Communist China is really a capitalist country in overdrive. I’ve been covering China’s economy since 1999. Further, I studied abroad in Communist China in 1997 for six months.
As soon as Houston Rockets General Manager’s, Daryl Morey, tweeted “Fight for Freedom. Stand with Hong Kong,” the lucrative relationship between the NBA and China began to disintegrate.
Given the Communist China market is worth roughly $1 billion a year to the NBA (versus $0 for FS), it was fascinating to see some owners, coaches, players, and the commissioner either say nothing, throw Daryl under the bus, or grovel for forgiveness.
If you care about your reputation and want money, sending one-liners on social media about a controversial topic is probably not the best idea. Wait until you are truly free. There is always two sides to every conflict.
Of course everybody is going to be pro freedom. But to think the Chinese people are tyrants and don’t want freedom and prosperity themselves would be naive. Please differentiate between a country’s citizens and its government.
What’s Going On In Hong Kong And Communist China?
During the summer of 2019, a highly controversial legislative measure was introduced that would allow criminal suspects to be extradited from Hong Kong to the mainland. If you’re a Hong Kong resident who has always been wary about the “one country, two systems” policy, you can see how this new law might undermine Hong Kong’s legal independence.
There is a real fear by the Hong Kong people that if you get sent off to China for doing something China considers to be wrong, you might never come back!
The expanding power of China is a paranoia I’ve listened to for over 10 years each time I went back to Hong Kong for work. Due to this legislation, there has been spirited demonstrations for months as Hong Kong citizens fight for their independence.
Part of the reason why I write so much about the college admissions scandal, the absurd rise of healthcare costs, and a rigged system that favors the rich is because they attack my ability to stay financially free to care for my family. Everybody needs to fight like hell for their freedom.
But what about the average Chinese citizen’s perception of Hong Kong? Based on my six months of study in China in 1997 and after visiting China more than a half-dozen times for work, my guess is that the average Chinese citizen looks to Hong Kong as a place of curiosity and wonder. They are amazed by the incredible wealth that was created in the region and they absolutely want to emulate its success.
The Chinese are a proud people who have seen incredible economic progress in their lifetimes. They are also fiercely patriotic and protective of their country due to historical atrocities such as the Nanjing Massacre.
A strong sense of identity exhibited by both the Chinese people and the people of Hong Kong is a strength, not a weakness. You want your citizens to be extremely proud of their country and everything it stands for.
In this post, I’d like to share my experience going to Chongqing, China in 2011 for work and listening to what some of its citizens had to say about economic growth and more. It’s just one man’s perspective, but a perspective that might help create better understanding.
To Understand Capitalism, Let’s Understand Communist China
Communism gets a bad rap for its ability to stifle innovation and effort. However, when you look at Communist China, growing at ~7% GDP per year, do you really think its citizens have no desire to improve their living standards beyond what is generally proposed?
We all have an inherent nature of wanting to do better. Not only do we want to continue improving, but we also want to one-up our peers! After all, what’s the point of making $100,000 dollars a year if everybody else makes the same?
We learned a good deal about how the happiest people on Earth live after my 2.5-week trip to Scandinavia. Now it’s time to learn more from the folks I met in Chonqing, one of the fastest-growing cities in China.
The Chongqing Fireball
Chongqing is known as one of the “Three Furnaces” of the Yangtze River because its temperatures frequently get into the mid-90s. We’re talking muggy, suffocating, scorching heat during the summer months. For sure, the heat is way worse than the “armpit states” of America. Wuhan and Nanjing are the other two “furnaces.”
The first thing I asked my cab driver when I arrived was how his life had improved over the years. I thought he’d be ecstatic, given Chongqing has been growing at a double-digit rate for the past decade. Instead, he was bitter.
“Yes, my income has grown by 30% a year, every year for the past five years. But, I am still a cab driver! Everybody around me is making just as much, if not much more,” he explained.
“What about living conditions? Surely, they are better now?” I asked.
“The government has decided to build these massive high rises for all of us. Yes, at least we have air conditioning during our hot summers, but the space is cramped. Furthermore, food prices have risen by 30-40% a year recently, especially pork prices. We’re all richer, but we’re all still the same!“
He went on to say, “During the Cultural Revolution, my parents were sent off to the countryside. They couldn’t help further my education, so I didn’t even go to high school. Here I am, decades later driving a cab. This is all I know how to do, and this is all I will ever do until I die.“
By the time we got to my hotel, the cab driver was exasperated beyond belief. I thought he was going to have an aneurysm as he complained on and on about how hard it was to get ahead.
I empathized with him through the smog and the eight million city residents who seemed to have no regard for traffic signs. All you notice when driving into Chongqing are the construction cranes everywhere.
My cab driver’s personality matched the climate – fiery!
Food To Diarrhea For
Chongqing is famous for its hot pot cuisine. We’re not just talking temperature hot, but spicy hot chili-infused hot that will burn your intestines from the inside out. In the beginning, I loved spicy food, but today, I almost never enjoy spicy food unless I want to punish myself.
Living in America for the past two decades has made my body soft. Too many ice cream sandwiches, donuts, and lemon meringue pies I must admit. As a result, there is no more lining as thick as an elephant’s rump to protect me from harm.
After eating what seemed like a buffet of chili oil, I almost died the next day as I pissed out of both ends. The hot-cold sweats beaded on my forehead as I dared not stray more than five feet from the bathroom. Thank goodness China has largely done away with squat toilets, unlike when I first visited in 1997. Holy hell did my legs get a workout.
Only after I became sick did my friends tell me to be careful of the Chongqing chili oil. Thanks, guys! Duly noted for the next time I visit.
My tour guide said, “Our food is as hot as our souls. We will do everything possible to take advantage of this economic transformation to get ahead!” I believed him.
The Yangtze River Of Commerce
The Yangtze River, also known as Chang Jiang is the third longest river in the world at 3,988 miles. The water comes from the glaciers on the Qinghai-Tibet Plateau in Qinghai, flows eastward across southwest, central and eastern China before emptying into the East China Sea at Shanghai.
At the eastern point of Chongqing, you can stand and watch the Jialing River and the Yangtze River collide. It’s quite peculiar to see water flow in opposite directions, eventually combining to become one great force.
If you didn’t already know, the waters of the Yangtze and Jialing Rivers are nothing like the crystal blue waters of the Bahamas. The rivers churn tremendous amounts of mud and silt as they pass through some of the world’s most industrialized cities. I stood at the edge of a cliff looking down in amazement until I finally started to feel sick again due to the 98-degree heat and remnants of chili oil oozing out of my pores.
“The Yangtze River is our pride and joy. It allows Chongqing to be a major manufacturing centre and transportation center for Southwest China,” explained my guide.
The Desire For More In Communist China
With a per capita GDP of roughly $10,000 ($8,840 for China overall in 2021), Chongqing ranks 13th among all Chinese cities. The top three are Tianjin, Shanghai, and Beijing with per capita GDP levels of around US$13,500-$14,500. In other words, in order to catch up with China’s biggest cities, Chongqing has to triple its income.
Imagine a 3X income differential for those who live in the Midwest vs. those who live in San Francisco, Los Angeles, and New York City. Actually, this is not hard to imagine at all as it takes over $150,000 a year in San Francisco to afford similar luxuries as someone earning $50,000 living in Des Moines.
I’ve got several friends who live in the heartland of America who want to make more money. When I ask them why not just move to parts of the country where the economy is booming, they tell me they can’t leave their families behind.
They also tell me they find housing prices to be outrageous in booming cities, not thinking that it’s because incomes are “outrageous” and quality of life is “outrageously better” that leads to higher costs. It’s weird how in a day of buses, trains, and planes, folks aren’t willing to buy a ticket to a better life.
In Chongqing, residents are also hesitant to move to the coastal cities of Shanghai, Beijing, Shenzhen, and Guangzhou as well. But, it’s not because they don’t want to get on a train or a plane. They don’t want to move because Chongqing is growing at a much faster rate than its coastal city sisters. They don’t have to move!
Whereas if you are part of a dying textile or auto manufacturing industry in Michigan, it might be best to develop some new skills and reinvent yourself in another part of the country. Easier said than done of course.
“Sam, I love it here in Chongqing. In the next 10 years, we are going to be a powerhouse and the envy of all of China!” explained my guide. I’m sure the residents of Chongqing will grow wealthier. I’m just not sure foreigners will be able to tolerate the heat and pollution.
Communism Is Disappearing
Many will argue that Communist China is more capitalistic than America, especially since China has a massive capital account surplus. America, on the other hand, has a current account deficit plus a growing budget deficit thanks to unrestrained government spending.
The American government is trying to narrow the gap between the haves and the have-nots by becoming more like China and Europe. However, China is fast becoming more like the US. Funny how everything seems to converge.
China is in its growth stage and will likely be the #1 economy in the world by the year 2035. The Chinese will turn from net exporter to net importer as they buy all of our stuff with their super middle class.
Their citizens will grow in size and weight as we Americans have done. Services and health industries will explode in profitability as a result of new wealth. Let’s hope they have a benevolent leader when it’s time for them to rule the world.
China Investment Returns Going Nowhere
To understand Capitalism, we must first understand Communism. Based on my trip to Chongqing, China, Capitalism and Communism are converging. Communist China is slowly becoming no more. The cynical optimist in me also believes the NBA and China will work out their differences because too much money is at stake.
No matter if you’re Chinese, Hong Kongese, or American, what’s indisputable is the desire for all people to better their own lives and the lives of their children. If you can understand and respect this truth, then it’s impossible to not show some understanding towards both sides.
Let freedom always reign!
Unfortunately, in 2022, China has given up much of its investment gains. After the 20th Communist Party in Beijing, foreign investors pulled billions in capital from the market. China stock investment returns are dismal as the government has too much power.
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