A Tale of Two Chinas

As the red-hot Chinese economy feeds the world’s appetite for consumer goods, the one-time 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 The machinery is outdated and the glue guns leak.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.

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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.

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