APRIL - MAY 2002 THE ON-LINE PUBLICATION OF THE FOREIGN CORRESPONDENTS' CLUB OF HONG KONG
		Club Speakers Is Shanghai a Potemkin Village? The author of The China Dream, Joe Studwell, who is the founder and editor of the China Economic Quarterly, believes so. Excerpts from his talk: When I arrived in Hong Kong in 1991 I was absolutely broke and I could never afford this place. So it's a very great pleasure to have free lunch off you today ... What's in this book? What made me want to write it? I think for journalists it's interesting why you write a book, because a lot of journalists think about writing books. (In) this one I really wanted to pull everything together. I formed views on China quite early because I came to Hong Kong in 1991 (and) didn't like the place. There was lot of tension, I felt, between the local population and the foreigners ... (mostly) to do with the sort of political uncertainty of the situation. I soon decided that I didn't want to be here ... and in May 1993, moved to Beijing ... I had (already) gone over the border with my wife to Shenzhen - we literally just took buses ... and stopped everywhere, every 20 kms (we) stopped and looked and talked to people and tried to figure out what was going on. It didn't take me long to see that the China dream, which I hadn't sort of conceptualised at that point, wasn't quite so dreamy as it is when you are sitting in Hong Kong speculating about the size of the market and so forth. So after a year, when it was time to leave, I thought I will do this book. I called it the China Dream because I think the China dream is something that has lived for centuries and it is easier for people to conceptualise. I think the China dream exists with foreigners (and) Chinese as well, although the dream has somewhat modified when you are talking about the Mainlanders and their dream ... What's interesting about the China dream is that (it) goes away sometimes when something bad happens, but it doesn't go away for very long ... As Nixon and Kissinger went in 1972, the game was on again...In a sense, China was the easiest marketing job in the world, because you just have to push something out there and the world will always run with it ... In the book, I track the initial sort of investments ... I just had to drive it anecdotally, to look at the things that people said, their expectations, what their beliefs were about the market ... expectations, the investment, the US$300 billion that was pushed into China in the 1990s. In the second part of the book - I call it "miracle deconstructed" - I look at the gap between expectations and reality ... One (chapter) is about statistics, about numbers and about how people strategise China, which personally I think is a very bad thing to do. It's a place to react, not a place to strategise at all. I talk about things like purchasing power parity ... You probably remember all those stories about China is already the third biggest economy in the world. I explain why purchasing power turned out to be wrong, why the World Bank never talks about purchasing power any more with respect to China ... In a sense it is boring, but it is also terribly important. If you really want to know what goes on in China, you have got to look at some of this technical stuff. (For example), people bang on about 20% growth a year in the Chinese car market, but they fail to make the observation that the number of cars sold last year in China was only slightly greater than the number sold in Australia, a country of 19 million people. The "Socialism - a Trojan Horse" section is all about the fact that in the 1990s when China spoke about things like "socialism with Chinese characteristics", a lot of people seem to think this was a code for capitalism - that they couldn't say the C-word because they were Communists ... But that was never the case. It was a misperception. I talk about the extent to which China is still a socialist country run by a Politburo and the Central Committee with a parallel government, but which is nonetheless essentially under the form of the Communist Party. At the moment, there is the Western Development Programme. A lot of money is again being thrown into real estate. People go to Shanghai and say, "Look at these skyscrapers. Look at these roads. Isn't it fantastic, all its economic development?" Milton Friedman had it down in 24 hours ... I can't remember exactly when, in the mid-1990s I think it was. They ... feted him..took him to Pudong to show him the place. He just turned around to me and said, this is the biggest Potemkin Village that has ever been built. You probably know the story. Catherine the Great in Russia had a first minister called (Prince Grigori Aleksandrovitch) Potemkin ... Every time the Empress wanted to see what was going on, he would take her down to a Model Village paid for with state money and say this is pretty typical. Well that's kind of what Shanghai is like ... One thing I was very careful to do in this book is not to write about China collapsing or anything like that. I don't know what that means. I mean, countries don't collapse, they don't die ... life goes on. I believe China will face a financial crisis and it will be on a scale considerably greater than the Asian financial crisis because the financial system is so nationalised. There is no short-term foreign money that gets pulled out when the foreigners get worried and make the thing come down. So they can actually build the biggest debt boom in the history of the world, because it's not until the local population wants its money out of the banks that they have got a problem. This I discuss at some length in the book as this is why you can't make scenarios. I just want to make an observation about Hong Kong ... There is a lot of stuff in Hong Kong at the moment about how Shanghai is going to eat Hong Kong's breakfast. It seems to me to be absolutely rubbish. The China Dream By Joe Studwell Profile Books, London ISBN: 1-86197-370-5 PB, 288 pp, HK$195		PUBLICATIONS COMMITTEE Convenor: Paul Bayfield Editor: Saul Lockart Publications: Terry Duckham The Foreign Correspondents' Club Hong Kong 2 Lower Albert Rd Central Hong Kong Telephone: [852] 2521 1511 Fax: [852] 2868 4092 E-mail: fcc@fcchk.org