Unlike most other recent China books, which have tended to be anecdotal, Kynge takes a straight journalistic approach to the topic, and has thereby produced the best primer on China's economy and prospects that has been published in a long time.
Years of explaining the intricacies of Chinese politics and economic policy machinations on a day-to-day basis for a newspaper audience have given Kynge, a former China chief correspondent for the Financial Times, an enviable ability to illuminate and summarize complex issues and information. He has some great lines in here which are well worth pondering. The best ones include:
"There are important differences between the internationalization of Japan Inc. and the first faltering foreign footsteps of Chinese companies. The main difference is that Chinese manufacturers are being pushed overseas through weakness rather than strength."
"Communism was all about production, not profit and loss. But bankruptcy not only recognized financial performance, it also made it the key criterion for corporate survival. Once bankruptcy had insinuated itself into the code of commerce, other expressions of capitalism were sure to follow."
"It is no revelation to assert that the edifice of Chinese statehood rests on frail ecological foundations. But what is new – and world-shaking – is the projection of this environmental exhaustion into the international arena."
"In spite of the resemblance China bears to America in an earlier stage of its development, the chances that the Chinese will one day be able to consume at the same rate as Americans do today are close to zero. It is not that they will choose to be more frugal. It is simply that the world does not have the resources to cater for 1.3 billion Chinese behaving like Americans."
Kynge is hyper-aware of the problems and potential pitfalls as China races ahead. One of his greatest concerns is the impact of China's economic growth on global commodity prices and supplies. Considerable attention is also directed at the possibility of the West becoming more protectionist – the ultimate worry being that the flood of Chinese exports will be addressed by simply stopping them dead.
He begins the book with a fascinating story about a German steel mill that was bought by a Chinese entrepreneur, shipped to the Yangtze delta near Shanghai and put back into production. It is a potent symbol of the shift in manufacturing capability from the West to China.
He then tries to pinpoint the moment at which China awoke, to return to the blurb referred to at the beginning of this review, and decides it was this:
"It occurred during the several weeks from mid-February 2004 when, slowly at first but with mounting velocity, manhole covers started to disappear from roads and pavements all over the world. As Chinese demand drove up the price of scrap metal to record levels, thieves almost everywhere had the same idea. As darkness fell, they levered up the iron covers and sold them to local merchants who cut them up and loaded them onto ships to China."
There it is, China shaking the world. And this, remember, is just the beginning.
China Shakes the World, by James Kynge, published by Weidenfeld & Nicolson, list price: US$25.00
Excerpt: Between chaos and stagnation
During the dinner, though, Cao said something which to me, at least, was well worth the price of a lobster. I was to keep it with me throughout my seven-year reporting assignment and came to see it as a basic formula for understanding the twists and turns and ups and downs of China's political economy. "Gaige tai kuai, jiu luan. Gaige tai man, jiu si" or "When reform is too fast there is chaos. When reform is too slow there is stagnation". To put it another way, it meant that without the liberalization of controls on the economy, growth would slow and eventually stop. But when the pace of liberalization was too fast, the rapid growth that resulted could spill over into disorder. On the face of it, this was straightforward enough, but there was an added, paradoxical twist: the legitimacy of the Communist Party sprang from both growth and control. Yet in order to get more of one, it had to sacrifice part of the other.
Without fast growth, Beijing has no chance of meeting its job creation targets and too few jobs could mean social instability. But surrendering administrative control to the invisible hand of the market saps the essential power that sustains a single party state. Therefore, the Party is a reluctant reformer and, in areas where control is critical to the maintenance of its rule, it has tended to resist liberalization that goes beyond the superficial. The reluctance also means that when things are going well and the economy is riding high, reform generally decelerates only to pick up again when the tide of growth ebbs away. The waves of activity created by this interplay of government fear and covetousness define the economy's momentum. Some call it the "business cycle" but that does not quite capture it. It is, like a lot of things in China these days, more of a mixture, a sort of a yin and yang amalgam of business and politics.