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China Dream

By Anton Graham

Probably the best overview of the China boom of the past quarter century is ironically provided by a book which sets out to prove that the boom itself is a chimera

Joe Studwell’s China Dream, published in 2001, is much more sensible than Gordon Chang’s “The Coming Collapse of China”. For a start, it leaves open the possibility that China will not collapse. It explains accurately and clearly how China moved from Maoist madness in the 1970s to capitalist chaos in the 1990s and beyond, and is a must-read for that reason.

The problem comes with the conclusions drawn. The implication, running through all the stories of messy Chinese politics and disastrous foreign investments, is that China in the end is a mug’s game.

“The current China boom,” he says, “is either the beginning of a new age, or an endof- era outpouring that is the precursor to a crisis.” Studwell suspects the latter.

“For centuries,” he says, “businessmen have gambled their capital on buying camel trains, chartering ships, building railways and financing highways in their efforts to open up the Chinese market, only to face disappointment.”

Okay, but what of Jardines and the other trading houses that made fortunes in the 19th century? And the many fortunes made in Shanghai in the early half of the 20th century? And what of today? The list of companies that admit to making money in China gets longer all the time, and many others run their mainland operations at a loss or small profit and quietly book the profits offshore, happy to fall below Studwell’s radar.

Studwell chooses to focus on the auto industry as an example of hopeless foreign dreams. But with GM this year reporting record profits for the first quarter as China’s middle class leaps for their own dream of wheeled liberation, it is a view that looks increasingly unsustainable.

He points again and again to the foreign tendency to create business plans based on extrapolations from a population figure of 1.3 billion. But, increasingly, why not? How many mobile phones have Nokia and the other foreign providers sold in China over the past five years? How many KFC and McDonald’s meals were served in China yesterday?

Many foreign companies have lost money in China in the past 20 years, but most should probably blame themselves rather than China. After all, if foreign guests insist on coming to China and throwing their money away, it would surely be impolite to stop them.

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