Bullish on China After My Recent Visit

Everyone seems to have an opinion on China - their people, the government, the economy and the markets.

After reading so much about it, I decided to invest the money and time (2 weeks) to go see it and feel it for myself.

• My favorite part of the trip was most definitely the people. They could not do enough to help even if they did not speak much English. They seemed amazingly happy everywhere I went (and I ventured away from tourist spots as much as I could).
• At the brokerage office I visited in Beijing (2 times), I asked how many brokerage accounts they were opening a day. The answer was about 100. This is down from around 300 per day 9 months ago when the Shanghai market was soaring.
• Don't believe everything you hear in the Western media about Tibet. There is another side to the story for sure. Some would argue that much of the Western media seems is as biased as the state controlled media in China.
• It sure didn't feel like I was in a country where human rights where being violated in a meaningful way. In fact, these people seemed so darn happy and proud of their country and government that is was a noticeable difference to most people's feelings toward the U.S. government.
• The true strength of China is the will of the people to lead a better life. Construction workers work all night long in the rain, cab drivers beam over a $2 tip, and business leaders from around the globe are coming to China to help them get even better.
• Tourism is exploding among the Chinese people. My guess is 98% of the tourist places we visited where mainland Chinese people…not foreigners.
• Hyundai and Volkswagen were the most prevalent cars in Beijing. Audi is the most popular high end car.
• China is open and certainly gives the feeling of welcoming visitors with open arms.
• The literacy rate in China is a surprisingly high 86%.
• China's advantage is not just cheap labor. It is Chinese peoples' skill level and work ethic that is most important to them having a major competitive advantage in the global market. Think about it, there is plenty of cheap labor in Africa, India and other Asian countries. The problem is, these countries lack education, infrastructure, energy, and the skilled workers needed to make the best products the world demands.
• Most of the wealth in China is in hands of 45 year and younger age bracket. Let's call it "new money". This is a stark difference from the U.S. (and the rest of the developed world) where most of the money is old money (older folks have most of the wealth). What this means is the younger people in China do not resent the rich; they look up and aspire to it. This is the exact opposite of what it is becoming like here in the U.S. where there is major resentment on the rich and a war on them by the politicians.
• While Communism is the political party in China, it is most definitely NOT the economic system. In fact, I can comfortably say that China probably has more dynamic entrepreneurs and capitalistic people than any other nation in the world.
• It is pretty clear that the Chinese government gets things done efficiently and quickly (a huge contrast to the U.S where it seems nothing can get done anymore). Once a decision is made; things move and progress is made. This means roads get built, airports get built, schools get built, power plants get built (nuclear included), factories get moved, taxes are cut or raised, safety measure are put into place, corruption is weeded out etc. Granted, no country is perfect and some people will correctly argue not enough is being done about things like pollution and piracy…but they are moving in that direction.
• I would describe the Chinese government as similar to the parent of a teenager (which is kind of where they are in their economic development). They allow a lot of freedom but there is also supervision, direction and strong decisions made for the good of the country and the masses. The way I look at it is, parents are not violating human rights when they tell you your curfew is midnight, or you must go to school, don't do drugs, cut your hair, you cannot get a tattoo till you are 18, don't drink and drive, you cannot drive the car if you flunk out of school, or you better not get your girlfriend pregnant.
• Regarding development - if your very dear, old run-down home in the city is chosen for a new high rise or expressway, you are given cash to move to another place nearby, or you are given housing far outside of the city.

On a scale of 1-10, this trip was a 12. My girlfriend never really wanted to go to China (she is a Europe gal); now she cannot wait to go back - and neither can I.

I am extremely bullish on the Chinese people (and thus their markets) for the long term.

Comments

[denissuslov]

"It is pretty clear that the Chinese government gets things done efficiently and quickly"
Yeah, schools in Sichuan also were built pretty quickly.

[fxtrader07]

oh my...
of course, literacy is "suprisingly"... high. so-callesd socialist/communist governments allover the world are very much determined to education of the people and allowing everybody access to it.
now, tibet - really, what did you see and hear with your own ears and eyes about tibet and from tibetans. i mean, while no chinese soldier, policemen or govt. guard was watching. I am 99.999% sure about the answer, but you may point it out.
then: of course, people are proud of their country. chinese people have been that throughout centuries. remember, china was already once the world's mightiest country back in the 19th century, though few people in the West seem to know about that
but this pride and alot of other feelings have been carefully cultivated and encouraged and even forced upon people. make no mistake after decades of central party dictatorship people are highly indoctrinated.
how much of china#s landscape (i.e. villages), backward areas have you seen? and how could you have talked to a single person there?

sorry, but your entire report reads like the one of some tourist haveing briefly visited a few places, talked to someone here and there. do you really believe to get a comprehensive picture from a 2-weeks trip into an absolutely different culture, with a language you don't know and a mentality that is completely different from a Westerner's (despite some urban middle class people adopting westernn ideas rapidly)?
Give me break!

[fxtrader07]

and the most silly - no truly embarassing part:
"I would describe the Chinese government as similar to the parent of a teenager"
HELLOO???
This government is ruling with absolutely cruel methods. Prison camps, letting people disappear overnight never to be seen again, genocide against Tibetans, torturing, suppression, mass evictions, mass executions...
that is waht you would call "parent of a teenager" attitude??
Are you Mao's spokesman or get you paid some money from the propaganda ministry or what???

really, i wish you would spend 2 weeks in a chinese prison camp where you can get in a blip just when some party or govt. official decides so.
maybe that would give you a true impression of the country's govt.

[Philly Jim]

Careful on the Tibet issue! How would you like your government telling you you can't worship freely?

In the U.S., politicians need 30 years just to decide on building a road or bridge, then it takes the union laborers another 30 to build it while they work 1 hour a day.

I don't see any friendly faces in cities in the United States, actually most cities in the United States remind me of being of South Africa or the ghettos of Brazil.

Old money definetly runs the show in the West which is evident in how our major corporations are being run into their graves by foreign competition.

Hopefully Barack will breathe new life into the American political scene and attract a new breed of politicians who thrive on ideas and progress, not power and greed.

[Hang]

Good article. Like America, China has its problems. But China is mispresented in the western media. Seeing and feeling China rather than simply listening to the biased media is the right way to know China.

[J.D]

Low grade propaganda.

[Steve K]

Thanks for your impressions, Jeff. Good to hear about China from someone who has actually been there.

[olympicdai]

People could have differrent feelings about their own countries....But no one has the right to judge anything others say about a country before you really go to the place and feel it by yourself.

[huangjin]

The cabby was happy because tipping is not the custom in China.

I think many people have wildly exaggerated ideas of China, either it is a communist pit or uber-capitalist. In terms of business you are right, but if you spend time reading news from China (or live there for an extended period), you will learn that there is a dark side to taking peoples' homes and farms, compensated or not. There is great unrest because government policies favored the coastal areas over the inland. The young people you met probably live in the cities and want to get rich, but the young people in the west and countryside are like illegal immigrants in their own country because they cannot get permits to work legally in the cities. Also, in Shanghai and Xiamen, residents have successfully blocked development and their power is growing.

Although I think it's far less rosy than your impression (take a look at the balance sheets of state banks), the Chinese will overcome whatever obstacles are in their way, be it economic or political, because they want to succeed. They have the attitude that America had 100 years ago.

[fxtrader07]

@olympicdai: you are right - and i have been to china, btw.
it is outright annoying if someone makes a characterization about the Chinese govt behaving like a teenager's parents from someone who has just briefly vistied this country enjoying the highly priviliged status of a tourist. Before one didn't live a couple of years undera government or knows people who do so very close, such judgements are preposterous to say the least

[bd1990]

I grew up in China and move to US at age 27. When I visited my hometown 14 years after leaving it, I could barely recognise 10% of the town. My folks kindly kept asking me why you don't come back. Most of my college classmates were owners of apartment(s), car(s) and they do appear genuinely happy with everyday life. I resent what the communist government did to students in 1989, but I have to admit, China is way more capitalist now than communist then. Some fundamental problems remain the same, no free press, no freedom of religion, etc. far less freedom by US standards. But US did not become the way it is in 20 years, so it is not fair to compare it that way. In priciple, I agree almost entirely on your sharp observation over a short period of time. Jim Rogers spend much longer time in China, hope your girlfriend will not complain if you move all you asset/investment to China as Rogers did. If you believe china is sort of like US 100 years ago, the stock market has another 29 years to grow. Good luck.

[mbborak]

What would give this article more credibility is a wider perspective on how China's strengths compare with its weaknesses. After a short visit to a huge and vastly different country, almost anyone would be awed by their experiences. Living in the country for over a year allows this initial "glow" to wear off and you see some of the more mundane and unimpressive aspects of the nation, such as the pervasive and unforgiving repression of free speech.

That said, China is a tremendous force that will certainly lead the world one day. The youthful energy and exuberance you highlight can lead to positive change, but also has the propensity to trample over anything obstructing the path of China's torrid growth.

[rainman]

pollution?

[texn2]

"In fact, these people seemed so darn happy and proud of their country and government that is was a noticeable difference to most people's feelings toward the U.S. government.

"hungjin," said it all above when he said "They have the attitude that America had 100 years ago." Many Americans have lost the fight, drive and ambition that made this country great. Handouts do not build character or a country.

[John Egan]

Anyone desiring to get a feel for China, might want to search for the 10 day to 14 day tours. One I was looking at was a 10 day cruise down the Yangtse, including air-fare, all meals and a quality hotel at the arrival and departure dates, sleep on the boat the rest of the time...Prices ranged between $1800 and $3600 ... Think I'd wait for a month or two after the Olympics, and expect the prices to settle... But, what an opportunity!!

Thx jegan ;-)

[John Egan]

Re: Some of the preceding comments:

1) The author was noting the positives... Apparently, in his mind, the positives outweigh the negatives.
2) His take on the people, the government and Tibet were just his perceptions. He clearly was positively impressed.
3) Countries that don't have our safeguards can move more expeditiously and you can expect issues with construction. (I'll never forget vacationing in Puerto Vallarta, MX in the week between two major earthquakes. You had to step up in a cracked hallway on the 12th floor of our hotel. The addition next-door was under construction. The structure was built of those hollow bricks that are popular throughout Europe and South America, rebar was placed vertically about every three feet and the openings were propped up with what appeared to be pine logs as the mortar was setting up... ) And safeguards are only as effective as the overseeing agency. In S.F., a major contractor was slapped on the hand last week for knowingly pouring improperly compounded cement in many major public projects over the years.
4) America hasn't lost the fight and drive etc., it is just harder to get anything done here as opposed to countries that are less restrictive. This is typical of countries that are moving away from authoritarian forms of government. China clearly has a a dichotomy in that it's politics differs from it's desire for wealth. And from what I've read, it seems that the populace is accepting of this situation. I'd like to point to G. Bush's failed attempt at pushing Democracy as flawed in concept. Having lived in many different countries for many years, I recognize that Americans are very ego-centric.. Probably as they are so isolated from the rest of the world. ( I am an American by the way.. )

Nice to hear from someone who has actually traveled there, as I intend to do.

Thx jegan ;-)

[syjcca]

It's far more interesting if one goes to China without joining any group. Just get your plane ticket and book a hotel and go there yourself after obtaining a tourist visa. Transportation is quite cheap so are hotels and meals. You can venture out and see all the sights in Beijing and other cities. If you've time, travel by train and bus. The prices are very reasonable and you will have more fun and 1st hand knowledge about the people and the country. Jim Rogers is a great fund manager. He's high on China for very good reasons.

[jaknicmom]

well written...almost makes me want to visit, and invest...thanks for the visual.

[Beijing ren]

I love these fly-in investors who visit China for two minutes, can't speak the language, only tour Beijing and Shanghai and are immediately experts/ in-the-know about going ons in China. Absolutely incredible!

They are given cash to move? Hah. What hotel did you stay at? You take cabs around town when 99% of the Chinese people take busses/ bikes. You really understand whats going on in China.... hmmm. The construction workers you mentioned do work hard absolutely right, they have to work harder though to get their pay once they are finished building the hotel you stayed in.

reply on twitter at TXCapBeijing

[User 65808]

Another nice "gweilo"!

[rlirph]

It is interesting to hear Mr. Farley had to say and I as a US citizen living in Guangzhou for two years appreciate his comments.

Why does any one has to jump on him because of what he said? It is the opinion of one person. Ever heard people are talking about how arrogant and self-centered the Americans are?

China is an emerging country. It still needs another 30 years before it becomes a threat to the US. Relax, everyone.... Meantime I listened to Jim Rogers and have moved every thing from LA to HK/GZ. I am sure that over a long haul it will be financially rewarding.

[cwang]

"I would describe the Chinese government as similar to the parent of a teenager". This is very very true. But communism shouldn't be blamed for this, but the Confucius. Things like this have been taught and practiced for two thousand years. Although Confucianism is not endorsed by Chinese government any more, and very few people study Confucianism classics, it is still practiced in major way in China under tremendous historical influence. It is also a magic that ordinary Chinese don't have to be educated to be influenced by Confucianism. It is a part of the culture and art. I am see why western people coming from different background resent "parent" government, but most Chinese people feel normal.

[cwang]

The up side of Confucianism is that it defines disciplines for government too. I was not surprised that Premier Wen Jiabao shown up in epic zone within hours after first shock in recent Sichuan earthquake. It is how official and government should behave in face of major natural disaster. If government doesn't do what's expected, Chinese people are not hesitated to refer their How to overthrow government 101, thanks to the history books written by many great Chinese scholars in the past 2000 years. In the west, a country is ruled by law, but China is ruled by its great history.

[James V]

Hello Jeff,

You are obviously a very nice, kind, polite person. The chinese very much like foreigners like you, I for the same reason get on with Chinese perople. It is obvious that you connected with the beauty of China just as I did when I made my first trip to China which lasted 6 weeks.

However there is a darker side. Having lived here for a very long time with an open heart, new prospectives develop. You are right in a lot that you say but in other areas such as below you are very very wrong.

Human Rights
Distribution of Wealth
Construction Workers

Beijing Ren I am afriad is right. Until you can speak Mandarin and live in China (mainland china) you dont get full picture. Infact even when you can speak Mandarin, unless you are introduced by another Chinese person you have very small chance of infiltrating into the more subtle, secret aspect of Chinese society. The chinese culture and society has extreme depths, most of the time foerigners are just looking in from the outside behind a piece of glass.

In response to cwang comment, I would like to share my admiration and respect for Wen Jiabao. He is a genuine man who cares about his people. Infact probably one the greatest officials in history of China.

[User 177405]

I believe some of the comments here are bias, the same negative comment that Taiwanese people would said about US some 20 years ago when US switch recognition from Taiwan to China. The same negative comments that some Asian people would said against other countries.

Question is, have these people stating negative comment had ever been out of their own country to provide judgement?

I believe the best advise to skeptics, go visit China yourself and make your best comment and judgement.

[ruff11]

Great article!
Been there, once with a "commoner and once with an entrepreneur The commoner had a wife and child and could barely keep up with expenses. The entrepreneuwas buying real estate and a factory all with money lent to him by the government at 2%. With inflation running at a 6% to 9% rate that bubble has to bust!
Also, China is feeding 25% (and rising) of the world’s people with 7% of the world’s agricultural land. That too will soon become a problem.

[rlirph]

It is amazing to see so many people leave sarcastic negative comments yet their comments have no substance.

Beijing Ren do you live in China now? Does your six week stay in China make you a better person to judge China than some one who spends two weeks only?

To James do you speak Mandarin? Which secret Chinese society do you want to join? May be I can help you...what a joke!

I have been living in Guangzhou for two years now...a transplant from LA. Like every place it has its own benefits and drawbacks. You just have to figure which place offers the best combo. Meantime I have decided to stay...

How can you compare China with the US or any western country? - where people are making a fraction of what Americans are making?
China has many its own problems, just like any emerging country. It may come through with flying colors or it may not. It will be at least thirty years before one can make a sensible judgment.

[Kingman]

This is a great article because the author is honest, observant, without a preset agenda, and did not try to be politically correct (in an American way). There are not a few observations that are original, in good perspective, true, and have never been suggested in western media. It is outstanding to have such good observations in just 2 weeks. Not every one of the media from the west has to be a critic going into China. Just like foreigners coming into US do not always complain about US treatment of the red Indians, the blacks, foreign policies that kill people, etc.

[Beijing ren]

@rlirph my "six week stay" turned into 2 years. come visit me up in Beijing whenever you get a chance. If you spoke Chinese you would understand what "Beijing Ren" means. I am glad you are getting such a wonderful prospective of China from down in Guangzhou where the foreign population outnumbers the Chinese.

用中文回答我就觉得你不是假的。

[Changle]

I don't think I've heard so credulous an observer of China since all those Westerners decades ago who came home celebrating Dazhai! (Look it up.) Seriously, the author makes the valid point that Westerners have an impulse to judge first and investigate later when it comes to China, and that many of those situations in China that seem so clear cut to us in the West do so only because we are thousands of miles away from them. However, in my years living there I've seen brutal arrests, shocking poverty, police harassment, surveillance and unwarranted detention, horrid working & living conditions, and scenes of spine-tingling pollution. And yes, many good things. But all in all, a dizzyingly complex, and yes, often deeply troubled society. And its troubles don't hide into he distance, they sit right under our noses as we travel through. Sounds like another Westerner who sees the world in China from his hotel. If this is the author's habit, to make observations this credulous, I shall be sure to avoid his investment advice.

[PF Chang]

China is nice country. Food here is good.

[canbj88]

Jeff, Five stars for your short article. I am recommending your article to many of my friends. You started it on the right note: "My favorite part of the trip was most definitely the people". I am a Canadian having been sent to China initially for three months by a Canadian government program followed by a two-year assignment by my employer. The experience was so positive that I later quit my job in Toronto and uprooted my family to come to China and have been here for almost 20 years. For the critics, I speak fairly fluent Mandarin and a little bit of Cantonese and other dialects. I have travelled to almost every corner of the country and covered all areas including the very poor and the very rich places because of my various jobs. Some of the critics seem so biased that even if I write ten more pages, it will not change their mind. One food-for-thought: In China today, the common people make fun of the government and criticize the state leaders with almost no fear, much less fear than in a democratic Singapore. Freedom is relative. As you correctly onserved, people are happy. They are happier than in 5, 10 or 20 years ago. (Regarding Tibet, it seems to be politically incorrect in the Western press to say anything good about Tibet. One statistics though: while there may be 50,000 Tibetans that are worst off today most of whom had fled China, the majority of the 2 million Tibetans are much better off today. The temples are also in better shape than any time in history as Tibet was always poor in the past with a handfull of rich serf owners similar to slavery times in the US.) I guess people in the US are also happier than 5, 10 or 20 years ago as humans are progressing and life is getting better everyday - materially (think of $$$), culturally and spiritually. Sometimes I joke with my Chinese staff/friends when having meals that we are enjoying better food than the rulers had in the palaces of yesteryears. Physically and materially it is true due to modernisation and science.

Think of the impact of tourism: 40 million Chinese went abroad as tourists in 2007 - this was unthinkable politically or financially even a few years ago. There are probably more Chinese that have been to all of Thailand/Malaysia/Sing... than there are US citizens that have been to all of those countries. Very soon, there will be more Chinese that have visited Europe than there are US citizens that did it bacause Europe is open to Chinese citizens and is a most favourite spot now. That 40 million will be surpassed this year, add to that domestic tourism in the billions of person days. Now you should start to understand why China bought more planes from Boeing and Airbus than any other country. Give China another 20 years then history could judge whether the current government is doing the right things. In my observation, they are mostly doing the right things. They do need to do much more in polution controls, energy management and medical care, and they do need to improve the checks and balances in the financial system (most people won't know what I am talking about here and I won't go into details) and construction system that critics are quick to point out correctly as exposed by the earthquake. The existence of problems do not nullify the achievements. Let's all be factual. A properous and peaceful China is in the best interest of humankind today. That's what they have - prosperity and peace. Hope it continues.

Jeff, your observation that: "Most of the wealth in China is in hands of 45 year and younger age bracket" is very real. That's one reason why "Swiss bank account" is not an issue here, the money people make is being re-invested in sharp contrast to some other corrupted countries.

Come and see China, it will be healthy for your health, mind and finance. And it will be good for peace and prosperity for all.