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Size and speed matter

I have been writing on the remarkable strides made by the Chinese economy in recent decades and the impressive clout gained by her in the international arena. My recent visit provided an opportunity to look at her strengths.

During a recent visit to China I was surprised to come across several busloads of tourists from Tamil Nadu. Well-organised tours are offered not just by established international travel agencies like Cox & Kings or SOTC, but also a number of enterprising smaller companies and private agencies. A couple of group of Tamilians I came across explained how they had already vacationed in the ‘usual’ destinations – Singapore, Malaysia, Dubai… before choosing China! These comprise in good measure not just families of small and medium businesses, but also government employees who have been enjoying much higher incomes and pensions in the last two decades. And the successful tour companies factor in dietary requirements and offer lunch and dinners in Indian restaurants – even serving idlis, vadas and dosas in Beijing!

Tourism a large revenue earner…

Tourism is a large source of revenue for China as it is for several other countries. Inbound tourist arrivals in China for 2019 are estimated at 143 million earning revenue of close to $130 billion. Among the major attractions are its highly developed transport infrastructure: 17 international airports with convenient connections to a number of countries, high speed trains and modern railway stations that vie with airports in terms of sophistication and facilities offered as also multi-lane highways, hotels and tour guides with ability to speak different foreign languages. The top five foreigners flocking to China are from South Korea, the USA, Japan, India and Germany.

China has simplified the procedures to obtain a visa. Yet there were some stipulations that need change. For example, the insistence on paying the visa fee in cash at the China Visa Service Centre, New Delhi. No such centre exists in Chennai or Kolkata. The system does not accept payment through bank instruments. Apart from furnishing proof for financial stature, detailed daily itinerary, hotel and airline bookings are all mandatory. Of course, the visa issue is well streamlined and quick if these particulars were furnished in full.

Focus on size/volumes…

Hardly 35 years ago Chinese economic activity was comparable to that of India’s. For instance, crude steel production in China in the mid-1980s was around 15 million tonnes and India’s was 10 million tonnes. The large population was also registering growth at a comparable rate. Today China has moved miles ahead. With production of over 800 million tonnes, China accounts for more than half of the world’s crude steel production. And China has succeeded in moderating its population growth.

My trip included visits to the capital Beijing, Great Wall of China, the Forbidden City, the Summer Palace and travel by overnight train to Xi’an, a bullet train ride to Chongqing and a cruise along the Yangtze river to Yichang, where the Three Gorges dam has been erected.

Rich focus on infrastructure

The cities visited were all sprawling metros with huge populations. Chongqing with a population of 34 million has over 40,000 bridges and over 1000 skyscrapers. Such tall buildings are ubiquitous, not just in large metros, but also in smaller towns and even parts of the countryside that remained faceless villages hardly a couple of decades ago. We were told that all the massive transformations we witnessed were built over the last 15-20 years. Beijing winning the bid in 2000 for the 2008 Olympics was a significant catalyst for these rebuilding efforts.

Democracies and market economies have the practice of building infrastructure in stages relating it to demand, cautiously avoiding excess capacity. The Chinese system focuses on creating large capacities anticipating demand several decades ahead. In this there is no worry about the return on capital earned over the medium term on such huge investments. The instance of a new airport in Beijing illustrates this: the Chinese capital already has two large airports that handle 95 million passengers a year. Yet a new, even more sprawling airport with capacity to handle on its own 95 million passengers a year is being developed at a frenetic pace and will be ready for commissioning later this year. Even while one is struck with the scale, design and facilities of the existing international airports, the new one promises to be bigger, better, more sophisticated and flier-friendly.

Railways in the lead…

China has focused on its railway system to great effect – perfecting tunnelling techniques, laying high speed rails and rolling stock. The country has achieved massive reductions in travel time. Our guide pointed to a new railway station nearing completion at the mountainous region of Chongqing at an altitude of over 1200 meters with an arch bridge over the gorge. The rail system includes over 20 km of tunnel; travel time to Beijing will get reduced to a fourth to 6-8 hours (from the current nearly 30 hours). Imagine travelling from Chennai to Mumbai in 4 hours!

Not just the speed of trains but every aspect of comfort and safety seems to be taken care of. At Xi’an a new railway station has been built on the outskirts of the city. The bus takes one through large sections of the newly rebuilt city with skyscrapers built all along with sprawling parks, public spaces for exercise… The railway station appears more sophisticated than an airport complex with automated facilities for handling thousands of passengers! At Beijing, Xi’an and other places, railways handle dozens of trains and thousands of passengers by the hour and there are well-streamlined systems.

The lesson for India lies in building volume and size. China opted to build large capacities, be they relate to infrastructure or manufacturing with technologies and systems that ensured handsome economies. These, in turn brought about competitive advantages. Thus, while India continued to work on linear, modest growth rates in building production capacities, China opted to grow in geometric progressions. Combined with aggressive marketing, be they relate to tourism or merchandise, the country has built custom in quick time.

The 10,000 km Great Wall of CHINA

Just look at the manner of attracting tourists to historic endowments like the Great Wall of China. This was reportedly constructed in 221-206BC by the Qin Dynasty, the guide explained with passion, and extended over 10,000 km in the north with watch towers and back up reinforcements, to keep the Mongols from invading China. These are today marketed as prized tourist spots. Sophisticated buses in hundreds transfer tourists from the capital to the foot of mountains; these are taken in mini buses and then transferred through cable cars to a height of over 1000 metres. One can then trek for miles from tower to tower along well-maintained steps. For the return they can also have the experience to travel by the toboggan, a small sled that runs down on gravity along a path that is similar to a giant slide curving along the side of a mountain.

The one child policy…

Travelling with my family members, our group attracted curious local Chinese folks who,without prompting or seeking approvals, whipped out their Chinese phones and clicked pictures, especially of children. One reason was just the sight of more than one child in our family! For over 40 years China strictly implemented a one-child-per-family rule. This contributed to a strict control over population growth. According to some estimates, around 400 million births have been prevented due to this rule, decreasing the overall burden on the economy. This has contributed to a faster rate of per capita growth and a better distribution of social and economic benefits. However, there is a higher social cost: the increase in average life span is resulting in a much larger burden on the working population to take care of their aged parents. Imagine a couple in their 30s being responsible for their two sets of parents and four sets of grandparents! Though China rescinded this rule in 2017, young Chinese are still hesitant to have a second child citing the prohibitive costs of child bearing, schooling, etc.

Public health administration is considered reasonably efficient with state-run hospitals catering to the requirements of the entire population. There is wide and expanding interest in learning English. In the mountainous Chongqing, I came across a school with 3000 students focusing on English language. There is focus on maths, science, engineering and computer education right from the early school stage.

There is widespread use of technology for a vast range of transactions. Internet usage is widespread as also of cashless transactions.

The quality and technology of the Chinese theatre are quite high. A couple of presentations laid great emphasis on the rigid system of the guru imparting knowledge and wisdom through vigorous training and discipline. Another depicted the effort of a king succeeding in uniting different warring kingdoms and building a strong empire. The quality of lighting, visuals, graphics and movements, deploying gymnasts, dancers and even horses in vast numbers and stages rotating at 180 degrees were breathtaking!

In most places we heard that the remarkable transformation has been taking place just in the past couple of decades. I understood most of the metros were as crowded and as haphazard as India’s. But the communist system provided for acquisition of land for public purpose without difficulty. The government gave alternative property and a reasonable compensation, but no choice. Beijing has seven ring roads, all spacious and there is no mixed traffic as in Indian metros. Result: smooth flow of traffic, though heavy, is free of bottlenecks. The straight, long stretches ensured smooth and rapid flow.

The social contract…

The administration ensures total control over information. Facebook, WhatsApp, YouTube and other social messaging sites are not available as also foreign publications and access to global news. WeChat is widely used, with the ubiquitous knowledge that all conversations are monitored and recorded. While language barriers and lack of fluency in English posed problems in the past, with recourse to technology and live audio and video translation apps, this hurdle is easily crossed. The constant monitoring doesn’t seem to bother the local Chinese. The social contract of the state takes care of jobs, food, education, health… and there have been remarkable improvements in living standards and creature comforts. We were pointed to new infrastructure such as high-speed trains and swanky railway stations drastically reducing travel times and improving connectivity even to remote areas. New constructions are taking place at remarkable speed. The bullet train ride we took for six hours took us through more than 100 tunnels. The trade off appears acceptable.

More goods sold locally

A recent McKinsey study points to more manufactured items now sold locally in China marking a steep rise in domestic consumption. From 2007 to 2017 China almost tripled its production of labour-intensive goods, from $ 3.1 trillion to $ 8.8 trillion. At the same time, the share of gross output Chinese exports has dramatically decreased from 15.5 per cent to 8.3 per cent.

Labour-intensive manufacturing for export was a major engine of China’s rise and it has historically been a clear path to economic development for poor countries. As China decreases exports of labour-intensive manufactured goods, other emerging Asian countries are stepping into that role.

There is a rapid increase in Asia’s share of the largest 5000 firms worldwide: Mainland China with 738 such global firms accounts for a seventh of these overtaking Japan (644).

China and India account for a third of the world’s internet users accounting for 19 per cent and 13 per cent respectively. Next to United States, China ranks second in terms of start-up investment and the fields supported include virtual reality, autonomous vehicles, 3D printing, robotics, drones and artificial intelligence.
China accounts for a 31 per cent share of urban consumption growth.

India has important lessons to learn from China in terms of bolder concepts for growth and timely implementation. But the democratic process of building consensus, especially in a federal set up, is a deterrent.
Source: Mckinsey Global Institute Discussion paper, Asia’s future is now.

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