View from Shenzhen: What recession?

If this blogger will forgive me, I want to quote in its entirety an email he received and posted on his blog today, because many, many people are going to read it and perhaps walk away with a less than complete picture:

I went through my first recession during my freshman year of college after 9/11. I remember the most tell-tale sign of the slowdown was that construction sites, ubiquitous in Florida, slowed or stopped entirely. I’m living in Shenzhen, China, now during an even bigger recession….

Except it’s not really a recession. China will likely be pulling 5-6% growth this year. While the IHT and other major papers carry a story a week about how bad the Pearl River Delta is doing, I just haven’t seen it.

Everyone talks about things slowing down but few people are talking, or seeing, things closing up. Projects I saw started a year ago are finally begin to shape up as the scaffolding comes down and beautiful “gardens”, apartment complexes, emerge. New projects are breaking ground and cranes are almost as ubiquitous as they were three years ago. My best friend here – a Hakka man in his late-20′s who grew up able to eat meat just once a month – turned down a sales job paying, literally, 8x more than he makes now because he’s convinced his current one-man operation is going to explode any day now.

As a foreign teacher I’m making more than I ever have. I’m making $35 an hour doing private lessons preparing a brilliant student to study in the US. I can treat a few friends to an exceptional dinner for half that. Four hours a week pays the rent for my 29th story apartment. My sister, a single mother who just got her Bachelor’s degree, is making $8. Enough for a Happy Meal and Big Mac dinner, perhaps.

A final note is that it’s surprising how well China’s Maoist legacy acts as a safety net inside a capitalist economy. Shenzhen and cities like it, effectively, have half of their population living not as citizens, but as long-term temporary workers. Most of these workers who are getting downsized now will be returning to homes and farms in the countryside because they mostly were not allowed to sell. Most never made permanent residence because the archaic “hukou” household registration system ties delivery of government goods and services to those hometowns. If it works out well, they’ll be going back to a rent-free home with decent savings and severance to start their own projects, where their children have free education and increasingly subsidized health-care. As terrible as these policies looked during the boomtimes, they’re looking increasingly wise today.

First, let me say I think this teacher is overly optimistic. When growth grinds down from years in the double digits to 5-6 percent, that’s an enormous shock to the economy, nothing short of a calamity. And whether he can see this or not in Shenzhen, it’s real and it’s painful. Often what we see in front of us can be deceptive. Just because people aren’t rending their garments in the street and lighting themselves on fire doesn’t mean there’s not misery aplenty. I own a home in America’s second most depressed housing market (after Las Vegas) and when I went back in November things looked just fine. I didn’t see a single person looking any less happy than in the good old days. But there were indications things weren’t quite right: for-sale signs on house after house, some of which have now been on the market for nearly two years. Lots of seats at the higher-end restaurants. Absurd discounts at the malls. The thinnest help-wanted section I ever saw (on-line and in the local paper).

Even though there’s all that new construction and entrepreneurial enterprise going on in Shenzhen, that doesn’t mean there’s “not really a recession.” I have so many success stories to tell you from Beijing, some of which I’ve related on this blog, including my own easy search for a new job. Many people I know are making money, and some see this as a new golden age. Really. But I also know how some companies in recession-prone markets are doing, and it’s worse than disastrous. I have friends there, and they’re at their wit’s end.

I did a lot of train travel over the past month and saw all the migrant workers sleeping outside of the stations waiting to go back to their hometowns. I’ve seen the half-finished buildings and the ghost malls. I’ve read some debates on whether the Chinese characters for “economic crisis” really mean “danger-opportunity” (my Chinese teacher insists it does, but I’ve seen the arguments disproving this, at least to the blogger’s satisfaction). No matter who’s right about it, this much is a fact: every crisis will mean an opportunity for somebody. Those lucky enough to get contracts from the government stimulus package, for example, will have a ball. But for many, this crisis is as real as can be.

I also think our teacher’s perspective on the plight of jobless migrant workers and the ingenuity of the “Maoist legacy” is a touch rosy. I think most of these workers will do alright; they’ll at least have enough for them at home to eat and sleep, which is enough to keep them from taking up arms and revolting. But I had to gulp when I read, “If it works out well, they’ll be going back to a rent-free home with decent savings and severance to start their own projects, where their children have free education and increasingly subsidized health-care. As terrible as these policies looked during the boomtimes, they’re looking increasingly wise today.” (Isn’t Maoism cool?)

I won’t dissect this. I’ll just say I think this fellow means well, but his analysis is simplistic, failing to take into account certain realities, like the the tragic state of rural education here, the crushing poverty of most of China’s countryside and its notoriously inadequate health-care system.

But I can understand why he’s feeling positive. There’s an optimistic, even euphoric mood in Beijing and Shanghai at the moment, and that’s probably the case in Shenzhen, too. A flurry of news headlines from all over the world seem to have created an impression that China’s stimulus plan is a winner, that it will pull out of the slump soon and even that the worst is over. China seems to be heading for a new leading role in the new world order. Or at least that’s the recent buzz. It’s at moments like this that I become especially cautious. I don’t think it’s time yet to uncork the Champagne.

______________

Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.

The Discussion: 28 Comments

I’m also living in SZ, and I’ve noticed a drop in private teaching work this year. For the past four years here I have, on occasion, had to turn down work. So far this year my phone hasn’t rang. Just as well I don’t depend on it….

March 27, 2009 @ 6:17 pm | Comment

Richard,

I posted this on my site as well as I too was struck by this fellow’s optimism- you of course have analyzed it more ably than I did. Reading the note a third time, I find myself annoyed by the “except it’s not a recession” bit, which exudes a certainty that’s wholly inappropriate in these times.

I’m sure the guy is delighted to be teaching English at $35/hour and to be living in Shenzhen, but there’s a reason why migrant workers kept going east during boom times, even ones who had accumulated impressive savings. People are going back West because they have to.

And as you say- the state of rural education and health are don’t exactly conform to a first-world ideal.

Anyway- well fielded.

March 27, 2009 @ 6:23 pm | Comment

I agree with you Richard that this person is somewhat overly optimistic. Anecdotal evidence is always dodgy – particularly when it comes from the big city expat bubble which we all live/lived in to some extent. This phrase from the email looks particularly naive:

“If it works out well, they’ll be going back to a rent-free home with decent savings and severance to start their own projects, where their children have free education and increasingly subsidized health-care.”

The key phrase being “If it all works out well”. My understanding of what tends to happen when things go tits up in China is that the owners tend to leave town in a hurry leaving a large mob of angry unpaid workers behind.

The other naive phrase that leaps out is “the children have free education”. Well yes. But then this is free education in the Chinese countryside. Has the emailer been there?!? This is not to criticise the self-sacrifice many rural teachers make and the hard work they put in, but the children aren’t getting the same level of education they would get in the city. Let’s not even get started on the whole health care thing. It’s getting better, sure. But my understanding is that that means it has moved from non-existant to piss poor.

The other glaring problem is this: lets assume that the happy worker goes home clutching a big payoff. Worker gets home. Then what? There’s no work in the countryside – that’s why the worker left in the first place. The worker cannot invest in starting a business or even put the money into the land by purchasing it (thanks to the amazing long sighted nature of Maoist policy). How long is the money going to last?

Secondly the financial tsunami hasn’t hit China yet. Yet being the operative word. The housing bubble in the UK peaked in the autumn of 2007 but it is only now we are seeing the real wave of redundancies and lay offs. The plummet in exports for China happened in the winter of 2008. It will take time to work through the system. But it will work through and it will cause pain. I am sure that China will come out of this better than many countries.

I’m sure that there is an ebullient feeling in Beijing, Shanghai etc etc. They are the privileged of China. They won’t suffer in the same way. If it all goes wrong they have options the average Zhou in China doesn’t. Frankly this person living the high life on the pickings of the rich whilst underplaying the suffering that many ordinary Chinese and ordinary poor people around the world will go through sticks in the craw.

March 27, 2009 @ 6:23 pm | Comment

Agree with all comments so far. Si, the buzz about the migrant worker returning home is that they left a farm, and while they won’t be bringing in extra income from their work in the coastal cities, at least they can live a god enough life eating what they grow and being assured a place to sleep. This, too, sounds rosy and simplistic.

The other phrase in the email that jumped out at me was the image of these workers going home to work on “projects,” as though the countryside were Silicon Valley and these workers were skilled enough and blessed with adequate resources to pursue the projects of their dreams. Sure, some will. But to make it sound like this is what those millions are all going home to – opportunities to work on their projects – is hopelessly naive. Most are going home to poverty, frustration and, at least for the time being, hopelessness.

March 27, 2009 @ 6:47 pm | Comment

“Most are going home to poverty, frustration and, at least for the time being, hopelessness.”

Absolutely. And this is the key point. What the emailer seems to miss is that these migrants are people who went to the city with hopes and dreams just like anyone else. Whilst they undoubtedly expected to have to move from job to job, they also undoubtedly had the very reasonable expectation they would be able to keep working and saving, and to be able to use the money to improve their lives and those of their families. To airily say as the emailer does, that they can just go home and hang out is a bit insulting. Kind of “they have sucked it up in the past, so they can just suck it up some more.”

This email has actually really got to me. I wasn’t pissed off when I first read it, but the more I think about it the more it irritates me. I suppose it is just the ignorance of someone who is young, foreign and single in the big city and has no understanding of the difficulties of people with others to support. But bloody hell, it has really annoyed me.

March 27, 2009 @ 7:02 pm | Comment

View from Shenzhen: What recession? » The Peking Duck…

I went through my first recession during my freshman year of college after 9/11. I remember the most tell-tale sign of the slowdown was that construction sites, ubiquitous in Florida, slowed or stopped entirely. I’m living in Shenzhen, ……

March 27, 2009 @ 7:22 pm | Trackback

Today I visited a company that used to help Western businesses conduct mergers and acquisitions in China. Now, they are helping Chinese businesses conduct mergers and acquisitions in Europe and America.

Also, I highly recommend reading the essay (http://www.pinyin.info/chinese/crisis.html) by sinologist Victor H. Mair, professor of Chinese language and literature at the University of Pennsylvania, regarding the “danger+opportunity=crisis” misperception.

March 27, 2009 @ 7:33 pm | Comment

What I would like to know is, what’s he going to do when his $35 an hour student actually goes to the US or doesn’t need his help anymore? Some people will pay that much, but I can’t believe there is such demand compared to supply. Please correct me if I’m wrong on that, richard. I know there’s work, but there aren’t hordes of people willing to pay $35/hour fighting to get lessons, are there?

Si is right about anecdotes. I’m doing fine and can’t see any real problems where I am. But I would never believe the UK wasn’t suffering as much as I hear about based on my experiences.

March 27, 2009 @ 9:17 pm | Comment

Raj, I don’t know about the rates for English teachers (thank God). I know there are some people willing to pay lots of money for certain services, and maybe English teaching is one of them. I also know people in certain other businesses, like consumer electronics, are less delighted with the current crisis.

March 27, 2009 @ 9:39 pm | Comment

I think in another decade or so the growth rates for this year are going to be revised way down, just as China’s overestimates are constantly being pushed back down by later analysis.

When migrant workers return, the jobless leave. Everyone remaining has work. Presto! Everyone around him has work. Where are the unemployed? Laid up in rural areas, brooding.

Michael

March 27, 2009 @ 9:48 pm | Comment

By coincidence yesterday I wrote an article on the Hukou system and how it suppresses China’s farmers.

Most of these workers who are getting downsized now will be returning to homes and farms in the countryside because they mostly were not allowed to sell. Most never made permanent residence because the archaic “hukou” household registration system ties delivery of government goods and services to those hometowns. If it works out well, they’ll be going back to a rent-free home with decent savings and severance to start their own projects, where their children have free education and increasingly subsidized health-care. As terrible as these policies looked during the boomtimes, they’re looking increasingly wise today.

The original poster shows a deep lack of understanding of the hukou system and life in China’s villages. Farmers are poor and live a subsistence existence. Chinese farmers are allowed to sell their homes and rent out their land, but the reality is that no one wants to buy it. (For $15k US I could sell you a home in a Chinese village. Contact me if you’re interested. I’ll be waiting). Migrant workers are forced to find work elsewhere and be separated from their spouses and kids. This is not by choice. Migrant workers share land with their extended families. Often when the parents die the land is given to the eldest son. The other siblings get no land and no inheritance. This is Chinese tradition. Siblings may purchase a house and land if they wish to stay in the village.

Migrant workers usually lose 3-4 months wages when they leave because the company owner won’t pay them until they continue to work, or the owner has left town and stole their wages. This is very common. Migrant workers put their wages into post office or bank accounts that can be withdrawn back home. This is to pay for the kids and to support the family back in the village. They have very little savings. Severance? What the hell? If they can’t even claim their last 3 month’s wages who gets severance?

Many villages have lost their primary schools, so the kids need to go to a nearby larger village, usually a couple of kilometers away. It’s tough on them but there’s no money available for a school in their village. High schools are in smaller cities. Kids need to pay for room and board to go to high school. Health care is similarly sparse. There’s only so much the local barefoot doc can do, if you believe s/he is competent.

The hukou system allows Chinese and foreign companies to access a seemingly unlimited supply of cheap labour that have few rights. The world benefits from the labour of migrant workers. The system has helped China develop into the mega world exporter it is today. With no protection, they are discriminated against, abused and cheated. By design it is impossible for them to change their hukou to the city. But there is no life nor work for them back in the villages. Still when they return home they will be reunited with their spouse, which is a good thing. They can eat what they grow, keep alive and bide their time.

March 27, 2009 @ 10:43 pm | Comment

@don tai

interesting comment and i enjoyed your blog post. regarding your comment about barefoot doctors – i thought they were now extinct? are they still around?

March 27, 2009 @ 11:10 pm | Comment

Dontai, thanks for the link to your wonderful piece, as well as the spot-on comment. I have always found the hukou system one of China’s great aberrations, a type of Apartheid that dooms or blesses you, depending on where you were born. I know it has become considerably less repressive than in the old days, but it still is hugely important when it comes to where you can study and work. Due to its harmful effects on a personal friend of mine, this is a particularly sore spot with me.

March 27, 2009 @ 11:12 pm | Comment

Si, I thought the same about the barefoots.

March 27, 2009 @ 11:13 pm | Comment

Hi there,

This is a great blog of yours, Your site is very informative and I can relate to your posts. My husband and I are also EXPATs in China. I have just started my own blog: TheShanghaiExpat. Please feel free to visit and let me know what you think for a link exchange.

Cheers,
Nikou

March 28, 2009 @ 12:05 am | Comment

@Si

Barefoot doctors were supposedly abolished around 1981. Maybe village doctor is the correct term. They are still around, otherwise there would be NO medical treatment for most of China’s smaller villages. My family and I were treated by one in a remote village last summer. The harsh environment made us sick. He was a lovely chap, very interested in Canada and all, but damned if he scared me with his lack of medical knowledge. At least there seems to be no lasting negative effect.

“If you don’t believe it will help you, it will not help you”. So was the unsolicited sage advice given to me as I gazed doe-eyed at the dried herb and animal parts that are known as Chinese medicine. Boil it and drink it, damn it.

March 28, 2009 @ 3:02 am | Comment

where their children have free education and increasingly subsidized health-care.

The second you hear a foreigner in China tout the Chinese education and health care systems, you know that person doesn’t have a clue about China.

March 28, 2009 @ 6:52 am | Comment

If there’s a guy doing great at these times – good luck to him. Lets applaud, for we only hear of people not doing so well !

Having said that, superficial impressions are indeed dangerous. If you walk the computer street in Guangzhou on a Saturday, you are risking getting caught in a stampede ! Does that mean there’s no recession. Of course not. The hardship is biting everywhere, including in the Pearl River Delta. Getting a job is not so easy here these days, for laowais and locals.

March 29, 2009 @ 2:44 pm | Comment

To make an assumption: I assume that the author of this post is getting his information on the “utopian” conditions of the Chinese countryside from his “fool and his money” employer the super-rich Shenzhener.

Many of us have experienced Chinese urbanites shall we say “innocent” (*cough*borderline delusional) views of their rural countrymen. But from some of the wealthier people I come in contact with, I see these delusions taking the shape of a familiar narrative i.e. “the welfare queen”. Basically, its the myth that public welfare allows poor people aka “loafers and n’er do wells” to live fat off of government assistance aka “the working man’s tax dollars”. It’s a neat little story that has tortured American politics for the last 3 decades, and its comforting (read: equally disturbing) to see it taking root over here. (I hope know one has translated any of Ayn Rand’s novels into Chinese yet.)

I could be wrong but I’ve heard this type of passive-agressive idealization of the countryside by some of my wealthy associates a lot recently, and I think that when the Shanghai clique inherits the throne from Grandpa Hu, you’ll see this narrative gaining more steam, but also I think it will be hard to not continue Hu and Wen’s rural policies without severely damaging the party’s image.

Anyway, Shenzhen looks fine. It’s a recession, rich people still make money, just less than they did the year before…and yes Shenzhen is still building, it’s always building because land developers through their ties to the government (and ability to create jobs for migrant workers) usually have unlimited access to funds which they use to build grandiose “garden apartment” complexes that if lucky are 50% occupied with the rest purchased by speculators who will eventually realize the stupidity of their investment when Shenzhen’s constant building exacerbates the real estate glut and drives down prices…

(anybody who pays 35USD an hour to a random foreign tutor is nuts, unless the guy has an advanced degree in education and has teaching experience (haha)…but having been naively involved in the extraction of cash from the pockets of good intentioned Chinese parents in my teaching days in Qingdao I realize how easy it is milk RMB with a foreign face…anyway, if this guy’s employer happens to read this blog, I’d be happy to do it for 25USD an hour(and of course still feel like I was ripping you off.))

March 29, 2009 @ 8:59 pm | Comment

Andy, great response on several levels, thanks.

March 29, 2009 @ 10:25 pm | Comment

The truth is somewhere in the middle, most of the time. I think there is much to your argument that this guy is overly optimistic, however, I also think you are overly pessimistic.

After all, one of the most important drivers of this crisis at this point is the lack of confidence people have in the market. Dispute valuations and price/earning ratios at record levels people refuse to invest or lend or take other financial risks. Recall that China doesn’t really have a credit or savings problem, it’s bank lending rate actually increased last month and it has one of the highest savings rates in the world. The biggest drag on the economy is falling exports (of course, most Chinese put this blame for this on weak economies elsewhere).

China’s (perhaps, as you say, unfounded) optimism about it’s own future is it’s greatest asset in this crisis, even more than the piles of US T-bills.

So lets not rain on this man’s parade. If we all felt like him this crisis would be over tomorrow.

March 30, 2009 @ 11:48 am | Comment

Also, not to make light of AndyR’s comments (I have no specific issue with the substance, he makes some good points), but you come off very bitter.

You don’t know anything about the writer of this email, who may be far more qualified than you.

Also, optimistic people are more pleasant than bitter people. They also earn more. Maybe that’s why he makes more?

March 30, 2009 @ 11:54 am | Comment

As a SZ resident, I am surprised to have a completely opposite feeling than the author’s comments. I too see a lot of construction projects being completed. Mostly high-rise apartment complexes (“welcome home to your and 50,000 of your closets friends”). And I see these complexes 90% vacant. Not a sign of an economy in good shape.

I drive through DongGuan and see the hundreds of boarded-up factories. And empty streets. I see the local shops there closed …..

I have quite a few recently unemployed ex-pat friends who are having trouble finding teaching jobs …. the ones they find are ¥10,000 or less per month salary.

In SZ, empty malls, empty stores, empty restaurants.

One would think this would lead to reduced prices as owners scramble and compete harder. On the contrary, getting ripped-off is growing in frequency. Desperation and competition is not driving prices down, it’s driving even less scrupulous activity in stores/bars/restaurants than usual.

March 30, 2009 @ 12:04 pm | Comment

DW, I am relatively optimistic about China, at least in comparison with the US. But based on everything I’ve seen, the writer of the original email is very, very wrong, not just a little. This is especially true of his casual reference to the educational opportunities and health care benefits in the countryside, and the happy life jobless workers will have heading back to the backwaters to work on their “projects.” Andy’s response didn’t strike me as at all bitter, just informed.

It’s true, optimism will help us get over the recession. But deluding yourself into believing the ridiculous is not a very wise strategy.

March 30, 2009 @ 12:18 pm | Comment

@don tai

thanks for that. it’s a great story about that doctor. did he cure your sickness? or did you not believe in him?

@jim

“The second you hear a foreigner in China tout the Chinese education and health care systems, you know that person doesn’t have a clue about China.”

absolutely

@dw

“You don’t know anything about the writer of this email, who may be far more qualified than you.

Also, optimistic people are more pleasant than bitter people. They also earn more. Maybe that’s why he makes more?”

it is true that we don’t have any personal information about the guy. however he is a private english teacher, which certainly doesn’t make him an automatic expert on the chinese economy. he could be worth listening to, but his breath taking naivety in some of things he says undermines his central point. he clearly hasn’t been anywhere near the chinese countryside or spent significant periods of time there. it is true the chinese economy is still growing, but parts of it have just fallen off a cliff and the most vulnerable members of society are going to suffer. it is his blase attitude to this that sticks in the craw. however i think this attitude is mainly due to his horrible ignorance, rather than genuine nastiness.

March 30, 2009 @ 5:46 pm | Comment

I guess I could see how my response could be read as “bitter”, but I’m not…don’t think I compared my financial situation with the e-mailer’s…anyway, maybe its unfair to question the guy’s teaching credentials, maybe he’s worth every penny, but in my experience there are few expat tutors who would be worth 35USD an hour (not to say they don’t exist because I know of at least one)…

I was a horrible teacher, my fellow expats teachers at the time would say the same thing, but the school still charged double for classes with us because we were Westerners. I just always felt bad that the parents were paying extra for someone with absolutely no teaching skills, but luckily I’m done teaching, and guilt-free because I’m not the one driving around Qingdao in a Porsche paid for by proceeds from false promises (ok, I may be a little bitter about my teaching days, but that has nothing to do with the e-mailer)

That being said, I don’t think it is unfair to challenge the guy’s observations on China…nor do I think it’s unfair to take a guess at how his opinion has been formed based on my own experience over here…and yeah, I may be totally off the mark, which is why I framed my response as an assumption based on my own experience, which is basically all that anybody can do…

Regarding pessimism, I have previously noted my reservations about China’s strategy of “building” its way out of the recession, but I understand that priority #1 for the CCP will always be employment and especially employment for migrant workers, therefore the constant investment in over-hyped land developments. Yes, you see the physical signs of growth everywhere, but what is the efficiency of this growth over the long term? It remains to be seen, but I question the rationale behind continuing to build in a declining housing market. They say the bubble burst in Shenzhen last year and prices for existing apartments have hardly hit a nadir. If you continue to build you are simply adding fuel to the fire. This in the long-term could be a good or bad thing depending on who you are, in the short-term its good for home-buyers purchasing a new home to actually live in, but bad for investors who see the value of their investment depreciate because the market is constantly being flooded with new developments. Eventually, the inefficiencies inherent in China’s growth today will have to be accounted for…what happens then I don’t know.

March 30, 2009 @ 6:59 pm | Comment

quite glad to find out so many people are concern about China

March 30, 2009 @ 10:27 pm | Comment

that person it too optimistic because he only concerns about himself,well,he can get $35 an hour and it’s quite high compare to his rent,so he’s satisfied about it,without knowing that there are few family can offer $35 to a private course.there are much more people who can not find a work at this recession,they have no choice but to return home,a home that is too poor to provide them anything.

March 30, 2009 @ 10:34 pm | Comment

RSS feed for comments on this post. TrackBack URL

Sorry, the comment form is closed at this time.