Erin Ailworth spent two weeks reporting in China at the end of last year, as China’s economic engine began to sputter. The slowdown has since deepened — underscored by last week’s cut in interest rates by the Chinese government — with implications for the global, national, and Massachusetts economies. Here are her impressions of a nation in transition.
BEIJING — The city’s Fucheng Men subway station teems with people at the end of the workday, as thousands of commuters cram themselves into subway cars already packed so tight that some faces are squashed against windows and doors. Above ground, honking motorists muscle their way through the streets, zipping around bicyclists, buses, and trucks, and popping onto sidewalks — pedestrians or no — when traffic gets in the way.
I navigate the crush carefully, hoping I won’t get lost — or run over — heading back to my hotel. I’d heard plenty about endless crowds clogging every corner of China’s capital, and had spent nearly a week here dodging cars and pedestrians alike. But I’m still stunned at Beijing’s free-for-all.
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ERIN AILWORTH/BOSTON GLOBE
China’s economy has shifted from being export-based to being increasingly focused on meeting burgeoning domestic demand.
The chaos, repeated in cities throughout China where roughly half of the country’s 1.3 billion residents live, is a reminder that this surging mass of people is China’s greatest strength, but also the source of great challenges as the country’s economy reaches a crossroads.
‘The foundations of this extraordinary boom are as subject to change as the skylines of Shanghai and Beijing.’
For a decade, this army of mostly unskilled workers fueled China’s spectacular growth, built on exporting lower cost goods around the world. But as its citizens’ wages and standards of living have risen, China has lost its low-cost advantage to competitors like India and Vietnam, requiring the nation to try to build a highly educated, highly skilled workforce capable of innovating, developing, and making sophisticated products.
At the same time, China is attempting to shift from an economy based largely on exports into one that is increasingly driven by domestic consumption.
How and when China makes this transition has big implications for the global, national, and Massachusetts economies. China has been one of the world’s most dependable engines of growth, motoring along even as the financial crisis of 2008 plunged the West into recession. It has also been one of the Bay State’s fastest-growing export markets.
The transition, meanwhile, has been complicated by an economy that is slowing sharply after growing at or near double digit rates for years. Adding to the uncertainty is an upcoming change in leadership this fall, when a majority of the country’s top officials are to be replaced.
Orville Schell, director of the Center on US-China Relations at the Asia Society in New York, tells me that China’s potential remains huge, especially if the government succeeds in building a domestic consumer market. But still he worries about the country’s future given a lack of consensus among leaders about laws, regulations, and the direction of government.
“The foundations of this extraordinary boom are as subject to change as the skylines of Shanghai and Beijing,” he says. “We just don’t know when or how. [But] no society goes onward and upward endlessly.”
Yet touring Shanghai, I wonder if China’s leadership is trying to do exactly that. The city’s horizon is dotted with construction cranes in nearly every direction, and the local executives and academics I interview tell me the government can drive the country’s vast labor pool to rebuild whole sections of China’s major cities in a matter of months — with little to no resistance.
George Yip, codirector of the Centre on China Innovation at the China Europe International Business School in Shanghai, says the combination of people power and authoritarianism has been an advantage in developing the economy.
“They just throw numbers [of people] at a problem,” he said.
I continue to wander Shanghai, reaching the bank of the Huangpu River, which divides the city’s east and west sides, and look across the water at the Pudong District’s cluster of gleaming skyscrapers before strolling down Nanjing Road, the city’s premier shopping area.
The street reminds me of New York’s Times Square, especially at night when neon-bedecked buildings and brightly lit shop windows beckon passersby to purchase Uniqlo clothes and Omega watches. Beijing, meanwhile, has the feel of a sprawling Chicago, with blocky high rises and office parks giving way to the city’s narrow maze-like hutongs, the historic alleyway neighborhoods.
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China has lost its low-cost advantage to other Asian nations as living standards have risen.
For all their surface sophistication, Chinese cities are still a reminder that China remains a developing nation. Many homes and businesses in Beijing’s hutongs,for instance, don’t have indoor plumbing, so public restrooms abound. In both Beijing and Shanghai, traffic laws are just suggestions as bicycles, cars, trucks, and buses compete for advantage in clogged streets, blasting through stop signs and red lights at will.
Bala Ramasamy, an economics professor at the China Europe International Business School in Shanghai, says he believes the chaos is a result of many Chinese, who have flocked to cities from the countryside, still viewing themselves and their lifestyles as rural.
“The one thing that I’m concerned about is whether the mindsets of the people are changing with the growth,” Ramasamy says.
Part of what’s holding the Chinese back, according to Steve Chung, a Beijing-based executive for a video software firm, is that the country is an imitator rather than innovator, more likely to say “Let’s do a Google of China” instead of inventing a new search engine. That’s in part because Chinese culture prizes achievement and success, said Chung, and therefore shies away from risk.
“I think every country in their developing stage goes through this process,” Chung says. “For China to innovate, it needs to foster an environment where it’s OK to fail.”
His words resonate a few days later, as I consider a final trip to the historic Yu Gardens and Bazaar, a marketplace I visited briefly on my first day in Shanghai. I’d passed on seeing the gardens after being bombarded in the bazaar by hawkers pressing me to buy knockoffs of Swatch watches and Louis Vuitton purses.
Rather than braving that gauntlet again, I spend my last evening in China at a restaurant in Shanghai’s trendy Xintiandi mall, enjoying one of the city’s true innovations: xiao long bao, or dumpling-like steamed buns.