| BUSINESSWEEK ONLINE : JUNE 28, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN COVER STORY
A Tale of Two Families (int'l edition) How China's transformation to a market economy is having jarringly different effects on ordinary citizens On a breezy evening in a dusty Beijing parking lot, Liu Fengtong, dressed entirely in black, twirls his partner with expert precision and dazzles her with deft footwork. Christmas lights wink overhead. Speakers blaring Chinese pop tunes compete with honking trucks and the whir of bicycles from the nearby road, which is lined with auto-repair and dumpling shops. It is a routine that Liu, 39, performs night after night at the makeshift dance floor, where he gives lessons to patrons paying a 25 cents admission fee. Liu earns $90 a month--half his old pay as a welder at a coal plant a few kilometers away. But ever since he was laid off last year, it has been the best work he can find. ''This is not a profession,'' says Liu. ''But I must make some money for my family.'' Some 1,100 kilometers away, in Shanghai, the family of Frank Liu is enjoying the economic fruits of the new China, the one that is fast joining the global economy. Liu--no relation to the Beijing dance instructor--heads a government agency that recruits foreign investors to the city's booming Waigaoqiao Free Trade Zone. Sitting in his wood-paneled office and dressed in an expensive dark suit, Liu, 42, proudly explains how Intel, Hewlett-Packard, and IBM all are looking to expand their operations in the zone. Soon, Liu will meet executives from Dell Computer Corp., which also is considering Waigaoqiao. The following week, Liu will fly to the U.S. to drum up more business. Liu's family has prospered as well: His wife has a good job at Intel, they just bought a new apartment, and his 11-year-old son attends an exclusive private school. The two Liu families offer jarringly different glimpses of the impact that China's breathtaking transformation is having on ordinary citizens. It is a process that's likely only to accelerate, regardless of the recent outburst of anti-Americanism and the stalled negotiations over China's entry into the World Trade Organization. As the shock of those setbacks wears off, the media and Beijing leaders such as Premier Zhu Rongji and President Jiang Zemin are again picking up the campaign to turn China's state-run economy into one that is driven by market forces. ''The reforms are painful but they are inevitable,'' concedes Liu Fengtong of Beijing. ''We all must accept that they are the reality.'' Frank Liu agrees: ''China has no choice but to push ahead with the changes.'' As a result, much of what has defined life for China's 1.2 billion people is in flux. Zhu's efforts to turn around tens of thousands of money-losing state enterprises will mean the shuttering of countless factories. More than 10 million workers like Liu Fengtong will be laid off over the next few years. Some of these castaways will find jobs in the proliferation of private enterprises, from new computer factories to roadside restaurants. If they are fortunate, they can afford to more than make up for the perks that they forfeit, from company housing to free cradle-to-grave health care, thanks to other reforms. New banking policies are making mortgages available so families can purchase their own homes. New social services schemes in many cities will provide health care, and employers will pay into mandatory savings plans. Private-sector workers will then form the vast base of middle-class consumers that Zhu and other leaders hope will power Chinese economic growth for decades to come. The other transformation facing China will be its greater opening to the outside world. Washington and Beijing are searching for ways to revive talks to conclude a WTO deal this fall. If they succeed, sectors from high-tech manufacturing to banking and telecom services will open to foreign investors as never before. Companies will flock to places with the most flexible policies, such as Shanghai's Waigaoqiao zone. Over time, millions of beneficiaries of this revolution will acquire the cosmopolitan outlook and modern lifestyle that professionals in neighboring countries such as Hong Kong, Taiwan, and Singapore already have. That is the vision. But for millions of Chinese, the transition will be wrenching. The purging of most of socialism's last vestiges will throw many into a desperate search for work and shelter. The income gap between those with the skills required to thrive in an open economy and those without will widen. But whether the changes bring them prosperity or hardship, the tale of the two Liu families shows that most Chinese are determined to seize the opportunity to attain a better life. For 19 years, ever since he graduated from high school, Liu Fengtong had toiled at the soot-stained complex of crumbling buildings known as Beijing No. 3 Coal Plant. Zhu's drive to end the financial hemorrhaging at state enterprises forced the plant to lay off half its 1,300 workers last summer. Desperate to find something to replace his monthly salary of $180, Liu turned to his biggest passion, dancing. But he could only find part-time work. Fortunately, his 36-year-old wife, Liu Jie, still has her job at the coal plant. But her position is tenuous. She has spent 17 years working both in the company cafeteria and as a teacher for workers' children. But under new guidelines, state enterprises are to shut nonproductive units. That includes the cafeteria and school; a health clinic for employees closed last year. What's more, concern over Beijing's poisonous air pollution is growing--and the No. 3 Coal Plant is a prime culprit. Soon, the entire complex is expected to be shuttered. Now, Liu Jie is part of a nationwide experiment: reemployment classes for laid-off or soon-to-be laid-off workers. It is a massive program run by cities and enterprises that aims to find new jobs for millions of people across China. Liu and her co-workers attend sessions at a sister coal factory across town. On a rainy April morning, she sets off on a bicycle at 6:30. Her 1 1/2-hour commute to her class involves pedaling to a nearby bus station and then changing buses twice. Inside a dingy room are 30 classmates, all uncertain about what jobs, if any, await them. Today's lecture is a throwback to an earlier China: Even as these students prepare to find jobs in the new economy, they must study socialist thought. Few pay attention; students chat quietly among themselves or stare out the window. In the afternoon, classes are more practical, on such subjects as restaurant and tourism management. ''These classes can be very important for finding a future job,'' says Liu Jie. Students in her class are thinking big: They hope that the coal factory's real estate could someday become valuable as urban sprawl advances to Beijing's suburbs. Their company plans to use the site to build an entertainment center, complete with restaurant, swimming pool, and bowling alley. This may be a vain hope. As more workers are laid off, consumer spending in China is dropping. New service ventures run by other state enterprises are finding few customers. Liu Wei, the couple's 12-year-old daughter, is aware that her parents are in a bind. With a serious expression beyond her years, Liu Wei says she feels bad that her mother must study so far away from home and that her father must look for a new job. The girl lives with her grandmother in another Beijing suburb, where the environment is cleaner and she can attend a public school with nominal tuition. She sees her parents only on the weekends. But she spends most of that time studying. ''All children with laid-off parents must study harder,'' the girl says. Liu Wei also senses that China's education system is becoming unfair. Until recently, admission to top schools was by examination. Now, wealthy families can buy places for their children. Her big dream: ''Someday, I would like to buy my father a car.'' Her father's dreams are more modest. He just wants his daughter to succeed in school so that she can get a solid job. To be a police officer sounds like a nice career. ''She should provide a service to our country,'' he says. He also thinks that as a cop, his daughter would have the skills to protect herself in cities where street crime is a rising problem. One of his friends' sons was recently killed in a fight. ''Today, China's society is more and more chaotic,'' he says. But Liu Wei has no interest in fighting crime. She wants to be a kindergarten teacher, as her mother once was, even though the pay is miserable. ''When people have too much money, they change,'' she says, citing her rich classmates who bully the other students and laugh at their simpler clothing. Frank Liu also knows what it is like to be thrust into an uncertain world. But for him, that was in the old days, when the Communist Party intruded more heavily into peoples' lives. Both of his parents worked as administrators in Shanghai's elite Jiaotong University. Life was simple but comfortable--until the disastrous Cultural Revolution began in 1966. Liu should have entered college in 1975. But in that radical era, only students whose parents were classified as workers, peasants, or soldiers could attend universities. So Frank Liu was ordered to work in a Shanghai automation-instrument factory, and his parents had to spend more time studying Mao than working at their jobs. When universities returned to normal in 1979, Liu, then 22, passed the entrance exam and jumped back into his studies. He earned a degree in management administration from the Shanghai Engineering Technological University. After six years of teaching, Liu landed a job in 1990 at the government-owned Shanghai Waigaoqiao Free Trade Zone Xin Development Co., where he now is a vice-president who manages the zone's development and works with foreign investors. ''I thought I should put my studies to practice in real life,'' Liu explains. At the time, Zhu was the mayor of Shanghai, which had become the new focus of Beijing's drive to build a modern market-based economy. Lily Li, Frank's 37-year-old wife, would also make a good ad for Zhu's new China. After earning an electrical engineering degree from Shanghai's Jiaotong, she got a job in the school's library just as it began to modernize its facilities with a $10 million donation from a Hong Kong tycoon. There, she learned to use the library's new Hewlett-Packard computers. Under HP's sponsorship, Lily spent time in California and Singapore for further training. She returned fluent in English and with a deeper interest in the computer industry. That enabled her to land a job at Intel Corp.'s busy office in Shanghai's Caohejing district, where she now manages the company's program that helps schools across China develop computer-educational facilities. Inside her cubicle, she works the phone, switching easily among Mandarin, Shanghainese, and English. Every now and then, she wheels around to blast off another E-mail on her Toshiba Pentium 130 computer. Education officials from across China are calling Intel in search of money and resources to develop computer-literacy programs. ''If we find their program worthwhile, we can help out,'' she says. Lily has just returned from China's southern island of Hainan to check out a school program. She is to fly to Beijing in a few weeks. While the parents are at work, their son, Liu Zichen, fills his days with the demanding class schedule of the private boarding school inside the Waigaoqiao zone. He's only in fifth grade. Yet the 11-year-old already averages more than two hours of homework per day. On weekends, when he visits his parents, the load is extra heavy. With China's one-child family policy still in force, there is added pressure on single children to excel in school. On a Sunday afternoon, Liu Zichen is hunched over mathematics homework in his bedroom at home. A poster of the Chicago Bulls basketball team hangs on the wall along with another of Brazil's national soccer team. The shelf above his desk is crammed with books. ''He doesn't get to read as much as he would like,'' says his mother. ''There is too much homework for Chinese children today.'' But given the soaring costs of education, the workload is understandable. In addition to tuition, top high schools in Shanghai can charge entrance fees of as much as $12,000, Lily Li notes. Another major investment for Frank Liu's family was its 140-square-meters, three-bedroom apartment in a new high-rise five minutes from the industrial park. Flats in their building range from $30,000 to $100,000. To make the purchase, they put 20% down and were able to secure a 10-year mortgage from the China Construction Bank and tap into a housing fund provided by Waigaoqiao. After poring over interior-design magazines, they began a five-month renovation. The Lius created a bookshelf-lined study and furnished the living room with a 34-inch Toshiba TV and a Philips video compact-disk player. Now they are saving money for travel. ''Every year, we want to take our son to a new place in China,'' Lily says. After a couple of years, they plan to visit Hawaii and Southeast Asia. Back in Beijing, Liu Fengtong and his family can't even afford to think about vacations. The view from their simple apartment, located inside the grounds of the factory complex, is of vast heaps of coal. Black dust blows against the windowpanes. With the loss of his job, Liu has also lost his free health care. His wife is worried. But, determined to save money for their daughter's education, and possibly a future business, Liu Fengtong refuses to spend the $35 monthly fee necessary for health coverage. The family also owes $4,800 they borrowed from friends to buy their small but cozy 67-square-meter, two-bedroom apartment. They do not own fully own it, actually. Unable to afford the entire sale price asked by their employer, they instead bought usage rights. If they move, therefore, they must sell it back to the factory at the original purchase price, rather than seek a market price. Liu Fengtong's decision not to buy the apartment outright illustrates the steep hurdles facing China's crash program to boost homeownership. State enterprises across the country are being pushed to sell company flats to millions of workers. Besides improving the finances of state companies, the aim is to stimulate a burst of consumer spending on renovations and furnishings. The effort also is meant to get Chinese banks, which lend mostly to state enterprises, to develop modern consumer businesses such as mortgage lending. That is easier said than done. ''Why borrow from the bank when the future is uncertain?'' Liu asks. His apartment's sparse furnishings show how difficult it is to get worried blue-collar workers to spend more. Beijing has tried to make it easier for families to buy electronic appliances and other household goods by having banks offer consumer credit. But these loans come with stringent conditions, such as extensive documentation of a reliable income. Many citizens, including those who run their own businesses, are deemed too risky for Chinese banks, which already are buried under some $250 billion in nonperforming loans. Government loan guarantees may be needed, especially at a time of rising unemployment. ''The government wants to stimulate consumption, but it also must assume some of the risk,'' says Cao Yi, vice-general manager of the business-development department at the Beijing City Commercial Bank. From his dusty dance floor, Liu Fengtong can still be optimistic. Stopping for breath between schmaltzy Pop songs, he confides his plans for the future. He aims to scrimp money until he has enough to start a business selling auto parts. ''The investment is small, and you can quickly make back your money,'' he says confidently. Their circumstances may be radically different, but the Lius in Beijing and the Lius in Shanghai are similar on one count: Both couples are convinced that their child's life will be better thAn theirs is now. Maintaining the faith that workers and educated elites alike will benefit in the new China is critical if the country's breathtaking reforms are to succeed. BY DEXTER ROBERTS _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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