May 17, 2013 6:27 pm

The Diary: Jonathan Fenby

The author of ‘Tiger Head, Snake Tails’ witnesses the results of the property boom that could bring China to its knees
The Diary illustration©Luke Waller

Even in China, the question keeps coming: what was Margaret Thatcher’s secret? The questioners are reform-minded economists I meet in Beijing on a visit for the research service, Trusted Sources, where I am a partner. Clearly they think the Iron Lady might have had some technique that could be used to implement change in China. After a gallop through the politics of the 1980s, I say she had “not minded being unpopular”.

That, I realise, might be a problem, paradoxical though this may seem in the last major state ruled by a Communist party. Public approval of China’s new leadership under Xi Jinping is important. Conversations here make plain how little trust there is in the regime and its agents, and the volatility that results.

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I give an evening talk at the Beijing English language bookshop, The Bookworm. Afterwards, a Chinese woman says she has noticed that I changed the subtitle of my latest book on China, Tiger Head, Snake Tails: China Today for the paperback edition from Where It is Heading, to Why It Must Change. Can I explain this, she asks. I tell her that I think the need for reform has become stronger since I wrote the first edition 18 months ago.

“Very interesting,” she says. “You may be right but it will not happen.” It seems that while the moment for reform is widely perceived to have arrived, the obstacles to it are so strong that nothing very significant may transpire, even as people grow increasingly fed-up with pollution, poor food safety standards and the “trust deficit”.

. . .

The next day I fly to Ordos in Inner Mongolia, said to be the richest place in China per capita because of its huge coal and gas deposits. Lunch consists of huge slabs of mutton on the bone, venison on skewers and delicious vegetables grown in sand.

Afterwards, we drive to a coalfield that produces 180m tons of the black stuff a year to feed China’s power stations, steel plants and domestic heating. The mines employ 40,000 people and support a sprawling coal town. The operation is highly automated with only 10 men working underground on each shift at each of the 18 shafts, monitored by huge screens in the central control room. At the end of the process, the coal pours into railway wagons at the rate of 80 tons a minute. I can’t help wondering if Arthur Scargill, the former mining union leader, would have gone along with the technology to compete in today’s global coal market as the Chinese have.

. . .

The following day I have lunch with three local property developers in a private room at a seafood restaurant in Ordos; two of them smoke through the meal while they drink endless toasts – I get away with merely wetting my lips with the 36 per cent proof liquor but they are unstoppable.

On the back of coal wealth, the city is a monument to overbuilding. Its six-lane highways are virtually empty of cars. Skeletons of high-rise projects dot the landscape. The property men say they will sit out the downturn, freezing projects and stopping interest payments to their creditors. They offer me a flat for free, an offer I feel able to decline.

After lunch we drive 20 minutes to the administrative centre of Kangbashi, which is full of grand buildings housing the local government authorities that run the 87,000 sq km region. Huge statues of Genghis Khan and Mongol warriors, looking heroic rather than rapacious, stare out over the enormous central square. Developers also built here as if there was no tomorrow, in expectation of the civil servants who would move in.

The result is a ghost town inhabited by 72,000 people against a target of 300,000. It has attracted the attention of short selling hedge fund managers, and CBS television has used it as an example of how the property boom will bring China to its knees.

The civil servants will probably come when the place has adequate services. But there are other developments nearby that look even more perilous, with scores of empty apartment towers. China operates on the principle of “build and they will come” – still, this seems an extreme example of the irrational exuberance that still powers the supposedly controlled economy.

. . .

Shanxi province has been one of China’s main sources of coal for centuries. The capital, Taiyuan, has a coal museum where you walk through a mock-up of a mine wearing safety helmets to get in the mood. The real thing, outside town, dates back 60 years and shows its age. But the managers are cheery as they toast us with almond milk and ask about coal mining in Britain – a short conversation. When they learn I am 70, they say nobody that old would still be working in China. I don’t know whether to be flattered or if they think I am past my use-by date, a sign of western obsolescence.

. . .

 

Back in Beijing, the habitual smog has given way to a beautiful clear day. I have lunch with a western businessman who has been here for a long time and is downbeat about the economy. Still the clear weather induces good feelings as does dinner in a private room in a renovated imperial pavilion on the edge of Ritan Park, where the waitress turns on a television projected on a huge wall mirror, showing football. We ask her to turn the screen off. She seems surprised. In today’s China, fine dining, with the cheapest wine at £60 a bottle, can only be enhanced by the latest gizmo.

Jonathan Fenby is China director of Trusted Sources.

The updated paperback edition of ‘Tiger Head, Snake Tails’ has just been published

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