China Dream: The Quest for the Last Great Untapped Market on Earthby Joe Studwell
In The China Dream, acclaimed business journalist Joe Studwell takes to task the predictions that China will become an economic juggernaut on the world stage in the twenty-first century -- and instead foresees an economic crisis. He argues that since the days of Marco Polo, Western nations have seen the vast population of the Middle Kingdom as a fantastic
In The China Dream, acclaimed business journalist Joe Studwell takes to task the predictions that China will become an economic juggernaut on the world stage in the twenty-first century -- and instead foresees an economic crisis. He argues that since the days of Marco Polo, Western nations have seen the vast population of the Middle Kingdom as a fantastic opportunity for expanding trade, investing time and resources again and again in the hope to develop it, only to see, century after century, its economy crash and their dreams turn to dust. Studwell traces the most recent developments in China from Deng Xiaoping's "liberalization" of its market in the 1980s through the opening of its economy to foreign investment in the 1990s. In his rigorous analysis of the Chinese economy, government, and culture, Studwell also shows the roadblocks to the continuation of the country's unprecedented expansion and why its economy will fail once more -- but this time, harder than ever before, and with potentially catastrophic results. Provocative, flawlessly researched, and endlessly engaging, The China Dream is a book that will have the business and political worlds talking about what's really going on in China -- and what we can do to prepare for the coming crisis. "The much-needed antidote to the delusions ... about the riches to be made from investing and selling in China. Brimming with ... statistics." -- The Washington Post " An entertaining, if cautionary, tale of Western business woes in China, stretching back seven hundred years." -- Peter Wonacott, The Wall Street Journal "[A] detailed account ... An excellent examination of the political and economic history of China, fascinating and mostly unknown to Westerners." -- Booklist (starred review)
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The dream through history
'Merçacciones innumeras [an incalculable amount of trade]'
Margin annotation by Christopher Columbus in his copy of Marco Polo's Travels, an account of his time in China.
The story of the western world's commercial fascination with China dates back more than 2,000 years and it began with a product that still symbolises the relationship silk. The Chinese fabric spun into a sensual, thin gauze first became familiar in Rome around 50BC. Cleopatra, mistress of Julius Caesar and Mark Antony, and queen of Egypt, was among the first to promote a fashion for transparent dresses in the exotic fabric. Despite the outrage of sartorial conservatives the writer Seneca railed against the wearing of such dresses in the Roman capital, 'clad in which no woman could honestly swear she is not naked' by the end of the fourth century, silk was a universal accoutrement in civilised society throughout the empire.
Silk is one of those rare traded commodities that is capable of stirring the imagination. It also gave rise to the first great myth of the China trade the perception of the 'silk road' as the principal commercial avenue of antiquity. At the height of European colonialism in the nineteenth century, archaeologists uncovered the flotsam of ancient trade between China and Europe along a series of routes through north-west China, central Asia and northern Persia to ports in Syria and along the Black Sea. From these discoveries derived an image of a collective silkroad along which a large and regular trade was being conducted. While there is no doubt the silk routes were traversed at the time of the Roman and Han empires (which roughly coincided), more recent scholarship suggests the trade has been much exaggerated. The enormous cost of land transport in the pre-modern era (twenty to forty times that of sea freight), the thousands of miles traders had to cover, and their vulnerability to attack both physical and fiscal make it highly improbable that large-scale exchanges occurred. Rational analysis says that most silk travelled by sea from southern China to the Malay peninsula, where it was purchased by Arab and Persian middlemen who forwarded it to Europe. The romantic image of camel trains trudging 3,000 miles through sand storms across the silk routes of central Asia is largely just that movie material.
* * *
But, if the classical silk road owes as much to imaginative fallacy as to historical fact, other aspects of China's pre-modern relationship with the outside world have been understated. Three hundred years after the fall of the Han dynasty (206BC-AD220), China produced a supremely confident civilisation of an extraordinarily cosmopolitan nature. The first, or 'golden' era of the Tang dynasty (618-907) was built on a level of internationalism that was not reached again until the forced opening of China in the nineteenth century and arguably still not then. The Tang epoch is known today for its exquisite statues and porcelain, among the most highly prized remnants of Chinese history. Less well known is that the roots of the dynasty's cultural outpouring lay in a society which combined Indian Buddhism, the courtly pastimes of Iran and a commercial inquisitiveness towards foreign goods and services with Chinese leadership in political organisation, technology and agricultural productivity. At the beginning of the Tang period, when Europe was plunged deep into the Dark Ages, China was so far ahead of the rest of the world that it needed nothing from it. Yet the dynasty remained so hungry for more that it borrowed freely from outsiders, with no apparent sense that this could ever involve a loss of national face. Tang China was too dynamic a place to care. It was, perhaps for the only time in history, just what the characters of China's name claim: the 'zhong guo', or 'middle kingdom' the realm around which every other civilisation rotated.
In the era of the Golden Tang emperors, an estimated 25,000 foreigners lived in the capital, Xi'an, in the centre of the country. Many more, quite possibly over 100,000 Moslems, Christians, Jews and Zoroastrians were based at Guangzhou and Quanzhou at the junction of China's key southern sea routes. The foreigners were the main facilitators of an international trade in which the outside world received far more useful products and ideas than China did in return, but in which the principle of interchange was paramount. Many leading Tang dynasty figures were foreigners Turks, Afghans, other central Asians and Koreans. Xuan Zong, one of the greatest of the Tang emperors, took a dancing girl from Tashkent, Uzbekistan, as a concubine and princess.
The Golden Tang period was a true golden era. The most sophisticated and open society in the world, it bred wealth. China boasted more than two dozen cities with populations of over half a million at a time when large urban centres in Europe counted their inhabitants in the tens of thousands. Two million people lived in Xi'an. With agricultural yields up to four times the global norm, few went hungry. For the well-to-do, success brought with it an early form of the international playboy lifestyle thoroughbred horses, hawks, polo, chess, silk, spices, aromatics and porcelain.
This cosmopolitanism, however, was not to last. For Tang China never fully overcame the xenophobic instincts of its baser subjects. In the late eighth and ninth centuries, the dynasty was weakened by rebellions, the rise of regional potentates and greater corruption, all coinciding with natural disasters that led to higher prices and increased inequality. In these more straitened times, anti-foreigner sentiment was roused. There was a massacre of foreign merchants by rebels at Yangzhou in 760. Trade recovered but, in the next century, the same latent, conservative forces built up to a greater massacre at Guangzhou, in 879. A fading regime lost confidence in cosmopolitanism and became a convert to prejudice. Foreign religions including the Buddhism that historian Samuel Adshead believes gave Tang China 'a critical philosophy hardly surpassed in the West till Descartes' were banned and persecuted. Tolerance gave way to paranoia and fear of outsiders. When the Tang dynasty fell in 907, there ended a brief flowering of pluralism that even now, well over a thousand years later, has not been approached again.
* * *
By the time the first western accounts of the country were being written in the thirteenth century, China was a civilisation past its peak. The problem was that while China had all the trappings of wealth and sophistication, it was no longer acquiring the means of further progress. The Chinese were becoming increasingly introverted and, with just a few exceptions, losing interest in what could be garnered from the wider world. Europeans, by contrast, acquired from China between the eleventh and the fourteenth centuries the critical technologies of modernisation: designs for multi-masted ships with fixed rudders; the magnetic compass; blast furnaces for the complete liquefaction and casting of iron; advanced hydraulics; gunpowder; and the 'escapement', the key component of clockwork. China took almost nothing in return that could help her retain her lead over the world. The Song dynasties (960-1279) were an era of what has been called with reference to the twilight of the British empire 'splendid isolation' from the cultural and political life of the rest of the world. China had her majesty but, in a tradition that continues to this day, her grandeur no longer indicated dynamism.
The earliest foreign commentators, most famously Marco Polo, however, had no sense of this, since China continued to enjoy a huge commercial, scientific and cultural lead over European societies. Polo, who came from Venice, Europe's largest city with 160,000 inhabitants, probably spent twenty years in China between 1275 and 1295. He passed a lot of that time in Hangzhou, capital of the Southern Song dynasty, with six million inhabitants. There was no comparison. As he describes at length in his Travels, Europe and China were worlds apart in terms of urbanisation, sea power, consumerism and aesthetic taste. He wrote of the Yangzi river, the great Song trade artery, that 'the amount of shipping it carries and the bulk of the merchandise that merchants transport by it, upstream and down, is so inconceivable that no one in the world who has not seen it with his own eyes could possibly credit it'. Other medieval commentators concurred. Oderic of Pordenone, also an Italian, said of Guangzhou: 'All Italy hath not the amount of craft that this one city hath.' The Arab traveller Ibn-Batuta, who compared the Yangzi with the Nile, and China with the wealthiest states of Eurasia and Africa, concluded: 'Nowhere in the world are there to be found people richer than the Chinese ... porcelain in China is of about the same value as earthenware with us, or even less.'
In the late thirteenth and fourteenth centuries, during the Yuan dynasty (1271-1368), China's wealth, and a series of European and Asian refugee crises created by the Mongol invasions, brought more foreigners on to Chinese shores than at any other time prior to the nineteenth century. Along its southern sea trade route, China was a huge importer of pepper and other spices from the Middle East and Africa, and foreigners were involved in this trade. Polo, who returned to Europe by the southern sea route, claimed that for every one spice ship travelling from Alexandria to Christendom there were a hundred heading for China. There were at least two established Italian trading communities with bases in the country the Venetians and the Genoese although the biggest commercial exchanges in terms of numbers of traders were with Moslems from central Asia.
The oceanic revolution, bad maps and unfriendly emperors
None the less, while the more adventurous fourteenth-century European merchant communities were familiar with China's thriving economy, they were not in a position to exploit it on a large scale. This could happen only with the oceanic revolution of the late fifteenth and sixteenth centuries, when, having recovered from the Black Death, European countries equipped themselves with the kind of large ships that the Chinese had been sailing for hundreds of years. Europe's maritime explosion, which began in Portugal and Spain and spread north to England and Holland, coincided with its application of another ancient Chinese technology: printing. In 1485, the first copies of Marco Polo's Travels appeared. Christopher Columbus, the greatest of the early European adventurers, soon learned of the book's contents and decided that China was where he must go. Columbus's own copy of the Travels is filled with more than a hundred margin notes about the gold, silver, silk, spices, porcelain, precious stones and fine wine to be found there.
Unfortunately, Columbus missed his target. Sailing west from Spain, he hit upon an unknown and unexpected continent America. The China mission was thereby diverted as the Spanish conquistadors set about extracting the booty of what became Latin America. It was the Portuguese who, following Vasco da Gama's 1498 voyage eastwards round the Cape of Good Hope, arrived sooner in the Chinese orbit. But they were driven by their own get-rich-quick dream that was built around a commodity spices rather than a place, their interest in China being that the country was the single biggest spice buyer in the world. The Portuguese wanted to handle the business and, in 1511, seized Malacca, a key spice trade entrepôt. The plan from here was simple: go to the Chinese and negotiate trading rights. It was a plan that would fail to bear fruit for the next three centuries.
China was by now a place far removed from the cosmopolitan, mercantile empire of the Tang emperors, or even the Song dynasty described by Marco Polo. In 1368, following a long period of civil insurrection, the Ming dynasty came to power, founded by a preacher turned regional warlord, Zhu Yuanzhang. The Ming state was populist and anti-capitalist. Although early Ming was also expansionist, creating an Indian ocean empire of tributaries, this was not driven by any love of trade. When the Portuguese sent a diplomatic delegation, led by Tomé Pires, to what was now the Ming capital of Beijing in 1520, they found themselves talking to an empire uninterested in doing business. Pires was told Portugal must vacate Malacca a Chinese satellite and forget about trading with China. When he had the temerity to suggest that Malacca now belonged to Lisbon, he was locked up in a Guangzhou jail until his death in 1524.
The Portuguese were rebuffed in further attempts to trade at Guangzhou and Ningbo, but they eventually tempted local officials, with the cash to be earned from trade, into letting them settle on the Macau peninsula. Macau became the first 'Hong Kong', an insular, isolated empire's window on the outside world. When Malacca fell to the Dutch in 1641, the more commercially aggressive Dutch East India Company thought to expand the China trade through a series of points of entry. But the Dutch navy was unable to deliver militarily, failing to take Manila in 1617 and Macau in 1622 and subsequently being kicked out of Taiwan by the Ming in 1662. Dutch diplomatic efforts to negotiate trade openings at Guangzhou and Xiamen received the same short shrift that the Portuguese had encountered.
By a curious turn of events, the single most significant route for China trade in the sixteenth century ended up in the hands of the successors of the explorer who had first set out there. After Columbus made landfall in the Americas, Spanish sailors discovered in the course of the next half century that the Pacific current and north-east trade winds would carry them from Mexico to Manila, while further north the westerlies would bring them back from Japan to California. While Mexico had silver, China had silk and other luxury goods prized by the conquistadors and Manila was a convenient offshore centre from which to do business away from hostile Ming officialdom. From the mid-sixteenth to the mid-seventeenth centuries this trade was small scale but regular and profitable. Records from Manila in the 1630s show that around twenty-five large Chinese junks a year made the trip from Guangdong and Fujian provinces.
European trade in the Far East via the Cape and routes originating in the eastern Mediterranean increased by a factor of about ten in the sixteenth century, but from a very low base. On top of this was the Pacific trade. The mainstay of Chinese exports continued to be silk in all its guises, with the addition of more porcelain, medicinal rhubarb root and the first shipments of tea, which was originally sold as a tonic. The China trade was not insignificant, but it was far less important than might be expected from a nation of 150 million people that was still unsurpassed in terms of technological and cultural sophistication, literacy and per capita income. And China bought almost nothing in return for its sales. Chinese exports had strong symbolic value attested by the porcelain collections of Philip II of Spain and other, lesser European rulers, or the silk tents of Middle Eastern potentates but they did not add up to much in terms of global impact. It was Spain, not China, that created the first worldwide commercial empire. The Ming rulers of the sixteenth century let their deep sea fleet rot in Nanjing, reduced the size of their army, appeased their neighbours and looked inwards, rejecting the kind of discursive reason and culture of discovery that was taking hold in Europe in favour of an ever-narrower, anti-theoretical Confucianism. China's potential as a trading partner for the west remained unfulfilled.
Excerpted from The China Dream by Joe Studwell. Copyright © 2002 by Joe Studwell. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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