Inside China Today: Q&A with Dr. Robert Oxnam

An exclusive interview with Dr. Robert Oxnam

Dr Robert B Oxnam is Senior Advisor at the Bessemer Trust Company, where he offers insights on the Asia pacific region. He often advises prominent Americans seeking in depth knowledge on China, including Bill Gates, Warren Buffet and President George Bush. Dr, Oxnam was President of The Asia Society for over a decade (1981 - 92). He has authored several works on Asia including Ruling from Horseback (on the Manchu conquest of China); Dragon and Eagle (a review of US China relations). He is a visiting Professor at Beijing University, Global Scholar for Robinson College of Business and Chairman of the US Trust for Chinese Science and Civilisation associated with the Needham Research Institute at Cambridge University.

In this exclusive interview, Dr. Robert Oxnam shares his views on China and Chinese economy with Zafar H. Anjum.

Q. What is it in the history of China that has made China what it is today?

A. My feeling is that China has a unique sense of history. The Chinese leadership, and indeed much of the Chinese people as they move ahead towards modernization live constantly thinking about the past as well. The key elements of that are a passionate sense of national unity; a deep commitment to, one might call, basic Confucian values, in a modern sense, that is education, family, discipline, hardwork; a feeling of strong emphasis on China’s internal progress having global significance. And therefore, out of some very old tradition comes the structure for rapid modernization.

Other part of the question I think deals with much more modern part of history. Deng Xiaoping, the leader of China from the late 70s to the late 90s, was acutely aware of history and he operated as much as in an authoritarian form as a traditional communist leader. But what he did was quite radical. Instead of a traditional Chinese approach, he reached out to the merchant class rather than the scholarly class. He stimulated economic growth not only within cities but sought foreign capital, much of it from overseas Chinese, which has been critical for the Chinese development. Over 70 percent of foreign direct investment in China over the last decade has come from overseas Chinese. And finally he tried to modernize China not only from the top end but also to release a traditional spirit of entrepreneurship at the local level, at the rural level. All of those factors have propelled China’s modernization.

Q. We have been hearing about China as a success story. But there are some down sides of China too, such as unemployment, water scarcity, environmental problems, etc. How do you think China would be able to cope with these problems?

A. Well you are quite right. The problems are well known and much talked about among Indian and foreign analysts. The problems are many, such as a banking system, which does not work, state-owned enterprises that are unproductive, and unemployment that is growing, environmental problems becoming very serious, corruption that is wide-spread in certain sectors. I think the Chinese are very aware of these problems too. In fact you can find many of them talk about them in the Chinese national press. But they have to be addressed and the Chinese are aware of it not just at the national level but also in key growing cities around China.

Therefore the new leadership in China that emerged at the 16th party Congress in November consist not only of new national figures who are going to continue the process of modernization but a lot of trusted, proven municipal and provincial modernizers, technocrats, whose responsibility will be to handle problems at the local levels. In my own sense, China does not face some kind of national collapse but we are going to see a cycle of growth and then decay and growth again if one would look at various cities around the country. One would make a very big mistake if one said that today China’s growth rate is almost 8 percent, and it will just continue that way. That’s not true. But one would also make a mistake if one said that Chinese are not trying to cope with the problems top down and bottom up. It is going to take two or three decades to really work their way through it. My guess is that the national growth rate will fluctuate between 6 and 9 percent but at a municipal level you are going to have wider swings in certain areas in terms of growth rate.

Q. We all have been hearing about these astronomical levels of Chinese growth. In media, there have been comments suggesting that these data might be somewhat inflated, maybe even fudged. You know China so closely. So tell us the truth about it.

A. It would be incorrect to assume that I have proven statistical data on China’s economy. Frankly, I am not sure anyone has that completely accurately. I think one has to combine the look on the outside which is done by excellent economists, so many from India, so many from United States, so many from elsewhere in the world and combine that with regular observations that I have made during some 70 trips to China. From a combination of those numbers with the application of a certain degree of skepticism, observations that I trust, I come away with the sense that China is going through, whatever the precise number, a dramatic process of modernization. If it is not true that China is at 8 percent but is at a lower percentage then it’s my observation that most of the rest of Asia is at even a lower percentage than their stated numbers. China, when you look at it, city by city, region by region, bottom up as well as top down, is going through a remarkable process of, if not coordinated modernization, efforts at modernization that parallel each other to produce a national phenomenon which is greater than I see in any other part of Asia.

Q. Briefly, would you give us a picture of Chinese villages or there are no villages in China?

A. Oh, there are villages in China. There are many villages in China. People often speak of rural China and urban China. I really don’t think they understand the countryside. One has to be more complicated than they say today 60 percent live in the villages and 40 percent live in cities. In fact a great part of the story occurs in the villages within 50 to 100 miles of the big cities of China. Those villages have been drawn into the urban take off whether as truck farmers or rural small scale industries or through figures in the village who actually travel often by public transportation to work with private sector concerns inside China. So that part of rural China has become a very important story in China’s national take off. It’s from the bottom up. There are villages of course well beyond that where they are less touched by modernization, but in fact the predominant story in terms of numbers in China are those rural areas which have been touched by the take off.

Clearly there are some issues at the rural level that are extremely important. If you live in a village near a city you can aspire to reach middle class status. But you haven’t in many cases fully achieved that. That creates friction. You can well have government tax policies that are heavy on the rural areas encouraging resentment between the city and the countryside. So I don’t want to give a picture that everything is perfect in China. But I do want to indicate that it is not just top down, it is also bottom up.

Last comment about that is that there is a good bit of evidence that China remains in a kind of soft authoritarian state framework top down and there is no doubt about the fact that there are considerable advances in terms of rural, more participatory, government. In some cases, although it is inaccurately called democracy, there certainly is decision making that is shared, in order to select people who serve as village leaders some of who are then chose by the Communist Party to be part of their network. So there is a top down and bottom up sort of change occurring, not small, not clear cut, but rural China is part of China’s modernization.

Q. What kind of trade relationship do you see growing between India and China in the coming years?

A. The prospect for India and China trade is substantial. I think in many ways there is a complementarily of interest. Both countries, even if they make comparisons between the two countries, in fact the big story if you get outside of both countries, is that both of them are in relative terms real success stories emerging out of 1990s into this decade. In both cases, their entrepreneurial leaders are trying to establish special niche markets.

In many respects India has provided a classic example in terms of IT development over the course of the last decade. Many Chinese are saying, can we adopt the Hyderabad model in terms of our own software IT back office sort of activities. I think there are issues of complimentarily there. I think both countries are looking into issues of labour markets and I find it very interesting that there have been investments in China made by Indians in which they are sourcing certain products that are produced by skilled Chinese labours that are turned to important Indian finished goods. That is a remarkably open approach to trade in groups. I think that is going to happen on both sides of the border.

I think the single biggest challenge right now is for the private sector of both countries to work with the governments of both countries to establish a framework, which promotes this trade. In some ways there is a kind of historic gap that emerged because of 40 years ago a military conflict between the two countries occurred which still has to be fully overcome. I am delighted with the flow of top level delegations and even highest level visits. Prime Minister Vajpayee is reported to be going to Beijing this year and as I understand it and I know that Li Peng has been here in India in recent history. That kind of visit really makes a difference. So I think there is more than India has in common in terms of exploring trade relations than anything which divides them.