The End Of Cheap China By Shaun Rein – An Insightful Look Into China From The Inside

Before End of Cheap China is released to the Asia market, it is already banned in China.  Why would a subject on economic and cultural trends that may disrupt the world received such treatment?  My contact at Wiley is intrigued.  And she is keen to hear my view.  I too am intrigued.  The author Rein is a mixed heritage of Chinese and Jewish.  He married the granddaughter of 50 most important Chinese Communist party members in history.  Because of his business background, he gets to converse with China’s leading entrepreneurs on a regular basis.  The author practically lives and breathes in China.  End of Cheap China is largely a collection of Rein’s social, economical, and political opinions of China written in a journal style.  Because this is a still business book, at the end of each chapter, there is a short appendix catered for the business readers.  While I may not have a definite answer to why China deems the book unsuitable for her people, let’s take a look at what this book offers.

1998, Rein was in Changchun, a city at the northeast China.  Back in those days, everything in China was cheap.  For US$20, according to his observation during that trip, you could have some ‘fun’ with a girl in your hotel room.  A girl with a physical outlook that could qualify to be on the cover of Teen Vogue magazine.  Such scene is now unseen of in China.  Why so?  Here is his view on this matter.

China’s economy and job market have seen dramatic changes in the past decade and a half.  As more attractive, better-paying job opportunities increased, pretty young girls took advantage of better options, and the pool of prostitutes got uglier as a result.  The uglification of China prostitutes is part of a boarder trend that is the subject of this book, The End of Cheap China.

It is hard to understand China without an appreciation of Chinese modern history.  Through his personal interaction with his mother-in-law, the author recounts the events and impact of Cultural Revolution (66-76).  Many in China still remember the pain and suffering.  Yes, to the Chinese people, free speech is great but not if it threatens stability.  According to Rein, Chinese people support the central government.  What they often protest against are the local officials who are given the flexibility to implement the policies set by the central government.  In this complex political landscape, the author examines the root of corruption that is often found at the local level.  Local officials in China are poorly paid, not allowed to travel or retire to the private sector once they have reached a certain rank.  This leads to local officials being more susceptible to accepting bribes.

Officially, prostitution is illegal in mainland China.  But why is it practiced openly?  Again, this points to the political makeup of the country.

For ordinary Chinese people, vices like drugs and violence are intolerable due to the immediate impact on their every lives, but often they will tolerate prostitution as long as it is kept behind closed doors and distant.  Here we see the divide in thinking between levels of government: Local officials and people confront prostitution pragmatically, whereas the central government upholds a more morality-based approach.

To examine the economic trends, Rein visited Laura furniture factory in Shanghai.  There are 10,000 workers on the working floor and the environment appears decent.  Because of the high demand in Chinese skilled workers, the factory (and many others) is facing the challenge of keeping the workers.  This drives up workers’ salary and in turn drives up business cost.  The factory could pass the cost back to American consumers and Laura may have to consider moving the factory to countries such as Vietnam or Indonesia in order to cut cost.  However, this is not desirable because the skill of Chinese workers and infrastructure of China cannot be met by these countries today.  What should Laura do?  Rein’s advice to the factory’s manager is that instead of exporting all the furniture to America, create a market share in China.  Leverage on China’s domestic market to sustain or even grow the business.  In fact, that is what the current trend is: Market the products back to China consumers.  Branding then becomes the next challenge because these foreign brands are going to compete with the local household brands.

You may have heard that because of China’s one-child policy and Chinese’s desire to have sons, this leads to an imbalance to the gender ratio.  In the past, for practical reasons, when many were farmers, sons were preferred.  In the past decade and a half, the role of Chinese women has changed.  Take Laura furniture factory as an example, women are paid more because of the skill involved in, say, sewing the sofas.  Men are paid lesser comparatively because labor type of work is less valued.  Moving away from the factory and into the cities, the same pattern is observed.  Women are flavored in the service industry, especially on the consumer sales.  More often than not, wives earn much more than husbands.  This has an implication to the social trend within China.

The empowerment of women is one of the great developments of modern Chinese society.  Women are becoming the key drivers of spending; they are beacons of optimism in the country, and a major force behind China’s transition towards becoming one of the biggest markets in the world.

When it comes to food, foreign brands seem to do well in China due to local food-supply problem.  The recent baby formula episode is a good example of why Chinese people are especially careful on food consumption.  Kentucky Fried Chicken is considered as ‘healthy’ because many Chinese trust that the food from these foreign brands is safe to eat.  While on the topic of food, the author observes that China import over $15b in food products from America in 2011, up from $6.7b in 2006.  This trend will continue to go up.  What is the implication to the world?

I suppose for those who are outside China, we often wonder: Is China really doing well?  The author examines the topic of real estate from various angles – the policy flaw in terms of favoring the commercial zone as it is easier to obtain construction loans compare to residential and Chinese’s preference to hold tangible asset rather than stocks.  The author also examines GDP in China and he argues that unlike Japan, China’s infrastructure spending is more efficient and it helps to jump start the economy growth in the cities.  On the education front, Shaun highlights the classroom overcrowding issue (imagine a class size of 1,500) as well as the fact that the Chinese education system is not producing enough creative thinkers.

The topic interests me most is on China’s foreign policy.  Because of the need for natural resources, China has been actively expanding the influence to countries like Africa and Pakistan.  Different cultures adopt different policies when investing overseas.  When Chinese companies financially takes over a foreign company, the existing management team is often left intact.  Yet, not all countries trust China’s non-interference approach.  Some countries do not welcome China’s money.  Some struggle to accept China’s financial help.  Now I know why as a Chinese, I bond well with Pakistanis here in Singapore.  They seem to have a good impression of Chinese people, thanks to China’s friendly investment in Pakistan.

End of Cheap China is a good read, for those who wish to learn more about China from the inside.  The journal writing style makes it easy to follow.  Because the content of this book is filled with the author’s criticisms and opinions, it could get a bit disoriented.  This book at times appears to be written for the Western businessmen who are investing in China.  In other chapters, the author seems to address to the US government, to the Chinese government, to other governments, or to the Chinese people in China, on what they should or should not do.  Each target audience – I would presume – has different agenda and potentially conflicting interests.  It is unclear if Rein’s goal is to advocate a win-win situation.  Personally I would prefer a straightforward journalistic approach such as Nothing to Envy (a book on North Korea).  Having said that, End of Cheap China is also a business book and it is packed with action items for those who are doing business in China.

I do not know how a book get banned in China.  I admire the author’s boldness in analyzing China at the ground level, talking to commoners in China as well as to the Chinese billionaires.  To be fair, some of his criticisms go beyond China and are directed towards America.  Maybe it is the book title.  Or the prologue when he was approached by a young prostitute in 1998.  Maybe it is his account of Cultural Revolution.  My question to the writer would be: If he was to know the ban, which bits would he rewrite or censor, if at all?

Hardcover: 240 pages
Publisher: Wiley; 1 edition (March 27, 2012)
ISBN-10: 111817206X
ISBN-13: 978-1118172063