 by Linda Seebach Scripps Howard News Service March 21, 2005
Officially, China's gross domestic product in 2003 was $1.4 trillion, making it the seventh-largest economy in the world. But that figure is far too low, Fishman says. For one thing - a very big thing - it does not include the underground economy, whose size is by definition unknown but certain to be vast. Second, that number relies on the formal exchange rate, but the Chinese currency is pegged to the dollar and substantially undervalued. In terms of purchasing power, $1 spent in China buys "about what $4.70 does in Indianapolis." Altogether, Fishman says, the size of the Chinese economy is probably closer to two-thirds the size of the American economy than one-sixth, as the official number would have it. Also, it's growing much faster. Annual growth rates hover around 8 percent or 9 percent, which means the economy doubles in size every eight or nine years. That is, it's some four times bigger than it was when we came home from Shanghai in 1988. I remember reading a story in China Daily, the official English-language newspaper, about the "egg lady" - a peasant woman who built a business supplying eggs to urban dwellers, and had earned enough money to buy a car. She was, the story gushed, the first private person in her town to have one. Or maybe it was her province, I don't recall. Whether the story was literally true isn't important; a lot of what you read in China Daily then wasn't. But it was close enough to true that some editor thought it was a plausible story to print. Not now. In 2003, 2 million new cars were sold in China, and within 20 years the Chinese market will probably be bigger than the American market, which accounts for about a tenth of the American economy. And it's not just cars; it's the parts they're made of, and the machine tools that make the parts they're made of, and the specialized equipment to build the machine tools, and maybe more important than anything else in the long run, the highly trained people who design and operate this vast infrastructure. "As big carmakers establish production in China," Fishman writes, "they drag along the companies that supply them. And as suppliers move to China - even if they moved in order to make parts less expensively for the American market - the big companies more willingly move too, confident that the industrial infrastructure they need to produce efficiently is taking shape in the new market." There's a shady underside to all this. Chinese companies can quickly duplicate popular models, without the development costs the initial manufacturers incurred. And, as Fishman notes, if they look enough like the originals, they scarcely even need to be advertised. He calls it "frightening and tantalizing." Frightening, "because steep deflation in cars has the potential to deflate entire economies, throwing millions out of work. Exciting, because, well, who wouldn't want a good car for a third of the cost?" At least cars, even if they're knockoffs, still are physical objects that have to be manufactured. In other industries, including movies, music and software, they merely have to be copied. "Standard legal protections such as copyrights, patents, and trademarks exist mostly in law books but not actual practice," Fishman writes. "In China's market, anything worth protecting is the first target of pirates and counterfeiters." He's surprisingly insouciant about this widespread piracy. "China is a country," he says, "where the public has repeatedly learned that rules spell disaster and that finding ways around them offers hope and dignity." While all these new factories and businesses spring up in the newly industrialized areas bordering major cities, the countryside is emptying out. In one county in Sichuan province, "seven of every ten families have said good-bye to someone who has gone to look for a job in the cities." Every train ticket out "gives those who remain all the more reason to leave," Fishman says. Much arable land - and China is short of arable land - sits idle because there is no one left at home young enough and strong enough to work it. Rural incomes are pitifully low, and social services including schools are in rapid decline. A World Bank study of poor rural areas found that 40 percent of children ages 7 to 15 had never gone to school at all, and for girls it was much worse. You'll have gathered that Fishman presents a very mixed picture of conditions in China today. But he's made a compelling case that the rest of the world can't afford to ignore what's happening there.
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