Financial crisis looks different in China
TEXT OF INTERVIEW
Kai Ryssdal: It’s not likely you’re going to be buying eggs imported from China the next time you swing by the grocery store. But that’s probably just as well. We learned today chicken eggs are the latest Chinese product that has been found to contain melamine. And Beijing said the industrial chemical is regularly being added to animal feed.
The food scare is just the latest economic problem China’s got to deal with. Although by most measures — a decade and a half of solid growth for one — things should be pretty good. Despite some recent setbacks.
We’ve got Marketplace’s Scott Tong on the line. Hi, Scott.
Scott Tong: Hello, Kai. How are you?
Ryssdal: I’m all right, thanks. But listen, we have been wondering — and this is the reason we called you — what life is like in a country where 9 percent gross domestic product growth, like China’s having, is considered not such a great thing?
Tong: Well, that does seem like an alternative universe, and I’ll tell you, it feels like it, because it’s so calm when you walk around the streets of Beijing. As I was getting around, I was on a brand new subway and they’re building more here. I walked by a bunch of guys who were flying kites, and they were complaining that traffic is so bad because too many people are buying cars, and their environment is too bad because too much industrial activity is going on, and housing prices are too high because too many people are buying houses. I mean, China’s still growing; it’s still growing at a good pace, as you say, and that’s the dominant feel here.
Ryssdal: How can it be, though, that the GDP falls 3 percent, like it did in China, and there isn’t more pain?
Tong: Well there is pain; there certainly is pain down south where more factories are — and we’ve all heard about Dickensian sweatshops down south. You have factories closing down; about half of the toy factories have closed down in the last year. You have labor problems. But the point is, China’s a lot more than factories and that’s the great myth about China — that all they do is make stuff that Americans buy. There is domestic investment. There’s a lot of stuff being built all over China. And the view from Beijing is, you know, these sweatshop jobs in the factories, we don’t really want them anymore anyway, so we’re willing to sacrifice those if we can kind of transition this economy into a more grown-up economy that’s more service oriented, a little more technology, a little more domestic consumption. You know, we can do that.
Ryssdal: You have to give the Beijing government credit for managing the economy on the way up; it got hot, but not too hot, it developed in a lot of the ways that they wanted it to. What about managing it on the way down now, are they going to be as successful?
Tong: Well, part of the formula for this kind of Goldie Locks “not too hot, not too cold” is the same thing, and that it so be somewhat disconnected from the rest of the financial world. And China has erected these financial barriers so they don’t get whacked by these market 2-by-4s every once in a while. It served them well in the Asian financial crisis 10, 11 years ago, and the view is it’s served them well now. I’m going to play you a piece of tape from Bill McCahill. He’s been in China for 20, 25 years and he works for the consulting firm J.L. McGregor. And here he is explaining this disconnect between China’s financial market and the rest of the world.
Bill McCahill: They’ve been rather prudent in the kinds of investments they’ve made with their foreign exchange reserves, which are now approaching $2 trillion. And so, in a time of crisis elsewhere, this, in a way, it’s another Great Wall of China that’s kept them insulated from that.
Tong: You know Kai, economists can argue whether this “Great Wall” is a good or a bad thing, but it’s going to stay because the view from China is, “You know what? It’s worked for us. We’re going to keep it up.”
Ryssdal: Tell me about the ex-pat life. Are other foreigners who live in your apartment building losing their jobs? Are they thinking about going home? What’s going on with them?
Tong: What’s interesting is one of our closest friends is connected to the auto business in the U.S., and the husband just got laid off because of what’s happening back home. So you do feel it. And when we walk around, and our kids play with other kids, and they’re parents from all over the world say, “you know, we’re watching what’s happening in the world, we’re sure glad we have a job.” But for the most part, people still have their jobs, and for the people who have lost them, you know, they don’t want to go back to Ohio; they don’t want to go back to the States where it’s awful. They’re like, you know, “I would rather be in China than back in the U.S.”
Ryssdal: Scott Tong is in China for us, Beijing this time around. Thank you Scott.
Tong: OK Kai, thanks.
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