Made In China

I'm spending the week in Guangdong, the southern-most province of China and the first to open up to outsiders in the 1980s. It's the world's factory, where most of the stuff that's Made In China gets made – and that's why I'm here, on an East-West Center fellowship studying the effects of the financial crisis in Asia.

The Pearl River Delta is not a tourist haven. In fact, the only foreigners in my hotel seem to be Americans and Europeans with newly-adopted Chinese orphans, or Middle-Easterners that have come to cut business deals. I'm guessing the fact that the bath water in even the 5 star hotels smells funny has something to do with that. Also, I was a bit put off at lunch in a local restaurant the other day when one of our hosts suggested we pre-wash our own dishes at the table because they are sometimes contaminated with Hepatitis B. Oh well, I'd been eating too much anyhow.

Anyway, when I'm not feeling slightly ill from God-knows-what chemicals that I'm being exposed to, I'm learning a lot. This place is more chaotic and in some respects more dynamic than Beijing or Shanghai. It feels a bit like parts of Turkey or Morocco. Street merchants abound, hawking every possible type of fruit, vegetable, fish, nut, white good and electronics from little shops. Everyone hangs their underwear and washing out to dry on their balconies. Jars of pinkish snake wine -- with large snakes floating in them--line the street (that's quite uniquely Chinese).

Guangzhou, the capital city where I am now, is built around a river, and it sort of meanders and winds every which way, with no clear planning or organization. The Pearl River Delta is the area you keep reading about in the papers, with the millions of laid off migrant workers and the boarded up factories. It's unlikely that I'll see any of those, as the Chinese foreign affairs folks have aggressively packed the itinerary full of visits to sparkly high tech parks and back office call centers (one of which services AIG, btw).

This is actually instructive, because while it may not represent the total reality of Southern China, it shows the future that Chinese leaders envision for Guangdong. This area has been the epicenter of China's growth, where factories specializing in low-level manufacturing belched smoke and churned out cheap stuff to be sold in Wal-Mart. Beijing knows that in order for China to move to the next phase of its economic development, they need to move on from the cheap goods model– unemployment is way up as exports to the West have tanked, and even the Chinese, who expect much less in terms of environmental standards, are concerned about the pollution (btw, lots of economists think environmental degradation is the biggest longer term impediment to Chinese growth). The idea now is to use the pressure of the financial crisis as a chance to move the lower end factories to the less developed Western part of the country where people are still seriously poor and in need of any kind of jobs, and encourage higher end manufacturing and services here along the richer coastal areas.

It's not clear to me yet if the strategy is working. For starters, while the Chinese are historically quite good at making change at tough moments (they joined the WTO in the wake of the Asian financial crisis back in 1998), the global recession could make it tougher to move beyond being the World's Factory. The officials I've been meeting with talk a lot about they aren't allowing any new polluting industries in, even if they create jobs. But they wouldn't clearly answer whether it's getting tougher to bring lawsuits against existing polluters or labor law violators (something that China watchers are worried about). As always in this country, real numbers are hard to come by. But what happens here will be crucial in determining China's economic future – and ours. I'll blog more of my observations on this front over the next few days.