CHINA'S RISING ECONOMY

CHINA'S RISING ECONOMY


October 4, 2005

The first report in a series on China focuses on the Asian nation's economy, which is the fastest growing in the world. But with its booming growth come challenges.

PAUL SOLMAN: Traditional China, still on display in modern Beijing: Tai chi; calligraphy practiced using Chairman Mao's poems and his penmanship; a daily song to welcome the dawn.
And yet, almost every week, an old neighborhood is razed to the ground to make way for sci-fi skylines, hip new clubs, Mao as merchandise, every luxury product you can think of -- sometimes real, often not.
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With more than twice as many people as the US and Europe combined, this is the most populous, fastest-growing major economy in world history. Will the good times just keep rolling? When you first arrive, it would certainly seem so.
PHILIPPE CARETTI: Welcome to the Pudong Shangri-La Tower 2.
PAUL SOLMAN: Just about to open in Shanghai: A second tower of the Hotel Shangri-La, with 375 new rooms.
PAUL SOLMAN: And what's the top of the line?
PHILIPPE CARETTI: Well, the top suite would be 2,500 US dollars.
PAUL SOLMAN: A night?
PHILIPPE CARETTI: A night.
PAUL SOLMAN: To general manager Philippe Caretti, an Italian-Swiss who's worked in a dozen countries for the hotel chain, Shanghai's the hub of the new global economy. So he's hired a dozen international chefs, backed up by hundreds of workers, to contribute native specialties to the global feast.
PHILIPPE CARETTI: He is the great-great- grandson of the man who invented the noodles. Three minutes and we have fresh noodles. We currently have a total of 1,800 contractors and workers finishing the building.
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PAUL SOLMAN: 1,800 people.
PHILIPPE CARETTI: Working three shifts a day around the clock. This actually reflects very much the drive and dynamics of China.
PAUL SOLMAN: You know, in a number of interactions we've had, --
PHILIPPE CARETTI: Yes.
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PAUL SOLMAN: I don't want to say lazy, but a slow kind of pace, an old sort of bureaucratic mentality, maybe. I couldn't tell. But not in your hotel.
PHILIPPE CARETTI: Not in our hotel and, to be honest with you, not in Shanghai. Shanghai has a drive that no other city in China has.
PAUL SOLMAN: Well, except maybe at noon on a 100-degree day.      
China's economy wakes up
PAUL SOLMAN: But part of what's so remarkable is that, for centuries, much of the Chinese economy had been sound asleep.
Since the late '70s, however, China's economy has doubled every eight years. In that same period, the US economy has doubled once.
Today, average Chinese have some ten times the purchasing power they had just a quarter century ago. At this rate, China reaches our current level in about two decades, passes us in about three, which may explain the sky's-the-limit sound bites we kept getting on tape.
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GIRL AT TSINGHUA U: I will be the most successful woman in the history of China.
YOUNG MAN IN BEIJING (Translated): Just like your President Lincoln, I also want to do something big for Beijing and for China.
PHILIPPE CARETTI: There is no terrorism. Tell me one country today which is safer than China and I invite you for lunch!
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PAUL SOLMAN: The boom in Chinese self-confidence is mirrored in the rise of its skylines. You see it in the sprawling profile of Beijing, seat of the central government; and in Shanghai, China's money and media capital, home to the Grand Hyatt Hotel-- floors 53 to 87-- in a building taller than the Empire State or Sears Tower and the Oriental Pearl, which dwarfs the Eiffel Tower. On a clear day, though there aren't many here, you can see more than 300 skyscrapers in Shanghai; in 1985, there was one.
But according to this tour guide at the city's Urban Planning Museum, the building boom has barely begun.
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SPOKESPERSON: All of here is Shanghai, but it's only 1/60 of Shanghai, the downtown of Shanghai.
PAUL SOLMAN: 1/60 or 1/16?
SPOKESPERSON: 6-0.
PAUL SOLMAN: Oh, 1/60.
SPOKESPERSON: Yes!
PAUL SOLMAN: Really? So the city goes on and on and on.
SPOKESPERSON: Yes.
PAUL SOLMAN: And how many people are here now?
SPOKESPERSON: Now in the model area the population is eight million people.
PAUL SOLMAN: And in all of Shanghai?
SPOKESPERSON: All of Shanghai is 16 million people.
PAUL SOLMAN: And Shanghai's got plenty of company. By the most conservative count, China now boasts 47 cities with at least 1 million people. The US, using the same measure, has nine.  
 
Working in China
PAUL SOLMAN: However, 60 percent of Chinese still live down on the farm; one out of every eight people in the world is a Chinese peasant. And each year, some 20 million of them leave the countryside for the city to get jobs, as at Three Gun, China's largest textile factory.
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WOMAN (Translated): There's not much work in the country, unless you want to work in the fields.
PAUL SOLMAN: At current rates then by the year 2020, China's cities should add some 300 million newcomers, more than the entire population of the US To house them, China has to build a couple of extra Shanghais every single year. It's planning to.
SPOKESPERSON: The colored buildings all exist, and the white buildings are to be built in the future.
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PAUL SOLMAN: And that's all planned already?
SPOKESPERSON: Yes.
PAUL SOLMAN: Meanwhile, our tour guide has her own plans of what to be when she grows up.
SPOKESPERSON: Director of city planning bureau.
PAUL SOLMAN: The director of the city planning bureau.
SPOKESPERSON: Yes.
PAUL SOLMAN: That's a big job in Shanghai.
SPOKESPERSON: Oh, yes, yes, I think so; it's very --it's a huge job.
PAUL SOLMAN: A very huge job made possible in part because so many are willing to work for so little. Philippe Caretti pays his crew about 80 cents an hour-- the lowest wage, he says, of any of the 17 countries in which the Shangri-La chain operates.
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PHILIPPE CARETTI: The quality of the work-- I mean the expertise, comparing to a worker in the US of course the laborers are not as professional, but the passion and the fact of having a job to be able to build a five-star hotel... the Shanghainese are very, very proud people and they --everybody in this city is participating in the success of China. And that's how they see it.       
 
Increasing exports
PAUL SOLMAN: In the factories, the pay's a bit higher: About $1.25 an hour, including benefits, according to management at Three Gun Textiles.
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Now manufacturing has taken China's total trade past that of Japan, and today, to the surprise of many, it's second only to the US But more significantly perhaps, China is moving up the value chain with higher-tech exports like computer chips being loaded onto this Danish ship headed to the US flying the Chinese flag.
Last year, Shanghai surpassed Rotterdam to become the world's second busiest port. This model of the city's new deep sea docks, to be reachable by the world's longest bridge, will become a working reality in a few years. When it does, Shanghai will overtake Singapore and become the world's biggest port, bar none.
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But China's not just manufacturing for export; the domestic market has exploded as well, meaning that investing in China is a no-brainer for multinationals looking to grow their brands. The head of Wal-mart Asia, Joe Hatfield:
JOE HATFIELD: Average incomes are going up. Car ownership is going up. I mean, you're seeing what occurred in the US thirty, forty years ago but in a much more compressed timeframe.
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PAUL SOLMAN: At this school for children of workers at a Shanghai semiconductor plant, the consumers and producers of the future are getting a global head start.
(Children singing alphabet)
PAUL SOLMAN: The company's kindergarten teacher, John Pelaschier:
JOHN PELASCHIER: All of these kids are growing up learning at least two languages, at least Chinese and English. And that's, I believe, a great advantage.
(Child singing alphabet)
JOHN PELASCHIER: Good job!       
 Juggling communism and capitalism
PAUL SOLMAN: For some perspective, we turn to an old China hand: Jim McGregor, formerly the Wall Street Journal's bureau chief in China, now a businessman.
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JIM McGREGOR: It's an accident of history this place was ever communist. They're capitalist down to their bone marrow. China is hungry and come from nothing, and they've still got a lot of poor people who are lining up to work hard and be the next person who makes money. And that's going to last for decades and decades and decades.
PAUL SOLMAN: But will it really? No slowdowns? No bumps in the road? Yes, a powerful central government has unleashed immense productive energy, but the hurdles are equally immense.
It's not just the obvious irony of the world's biggest communist country ever creating in some ways the most freewheeling market in world history. It's also that the world's biggest country faces a pack of the world's biggest problems: Trying to innovate in a repressive culture; trying to privatize property in an economy where intellectual property is so famously pirated; trying to invest productively where corruption runs rampant, bringing the stock market, for example, to a standstill; trying to find work for millions of unskilled peasants from the countryside in factories ever more mechanized; trying to keep growing at a pace that, in a few decades, would mean China is consuming all the output -- iron, oil, food, cars, clothing, et cetera -- all of what the world consumes right now; just trying to breathe, for goodness' sake, in a country with 16 of the world's 20 most polluted cities.
And yet, China's spirit is infectious; its economic energy, practically viral.
PAUL SOLMAN: I bet it's hard to get stuff done in China.
PHILIPPE CARETTI: No, it's easy. Everything is easy because you have the human resources.
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PAUL SOLMAN: In future stories, then, we'll explore the question: Is the American century about to be followed by the Chinese millennium? Or could it be that China, at the moment, is flying a little too high?
JIM LEHRER: We'll have another of Paul's reports later this week. The next one is about Chinese consumers.