The 750 million Chinese who aren't getting rich.

A series on the China gold rush.
April 8 2005 8:14 AM

The Empty Village

What about the 750 million Chinese who aren't getting rich?

When I grow up, I'm going to be an investment banker. Click on image to expand
When I grow up, I'm going to be an investment banker

After a few days in Shanghai, it is easy to think that China has already become the world's leading economic superpower. This illusion is not dispelled in Beijing. When I lug my bags from the train station to the Grand Hyatt, I walk right by the Lamborghini dealer.

Of course, as many observers have noted, China is two countries, urban and rural, and they are as different as Los Angeles and Appalachia. The Appalachian part would have remained theoretical for me, but one morning I was invited to ride shotgun in a dusty Jeep Cherokee with Tim Clissold, the author of Mr. China, for a drive to the north.

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Statistics in China are easy to come by and hard to have faith in. But here goes: About 750 million Chinese are farmers, and about 85 million make less than $75 a year. The average rural per-capita income in Sichuan province in 2002 was $253, less than the fees required to attend a local middle school. Rural incomes have almost doubled since the mid-1990s, but taxes have jumped four to five times. (To register to get married, for example, you have to pay 14 taxes.)

Of course, poverty alone doesn't lead to social unrest, which many people cite as one of the biggest threats to the Chinese economic miracle (the others being overinvestment and a fistfight with Taiwan). To trigger the class riots that frequently occur in China these days, you also need a sense of unfairness. There is plenty of that, stemming from corruption, limited opportunities, and income inequality. Experts disagree about exactly how China's rural/urban income gap compares with that of other countries, but the dispute is confined to whether it is the most extreme in the world or merely extreme. In an extraordinary series in the New York Times, Joseph Kahn told the story of Zheng Qingming, a brilliant farmer boy who aced his high-school admission test but couldn't scratch together the $80 necessary to take the college entrance exam—and solved the problem by stepping in front of an express train. In China, Inc., Ted Fishman described a villager, who, after demanding that the spending of local authorities be publicly audited, was taken into custody and beaten to death.

Clissold and I drove until the city's superhighways narrowed to single-lane strips and brown mountains appeared. Then, after winding through a dusty town near the Ming Tombs, we parked near a cluster of stuccoed brick buildings and walked. Compared to the poorer parts of China, of course, the village was well-off. Beijing money flows out of the city into the surrounding towns, and many of the brick buildings here had been recently rebuilt. The village's inhabitants, meanwhile, flow the other way, so the town was deserted except for old people, dogs, and kids. The town's dirt lanes were strewn with burned coal ash and garbage, the air smelled of brush smoke, and an ancient farmer pedaled by occasionally on a bicycle overloaded with sticks. We hiked through a field into a walled, unkempt area—the grave of an emperor's concubine—then up the side of a hill. From there, we could see across the valley to an incongruous, nearly flat, snow-covered field, which was apparently a ski area. Now that they have some money, Clissold explained, the Chinese want to do things people with money do, such as skiing and golf. Unfortunately, equipment and skills have yet to catch up with desire, so the broken-leg-repair industry is burgeoning, too.

Later, we drove northeast, past an abandoned reservoir project and a military base inside a hollowed-out mountain, and stopped at an empty roadside restaurant for lunch. The menu promised a veritable banquet of foods, but after a long exchange with the excited waitress (Customers! Laowai!), Clissold reported that the only ingredients in the larder were potatoes, chicken, and celery. Then it was another 45 minutes in the Jeep up and down steep hillsides and through tunnels until a familiar ribbon of stone appeared on a distant ridgeline, snaking away as far as we could see. Richard Nixon will forever be ridiculed for his assessment of this architectural wonder, but he got it right: "It sure is a great wall." In fact, when one imagines the labor required merely to haul the massive rocks up to the ridge, let alone carve and fit them into place, it's no wonder people have such respect for the awesome power of the Chinese workforce.

Fearful that social unrest will weaken its power—and also because it is the right thing to do—the Chinese government is aggressively addressing the income gap. The answer, for now, is not more-efficient farming but easier migration to cities and the establishment of ever more factories. Like other governments, however, the party is not a single unified entity, and intelligent reforms in Beijing can often be negated by local officials in the countryside. Creating jobs for a billion people, moreover, does not happen overnight. Even with China's frantic rate of growth, the lack of rural opportunities and the death of many state-run enterprises have resulted in mass unemployment. Fishman suggests that China may have more unemployed industrial workers than the rest of the world combined.

Which is why, when one has seen the other side of the coin, it is even harder to wave the pompoms in support of U.S. protectionist rhetoric aimed at whipping up fear of the "China threat" and saving "our" jobs. It's easy to have sympathy for those whose jobs disappear across the Pacific, but hard not to also feel excited about the opportunities created for millions of Chinese so desperate to have them. As Thomas Friedman observes unapologetically in a recent New York Times piece, like it or not, the world has changed, and globalization is here to stay. If we fail to react, or resort to whining instead of innovating, China will indeed prove a massive threat (and might regardless). But ultimately, the answer is not tariffs, quotas, or safeguards, but figuring out what we can do better than the Chinese—or with their cooperation. And then helping our companies and workers get on with it.

Henry Blodget is the founder, editor, and CEO of Business Insider. Follow him on Twitter.

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