Review: China Shakes The World
by James Kynge. (Weidenfeld and Nicolson 2006)
If you are interested in China, and how its rise will effect the rest of the world - including its impact on Sustainability and implications for Responsible Business - I strongly recommend an excellent new book: "China Shakes The World - The Rise Of A Hungry Nation" by James Kynge.
Kynge first went to China in 1982 as an undergraduate student, speaks fluent Mandarin and was for many years, the Financial Times (FT) bureau chief in Beijing. It is a meticulously researched book and, as a good journalist, Kynge knows how to tell a good story. It begins on the Ruhr, on the site of an almost dismantled German steel plant, which has been sold to China. A Chinese team has removed the plant in half the time the Germans had calculated; and its loss has left the traditional manufacturing community disorientated and demoralised. Kynge then follows the plant to its new home in central China. The purchaser had started his business as a village workshop in the mid 1970s after the death of Mao, in the first wave of economic liberalisation unleashed by Deng Xiaoping. With the former German steel plant's production included, Shagang, the Chinese company, will become one of the 20 largest steel producers in the world. Over the rest of the 227 pages, Kynge criss-crosses China. He travels to Italy where the Italian footwear sector, having enjoyed a boom aided by cheap (often illegal) Chinese migrant labours, is now facing destruction as its Intellectual Property (IP) and designs are copied back in China and jobs disappear; as well as to the American mid-West where his report from a conference of bemused middle Americans in Illinois, a state gutted by Chinese competition, is masterly. Kynge's conclusions are stark, "It is a challenge unprecedented in the annals of global capitalism," he states.
"The simple, unpalatable truth is that, in many areas of manufacturing, European companies cannot compete in the longer run." With the Chinese buying a European company every six days, we need to understand these new realities.
Kynge's FT background shines through in a myriad of telling statistics:
- In 1949 when Mao seized power, there were 8 Chinese cities with a population of between half and one million, and 5 cities with more than a million. Today, the figures are 53 and 40 respectively. Take the city of Chongqing. In the 20 years from 1985, it has grown by the equivalent of three Dortmunds, 2 Birminghams and 2 Detroits - "it may become the largest city on earth." In 2005, 400m Chinese lived in cities - by 2050, there will be another 600-700m in cities - but even then only 70% will be urbanised (the UK is 90%).
- In the five years after the Asian financial crisis of 1997, China laid off 25 million employees from inefficient State enterprises - the dismantling of the State-financed Social Welfare system in less than a decade means that "China today is a great deal less Socialist than any country in Europe"
- In 2005, there were 350m mobile phone users and 100m Internet users in China. With global R&D centres now located in China, the country is zooming up the technology ladder fast: "it is difficult to think of an area of technology in which China does not have credible ambitions to lead the world."
- In 2005, c 60m were wealthy enough to buy a car - that will be 160m by 2010 - which makes China the fastest growing auto market in the world
- By 2040, a third of China's then population will be over 60 - 400 million people: "it may be that China grows old before it grows rich"
Kynge explores vexed issues such as IP theft, piracy, and corruption. I particularly liked his exploration of the trade-offs between economic growth and social/political control that the Chinese Communist Party continue to make at different stages of the economic cycle: "when reform is too fast, there is chaos. When reform is too slow, there is stagnation."
Anyone interested in the implications of China's rise for Sustainability and the Responsible Business movement should pay particular attention to Kynge's chapter 6. 400 of the 668 largest Chinese cities are short of water and water rationing is increasing. China uses between 7 and 20 times as much water to produce a unit of GDP as the developed world does. At the current rate of deterioration, two-thirds of China's high-altitude ice fields - 15% of the planet's ice - will have melted by 2050.
The World Bank calculates that 16 of the 20 most polluted cities in the world, are in China. Global air pollution - especially mercury - is generated in China. Furthermore, China's insatiable demand for raw materials is causing huge environmental damage in other parts of the world. Rainforests in Indonesia, Myanamar, central Africa, Siberia - "the lungs of the planet" are disappearing at unprecedented rates to satisfy China. WWF calculates that 44% of timber logged for sale to China, has been felled illegally. "But in terms of potential damage to the global environment, China's demand for soybeans may be having an impact a least as deleterious as its requirement for timber." The shortage of water in northern China combined with rising affluence has meant that in less than a decade, China has moved from being a marginal presence on international soybean markets to become by far the largest importer. One result is that in Brazil, swathes of Amazon Rainforest (home to 30% of the world's animal and plant species) are being destroyed. In 2004 alone, an area the size of Belgium was lost - six football fields every minute. Kynge warns: "in the years that it takes to reach that hazy goal of environmental responsibility, the international tensions released by China's appetite for foreign resources and the abuse of its own environment may escalate sharply."
Kynge also explains why current environmental controls in China are so weakly enforced: the local offices of China's Environmental Agency, are funded by local authorities - who own companies which may be deeply hostile to Agency rulings. The Courts are in a similar position.
More than 400m people have been raised from poverty, and their drive to better themselves and their children has unleashed "one of the greatest ever surges in general prosperity." As Chris Patten, in his review of Kynge's book concludes: "who is threatened as China stands up? In one sense, this is a daft question. Do we really believe that for more than a fifth of humanity to raise its living standards is a threat to the rest of us? Would we prefer China dirt-poor and starving? Where China undercuts and outperforms us in the market place, the answer is not protectionism - though I fancy we shall see many more future surrenders to protectionist pressures - but better education and training, more labour flexibility and lower government charges on industry. The threat, where it exists, is more subtle. It is not to American hyper-power hegemony, but rather to the global environment (as well as China's own of course)." The dilemma for the Sustainability movement is that innovative environmental technologies are one of the new sources of competitive advantage. The Chinese have so far shown themselves unable or unwilling to protect IP. So how can the latest environmental technologies be made available without asking Western businesses to surrender their crown jewels? |
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