Teenager Chen Daidai and her mother, Hu Shuzhen, a part-time real estate agent, live in an apartment that the family owns in Wenzhou, a hub of manufacturing—and growing prosperity (Mark Leong / Redux)
In depressed Shenyang, retiree Song Guifang and his wife,Yan Shikun, share a condemned two-room house with their two unemployed sons (Mark Leong / Redux)
China produces about two-thirds of the world's shoes, and its unofficial shoe-making capital is Wenzhou (Chen Wenyi makes a call at the Heyu Shoe Materials Company). Says one factory owner: "Wenzhounese work harder than anyone else in China." (Mark Leong / Redux)

A Tale of Two Chinas

As the red-hot Chinese economy feeds the world’s appetite for consumer goods, the workers’ republic is more than ever a nation of haves and have-nots

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The dimly lit room has low ceilings and poor ventilation. The machinery is outdated and the glue guns leak. Rubber cement fumes spike the air. Rolls of leather stand alongside a pile of rubber soles. In a corner, a woman cuts synthetic material into shoe linings while her colleagues take a break over bowls of spicy tofu.

Chen Chuang and Dai Wei located their factory in Wenzhou (pop. seven million), China’s unofficial shoemaking capital, because of the city’s ready supply of laborers. The factory produces some 100,000 pairs of shoes a year—deck shoes to cross-trainers—making a profit of about three yuan, or 37 cents, a pair. Chen, who wears a T-shirt with “Welcome to the Love Hood” on it, says he would have been miserable in the state-run rubber factory that employed his father. “Our future is much more interesting,” he says. “We work for ourselves, and we are more successful because we can survive with such small margins.”

In less than a generation, Wenzhou, a port city on the East China Sea about 200 miles south of Shanghai, has transformed itself from a charming backwater to a showcase of China’s new commercial vitality. Wenzhou churns out not only shoes but also pharmaceuticals, garments, sporting goods, optics, kitchen appliances, valves, paint and metal works. Construction cranes rake across work sites manned by crews on double and triple shifts. The city’s annual per capita income of $2,500 is almost double the national average of $1,300. Gated communities of opulent villas have mushroomed in the suburbs, while entire neighborhoods of dilapidated hutongs—wooden homes and courtyards that have stood for centuries—await the wrecking ball. Traffic along the city’s main thoroughfares is a frenzied ballet in which bicycles, wagon-pulling tractors and carts pedaled by coolies (derived in part from the Chinese ku li, or “bitter labor”) vie with Cadillacs, BMWs and even Hummers.

Since 1989, when pro-democracy demonstrators were massacred in Beijing’s Tiananmen Square, prompting many foreign business men and women to vow they would never bet again on China, the country has attracted $600 billion in foreign investment. China now enjoys an estimated $202 billion trade surplus with the United States and owns more than $795 billion in foreign currency, most of which is invested in U.S. bonds, which help the deficit-saddled U.S. government finance itself. In the two decades before 2000, the Chinese economy quadrupled, and it is expected to become the world’s fourth largest by the end of this decade.

But the socialist state also suffers high levels of unemployment. Some 13 percent of its 1.3 billion people survive on a dollar a day or less. Chinese banks are stuck with half a trillion dollars in bad loans. And China’s roads, railroads, energy grids and healthcare systems are woefully inadequate.

If China’s colossal impact on world markets is now familiar, the effect of the red-hot economy at home, where it is fueling record levels of internal unrest, is less well known. Last year, China’s public security minister Zhou Yongkang reported that almost four million Chinese took part in nearly 75,000 protest “incidents” in 2004. Zhou characterized the number as a “dramatic increase” over the previous year and noted a trend toward organized, rather than spontaneous, outbursts. In response, Beijing has reportedly formed a new police force equipped with helicopters and armored vehicles.

Meanwhile in the West, starry-eyed accounts of China’s economic transformation often obscure Beijing’s contempt for basic human rights, its one-party politics, its rubber-stamp judiciary, its censored Internet and oppressed minorities, and a prison system so secretive that human rights groups can only guess at how many people may be languishing in it.

“China is facing a huge number of social and economic challenges that are making expensive demands on the national budget,” says Murray Scot Tanner, a China analyst at the Washington office of the Rand Corporation, a Santa Monica-based think tank. “If the economy does not grow at an [adequate] rate, the pressure will intensify. There is not yet a sufficient appreciation in this country that when it comes to China, a number of things could still go wrong. The stakes are very high.”

To reacquaint myself with China, a country I had not covered for seven years, I visited two cities separated by geography, history and politics. In Wenzhou, I found China’s bold future, where newly made fortunes and go-go consumerism have transformed lifestyles but at a cost to the environment. In Shenyang, I found a once proud government stronghold now convulsed by free-market commerce, high unemployment, anxiety about the future and a certain longing for days past. Once the crucible of Maoism, Shenyang is by some accounts China’s most politically unstable region. Both cities suggest that the global economy needs a stable China at least as much as China needs the global economy.

The mountains are high and the emperor is far away.”
The old Chinese proverb alludes to how much can be achieved beyond the meddling reach of the state, and it is nowhere more appropriate than in Wenzhou.

Wenzhounese are known for their resourcefulness in turning what could be a geographic liability—isolation due to the forbidding Yandang Mountains—into an asset. Neglected for centuries by the central government, Wenzhou’s citizens began pioneering a more nimble, private-enterprise economy long before Beijing launched its “market-socialist” reforms in the early 1980s under Premier Deng Xiaoping, who ended more than a quarter-century of totalitarian restrictions under Mao Zedong.

“People are defined by their geography, and Wenzhou was once an island, always remote from the cities,” says Chen Youxin, a 73-year-old semiretired government historian who edits Wenzhou’s official statistical yearbook. The city was a tiny kingdom with its own language and culture until, he says, it participated in a failed rebellion against a Han dynasty emperor in the second century b.c. In retaliation, the emperor exiled Wenzhou’s entire population to the present-day eastern province of Anhui, and replaced it with people from the northeast who were among China’s most cultured and educated. By the tenth century a.d., Wenzhou had emerged as an enclave of art, literature, handicraft and scholarship.

Wenzhounese became shrewd and self-reliant, Chen says. Centuries before the state began experimenting with private enterprise, the Wenzhou economy revolved around a nucleus of small, family-owned businesses financed by gao li dai, or high-interest loans from one family member or friend to another. Often capital is pooled among members of a meng, a fraternity of sorts of half a dozen or more male friends. The meng might help a member finance a home, find medical attention for a loved one or ensure that the seats at his wedding are filled—a real bonus in a country where guests are honor-bound to give newlyweds money. Last year, according to the Chongqing Morning Post, a provincial newspaper, Wenzhou residents spent nearly 11 percent of their income on wedding gifts, the highest in China.

The Wenzhou shoe market and factory complex takes up several city blocks. Inside a honeycomb of small shops and factories, pedestrians compete for sidewalk space with scooters, construction crews and boxes stacked outside crowded showrooms. The streets are slick with oil and garbage. Rows of squat warehouses roofed in corrugated steel or terra-cotta tile front sewage-choked waterways.

Pan Wenheng and his wife started the Wenzhou Rui Xing Shoe Factory 13 years ago with an initial investment of $6,230. The factory now turns out a thousand pairs of shoes a day. In its warehouse, canvas moccasins for Chinese buyers and leather loafers and lace-ups bound for Italy and Germany are stacked in black boxes on wooden pallets. The company generated sales of $4.6 million last year, according to Pan, whose laborers earn between $125 and $374 monthly. “We work from 8 a.m. to 11 p.m.,” he says. “We Wenzhounese work harder than anyone else in China.”

A few blocks from Pan’s factory, Wong Tsinhuei is cutting linoleum for a storefront. Wong says he makes ten times the amount he could earn back home in Shaanxi Province. He says he came to the city five years ago with his wife and three sisters, who work as chambermaids. They’re among the 300 million people who left rural villages to find work in cities since Beijing lifted restrictions on personal movement in the mid-1980s—one of the largest migrations in human history. “I work every day if I can,” says the 38-year-old Wong, an expert furniture-maker who began an apprenticeship at the age of 18. Wong says he makes about $200 a month, and he and his wife, who earns about $100 herself, send more than 15 percent of their income to family members back home.

The abundance of cheap labor in China has kept the prices of most consumer products low. Chinese people can now afford such commodities as televisions, refrigerators and personal computers, which were once considered luxury items. But services such as healthcare, which was jettisoned by the government to the free market decades ago, are costly and of uneven quality, and rent can absorb half of an average worker’s wages. Still, many of China’s itinerant workers have the same ambitions as their counterparts in other market economies. “There is no way we could make this kind of money in the village,” Wong says. “But we won’t stay here forever. Our dream is to make enough to build a big new house and lead a quiet life back in Shaanxi.”

Getting rich may be an article of faith in Wenzhou, but it is not the only one. Religion, both Western and Asian, is enjoying a revival in a city known, because of its many Christian churches and Buddhist temples, as the Jerusalem of China. Organized faith has rebounded since the 1980s, when the Communist Party relaxed Mao-era prohibitions on religion. “Communism has become bankrupt as a worldview,” says Daniel Wright, author of The Promise of the Revolution, a book about his experiences living in rural Guizhou Province, one of China’s poorest regions. “Since the early 1980s, you’ve had a vacuum that religion has partially filled.”

One of Wenzhou’s oldest Christian establishments is the Cheng Xi Tang Methodist Church. It was built by British missionaries about 120 years ago, and its cherry-wood pews and lofty pulpit would make any Anglican congregation in Surrey proud. Yu Jianrong is the parish priest. He was attending a seminary in Nanjing when it was shut down in 1958 in the backlash that followed Mao’s “Let A Hundred Flowers Bloom” campaign inviting public criticism of the Communist Party. (The movement turned out to be a ruse to expose and punish dissidents, clerics and intellectuals.) The genial Yu was forced to work in an electronics factory, and the Cheng Xi Tang Church was turned into a cinema. The church reopened in 1979. “There were 200 people then,” he told me. “Now thousands come every Sunday.” The parish bookstore offers Chinese- and English-language Gospels, prayer books, self-help books and Holy Land tour guides. There are even Chinese-language copies of They Call Me Coach, the autobiography of legendary UCLA basketball coach John Wooden, a pious Christian. Business is brisk.

Shenyang, the capital of Liaoning Province, is about 940 miles northeast of Wenzhou. In the heart of what is known in the West as Manchuria, Shenyang was once celebrated as the blast furnace of Communist China’s industrial might. Its wide thoroughfares are flanked by sprawling factories that for decades produced the bulk of China’s steel, automobiles and machine tools. But by the late 1990s, when the government declared it would privatize its failing enterprises, most of Shenyang’s factories were shut down or restructured. Tens of thousands of laborers, many of whom had spent their lives toiling for the state, were laid off and their pensions and benefits slashed or canceled.

Until health problems forced him to quit in the late 1990s, Li Zizhong used to work at the state-owned Shenyang City Metal Works just east of the city. The factory was privatized beginning in 1991, and many of its employees were let go. “The lower class is suffering due to these free-market changes,” says Li. “It used to be you had guaranteed employment. No longer.” Still, Li says he’s happily retired, exercising, practicing tai chi and assisting his daughter, 27-year-old Li Hongyu, who runs a shop that exhibits and sells paintings and calligraphy from local artists.

Her 8- by 12-foot gallery cost her the equivalent of $200 to purchase, and she estimates she makes $60 to $100 a month. “It’s not much, but it helps us get by,” she says. Li, an expert digital-lathe operator, has a college degree in industrial engineering and went into the art business only after fruitless attempts to find work at a large company.

Many Shenyangese are uneasy capitalists. Unlike in clannish Wenzhou, there is no meng safety net here. And with the size of an average Chinese family vastly reduced by the government’s 25-year-old one-child policy, failed businessmen have few if any siblings to turn to for support. Many older Shenyangese are nostalgic for the cradle-to-grave health and education benefits of the Mao era, though not for Mao himself, who died in 1976 and whose brutality, drug use and perverse appetites have come to light in the years since.

A prosperous trading center under Mongol rule from the 10th to 12th centuries, Shenyang was an early capital of the Manchu dynasty, which ruled from 1644 to 1911. At the turn of the last century, Russia and Japan competed for influence in Shenyang and the rest of Manchuria, a rivalry that culminated in the 1904-5 Russo-Japanese War. The victorious Japanese went on to occupy and develop the region into an industrial base from the early 1930s to the end of World War II, after which Manchuria was restored by the Communists as China’s industrial heartland.

Today, many engineers, managers and other former members of Shenyang’s industrial elites drive taxis or run nanny and day care services. Some work for low wages in the city’s vast indoor market amid counters piled high with fruits and vegetables and butchers’ stalls full of animal carcasses. Li Fu, a 31-year-old electrician, has worked at a meat counter since he lost his job at the Donlu Radio Factory about a year ago. A member of Manchuria’s large Muslim community, Li Fu lives with his parents, who both work outside the home, while his wife is a homemaker. Like many of his former colleagues, Li Fu says he earns slightly more money running his own business than he did as an electrician at a state-owned company. But the work is less rewarding, he says, and he worries about the future. “It’s hard to say if things are better now than they used to be,” Li Fu says as he pushes beef through a meat grinder. “When business is good, times are good. But when I worked for the state, I had medical benefits. Now, all that is gone.”

Free-market economics has also caught up with the Chang family, whose home has been scheduled for demolition as part of Shenyang’s urban renewal program. For 57 years the Changs have lived in two rooms and a vestibule that doubles as a kitchen. The Changs (who declined to give their real name for fear of reprisal from local officials) worry that the rent on their new home will drain half of their monthly earnings. “Frankly, I would rather rebuild what we have,” Mrs. Chang says. “When you haven’t been able to save all these years, you can’t really afford a decent place. But the land belongs to the government, even if we own the house.”

Mr. Chang was 21 when he joined the Shenyang Molding Factory in 1968. Thirty years later, it was sold to a private buyer, declared bankrupt and then its ex-director bought it back from the municipal government for a token 8 cents. “Most of the employees were sent home,” Mr. Chang says. “There were demonstrations, but the government would not relent.” The factory was then sold off bit by bit to other recently privatized companies. By the time Chang retired due to poor health in 2001, he had been demoted to mechanic and was earning $50 a month. Today, he collects a monthly pension of about $61. Still, the Changs feel they are lucky. Most redundant employees of state-owned companies are given token buyouts instead of pensions, if they are offered anything at all.

Mrs. Chang was sent during the Cultural Revolution to work on a farm collective in rural Inner Mongolia, and she still resents the six years she feels she wasted in the fields when she wanted to study literature. “We had to do it or else be associated with the ‘unscrupulous few,’” she says solemnly. Almost to herself, she adds: “This was the prime of my life.”

The husband and wife exchange glances. Mr. Chang stiffens. “The government will control the situation in an effective way,” he says finally. “Everyone will have a job. The government works for the people of China. If there is difficulty, the government will take care of everything.”

Napoleon famously counseled the world to “let China sleep, for when she awakes, she will shake the world.” It is a memorable quotation, if somewhat misleading. China may indeed have napped over the centuries, but it has also been the world’s largest economy for all but 3 of the past 20 centuries, and its current rise is more a return to its historic role than anything new.

A statue of Mao towers over the city square in downtown Shenyang. The Great Helmsman, as he was known, smiles broadly with his arm extended in a grand gesture of beneficence. On warm spring and summer evenings, young people mill about the square eating tanghulu, or sugarcoated fruit on a stick, and listen to music from portable radios. One recent afternoon, the square was nearly empty except for a few Shenyangese who seemed to regard the statue as they might a slightly deranged uncle at a family reunion. The statue is surrounded by buildings crested with billboards promoting everything from washing machines to cellphones. Shenyang is struggling to adjust to China’s new economic reality, but one gets the feeling that it will not be long before boom times consume the Mao statue and what remains of his legacy, assuming an angry mob doesn’t do it first.

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