The Word On The Streets XXIX: The Guangdong Hustle Edition
Your correspondent slept and woke up one day and found himself in China. The Middle Kingdom continues to fascinate me — I read at least one China book every year and I try to keep an eye on what’s going on there. But I find that even reading is no substitute to actually experiencing the place in person.
I know you didn't ask but I’m going to force my thoughts on you anyway, so here goes. The thoughts are not arranged in any particular order.
- Chinese internet is an incredibly frustrating experience. This time, I went armed with VPN on my phone so I was able to use the internet as normal. But my laptop had no VPN which meant I was free to ‘enjoy’ the Great Firewall of China in all its glory. Obviously, the websites I access daily as a foreigner — FT, Economist, Amazon etc — were either blocked or terribly slow to the point of complete frustration. But I then noticed something else — every Chinese person on the train or on the road was on their phone. It’s an amazing sight to behold; everyone WeChating or watching or reading something (I did not see one analogue phone — everyone had smart phones). It made me wonder what internet they were so addicted to — surely not the same one I was struggling with? So I went back to my laptop and tried to open the Alibaba website. It opened in a flash. And then I had my answer.
2. Speaking of WeChat, last year or so, I read this long piece by Connie Chen on the ubiquity of the messaging app in Chinese life. But again, seeing it in action was something else. WeChat works everywhere with everything. You use it to unlock bikes and pay for meals at restaurants. You use it to pay for taxis and long distance train tickets. Everybody has it. So much so my cousin showed me where he leaves his bank card in his room everyday — once you have your phone, you’re good. The pictures below were my favourite application though.
The Bingo Box is like an emergency grocery store for when you need something say, late in the night. You unlock the door with WeChat, pay for what you want with WeChat and leave the store with WeChat. All unmanned.
There’s a lesson for Nigeria in this I think. This is mobile money but it’s not mobile money in the way Nigeria has been (unsuccessfully doing it). WeChat is a messaging app and bank cards are bank cards. Nigeria has been trying to do mobile money by licensing mobile money companies and all that. But there is conflict because the CBN does not want another M-Pesa and it cannot give power to telcos which it cannot regulate. But Nigerians have bank cards and they also have Whatsapp. The success of WeChat is in bringing those different things together and getting them to work. People already had bank cards in China before WeChat. They also had messaging apps. Marrying them together seamlessly is the genius of it all. There is no ‘wallet’ where you deposit funds and then start spending it at a cost. For anyone who wants to expand financial access, joining 2 different things that Nigerians are already using (and enjoy using) is where the work is — link banking to Whatsapp and the job is done.
There’s an even better thing about this — the Chinese government is able to collect taxes very efficiently given how pervasive WeChat use is. Which brings me to my next point…
3. Chinese subnational governments (provinces, prefectures etc) live and die by tax revenues. Half of most tax revenues is kept by them while Beijing takes the rest. Many times, new responsibilities get pushed down to them from Beijing without all the funding to match it so local authorities have to come up with new ways of raising tax revenues. The surest tax is VAT which local governments keep 25% of. What this means is that they have every incentive to generate economic activity to boost VAT. It can sometimes get out of hand, of course, but you cannot fail to notice the amount of investment going on in China.
I cannot overemphasise this point — Chinese infrastructure is excellent. The roads are very good (even narrow side streets) and the trains are like a wonder on their own. I spent a couple of days in a small city called Dongguan — sandwiched between the much larger cities of Guangzhou and Shenzhen — and I was taken aback by the level of infrastructure there. Think of Dongguan as a Shagamu to Lagos. But it had a shiny new subway system that opened in 2016 (40% of the cost was paid for by the national government in Beijing). Just looking around, you can tell that Dongguan is new money — as observed by new cars parked outside old houses. I saw some stray dogs around and the buildings were not too tall. But it clearly has ambitions.
On the subway, there was announcements in English after Mandarin. All the signs were also ‘subtitled’ in English which made it easy to get around. In self-confident Guangzhou, there were no English translations or announcements. I interpreted this is as a sign of a city that wants to grow.
4. One of the things I look for about infrastructure is how uniform things are. If you have driven across Europe for example, you will not have failed to notice the blue road signs, down to the font, are the same across different countries. This is not something that just happened by a happy coincidence — it was made so by the EU. But what then happens is that once something like that has been created, a company that makes the particular type of paint used for the signs or the steel for the boards, gets a bigger market and can scale.
Having used the subway system in Guangzhou, Dongguan and Shenzhen, I noticed they were all the same design. That is, once a city wants one and the financing is all in place, the rest just follows a set pattern and standards. This means that the company that makes the trains, tracks, doors, glass windows, escalators and so on can be viable as a business serving the Chinese market given that there a ton of these cities in the country and many subway lines continue to expand (Dongguan has opened only 2 lines and plans to open 3 more over the next 15 years or so). Same thing with the roads — all the signs are the same across all the cities I’ve been to in China (5 so far).
It’s a subtle point but it helps to explain how a Chinese company you’ve never heard of can just turn up with some impressive technology almost overnight — they’ve had a huge local market to practice with.
5. In Donnguan, I got a factory tour of a paper based manufacturing concern. By Chinese standards, it probably counts as a small to medium sized factory. People were working while I walked around and so I got to see the famed Chinese efficiency in action. But I did not see anything particularly special. One guy who was working on some production run was sitting down watching something on his phone. He got up, and with his earphones in his ears, continued the production run. Yet this small factory has produced stuff for Disney. Indeed, the earphone guy was actually working on something for an American company when I glanced to check.
I’m confident that you can replace all the workers in that factory with Nigerians and there will be no drop in productivity, subject to normal supervision. I was reminded of something I read in Made In Africa a couple of years ago
Yep, the killer app is what happens when the goods have to leave the factory for somewhere else. No, Nigeria cannot match that one. There are definitely no Chinese policemen standing on the road harassing trucks for bribes or drivers diverting the goods to Cotonou instead of taking it to Apapa. The political consensus is for China to be the place where goods are manufactured for the world and incentives are aligned to that end. Again, to belabour the point, Chinese infrastructure is excellent and that goes all the way to the ports. So a small company can take orders from a giant company in America confident that it will deliver even with tight margins.
Further, Chinese companies know how to cooperate for mutual benefit. As the factory manager told me — even if you manufacture paper and some foreigner somehow asks you to help them manufacture electric plugs, you never say no. You say yes and then you find an electric plug manufacturer to make it and you share the profits. Everyone is happy. Chinese culture (and language) is impenetrable to outsiders so you (the outsider) will never know.
That said, the manager did mention to me that if things get really busy and they have to work flat out, the work ethic is such that he can get a full complement of staff to work even overnight on Sunday. The factory also had 4 floors so a chute/tube had been installed on the top floor to allow boxes slide down into a waiting truck on days when they are making deliveries. One fine day, an exuberant worker got a bit too excited and decided to slide down the chute from the top floor. He was fired on the spot — pour encourager les autres.
6. Not hard to see why Uber ran from China. Didi Chuxing is really impressive. Even in a small city like Dongguan, the thing always seemed to arrive in no more than 2 minutes.
7. Chinese people seem to love children a lot. Kids seem to be protected and had a lot of freedom to play with adoring adults watching over them. On the train, I noted on more than one occasion adults giving up their seats so their children could sit down. I can’t remember the last time I carried my 4 year old in public and even when he’s trying to act sleepy or tired, I always insist my wife let him walk. But I saw kids his age/size being carried by adults when the trains were full.
I put this down to the effects of the one child policy. China is ageing quite rapidly and alarmingly as a society and maybe this places a lot more value on children. Even with the restriction being lifted, I glanced at a news item (in Hong Kong) that said Chinese people were not taking up the option to have a second child. If anything is going to slow down the breakneck Chinese growth, it might be this rapid ageing. I cannot think of any obvious solutions but perhaps the government that forced people to stop having kids can always force them to get under the duvet.
8. Personally, I have a high tolerance level for what I’m willing to describe as racism. For example, someone looking at me funny does not count as racism to me. In that sense, the Chinese fascination with outsiders is quite amusing. I caught a number of people taking photos of me and staring so hard in some cases. At one point one guy was not content with staring, he walked very quickly behind me and when I stopped at a zebra crossing, he got what he wanted — he touched me (and perhaps was made whole?). My cousin said when he’s feeling mischievous he reverses the game and hides when he knows someone is desperately trying to take a photo of him.
But it is nowhere near anything like Arab racism for instance (those ones remain the undefeated champions in my experience). I just remind myself that only 5% of Chinese people own passports and even of those, the vast majority of them only use it to go to Hong Kong or Macau. That is, not only do they not travel far, most people probably also do not know anyone who has travelled far.
9. Speaking of travels — someone mentioned to me that he knows so many business owners who do $10m in annual revenues and do not even have passports or speak a word of English.
My interpretation of this is that if you think you’ve seen too many Chinese tourists, think again. There are many more coming.
10. Another benefit of good infrastructure — travelling around is so easy. I decided to hop on the train from Dongguan to go spend a day looking around Shenzhen. About 45 mins on the train that felt like 15 mins. Shenzhen is obviously very rich and the money is old money — as observed by old people strolling around with designer sunglasses perched on their heads. It was also in Shenzhen that I saw beggars (and in Hong Kong too) which was a bit jarring at first.
Shenzhen is of course home to the highest concentration of billionaires in China so make of that what you will.
11. Monday was a public holiday and also the day I was leaving China. I took the train to Shenzhen and walked over the border into Hong Kong. It was a chance to observe ‘Chinese movement’ in all its glory. Any holiday is an opportunity for them to travel around so there were queues everywhere and the trains were packed full. Everyone seemed to be heading to Hong Kong for sightseeing and shopping for the day.
If nothing else, such a thing teaches you patience. The queue to buy train tickets was long. The queue to get money from the cash machine was long. The queue to get on and off the train was long. The queue to wait for a taxi was long. There are so many Chinese people in China it’s incredible.
12. There are some things the Chinese still can’t do well. Healthcare seems to be one of them. I had dinner with some Americans and quickly discovered that they cross over to Hong Kong when they need to see a doctor for anything. Apparently your leg might be broken and the Chinese doctors will ask you ‘what do you want to do to it?’. If you tell them maybe putting it in a cast is a good idea, only then will the doctor agree with you. But if you don’t ask…
13. Roads in China seem to be some kind of giant laboratory for all kinds of technology enabled mobility devices. I noticed all sorts of electric scooters and bicycles and even skateboards or hoverboards being used to move around and not just for fun. I rode my cousin’s scooter for a bit (made by Xiaomi who started its life making phones!)
No way those things will be allowed here in Britain with health and safety and all that. But as someone remarked to me, there are so many people in China that if you want to kill yourself, no one will stand in your way — go right ahead sir. This was further brought home to me when I was in an apartment on the 19th floor. I went to the window to look outside at the city and my heart skipped a beat when I realised the window opened and there was absolutely nothing stopping me from falling over and down to the ground. In Britain no way a window will be built like that — it would definitely be a suicide risk. But in China? Knock yourself out.
14. China is the land of the hustle. The Americans I met were all there doing different businesses. If you’re moving there to do business and not to look for formal employment, it’s actually quite easy — just get a business visa and join the fun. There is literally no kind of manufacturing or business you can’t do. One of the guys runs a factory there and sells across the world mainly back to America but also to Brazil and now South Korea (that infrastructure again!).
If that’s what you are doing, the authorities just turn a blind eye and leave you alone. For a certain type of American who fancies an adventure, the country is like a raw diamond that is irresistible. You can make stuff there and you can sell stuff there — 1 billion people is a lot but Chinese people also have a ton of money (they save too much even) — I lost count of the number of Teslas I saw on the road in Guangzhou and some of the shopping malls were just breathtaking to behold in size and luxury.
15. Final point. I went into 2 different bookshops to look around and the range of books that had been translated into Chinese was quite something. Not just modern books like Zero To One but classics like Proust and Dostoevsky and so on.
I’m sure there’s some theory somewhere about the number of books translated into local languages and the level of economic development. If there isn’t one, I’m going to have to make one up.
That’s that. The subject of economic development is one that continues to fascinate me and China is perhaps the best living example of it. Most western countries have since forgotten how they got rich but China is still in the process and it is happening in real time.
If this is something that fascinates you as well, I only have one thing to say to you — 往东走，年轻人
