressions of how the government functions?
The first and overwhelming impression is that all government buildings, local, provincial,
national are modern, smart, luxurious, a place where you want to work. We were treated to
a staff lunch in the provincial government of Sanqi. Well, I must tell you, I've never
been to a five-star restaurant with that kind of buffet and that kind of display. This was
on a Wednesday. It was in the middle of the week. It's the staff canteen. It's the staff
canteen. The municipal buildings are smart. They're imposing. They make our union buildings
look quite dilapidated. It's just a different visual environment. I think one of the impacts
is that the people working inside those buildings, in a sense, have to live up to the standard
of the building. That brings us to the fact that in China, for more than 3,000 years,
people had to write exams before they could become a civil servant. If you wanted to serve
in the court of the emperor, you had to pass an entry exam based on Confucian principles.
They still have that. Again, after our return, there was a report in the South China Morning
Post that this year, now in September, 2.85 million people applied to write the civil
service exam for this year. 2.85 million people. Yeah, it's a big population. That's true.
It also tells you how many people want to get into civil service and the loops that
they have to go through. Apply to write. If you're accepted to write, well, then you can
write the exam and you either pass it or fail it. That's how they built a capable state.
They certainly have a capable state. There's no question about that.
Why do you think our people, and I'm generalizing here, often so distrustful of China?
I think it's us and them. I think it's because they're foreign. The language is very, very
different. I mean, if you don't have an interpreter with you all the time, you simply cannot communicate.
And even with an interpreter, it's difficult to communicate.
And we haven't really been exposed to Chinese culture in the way that we are to Americans,
say. Or European. Or European. Absolutely not. Traveling to Europe, traveling to America,
you know, it's really not a big deal. Traveling to China, not that many people have done it.
It's completely foreign and because of the language, an alien society.
Yeah, quite opaque. Quite opaque for an outsider. So I think the us-them dynamic is very, very
different. And that's a great pity because they are there. They're not going to disappear.
They're not going to get weaker. They're the world's second biggest economy. Even if they
just remain number two, they're an important player and we have to live with them.
May I ask an opinion on the American approach to China?
Look, I think it's silly to declare that China is your competitor and you want to stop their
progress. This is an old civilization going back 5,000 years. It's the only surviving
civilization of that age on this planet. You're not just going to suppress those people. They
can shoot themselves in the foot and in the knee. And they've done it in the past. That's
quite possible that they do it again. But that is because of internal dynamics. But
if you think you can come from the outside and stop people's development, I think that
is a fool's errand. That's not going to happen.
That is probably the first. So what? What is the bottom line? What are the takeaways?
Well, the bottom line is that the Chinese are there and we in South Africa not only
have to live with them, but want to live with them. They are our biggest trading partner.
So why would you not want to have good relations with the biggest trading partner that you
have? The United States is our second biggest trading partner and we would love to have
good relations with them in spite of their silly ambassadors, silly comments. So be on
good terms with the people that you do business with, both the United States and China.
I think the second so what is if we want to build a capable state, and I think all South
Africans want to do that, we don't have a capable state. I think we can all agree on
that. Just look at the state of many of our local governments. If we want to build a capable
state, it requires a specific and focused effort. It's not just going to happen by
itself. I think the idea of entrance exams is a good idea. We started to some extent
with that. You need certain minimum qualifications for appointment in financial positions, for
example, but I think we can make it much, much bigger than that.
I think this is the third so what is let's learn from the Chinese on pragmatism. They
did not let ideology develop their economy. They let pragmatism develop their economy
and they said to local governments, experiment, play around, see what works, attract people
and then you reward the local governments which generate the highest growth. So pragmatism
is the big story.
What's that wonderful quote of Deng Xiaoping?
Yeah, Deng Xiaoping reputed to have said, what does it matter if the cat is black or
white as long as it catches the mice? And I think that kind of pragmatism is extremely
important. And then lastly, as I've said, they may shoot themselves in the foot. They
may shoot themselves in both feet. That's quite possible. They've done it before, but
they will determine their destiny, not people outside China.
Thank you so much. I want to end with one question for listeners who may want to understand
something about China. What are the sources that are available to South Africans?
Look, there are a couple of very good books available. I found personally in my own life
that subscribing to the South China Morning Post, which I've done now for two or three
years have opened my eyes to a different world.
And that's available online?
And that's available online. I read it every day and it gives you a feel for what's happening
in the other part of the world. And there's some really good books. I started my reading
journey on China a couple of years ago with Henry Kissinger's book on China. It's as good
a starting point as any. And from there you can grow into other literature and learn more.
I've also come across very good podcasts. The Economist, for example, does very good
podcasts. They have a separate one on China. I think it's called Drum Tower. Also easy
listening and very informative.
Yeah, and it just gives one a different perspective and it introduces you to a world other than
the one in which you spend your every day.
Thank you very much.
Thank you.
Thank you for listening to this episode of the So What podcast. If you like it, please
subscribe, rate and share. This is the last one for 2023. If you haven't already, you
might want to listen to the 10 other episodes available. And we'll be back in February 2024.
Until then, goodbye.