Musing on the Middle Kingdom & More: The Really Good, the Perhaps Not So Good, and the (Really) Not Very Good At All About China

Some observations

People often ask me: “Where do you stand on China?” Am I a “China Hawk?” Or am I a “China Dove?” What are my real feelings about China? And how do I feel about my experience when I look back on the four years that my wife, Ruth, and I lived there? That was 2011 through 2014. I was there to build a joint venture (JV) bank with Shanghai Pudong Development Bank (SPDB, which is owned by the Shanghai government, which in turn is controlled by the Chinese Communist Party, or CCP) as my partner; and Ruth was there to learn about China, meaning the Chinese language, Chinese history, Chinese culture, and—in particular—Chinese art, both classical and contemporary.

My standard reply is this: Those four years in China were the most interesting four years of my life. And yet, at the same time, the CCP can be a very difficult JV partner, and I would never knowingly choose them as a JV partner again.

Of course, a statement that brief can never convey the essence of an issue as complex as that of what I believe to be the “truth” about China. In this essay, I will try to dig a little deeper. That said, China is—especially for Westerners—a very complicated topic, and to do it justice I would have to study it for another 25 years (I’ve been at it for 25 already) and then write at least 25 volumes. True “Old China Hands” (and I don’t claim to be one) are fond of saying that the longer they study China, the less they understand it.

I’d like to begin with one (at least one) disclaimer. Nothing I say about China can capture all of China. It is too big and too differentiated and too opaque and too difficult to understand to be “captured” in generalizations. My statements are intended to be just that, generalizations, that reflect my perceptions.

I’ll divide these “generalizations” into three different groups: the “good,” the “bad” and the “ugly.” And after that, I’ll include another paragraph or two about my perceptions of the U.S. at this point in time, to demonstrate that I am at least somewhat aware of our own shortcomings.

So, here goes.

The Really Good

These are the things about China that I like and admire:

China has really good cuisine. Varied, to be sure. Cantonese food is different from Shanghainese food, which in turn differs Sichuan’s spicy cuisine, and all three are different from the food in Xi’An, and so forth. In fact, each of China’s provinces has its own unique cuisine, and all of them are worth getting to know. In general, Chinese food is an amazing “taste treat.” I like almost all of it, and even love some of it.

The history of China is utterly fascinating. From the “dawn of time” through to the 76 years since the “Liberation” (which is how the Chinese refer to 1949, the year in which the CCP assumed control over what is the present People’s Republic of China, or PRC), Chinese history never ceases to fascinate me. I can’t stop thinking about it, and I continue to read books about it.

I would like to include here a special “shout out” for Tang dynasty poetry. The Chinese language is especially well suited to poetry, because it is both vague (in the sense of allowing the listener to exercise his/her imagination) and evocative (which characteristic supplies the imagination with veritable wings).

Our management team in our JV bank included one member who had memorized a large number of Tang dynasty era poems, and he regularly volunteered to recite them at all-hands meetings. His presentation style was impressive. Sometimes I felt he had missed his true calling.

By the way, even Mao wrote poetry in the style of the Tang dynasty (618-907 CE).

In my experience, it can be fun to spend time with Chinese people. In our JV bank, we would stage “talent shows” from time to time. Employees would volunteer to present in front of the whole bank (which at our high point included almost 300 employees): skits, songs (both sung and rendered on musical instruments, which included the erhu, the guzheng, the pipa, and the zither. Our employees needed no prodding whatsoever.

I remember, so often when I walked through the employee lounge in the late afternoon, I would find four or five young women piled up like puppies on one of the couches, chattering away and giggling. They really seemed to enjoy being together.

In general, Chinese people are hard-working and industrious. It is no joke, many actually work “9-9-6,” which means 9:00 am to 9:00 pm six days a week.

As such, Chinese people are the masters of deferred gratification. They have often worked for decades without significant reward, often for the sake of the next generation. It is no wonder that many (if not most) Chinese worship their ancestors. Frankly, they owe them.

This characteristic is related, I believe, to a willingness to sacrifice their own needs to those of the collective. There are so many examples of this that I can’t count them all. You would never find a Chinese person suing the government in response to the “request” that they wear a mask during a pandemic. First of all, they wouldn’t dare. But, as importantly, they consider it their duty to protect their fellow citizens.

Many Chinese are somewhat conservative, as seen in the decision of many young people to work in a state-owned enterprise (SOE). SOEs are seen as stable and secure. But recently, many young people have chosen to work in start-ups or even start up one themselves. During the years when we lived in China, there was a kind of start-up mania. It was a sight to behold, and it filled us at our JV bank (itself a start-up) with optimism about China’s innovation space. Our optimism turned out to be justified. China’s innovation has flourished. Those denizens of Silicon Valley who were once fond of saying that Chinese could not innovate turned out to be wrong. I’m not prescient, but I could tell from the start that China was going to innovate, come hell or high water.

Chinese in general have values that I believe are admirable. Here are a few of them:

· They put a lot of emphasis on family. In fact, many sociologists would tell you that the family is the basic building block of Chinese society. Even many Party members believe their allegiance to their family is of greater importance than their allegiance to the Party, even though the Party insists that allegiance to it overrides all else.

· In general, the Chinese value education. For hundreds of years, since the Qin dynasty (221-206 BCE) China has been largely run by kind of a civil service. Admittance was based on education (followed by an extremely demanding exam). The educated class was the most admired. Even today, the CCP seeks (allegedly) to recruit only the best and the brightest.

· Another thing I admire about China is the way in which it puts more emphasis on strategy than it does on profits. I remember only too well the dinner I had in Boston in 2010 (I think) with the CEO of A123 Systems, a manufacturer of lithium batteries that were based on technology that came out of MIT. The CEO told me that it was getting harder and harder to raise venture capital for an electric vehicle (EV) battery company because the venture community believed that acceptance of EV was too far off in the future. In the end, A123 was acquired by the Wanxiang Group in China. I am told that its technology provided the foundation on which the EV battery industry grew and prospered. Today, China supplies the vast majority of the world’s EV batteries.

· I also admire China for the extent to which it has embraced Confucianism over the course of the past couple of millennia (Confucius died in 479 BCE). Except for its emphasis on authority, I believe that many aspects of Confucianism provides guidance for living a good life and treating other people with respect and compassion.

The list of things I admire about China is long. I will end with an accolade about its language. I studied Chinese for three hours a day over eight years, one hour of which was with a tutor. It is a beautiful language. But it is very difficult. At the end of my eight years of study I tested out as having the language facility of a ten-year-old.

The Perhaps Not So Good

Visiting China for a couple of weeks a year for ten years running, I barely noticed anything that I might have classified as corruption, except what I read about in the newspapers. How could you?

But once we set down at least temporary roots, evidence of corruption began to pop up everywhere. Some of our employees whom I trusted the most began to exhibit signs of what I considered, based on my years of working in banks supervised by American regulators, dishonesty. One of our most trusted employees begged me to allow her to pay kickbacks to CFOs—if they parked their company’s deposits with us, she would reward them personally. It was rumored (and not without cause) that our Head of IT accepted kickbacks from computer vendors for bulk orders. Our new Head of Marketing appeared to be taking personal kickbacks in exchange for booking corporate events at hotels with which she had a cozy relationship.

I attended a lecture given by an “expert” on the differences between business mores in the U.S. and those in the PRC. His belief, which I’ve heard many times since from others, was that Americans tend to experience guilt when they engage in business practices that we consider immoral, unethical, or illegal. In the PRC, people tend not to unless they get caught, in which case they feel shame. Two different responses. So many Americans are church-goers. I was reminded of the ditty we learned to sing in Sunday school: “Oh be careful little hands what you do, for the Lord God above is looking down below…”

When Xi Jinping came to power in late 2012, in an attempt to tamp down on corruption, he issued eight directives on ways in which Party members should change their behavior. The Shanghai government chose to one-up Xi by issuing a list of their own, similar to Xi’s but with twice the number of directives. One of the directives was to not have opulent banquets. Within weeks, I noticed that the banquets I attended were just as opulent as they’d always been. When I inquired, one of my good “friends” (also a Party operative) told me that businesspeople and Party members in Shanghai had already figured out a way around the new directives. They were paying each other “in kind;” hence expenditures were untraceable.

In the PRC, the cunning “end-run” is always admired, until the person who dreamed it up is caught. Then his behavior becomes shameful. Guilt doesn’t seem to play much of a role.

I was sometimes annoyed by the attitudes I perceived many PRC denizens held toward their U.S. counterparts. First there is China’s age-old belief, which predates the CCP by hundreds if not thousands of years, that non-Chinese are all “barbarians,” that is, people of an inferior culture. This inferiority can only be remedied by adopting the Chinese culture—which is difficult if not impossible for a foreigner to do. Around the times of the Opium Wars (mid-19^th-century) the Chinese started to use the term “guizi”or “gwailou” (foreign devils) for Westerners, in reference to our pale skin.

Today these terms seldom appear. However, Mao taught his country-people that all Westerners were enemies. After he died in 1976, the Chinese in general seemed to display an inferiority complex toward Americans, which is understandable in that they were, from a technological point of view, far behind, due to Mao’s attempt to destroy the education system and replace it with “learning from the peasants.” Today, now that China has more or less caught up and, as concerns some technologies, surpassed us, there is a strong tendency to brag about their superiority. In general, the CCP perpetrates the belief that Americans are constantly trying to hold China back and always have been. While that may be true today, I believe it is a relatively new phenomenon, engendered by Xi’s aggressiveness and relentless chest pounding.

It begs the question, why is it so difficult to see us as fellow human beings. Why do they find it so necessary to stratify? And deify? Or demonize?

Of course, that is just a personal gripe of mine.

From a geopolitical point of view, China has entered into a “grand bargain” with the CCP. The Party is supposed to advance the people economically, and in exchange, the people have agreed to willingly submit to its rule. In fact, many Chinese believe that they would be incapable of self-governance. They need a dictator, they think, to avoid falling into a state of chaos.

The CCP has mercantile tendencies. The definition of the word “mercantile” in this context is this: competing on a global basis with other countries to export more than it imports, the end effect being that competitors in other countries are driven out of business and China ends up being the strongest or in some cases the only remaining competitor. We saw this in solar panels, we saw it in batteries for EVs, and now we’re seeing it in automobiles.

The governing force in the PRC is not the law but “leverage.” He who can obtain, develop, and perpetuate leverage is the winner. Many other countries at least try to engage in “win-win” relationships with others. The PRC often pretends to do so. Don’t be fooled. Or, if you wish, be fooled, if that makes your life easier, but don’t be surprised when you discover—as I did—that “win-win” in this context means that China wins twice.

Laws in the PRC are at best guidelines and at worst, tools deployed by the government to achieve an end. They are often negotiable and may be created after the fact, to justify the arrest of someone whom the government has already incarcerated. When Xi Jinping uses the phrase “rule of law,” he doesn’t mean that all people in China must be governed by the law, including him. Instead, he means that he creates and deploys laws as tools to enable him to make people do what he wants them to do.

Conflict of interest in the PRC is not a crime, it is a way of life. People expect you to seek it out and to make use of it, to enhance your own position. When we opened our JV bank in China, our Chairman (I was the CEO) utilized his position to reward people to whom he owed favors, by hiring their children into the bank. Most of them were totally unqualified for the jobs in which he placed them.

People in the PRC communicate through implication and nuance. In the PRC I was accused of being ill-equipped for the job of CEO. The reason: I too often said what I meant and meant what I said. That did not serve me well in China.

The (Really) Not Very Good At All

Orville Schell is considered by many to be one of the most important sinologists in America. It is not by accident that what I consider to be his most important book (written together with John Delury), which appeared in 2013, was entitled Wealth and Power. These are the two most important themes in Chinese history. Like many, if not most, cultures China has been focused on these two themes, wealth and power, since the beginning of time. One of (what I believe to be) the two most formative literary influences on Chinese thought and behavior, The Art of War (the other being the works of Confucius), is primarily concerned how to win wars (in other words, with how to obtain wealth and power). Even more alarming, it recommends deception, first and foremost, as the best method for winning. True to form, deception is considered a valued skill in the PRC. The government deceives the citizens, and the citizens in turn deceive the government. Geopolitics is no different. The CCP deceives the governments of other countries, and yet is always quick to accuse other countries of lying, often erroneously.

From the start, the CCP has cultivated the art of deception. In 1944, Mao and Zhou Enlai sought out the highest ranking Americans in China at the time (who were there to help China win the war against the Japanese invaders), to convince them that they should support the Communists rather than the Nationalists. Both Mao and Zhou told the Americans that it was their fervent desire to build a democracy in China modeled on that in America. Our “Founding Fathers” were their heroes, they said. However, within a matter of months, the Red Army was attacking the U.S. Marines in China as the latter escorted Japanese prisoners of war from the interior to the ports that would return them to Japan.

Since then, consistently, the CCP has made up stories about Americans. Stories that are not true. During our years in Shanghai, I dug up some old textbooks that were used by the CCP in Chinese schools during the 1960s. You would not believe the things they say. Based on those textbooks, Americans are all evil imperialists. We are the #1 enemy. Take a look at the speeches given by Wang Yi (Director of the CCP Contral Committee Foreign Affairs Commission Office and Minister of Foreign Affairs). Many of these speeches are available on the internet. You won’t believe what you’ll read. Nor should you. Ironically, my generation, in elementary, middle, and high school at the time, were taught that Chinese people were “nice” people who sadly did not have enough to eat due to the famine during the Great Leap Forward.

A tendency to lie would not be so problematic, if China’s ambitions were not as extensive as they are.

The CCP is a Leninist party. What that means is this: Its first priority is to stay in power. How? It doesn’t matter as long as it works. The ends justify the means. And what does it want beyond staying in power? It wants to make the world safe for autocracy (meaning “dictatorships”).

Many of us underestimate the danger posed by the CCP. For a quick refresher, I would recommend going back and reading the edition of this Substack I published on January 24 of this year. It’s all about Document #9. Document #9 was published by the CCP in 2013, early in Xi Jinping’s tenure. It is a warning to the Chinese people about “dangerous” Western values. Those include freedom of the press, independence of the judiciary, freedom of speech, constitutional democracy, universal values, human rights, and so forth. They must be stomped out, both in China and, to the extent possible, in the rest of the world as well.

These are the things we have to look forward to if the CCP is successful in making the world safe for its form of government.

The Long Game

There is much to admire and enjoy in the Chinese culture, as in ours. But there is much we should be aware of and learn from, as well. Our assumptions, both good and bad, are likely to be simplistic and, often, wrong. It’s important that we listen carefully to what we’re being told, because much is, as the Chinese say, “hiding in plain sight.” Furthermore, we must distinguish what we hear from what we wish to hear. We need to slow down and proceed much more slowly than our achievement-driven, hit-the-quarter-results mentality would urge us to do. China is playing a very long game. If we don’t understand that and adjust our expectations accordingly, our own time in the game will be very short

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