The China Vortex

Yesterday, the new national aquatics center was unveiled in Beijing. This will become the venue for the leading water events of the Beijing Olympics. After the Olympics are over, it will be converted to a shopping mall for Beijing’s masses.

Beijing is now the site for some of the most exciting architecture in the world. For many Chinese though, there is an underlying uneasiness. Is all this dramatic futuristic architecture the beginning of a new and exciting future of wealth and prosperity which Chinese have never experienced in their long history?

Or is this instead a blip of prosperity, and will the future be much less bright, and will their children and grandchildren look back and see the Beijing Olympics as the apogee of what has since become a downward trajectory? And will this architectural marvel become dirty and dusty and seedy?

China has seen prosperity before, only to have its dreams shattered. Westerners today see China as a rich, prosperous and growing power, but it has run into the wall before, and on many different points in history. The first Chinese industrial revolution, when Chinese factories started making goods for the Chinese market started at the end of the nineteenth century, with textile mills and flour processing factories spouting up in the Yangzi river delta, mostly started and financed by entrepreneurs from Shanghai and Wuxi. Then China went into political chaos in the period following the revolution which overthrew the Qing dynasty in 1911.

Another period of short-lived period of prosperity came in the early 30s, this was cut short by the Japanese invasion of China in 1937.

Then, in the period following the end of WWII, China fell into civil war between the two leading political parties, with the Nationalists losing and retreating to Taiwan. Following the establishment of the PRC, China was very poor, and then made even poorer by the Cultural Revolution. In 1978, the Chinese government essentially decided that they were tired of being poor and moved ideology off the national agenda. From now on, it would be about making money.

Even today though, with all their savings and comfort, Chinese feel that it can all change and all go away. That is why they save and sit on their cash.

Americans are the opposite. Until very recently, most Americans believed that the future would always be brighter, that although there were things that they did not understand, America was the strongest and most prosperous country in the world, and that there would always be a way. This is why theyspent their savings, and when their savings were gone, they would take loans on easy credit terms, promising to repay the loans and credit when they had income again. It led to a bigger and bigger mountain of debt. And now, Americans are much less sure about their ability to repay the loans.

This is a way of thinking which is completely foreign to Chinese, and makes no sense at all to them. For Chinese, the only real money is cash. And when money goes bad in times of high inflation, they don’t even believe in cash.

They believe in land, and if the politics becomes unstable, they go to gold.

Runaway inflation is something the Germans experienced in th 1920s, then again in the postwar period. Japan experienced it too in the postwar period. China also experienced it in the postwar period when the Nationalists had to change national currencies three times in the period up to 1949. With the runaway inflation in the cities, people had to carry their money in paper sacks to do their shopping. They would go to the markets carrying bags of money to buy their groceries, then they would use the same bags to carry their groceries back home.

When the Nationalists lost control of inflation, they lost the Chinese cities and the support of the business community. This paved the way for the establishment of the PRC in 1949. The first task for the government was then to stabilize the currency.

While China was very poor in the fifties, sixties and seventies, there was virtually no inflation.

Today in China, we are seeing the early signs of inflation again in food prices and property prices. For any Chinese government, and this government is no exception, inflation is the greatest single and most frightening enemy it faces. It may creep up slowly, but it unleashes forces which can easily spin out of control.

If a government cannot maintain the value of its currency, it cannot protect its citizens, and the people end up in the poor house. It’s that simple.

This is why the Chinese government will not easily revalue the yuan upwards, and why the government keeps such a tight control on credit.

One of the upsides for Chinese businesses investing in Africa is that although the people are poor, at least they pay cash. When times turn hard, you want to be paid in cash.

For most Chinese, you aren’t rich unless you own cash.

Credit is just a derivative and in tough times, no one wants derivatives.

Several days ago I attended Urbancamp Beijing, hosted by Orange Labs in Beijing.

The purpose of the event was to explore how cities of the not-too-distant future will look like; the theme was the Chinese City 2.0. Because China is growing so rapidly in this area, it has become a sociologist’s paradise for study. Neville Mars of the Dynamic City Foundation is a Beijing-based architect who is actively studying this field, and will come out shortly with an 800-page book on the subject in January.

His presentation was presented in a very interesting and chaotic manner, as if to reflect the chaotic development of the subject he covers. He alluded to how rampant growth in China was being fostered by the government, and then in most cases, the government took over development from the artistic groups.

Another group which is studying Chinese urban growth is the Urban Forum, which is studying the effects of China’s urban development. A Chinese language magazine, Urban China, is now covering China’s development, and a speaker unveiled plans for a web version of the magazine for global distribution.

Shang Dan of Orange Labs Beijing provided a fascinating report on car clubs in China, which bring together car owners to join in social activities. Since Chinese treat cars mainly as symbols of social rank and status, it is natural for them to research the car clubs before buying the model they want. This fits well into the city landscape well because it hard to find like-minded people in a literally new city, and the car club provides a welcome activity club for the new car-owner.

I wonder what kind of car club there is for owners of black Audi A6s? (If you have lived in China for a while, you’ll get this joke.)

Kenneth Fields of Peking University spoke about how to use tagging for location data, and City8 introduced their 3D mapping software for cities.

The afternoon discussion, which was a free discussion, was about the different themes in the definitions of place and city.

One subject which was not clear to me was what is the definition of city where people spend more and more time online on the Internet? Most of us spend a good part of the day jacked into the Internet; is it really important to have cities anymore? Has the city become a state of mind instead of a physical place? When pollution and hydrocarbons and global warming become ever greater issues, why bother with physical cities anyway? What are online and offline communities, and how do they map to each other?

Are Chinese developers and the Chinese government going exactly contrary to development trends by developing physical urban cities now, when they are falling into discredit?

These are interesting questions which need to be explored further.