The Chinese S.A.S. - Speed, Ambition and Scale

I returned to Hong Kong 25 years later as a businessman and found a city with a population of seven million people now occupying that area. I'm referring, of course, to Shenzen, China's original "Special Economic Zone."
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In the early 1980s I stood in a military observation post in Lok Ma Chau and looked to the North through my binoculars at a large, empty patch of dirt being slowly flattened by a bulldozer. I returned to Hong Kong 25 years later as a businessman and found a city with a population of seven million people now occupying that area. I'm referring, of course, to Shenzen, China's original "Special Economic Zone."

Fast forward a few more years after that trip and China's explosive economic expansion continues until one day the administration deems it prudent to allow one of its over-leveraged steel mills, Jiangxi Pingte Iron and Steel Co. Ltd., to go into insolvency. "Is this China's Lehman moment?" Comes the shrill cry from Wall Street. "Will there be a melt-down?" (Pardon the pun). Although there's no doubt that the Chinese steel industry suffers from too much capacity and too much debt, the comparison with Lehman stops right there. The West's reaction illustrates how ignorant we continue to be about what's really going on in China and how little it compares to our own contemporary economic experience.

What Lehman et al taught us is that there is a certain limitation to economic activity that essentially occurs on paper and computer screens. China may not be immune to financial markets, even in a semi-controlled economy, but when the dragon shifts its sizeable bulk and farts a bit of black smoke it's not the end of its dominion, it's just what dragons do. China derives its strength, not just from massive resources, but by combining its sheer scale with two other attributes; speed and ambition.

Perhaps you know about Shenzen but have you ever heard of Zunyi or Guigang? How about Zhucheng or even the beautifully named Pingdingshan? The chances are you haven't because they are amongst the smaller of China's many conurbations. I only mention them because they are each of a similar size to Birmingham, which is increasingly a useful place to observe Chinese commercial behaviour. To London-obsessed Britain, Brummie Land might seem like a distant city, comparable perhaps to somewhere like Pingdingshan, but when the Chinese look at a map of Europe they see a small blob of land called Britain with two overlapping black dots labelled London and Birmingham. It is a geographic distinction of modest consequence and it may explain why China Southern Airlines will soon be ferrying passengers directly from Beijing to Birmingham instead of Heathrow. When Chinese tourists arrive at the airport this summer they may struggle to get onwards to the city centre or National Exhibition Centre. Why this should be the case is a mystery to the China Railway group who are happy to chip in £280 million to regenerate an old line and solve the problem. It's already seeking to pump money into HS2, including a new Birmingham terminal, so it's a natural extension of their interest. Moving people and resources from A to B at speed simply requires a little focus.

Chinese Industrial investment in and around Birmingham also continues apace. A decent sized plant will soon be built to accommodate an arm of China's largest lighting company, adding to the Chinese presence in automotive manufacturing. They have also latched onto Britain's London-centric obsession with real estate. The Chinese, in their own highly respectful way, are puzzled by this British parochialism. If London has a massive supply deficit, why not buy or build a short distance away in Birmingham? Peng Global Holdings set the direction with the £7 million purchase of the 133,000 sq ft Quayside Tower. This was followed by a smaller, but symbolic purchase of an ornate Grade II listed building in Colmore Row, opposite the City Council building, by a group of entrepreneurial factory owners from Hangzhou. They want the people of Birmingham to know that the Chinese are here to stay.

Britons observe Chinese expansionism with awe but the great irony is that Birmingham was once the fastest growing city of the eighteenth century. It led the way with science, technology and medicine. It combined intellectual rigor with manufacturing practicality. But its explosive growth was also partly attributable to its non-conformist attitude, it's refusal to be trammeled by conventional thinking. So perhaps Speed, Ambition and Scale are not a Chinese invention after all. They were familiar friends to men like Matthew Boulton, James Watt and William Murdoch who led the way in the industrial age Midlands. In reality, the Chinese are not teaching us something novel and foreign. They are reminding us of what we once knew.