China's second revolution

An eager population and heavy courting of foreign investment are the fuel for this new economic fire. Everywhere you turn in Shanghai, it's the same message: This century belongs to us.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
SHANGHAI, China--Jian Daning, director of the Shanghai Waigaoqiao Free Trade Zone of the People's Republic of China, declined the fish. He was worried about his waistline, so he stuck to the yogurt drink.

The Cold War ended 13 years ago, but it's still weird to get dieting tips from a high-ranking Communist official in a "power blue" marketing shirt during lunch. But China isn't what it used to be.

A rapidly growing industrial complex, an ambitious population and an aggressive public-private effort to court foreign investment are transforming China into the next economic superpower in quick order.

The evidence in Shanghai is pervasive: high rises going up next to dilapidated apartment buildings, shoppers traipsing through multistory malls, streets jammed with Japanese cars and the sporadic American SUV, and one of the cleanest, most-efficient airports in the world. Drivers even obey streetlights, almost. Everywhere you turn it's the same message: This century belongs to us.

Fifteen years ago, "if you had an electric fan, people felt you were already rich enough," said Xiao Yin Shao, deputy general manager of Intel's test and assembly plant in the Pudong district of Shanghai.

Shanghai today basks in expansion. In the past, the Pudong region in eastern Shanghai consisted of farmland; people would refuse to move there. Now apartments with 100 square meters of floor space sell for 500,000 yuan ($61,000) and the Waigaoqiao Free Trade Zone, a huge industrial park for export manufacturing at the center of Pudong, plays host to IBM, Hewlett-Packard, Nortel, Intel and 5,296 other multinational corporations. Exports from Waigaoqiao totaled $10 billion last year.

In 1986, there was only one hotel that admitted foreigners, said Vincent Lo, president of the Shanghai-Hong Kong Council for the Promotion and Development of the Yangtze, a nonprofit group trying to bring investors to western China. Once, the hotel lost Lo's reservation and he had to share a room with a stranger. Now you can drive for an hour from east to west across Shanghai and never leave the maze of tall office buildings and luxury hotels.

Oddly enough, some of the credit appears to belong to the government. The market reforms launched by Deng Xiaoping in 1979 eroded the government's control over the economy. Instead of dictating agricultural goals, it now functions to lay the bedrock for private interests by creating tax breaks and other incentives for development.

Party cadres have changed too. The Party recruits heavily at colleges. Party members are now given annual reviews and primarily judged by how they met productivity goals, an idea adopted from corporations, according to sources.

Still, it's hard not to give primary credit for the transformation to the population at large. Shanghai is in constant motion, and nearly every square inch that can be given over to selling something is. People work eight hour, five-day weeks, but then go home to their independent businesses. Energy is simply in the air.

The rush into modernity

So what are the implications of China's headlong rush into modernity?

• Silicon Valley will move east. High-tech companies have expanded from using the country as a manufacturing base to also using it as a development center. PhDs from Nanjing University and other top colleges are actively sought by multinationals. Much of Intel's compiler work takes place in Shanghai and Russia, said Wen-Hann Wang, director of the company's Technology Development Group.

U.S. brands, though, remain popular. In the Buy Now PC mall, a three-story building that houses a number of do-it-yourself PC manufacturers and resellers, clerks said machines from IBM and Compaq Computer attract buyers despite their higher prices. Apple Computer, though, was an exception. The Apple Centre was the most tastefully decorated store, but was devoid of customers. The resident clerk occasionally got up to fiddle with the flat-panel iMac on display.

• Taiwan will, in some form, be united with China. Despite a tense war of nerves being waged between the governments of Taiwan and China, some sort of accommodation seems inevitable, according to even Taiwanese executives and local residents. Economically and culturally, the merger is already occurring.

A few years back, the elite in Taipei would recoil if the topic of the latest happenings in Shanghai came up, said Shirley Young, president of the Committee of 100, a group of Sino-American leaders. Now they all have "Shanghai fever," she said, and want to know where to get a maid or buy a house.

• Despite the decline of Communism, Mao isn't going to vanish anytime soon. At every flea market in town, vendors are still selling Mao vases, clocks, plates and other relics from the golden age of totalitarian graphic arts. Fine craftsmanship too. My Chou En-lai wristwatch has only lost a minute or two in a day. One of the hot items: plaster figurines of the Gang of Four denouncing fellow citizens in dunce caps, a relic from the Cultural Revolution.

• The golden age of piracy will end. Despite years of lax enforcement, the government has begun to crack down on stolen software, CDs and DVDs. The evidence too can be seen in the street. I searched several alleys and stores for pirated discs and only turned up one place that sold any. And the selection was poor: Despite a copy of "A Beautiful Mind" ("Snowboarding through life, David Aames appears to lead life," read the liner notes), they mostly sold stale Tom Cruise movies and Celine Dion music. Many stores sold legitimate discs.

"When we find (piracy rings), we confiscate the products and the equipment they use to make them and turn to execute the persons or organizations involved," said the Waigaoqiao Free Trade Zone's Jian.

That sort of explains it.