2019-03-12

“For years Mr. Deng had received tributes in local media for turning farmland into glistening conference centers and hotels. Hefty contracts rolled its way, including one to develop a landmark in the suburbs of Chengdu, a city of 14m in the Szechuan province of China. This, the New Century Global Center was to be his crowning accomplishment, the world’s largest structure by floor space, the size of 246 football fields, or nearly 3 Pentagons and 8 Louvres. Inside it has a massive water park with an artificial beach, an ice rink, a 15-screen cinema, a 1009-room Intercontinental, offices galore, 2 supersized malls and its own fire brigade, but a smattering of businesses and shoppers. It became a parable for the economy’s excesses and over-reliance on debt.”

“Can Pandas fly?” asks The Economist in its February 23^rd edition, in an article about the struggle to reform China’s economy. Interestingly enough, just before the publication of this issue, I had just spent 15 days travelling across China, embarking on my own “Dragon Trip”.  I spent 10 days visiting the production facilities, sales rep offices and customers of some of the Fund’s Swiss companies in Tjanjin, Shanghai, Changzhou and Hong Kong, as well as Singapore, Kuala Lumpur. Then, around the time of the Chinese New Year, I visited Kunming. I left Kunming in a brand new high-speed train, stopping at Chongqing and reaching Chengdu, capital city of the Szechuan province, in less than 6 hours. In Chengdu, a visit to the Giant Panda Breeding Research Base is a must. To watch these adorable animals is a real treat. I am now in a position to respond to The Economist’s question “Can Pandas fly?”:No, they can’t!

Another must in Chengdu is to visit Du Fu Thatched Cottage, where the poet lived a particularly peaceful and happy period of his life.  Du Fu arrived here on December 24 of the year 759, some 700 years before Johannes Gutenberg introduced printing in Europe. Du Fu lived during the Tang dynasty and under the Tang "equal-field system" all land was owned by the Emperor and granted to people according to household size. Men that were granted land were conscripted for military service for a fixed period each year. These policies stimulated a rapid growth in productivity and a significant army, without much burden on the state treasury. Today there is a certain similarity: rapid growth, but debt has also grown.

Boarding the Chengdu metro (covering 226 km today, 291 km in 2020, and a projected total of 714 km by 2025!) I reached The New Century Global Center, written about by The Economist. As I am a pragmatist, I “walked the talk”, and it took me 25 minutes to go around the Center (400m x 500m). Yes, the lavishness, the excesses, the lack of finish of the construction are patently obvious. Yes, as The Economist wrote in the article, I did see a closed waterpark, as it is too costly to run in the winter when crowds are sparse. Yes, some spaces are empty and parts of the building are poorly maintained.

In 1978, ABBA was singing “Take a chance on me!”, when China, under Den Xiaoping, converted (back!?) to a market economy. The 1978 $149 bn economy has risen to a $13’457bn economy today, a 90-bagger! In comparison, the Swiss economy, during the same period, has grown from a $94 bn economy to a $678 bn one, a 7-bagger. In 15 years, China is expected to be the top consumer market in the world, ahead of the US.

It would be foolish to expect such a grand-scale evolution to unfold seamlessly. Nobody’s perfect! China started from a very low base, that’s true, but no country has had such a long run of GDP growth and prosperity. Its citizens don’t live in a democracy, but they have a true perspective of social advancement and economic welfare. While China is building a solid middle class, the European and US middle classes are being corroded.

As per the Gospel of Matthew, 7.3: “Why do you see the speck that is in your brother’s eye, but don’t consider the beam that is in your own eye?”.

No, Pandas can’t fly, but they can move swiftly, with the impression of moving slowly, but surely.

To be continued…