Some observations about China, its economy, its future

Last year I decided our business could benefit from an expanded relationship in China, and I have spent an ever-increasing amount of time and energy learning about our new market. This is not an economic, political, or even a business treatise; it is simply some personal observations on my recent trips and experiences.

"Life is finite, while knowledge is infinite."

Zhuangzi

Prosperity in life is strongly linked to what someone knows education and what someone does with what they know disciplined activity. The Chinese pay attention to both. The Program for International Student Assessment recently ranked students in Shanghai the highest throughout the world in reading, mathematics and science. Meanwhile, a recent article in the Wall Street Journal, "Why Chinese Mothers Are Superior," followed the regimented lifestyle and study habits of the children of Yale Law School professor, Amy Chua.

China is well aware that it has crossed a huge amount of territory in the past 40 years in its advancements on the international stage. One of the distinct advantages it has over its Western counterparts is a very strict and very structured expectation of its children in their formal education, and discipline of study in arts, athletics, and games like chess. (At 16, China's Hou Yifan has become the youngest person to win a world chess championship). The outcomes are producing strong results in scholastic achievement, athletics and business.

A big opportunity for the United States: Our country still holds a strong advantage in higher education, and the Chinese are able and willing to pay whatever it takes, in money and time, to make certain their children receive the best opportunities for learning and advancement. The United States can benefit from this desire for the best by attracting top students to our shores, and keeping those students interested in doing business here even if they choose to return to China. The American economy, our universities, China and the world will do better as these doors continue to open.

"Seeing it once is better than being told 100 times."

Zhou Chongguo, Han Dynasty

The cities and urban planning are simply amazing in China, as is the cost of real estate. Housing prices in any of the cities I have visited far exceeds the average worker's ability to own a home. Like most of the world, real estate is a primary investment for those building wealth outside of business ownership. The newly wealthy's search for investments keeps pushing up real estate prices, and moving the reality of homeownership out of reach for the bottom tiers of the employed.

A new concept of live-work-play-learn is taking shape throughout the many large-scale projects I visited. And while the pace of new construction is unbelievable, attention to historical preservation and re-introduction of treasures hidden from the chaos of the Cultural Revolution shows that history and progress can co-exist.

"The emperor is far away and the mountains are high"

While I experienced no overt signs of the Big Brother China there were clear signs of China's one-party rule. While social networking is allowed in Hong Kong, it is hard to come by in mainland China. Of course, while not allowed, you can get your own private VPN and run it through Hong Kong servers, and now you can follow your friends. Do not think, however, that what you search on the Internet and what you type in your status is not being watched.

In addition, there are cameras nearly everywhere, although I would argue that the United States probably has close to the same number. We are told they are here to protect us, while in China you know they are there to watch you.

The big challenge: Most anything is allowed but most everything is illegal. Until the rule of law takes hold, and a justice system is in place, the people will fear the government, and the wealthy and businesses will keep a back door open just in case.

The Mandate of Heaven grants the rulers legitimacy as long as they do a good job of taking care of their citizens. However, once they stop fulfilling their obligations they cease to fulfill the Mandate of Heaven, which is then given to another government.

While the government keeps a watchful eye and relatively strong controls in place, the leaders' actions cause me to believe that they recognize their minority status. To control 1.3 billion people there has to be enough freedom and ability to feel in charge of one's own destiny that the people will stay content with that control. The Party appears knew, as generations of Chinese emperors have known, that it must allow enough latitude in daily business so that the people will be willing to accept its rules and laws, all the while maintaining a structure of safety and prosperity to keep this unprecedented growth moving forward.

"Like weather, one's fortune may change by the evening."

Luu Mengzheng, Song Dynasty

In Shanghai, an advertisement by HSBC announces "Every minute, one more person in Asia becomes a U.S. dollar millionaire." Much of the wealth being created is for real. The business owners and people make goods that others buy, and they know how to sell what they have. At the same time, the economy is precarious due to several factors including inflation risk for basic necessities such as food and healthcare as well as real estate, possible social uprisings from the growing disparity of incomes, nearby neighbors with nuclear weapons, and an aging population that has less and less of a safety net.

My overall impression of China is that the United States has been, for the most part, a good friend during the past 40 years of growth, and this is recognized by the great majority of Chinese. For one nation to succeed does not require another nation to step into a lesser position. The United States needs to continue to be proud and build upon our strengths such as the entrepreneurial spirit and capitalism, our foundations of freedom, and a government that is bound by the rule of law. As China's President, Hu Jintao, visited the United States last month, there are signs from both superpowers of a willingness to continue the progress of a mutually beneficial relationship. The future, both near and over the next several years, will reveal the outcomes of both countries' internal and external efforts to navigate uncharted and unpredictable landscapes.

Thomas J. Powell is chief executive officer of Resolute Capital Partners in Reno. Contact him at www.ResoluteCapitalPartners.com. This article originally appeared in the newsletter of Northern Nevada Network.