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Hello and welcome to the So What podcast, in which political economic analyst JP LanDman

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discusses the issues uppermost in the minds of South Africans. You can find a written

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version of this content on JP's website, jplandman.co.za. I am Ruda Landman and I am your host.

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This episode goes with the newsletter dated the 9th of November 2023, which you can find

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on the website under the title, Thoughts After a Visit to China. JP, getting off the plane,

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first impressions that evening, you landed at what, 11 o'clock at night?

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Yes, first impression, incredible social organisation. The efficiency with which people and your

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luggage and everything else gets processed is simply unreal. That was noticeable throughout

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our visit. I just want to make it clear, Ruda, just like one swallow certainly doesn't make

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a sw- summer, one visit to China doesn't make one an expert. Certainly not. But these are

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just my initial impressions as I experienced them. And the first one is the incredible

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level of social organisation. But the flip side of that is security.

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Absolutely, there are cameras everywhere. You've got to show your passport wherever

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you go. If you take a train trip, you show your passport or if you're a Chinese citizen,

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your ID card, when you enter the station and again when you are on a platform and you want

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to enter the train. Yes, security is very strict, no question about it.

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You were also impressed by infrastructure. Yes, again, you know, nothing really prepares

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you for it. One hears about these things, one hears about 40 and 50 and 60 storey residential

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buildings and so on. But nothing really prepares you for the physical infrastructure, for the

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buildings, the roads, the highways, the trains, the power lines. Wherever you go, you see

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power lines. We took a train from Beijing to Qijian in the Shanxi province. That's

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where the Terracotta soldiers are. It's a distance more or less from Johannesburg to

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Cape Town. The train covered it in four hours and seven minutes. It is simply unreal. Six

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years ago, seven years ago, that train line did not exist. It simply wasn't there. So

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what they've done in terms of infrastructure is incredible. What they're busy doing in

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terms of digital infrastructure is also incredible. You can move around the entire Beijing and

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never use any cash. Everything is on a cell phone, a smartphone. And people who know say

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that WeChat is much better than WhatsApp. So it's not just physical infrastructure,

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it's also digital. And all of this happened, all of this changed in 40 years. 40 years

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ago, it looked very different, one would assume. Absolutely. When Ding Xiaoping launched these

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reforms in 1978, now 45 years ago, India, China rather, was a backward, poor country.

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There's no question about it. The photographs show it, documentaries from the time show

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it, people who live show it. People who are alive can testify to it.

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Well, it was just after the Cultural Revolution.

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Yes, absolutely. It started in, as I said, in 1978. And I want to tell you two anecdotes

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that I think illustrate the point best. The first one is from a gentleman who's now 48

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years old. 40 years ago, he was eight years old. He went to school in Baozhi. Nobody in

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school had shoes. There was simply not enough money around for parents to give shoes to

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the children. Today, 40 years later, he runs a business with 10 primary schools or kindergarten

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schools as he calls them. He charges 10,000 renminbi per month per child. That's about

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25,000, 26,000 rand per month per child. And he's got 10 of these schools in Baozhi. So

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from a level of income where people couldn't have shoes to a level of income where parents

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could afford to pay that amount of money, it is simply transformational. It doesn't

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matter how you look at it, it's transformational.

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Those schools are, this is a private enterprise.

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Completely private enterprise, completely privately run, belongs to him. The properties

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where the schools are belong to him, completely private.

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He found his name in South Africa.

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Well, that he find his name was South Africa, that we copy it. He calls his schools the

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Kuro schools. Some people say indeed everything is made in China.

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And the other person you met whose story also struck you?

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The other gentleman is about 45 years old and he recalls how as a young child, his mother

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sent him on a bicycle to a neighboring village to go and buy some paraffin for use in the

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house in the kitchen. There was no paraffin available in their village. And secondly,

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they needed a ration card. There were rations on all products. So he needed a ration card,

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take that with him on the bicycle, go to a nearby village, buy a bit of paraffin, come

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back. He is simply amazed that today there's no limit to the consumer goods that he can

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buy. There's no shortage of electricity, of gas, of food, of clothes. He can buy whatever

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he can afford, which is available in abundant supply.

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And it tells you what happened in 40 years. And what struck me most was that nothing that

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I read, nothing that I tried and investigated beforehand prepared me for the sheer quantum

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of what they've done in 40 years. It's really incredible.

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Well, all of this was possible because of economic growth. What's the recipe?

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Very, very interesting. I think it seems to me it comes down to two things, local government

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and embracing the private sector, or as Chinese prefer to call them, entrepreneurs. They don't

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really talk about private sector, but they do use the term entrepreneur as a substitute.

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The first point is local government. After 1978, Deng Xiaoping started with experimentation,

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allowed different local governments, different provinces to do different things. And they

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basically set up an incentive and reward scheme to reward city leaders, town leaders, to generate

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economic growth.

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But it sounds as if it's on both those levels, local government and provincial.

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Absolutely, absolutely. Strong national guidance, provincial governments and then local government.

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China, you know, is a big country, 1.4 billion people. So you have a structure of government

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throughout. And because it's a one-party state and very strong centralized political control,

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the political rewards for local leaders and provincial leaders who could generate growth

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were indeed quite substantial. So there was a competition between local governments for

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attracting business, attracting entrepreneurs, attracting capital and getting economic activity

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going. So that played a big role. That and implicit in that embracing the private sector,

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those two things made the difference.

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You came across that provincial government that you visited, you said that they were

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boasting about having business relationships with more than 100 countries in the world.

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So that province has reached out far beyond its own borders.

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Oh, absolutely. The Shanxi province, which is more or less in the middle of the country.

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So it's far to the west of Beijing. So it's not part of the prosperous eastern seaboard

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of China, not at all. It's in the middle of the country. Yet they have established businesses

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and as you've said, they established relationships with businesses in more than 100 countries.

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For a provincial government to do that, it's quite astonishing. Likewise, we went to a

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local city, about 3.3 million people, Baozhi, which is also in the province of Shanxi. Similar

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kind of story there. They reached out, they received us very generously, very hospitably

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because they want to. They want to have relations. They want to establish commercial ties. The

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one experience we had throughout was that the businessmen are very, very hungry for

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business. Back here in South Africa, I've received a couple of emails from people who

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said, we met you, these are our products. You find anybody who would like to buy these

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products, you know, please put us in touch and so on. They're the very aggressive business

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people. And in Baozhi, it sounds as if titanium made all the difference. It's a fascinating

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story. It is on a river, but it's not a navigable river. It's inland, so there's no ocean, there's

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no deep harbor nearby. Yet, they imported titanium from Mozambique, from Australia,

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from North America, and they smelt it in Baozhi. And they built up a titanium industry around

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that. It's simply incredible. They produce a range of titanium products and there again,

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there's a drive to innovate and to move up the value chain. So, they're now developing

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all kinds of products to go into electric motor cars, to go into spacecraft, that sort

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of thing. They're moving up the value chain. And because you had titanium factories, other

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industries also followed. They are currently in Baozhi, 13 motor car manufacturers, manufacturing

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or assembly complete motor cars, and more than 300 spare part manufacturers for motor

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cars. It is just big. 3.3 million, that's about half the size of Johannesburg, of the

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greater Johannesburg? Yeah, probably about half the size, yes. You say that the growth

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model is changing. What do you mean? China, based on to the world scene, as an export

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led economy, they manufactured cheap goods at cheap prices and cut that out onto the

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world markets. Over time, of course, they moved up the value chain and they're now the

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world's biggest manufacturer of electric motor cars. Tesla's biggest factory for electric

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vehicles is to be found in China. What is happening now is that they're focusing on

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three things. They're focusing on health and health services. They're focusing on green

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energy products. For example, China is the world's biggest solar panel manufacturer.

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And they're focusing on digital infrastructure and digital products. Call it advanced manufacturing.

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So they still want to manufacture, but it's much more advanced than just making toys or

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the simple products that they started off with. And there's a lot of money going into

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that. Provincial and local governments and the national government give incentives to

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companies who innovate, who experiment, who come up with new ideas and new products. So

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the growth model is switching from just export led to much more advanced manufacturing and,

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as I've said, health services as well. The population is also changing, growing older.

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There will be in future, maybe already, fewer people of working age. Did you see whether

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they are adapting to that? Very much so. We went to the Geely Auto,

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Geely car company in Bauri. They started the factory there in 2016 with 1000 people. They

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now have 350 workers in the factory. Yet they produce more than what they produced seven

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years ago. Why? Robots. They've installed the whole production line. You almost don't

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see people. You just see these robots working and arms and legs of robots moving around.

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Some of those robots they bought on the market, some they've developed themselves. The price

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varied from about 2.6 million to 26 million rand per robot. There's no question that they're

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moving up the technology spectrum. That's one of the ways in which they want to handle

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the fact that the demography, as you point out, is changing quite dramatically. This

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year is the first year that I think that China's population actually was stagnant. Its population

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now is marginally smaller than India's population, no longer the world's biggest population.

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This trend will continue over the next 50 years or so. The population will over time

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get smaller. Employing robots and, of course, encouraging more people to urbanize would

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still be good big growth drivers for China. That's one of the ways in which they're trying

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to adapt. They focus on robotics to developing new layers of robots. Oh, yes. After I had

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returned, there was an article in the South China Morning Post with some very interesting

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statistics indicating that in 2022, 50% of all the robots installed in the world were

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installed in China. It is, again, just mind boggling. The same article says that according

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to some survey done by a Western Institute, there are now 8,000 smart factories, robotic

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factories in China. The scale is just incredible. When they decide to do it, they do it and

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they implement. That's really the story that we've had for long now, but certainly in the

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last 40 years. That actually leads me to my next question. You, as we've said, visited

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local government and provincial government. Impressions of how the government functions?

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The first and overwhelming impression is that all government buildings, local, provincial,

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national are modern, smart, luxurious, a place where you want to work. We were treated to

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a staff lunch in the provincial government of Sanqi. Well, I must tell you, I've never

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been to a five-star restaurant with that kind of buffet and that kind of display. This was

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on a Wednesday. It was in the middle of the week. It's the staff canteen. It's the staff

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canteen. The municipal buildings are smart. They're imposing. They make our union buildings

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look quite dilapidated. It's just a different visual environment. I think one of the impacts

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is that the people working inside those buildings, in a sense, have to live up to the standard

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of the building. That brings us to the fact that in China, for more than 3,000 years,

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people had to write exams before they could become a civil servant. If you wanted to serve

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in the court of the emperor, you had to pass an entry exam based on Confucian principles.

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They still have that. Again, after our return, there was a report in the South China Morning

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Post that this year, now in September, 2.85 million people applied to write the civil

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service exam for this year. 2.85 million people. Yeah, it's a big population. That's true.

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It also tells you how many people want to get into civil service and the loops that

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they have to go through. Apply to write. If you're accepted to write, well, then you can

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write the exam and you either pass it or fail it. That's how they built a capable state.

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They certainly have a capable state. There's no question about that.

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Why do you think our people, and I'm generalizing here, often so distrustful of China?

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I think it's us and them. I think it's because they're foreign. The language is very, very

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different. I mean, if you don't have an interpreter with you all the time, you simply cannot communicate.

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And even with an interpreter, it's difficult to communicate.

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And we haven't really been exposed to Chinese culture in the way that we are to Americans,

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say. Or European. Or European. Absolutely not. Traveling to Europe, traveling to America,

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you know, it's really not a big deal. Traveling to China, not that many people have done it.

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It's completely foreign and because of the language, an alien society.

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Yeah, quite opaque. Quite opaque for an outsider. So I think the us-them dynamic is very, very

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different. And that's a great pity because they are there. They're not going to disappear.

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They're not going to get weaker. They're the world's second biggest economy. Even if they

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just remain number two, they're an important player and we have to live with them.

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May I ask an opinion on the American approach to China?

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Look, I think it's silly to declare that China is your competitor and you want to stop their

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progress. This is an old civilization going back 5,000 years. It's the only surviving

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civilization of that age on this planet. You're not just going to suppress those people. They

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can shoot themselves in the foot and in the knee. And they've done it in the past. That's

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quite possible that they do it again. But that is because of internal dynamics. But

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if you think you can come from the outside and stop people's development, I think that

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is a fool's errand. That's not going to happen.

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That is probably the first. So what? What is the bottom line? What are the takeaways?

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Well, the bottom line is that the Chinese are there and we in South Africa not only

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have to live with them, but want to live with them. They are our biggest trading partner.

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So why would you not want to have good relations with the biggest trading partner that you

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have? The United States is our second biggest trading partner and we would love to have

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good relations with them in spite of their silly ambassadors, silly comments. So be on

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good terms with the people that you do business with, both the United States and China.

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I think the second so what is if we want to build a capable state, and I think all South

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Africans want to do that, we don't have a capable state. I think we can all agree on

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that. Just look at the state of many of our local governments. If we want to build a capable

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state, it requires a specific and focused effort. It's not just going to happen by

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itself. I think the idea of entrance exams is a good idea. We started to some extent

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with that. You need certain minimum qualifications for appointment in financial positions, for

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example, but I think we can make it much, much bigger than that.

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I think this is the third so what is let's learn from the Chinese on pragmatism. They

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did not let ideology develop their economy. They let pragmatism develop their economy

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and they said to local governments, experiment, play around, see what works, attract people

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and then you reward the local governments which generate the highest growth. So pragmatism

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is the big story.

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What's that wonderful quote of Deng Xiaoping?

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Yeah, Deng Xiaoping reputed to have said, what does it matter if the cat is black or

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white as long as it catches the mice? And I think that kind of pragmatism is extremely

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important. And then lastly, as I've said, they may shoot themselves in the foot. They

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may shoot themselves in both feet. That's quite possible. They've done it before, but

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they will determine their destiny, not people outside China.

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Thank you so much. I want to end with one question for listeners who may want to understand

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something about China. What are the sources that are available to South Africans?

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Look, there are a couple of very good books available. I found personally in my own life

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that subscribing to the South China Morning Post, which I've done now for two or three

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years have opened my eyes to a different world.

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And that's available online?

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And that's available online. I read it every day and it gives you a feel for what's happening

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in the other part of the world. And there's some really good books. I started my reading

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journey on China a couple of years ago with Henry Kissinger's book on China. It's as good

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a starting point as any. And from there you can grow into other literature and learn more.

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I've also come across very good podcasts. The Economist, for example, does very good

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podcasts. They have a separate one on China. I think it's called Drum Tower. Also easy

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listening and very informative.

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Yeah, and it just gives one a different perspective and it introduces you to a world other than

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the one in which you spend your every day.

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Thank you very much.

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Thank you.

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Thank you for listening to this episode of the So What podcast. If you like it, please

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subscribe, rate and share. This is the last one for 2023. If you haven't already, you

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might want to listen to the 10 other episodes available. And we'll be back in February 2024.

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Until then, goodbye.

