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Sunday, March 26, 2006 - Page updated at 12:00 AM

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China's promise, problems spill over into rest of world

Special to The Seattle Times

SHANGHAI — Everything that is right and wrong with China is right here.

The tree-lined boulevards and glittering skyline are beautiful, and the dull gray sky is thick with pollution. There is room for the ambitious to make money, and 17 million people make the city perpetually crowded.

But to drink in the contradictions of Shanghai is to understand some of what confronts 21st-century China, and China's problems echo across the ocean.

Globalization may be the most overused term of the age, but China and the U.S. are increasingly joined at the wallet, if not the hip.

From artificial exchange rates that keep Chinese products cheap, to pollution and environmental degradation that spills and sloshes over political borders, what happens here has implications for us.

An acquaintance of mine, hearing that I had spent time in China, remarked with typical American indignation, "Don't the people know they're Communist?"

Technically, that's no longer true. China is ruled by the Communist Party, but that whirring sound you hear is Karl Marx spinning in his grave. What I like to call the Kaching! Dynasty has adopted what it calls "socialism with Chinese characteristics."

It's a somewhat haphazard mix of state and private ownership of the means of production, which is attempting to be both more efficient and yet keep a nation of 1.5 billion people gainfully employed.

Sometimes it works better than others.

For example, Shanghai is home to Silk King, a government-owned chain of 10 fabric and clothing stores.

Silk King's walls are decorated with pictures of prominent people from around the world posing in dresses made by the company's tailors. Hillary Clinton and Cherie Booth, the wife of British Prime Minister Tony Blair, had dresses made at Silk King.

Silk King is a bit overstaffed, but the service is attentive and the quality astounding; both the fabric and the tailoring are top drawer. This is a going concern.

At the other end of the spectrum is the Hualian department store near where I once lived in the Xujiahui neighborhood of Shanghai, a sprawling hub of stores, upscale malls and apartment blocks.

The department store is so overstaffed that everyone's chief assignment seems to be conversation with co-workers. These appear to be punctuated by occasional breaks for work, as the shelves are always stocked.

An eclectic mix of Eastern and Western groceries, clothing and household items are spread across three floors. With no particular pattern, some items require that you get a slip from the clerk, take it to a desk, where another clerk writes up a sales slip. You take that slip to the cash register to pay, then go back and get your item. You can take other items directly to the cash register.

The fourth floor apparently is a home-furnishings store run by somebody else, and you can't take a department-store basket up there. I know. I tried.

Hualian carries Washington apples, which are decidedly better than the competing Chilean apples nearby.

By Western standards, the department store, though busy, is not a model of productivity with a high concentration of workers per square foot. Any privately run store in China will be obvious because if it's crowded, half of the people there won't be employees.

But that's the government's dilemma — keeping people employed as they continue to try to turn things around. Like a great ship, China is turning steadily but slowly, and the seas are sometimes rough.

The Chinese leadership is taking baby steps toward letting the yuan float, though they continue to fear the kind of currency debacle that was part of the 1997 Southeast Asian economic collapse.

The Thai baht, for example, got pounded as Thailand's economic bubble burst. With a currency tied strictly to the U.S. dollar (and a much stronger economy), China skipped most of that.

But Western nations continue to push China to revalue the yuan, and the currency is now tied to a basket of world currencies instead of just the dollar.

With China's large trade surplus, a floating yuan would appreciate in value because we all need more yuan to continue to buy Chinese-made goods.

A higher-valued yuan would make Chinese exports more expensive and foreign imports into China cheaper, which would help both Chinese consumers and foreign producers.

But that would also cost China some manufacturing jobs, and no nation — including ours — is particularly good at dealing with economic dislocations caused by trade.

One possible solution for China's jobs problem would be to invest more in cleaning up the environment. The government is just beginning to hint it will start thinking more about environmental impacts in its economic plans.

For example, around 80 percent of China's sewage remains untreated. Sewage treatment would both save the rivers and the groundwater and create some needed jobs.

The country needs a lot of reforestation. It needs a recycling program. China recycles all the plastic it can get, but has no collection system.

Bullying China over trade and pollution, as many members of Congress threaten to do, simply won't work.

But the Chinese want to be recognized as players. So far, they have played by the rules when the United States has played by the rules.

Shanghai, meanwhile, like the rest of China, grinds along. Gleaming steel-and-glass towers continue to rise along both banks of the Yangtze River.

Traffic lights often click off the seconds you have left to cross the street, and you dodge cars and bikes every step of the way.

We should all hope that Shanghai, and China, make it across that street.

T.M. Sell, Ph.D., is professor of political economy at Highline Community College.

Copyright © 2006 The Seattle Times Company

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