For a view on the future of the Chinese economy, who better to ask than its businessmen? I had the chance to talk to two while I was in Hong Kong and Guangdong over Christmas.
The first, Jim, never went to school. He was working in a Hong Kong factory at the age of nine, where he made just £4 a month — all of which went to his family. Today, he lives in a large house in Hong Kong, has four cars, is a member of the prestigious Jockey Club and thinks nothing of betting a few thousand pounds on the horses at Happy Valley.
Jim has three fine and well educated sons, but he wonders whether they will do as well as he has without the incentive of an escape from poverty. After working for others for several years, he set up his own clothing factory in China, he made a good business supplying customers in Europe, and provided many jobs for loyal and grateful staff.
The new China: From exporting clothes to farming sea cucumbers
But Jim no longer thinks it is possible to make much money in the clothing trade. ‘Chinese wages are just too high now’, he explained. And he has another reason for closing his factory: the land on which it stands is now worth millions. So he is selling up, but business is in his blood and he explained his new plan.
The new Chinese government, he told me, is intent upon doubling the living standards of the population. For that to happen it must improve its agricultural economy. So twenty million peasant farmers will be moved into the cities, their small holdings will be consolidated into large ones and subjected to the most efficient methods of factory farming.
But Jim does not envisage riding a tractor. He has his eyes on the sea cucumber, to my Western tastes a rather unpleasant rubbery marine creature, but one nonetheless that the Chinese prize highly. Indeed, I saw a small box on sale for about £1,000.
It is not just the taste that the Chinese savour but also the sea cucumber’s health-giving qualities which reputedly are effective against arthritis, cancer, gum disease and impotence. As the Chinese become wealthy they want to eat better, and the ageing population is increasingly concerned for its health.
With the blessing of the government, crucial to any enterprise in China, Jim reckons that the sea cucumber is a juicy business opportunity. He is looking for a suitable spot along the coast to start his marine farm.
‘China’s growth is good for another twenty years’
The other businessman is Lee. He too started with nothing, but now lives in a penthouse flat in Panyu and with a partner owns a business with a £5m turnover. This enterprise provides sound systems for hotels and other buildings and is clearly dependent to a large extent on the continuation of the Chinese construction boom.
Lee showed me the new headquarters of the business, now taking shape in Panyu. His new office will extend to a roof garden, where he is hoping to grow some plants and practise his putting. But I’d say he won’t have too much time for that.
The business now employs thirty people, but the new office can accommodate eighty. The target is to grow the turnover to ten million and Lee does not think that should be a problem.
China’s growth, he reckons, is good for at least another twenty years, and he had some interesting things to say about the new government.
This, he believes, is a government of technocrats. The new leaders are not just favoured sons, but are intelligent and practical. The new premier has already spoken out against corruption, and demanded that official banquets are less lavish. Whether to maintain its grip on power, to improve the lot of the Chinese people or to poke a finger at the West, the government is determined to promote growth and modernisation.
A tip from a Chinese businessman
Neither Jim nor Lee see any threat to the sustainability of China’s boom. Indeed once the underlings of the new administration have taken the places of those recently departed the whole Chinese system, whereby an edict from on high filters down through the system to approve favoured projects, should crank up once again.
My conclusion? That Chinese influence on the global economy, via demand for resources, luxury goods, and overseas travel, will only increase. And the tip from a Chinese businessman is: ‘Everything in China starts with politics. The Chinese economy will pick up in 2013 – and so will the stock market.’
Contributing Writer, Money Morning
Publisher’s Note: This article first appeared in MoneyWeek
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