China's Change

The Greatest Show on Earth

Hugh Peyman

• Publisher: WSPC
• Year: 2018
• eBook ISBN: 9789813231443
• Topic: Politics & International Relations
• Subtopic: Development Economics
• Index: Politics & International Relations

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China's Change injects timely, original ideas into the world's most important, if confused, debate over how to manage the twin challenges of anaemic economic growth and accelerating global disruption. Change is the cry from the US to Europe, Asia to Australasia. The snag is the West has no playbook to help. China however, to regain control of its future, has regularly reinvented itself by understanding change's nature through traditional philosophy.

This book argues it is time to "Look to China" but stresses China's approach to managing change only supplies the process not individual policies: the how not the what. Policies have to be created locally. In managing change, traditional thought is China's X-Factor, the key to China's record-breaking economic transformation. To grasp this, China's Change provides an understanding of China's past, present and future through its philosophy, history, economics, business, politics, prospects and impact in a way that no other book has done.

Two big global questions are answered. Can other countries, firms and individuals find paths out of their dim twilight by adapting China's change process? Can China continue to create one-third of world growth, more than the US, EU and Japan combined, to help cure the last decade's global economic malaise?

China's roadmap for change enables anyone to navigate growing global disruption. Ironically China's process is built on such ignored-in-the-West ideas as long-term thinking, clear priorities, gradualism and non-ideological pragmatism that earlier powered two centuries of Western economic dominance. If the West and rest of Asia learn from China to manage change, the next global surprise could be another turning of the tables. There is no end to history, only more turns of the wheel: for now China's Change is again the Greatest Show on Earth.

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--> Contents:

• China and an Increasingly Disrupted World
• Change, the Chinese Principle and the Greatest Show on Earth
• History, Philosophy, Strategy and Governance
• 20 Essential Ideas for Life, Family, Business and Government
• Pivots of Change
• Managing Change: China's X-Factor
• The Overseas Connection
• Wen's Xun and Wenzhou Theatre
• Battling within the Party for Change
• Why Many Misunderstand China
• Why China's Economy is Misunderstood
• Economic Change: The Difference is Night and Day
• Four Strong Overlooked Pillars
• Ghosts, Nightmares, Middle-Income Trap and Reality
• Finding the Morning Sun to Avoid a Chaotic Era

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--> Readership: General public interested in the social, political, economic and financial development of China as well as world affairs. -->
Keywords:China;China's Change;China's Economics;China's Business;China's Finance;Globalization;Disruption;Culture Wars;Post-BrexitReview:

"Through the extraordinary array of people he has known and met over 40-years, Hugh Peyman tells the story of today's China in a way that has never been done before."

Tony Hall
BBC Director-General

"It is rare for a foreigner to understand China from the ground up. Hugh's advantage is that he got to understand China's diaspora before working in China, going through the numbers at the ground level and meeting people engaged in both business and officialdom"

Andrew Sheng
Former Chief Adviser to the China Banking Regulatory Commission
Head of the Hong Kong Securities and Futures Commission and
author of From Asian to Global Financial Crisis

"Every time you hear the negative alarm about China, reach for China's Change."

Ralph Layman
State Street Global Advisors Vice Chairman

" China's Change is essential reading for any serious global investor. Get insights from the perspective of a researcher who sees things from top-down and bottom-up and who has lived in China for 15 years."

Ng Kok Song
Former Chief Investment Officer of the Government Investment Corporation of Singapore and
Adviser to PIMCO

"Punctures the biggest myths about the Chinese economy, from ghost cities to shadow banks. A great read, likely to change many readers' views on China."

Andy Rothman
Matthews Asia Investment Strategist, former US diplomat and
top-rated CLSA strategist

"Really like the way this is going for 'change'. China's Change is onto something, allowing it to be philosophical economics, which is much more beguiling than straight economics, of course! Particularly drawn in by the question of 'what is China getting right'."

James Kynge
Emerging Markets Editor Financial Times and
award-winning author of China Shakes The World

"All travellers to China, whether on business, holiday or study, should take this book that has it all on China: history, philosophy, government, politics, business and economics."

Ho Kwon Ping
Banyan Tree Resorts Founder, Singapore Management University Trustees Chairman and
author of The Ocean in a Drop

"A very valuable book. Makes cogent arguments, with a lot of valid, interesting and provocative statements."

Ian Johnson
Pulitzer Prize winner and
author of Wild Grass

"Fascinating: has a flair for making the difficult to grasp and conceptualise accessible."

Mike Tsang
Editor, Chatham House

"Ahead of the curve, more visionary than most China followers and even lots of Chinese!"

William Fu
Anglo American Group China Chief Representative

"Brilliant. China's Change is the book that needs to be written. Just excellent. Monumental."

Ulrik Trampe
Odin Capital Founder
Key Features:

• Identifying China's understanding of change to explain China's record-breaking economic recovery is unique; and a process that can be applied in the rest of the world
• "Look to China" is a startling and very unconventional idea for those in the West and parts of Asia battling with slow growth, economic challenges and no clear idea how to solve current problems: yet they have looked to China before with great success
• China's Change weaves decades of detailed on-the-ground research and observations to correct major misconceptions such as ghost cities, shadow banking and excessive debt, while describing China's process that makes change work

Chapter 1

Change, The Chinese Principle and the Greatest Show on Earth

“It is not the strongest of the species that survive or the most intelligent, but the one most responsive to change,”

Charles Darwin
(1809–1882)

“It is possible to see into the potential changes before they occur,”

John Minford
Introduction p. xxvi
Sunzi’s The Art of War 2002

China’s Change is not about policy but process: not what but how. Each country or person is different, with their own history, characteristics and culture. Policy that works in China may not elsewhere. Anyway, plenty of opinion makers and policy institutes provide the what but not the how. China offers the how: a roadmap for thinking about renewal.

Chapter 1 explores the main themes of China’s Change, many observed from my own experience and detailed, on-the-ground research. Starting with the essential background for context — China’s history, philosophy, government and politics — the book then considers why China is so often misunderstood, particularly its economy, and how China’s change will impact the rest of the world. With this complex mix revealed, China is a lot easier to understand. Essential Chinese ideas very largely exist in Western thought. Many have just been forgotten or disregarded, especially after the rise of short-term approaches to solve long-term problems.

Whenever I ask people in the West about long-term thinking, they laugh at its widespread but lamentable absence. The West has no Book of Change (Yi Jing or I Ching), which has analysed change for over 2,000 years. At least East Asia is familiar with its concepts and Confucianism, even if the younger generation is much less knowledgeable about them. Note, the traditional spelling of the Book of Change has been I Ching, but the current hanyu pinyin spelling is Yi Jing, just as Taoism has become Daoism. For consistency, hanyu pinyin is used throughout, except where this makes no sense. Also, I use Confucianism in a very broad sense to refer to the array of traditional Chinese schools of thought, including those of Confucius and his followers, Daoism and Buddhism.

All Confucian-based economies, bar China, Vietnam and North Korea, have become First World economies. A First World high-income China would be a complete global game changer, yet from 2016, if gross national income per person can grow annually by 6% within seven years it will reach the World Bank definition of a high income economy of $12,236. Even at 5% average growth, China would reach it by 2025. Prepare for major change before it is too late.

Applying Chinese Thinking

Given the many clouded views of China, it is necessary to state immediately that China does not have the best systems in the world. Furthermore, this is no Maoist or Confucian tract. It is an attempt to take from China ideas that create a process others can use to solve problems anywhere and to understand China’s economy better.

Indeed the list of China’s flaws has been long, be they in finance; from banks to stock markets, environment; from air to water and soil quality, society; from migrants to corruption or safety; from SARS to rail. Flaws though have been markedly reduced during the transition from central planning to a more market-based economy. Leaders in Beijing are generally very well aware of problems, often more so than their critics. They know everything takes time while experience teaches that change is more likely to succeed when approached gradually. Take safety, for example. Since 2000, China has had disasters in transport, health, food and fire because it lacked effective systems: babies died, epidemics only narrowly averted and passengers killed. Yet, China has developed a way to overcome problems, by understanding and implementing change. Its size creates complexity and much is intertwined. China is one enormous Rubik’s Cube: change one thing and a myriad other things are altered. What China does have after setbacks is a process to regroup, to redesign systems and approaches so as to ensure disasters do not recur, at least not on the same scale.

Many outside China see one disaster or fault after another, presuming the same is true throughout. What many observers lack is extensive knowledge let alone the relevant perspective to appreciate context or scale. So much has to change that priorities have to be selected and followed strictly. Everything cannot be done at once. If China tried, it would be overwhelmed by administrative gridlock, poor implementation or unintended consequences: doomed to failure. Instead, it sets a clear sense of goals, guided by long-term thinking and gradualism to smooth the process. Change is supported by the often overlooked very strong assets of private sector dominance, education, R&D and new growth areas.

Chinese thinking about change is not some mysterious, opaque Oriental philosophy, but a very rational approach fully compatible with the 21st century. Managing change can be described in barely 70 words. For China, the main goals are harmony, stability and moderation: in other societies, goals will differ. They can though be crystallized using the same long-term, 360-degree thinking and vision, along with a good grasp of cycles and priorities. Implementation then follows with research and field work, pilot schemes and correct sequencing. Pragmatism, flexibility, gradualism, restraint and constant renewal are central to success. Educating people for politics and administration is essential. Such precepts may be ignored or contradicted, but they remain China’s default thought position. Everything is work in progress, nothing is complete, but sufficient adoption of 20 essential ideas keeps China moving forward.

People everywhere have long-term goals and aspirations, ranging from work, incomes and identity to budgets, security and social stability. All have to be discussed and heard carefully, otherwise politics becomes a Tower of Babel with competing interests and ill-thought-out ideas collapsing the entire edifice. Many aspects of life must be considered, not as single issues, but as part of a connected whole. What will work look like in an age of artificial intelligence and robots? What skills, education and R&D will be needed to make the most of this major change and avoid the worst? How should foreign policy best be implemented? What are possible unintended consequences, such as waves of refugees resulting from armed intervention? How to alter global governance structures for economics and security to gain the most from rapid change while avoiding the worst? Sleep walking towards this misty future with the sound turned off is unwise.

New long-term approaches are hard but not impossible. When there is no obvious alternative, as in the late 1970s, minds can be focused as Margaret Thatcher’s TINA (There Is No Alternative) did. Now, much of the West and parts of Asia have to acknowledge a similar point has been reached: their Stable Era is over. A new morning sun may await, but only if people reinvent themselves before a new Chaotic Era ensues. Muddling through with strident slogans and short-term tactics is no permanent solution. Nor is hoping something will turn up, as the everoptimistic but impecunious Mr Micawber did in David Copperfield. Life’s lottery is rarely that generous, usually quite the reverse.

How might Confucianism help Western and Asian democracies recover? Moderation and compromise are at the heart of Confucianism, as Arthur Waley, the leading 20th-century English translator of Chinese philosophy and literature, observed in 1938. In the shadow of the looming Second World War, he grieved for his liberalism after seeing totalitarianism rise in Spain, Portugal, Italy and Germany on the right and the Soviet Union on the left.

“That good lies between the two extremes has been very generally accepted by those who have tried to view the world rationally. As a political principle, it was the foundation of 19th-century Liberalism and in particular of English Liberalism…Unfortunately it is extremes and not compromises that most easily become associated with strong emotional impulse. The downfall of Liberalism has been due to the failure to associate the middle way with a strong trend of emotion. The success of Confucianism…was due in large measure to the fact that it contrived to endow compromise with an emotional glamour,” he wrote in his introduction to the Analects of Confucius.

Today, Waley would hope that Confucianism, well away from the extremes, could again inject rationality, moderation and emotional glamour into debate during a time of accelerating global disruption and a search for new political moorings.

When the World Looked to China

China’s links with the rest of Asia go back thousands of years. To the east and south, they extend from Japan’s Kyoto, which copied the Chinese capital’s city plan and philosophy during the Tang Dynasty (618–907), to Indonesia, where Confucianism is one of the six state-recognized religions, reflecting three millennia of contact. To the west, the overland Silk Route, through central Asia to India and Pakistan, began more than two millennia ago.

More recently, Chinese traders settled in the main Southeast Asian cities of Manila, Jakarta, Bangkok and Yangon before a wave of labourers came to the tin mines and rubber plantations of 19th-century and early 20th-century Malaysia and the trading entrepôt of Singapore. Their influence, not just through descendants, has left an indelible impression on Southeast Asian thinking. Some of Chinese philosophy’s main ideas are still familiar, though often much faded.

Increasingly removed from direct experience of the East Asian Miracle, today’s Asia would do well to revisit it and the Chinese philosophy at its roots. After all, Asia did before. So did the much more distant West, borrowing ideas for government, technology and philosophy, from bureaucracy to porcelain and human rights; and now, even maths education and bike sharing.

To reform an ineffective and often venal civil service, Britain, in 1855, did not hesitate to embrace a seemingly thoroughly modern and Western idea, meritocracy: an idea very much in tune with the times. Other European countries, the US, Canada, Australia and New Zealand all followed suit. Instead of senior administrative positions being awarded on the basis of patronage, favour, nepotism or bribery they were to be won by public examination: on merit. The result was a bureaucracy of greatly enhanced quality. Selecting only people of ability helped Britain manage the Industrial Revolution’s problems and capitalise on its opportunities to become a leading global economy and power. Nowhere in Europe or America at the time had adopted such a“modern” idea, yet the practice was 1,250 years old.

Meritocracy came to Europe indirectly through empire. Struggling with its increasingly unwieldy and complex administration, the British East India Company sought solutions in the early 1800s. The answer, company officials in Guangzhou suggested, was to learn from Imperial China’s system of public examinations that had started in 605. To their minds, this was the foundation of China’s success. In 19th-century Westminster and Whitehall, meritocracy in the civil service came to be called the Chinese Principle: Britain’s senior civil servants became known as Mandarins.

Like silk, tea, pheasants, rhubarb, umbrellas and much else, this British import came from China. There was nothing surprising about it. France’s Sun King Louis XIV in the 17th century wanted to know more about China, especially its sciences, mathematics, philosophy, medicine and emperors. Voltaire, the very embodiment of 18th-century European Enlightenment, praised Chinese government and Confucian morality. Indeed, he wrote a play about it based on the 13th-century Orphan of Zhao.

Learning and copying from China had been going on for hundreds of years, if not a couple of millennia. Marco Polo brought knowledge of porcelain to Europe in 1291. While remarking that “nothing lovelier could be imagined”, Edmund de Waal in The White Road noted that bowls and dishes were made from clay, “stacked in huge mounds and then left for 30 or 40 years exposed to wind, rain and sun…You must understand that when a man makes a mound of this earth he does so for his children.” One thing the West learned was that long-term thinking was part of traditional Chinese thought and practice.

The United Nation’s Universal Declaration of Human Rights drew heavily on the concept of the universality of ideas, influenced by a Lebanese diplomat Charles Malik and Chinese philosopher-cum-diplomat Chang Peng Chun, representatives of two of the world’s oldest cultures. These were not just Western ideas. The first paragraph quotes Mencius saying the highest aim should be to rule through benevolence, ren. Chang told the United Nations in 1948, “In the 18th century, when progressive ideas with respect to human rights had been first put forward in Europe, translations of Chinese philosophers …had inspired such thinkers as Voltaire, Quesnay and Diderot in their humanistic revolt against feudalism,”: so much for human rights being a wholly Western concept.

What the World Needs Now

Ideas to overcome increasing global disruption are needed badly. States failing to meet public expectations disrupt Western politics, security and economies. Provision of basics like education, healthcare and infrastructure is wanting. All play out in the political arena, which is a large part of the problem. Increasingly, the same is happening in Asia, from insufficient affordable housing in Hong Kong to the need for a new approach in Singapore and harmony in Indonesia.

Broad goals (apart from re-election) are increasingly lost as special interests, cronies, lobbyists, identity politics, narrow pressure groups and a general sense of malaise take control, polarizing politics. Adversarial politics divide rather than advance society. Checks and balances to protect against tyrants and predators are abused or distorted, with deadlock resulting. Elections on their own are no guarantee of good government, as Thailand and the Philippines have shown, let alone the West. A sense of the long-term, integrity, the common good and compromise is needed, a spirit of moderation and not of winner-takes-all: all solid Confucian principles.

A failure of the political class and its advisers defines much of the West today. Gambles are taken on domestic, foreign and economic affairs, as the UK’s Scottish referendum, Brexit and austerity have shown. The modern state is based on its bureaucracy, whose competence, autonomy and accountability are critical to its success, making David Cameron’s failure to instruct his cabinet office to prepare contingency papers for a Brexit vote simply breath-taking. Brussels’ inability to explain itself adequately to voters eroded support for the EU. The US is no different, only the details. Alexander Hamilton lost the argument for a sufficiently strong central government. Instead, Madisonian checks and balances restrain power, especially of the executive, while Jacksonian populism distrusts bureaucratic expertise for being elitist, preferring instead more political appointees in senior posts, quite the opposite of what a well-motivated, competent and autonomous civil service needs.

In contrast, China has been a “precociously modern state” for over two millennia, in US political scientist Francis Fukuyama’s eyes. In the second century BC, Han Dynasty China had many of the attributes of what Max Weber in the late 19th century considered a modern state. Therefore, it should be no surprise that East Asian administration and statecraft, whose Confucian framework guided the East Asian Economic Miracle, has much to offer.

What China Offers

The two millennia old Yi Jing, the Book of Change, is called the Chinese book by Australian National University Professor John Minford. China “gets” change, today’s West does not. After all, China has suffered so much from Chaotic Eras, including eight of the world’s 12 bloodiest wars, forcing it to understand change in order to regain stability. Compared with what the West now faces, East Asia navigated through much greater uncertainty and change during its economic miracle of the last half century. This is modern Confucian-influenced Asia’s great strength, transforming itself beyond recognition.

These are proven ideas. Three times, for about half of the last 1,400 years, China has been the world’s leading economy. Three times it has stumbled, declined and then recovered. Fellow Confucian-based societies Japan, South Korea, Taiwan, Hong Kong and Singapore have been the greatest economic achievers of the last half century, climbing from Third to First World. Now China, knowing how to manage change, has again grabbed global attention by lifting 700 million people out of poverty, creating a middle class of over 250 million and jobs for 900 million.

This is in great contrast to the West or parts of Asia today that display no appreciation of the need to understand change let alone how to manage it. Societies have no clear set of common goals or priorities. Long-term thinking is lacking in the major political parties. So much is ad hoc, one-off, tactical moves, short-term games, as Brexit and US politics reveal so graphically. Decisions are reactive rather than pro-active. As Einstein said, if you keep doing what you have always done, you will continue to get what you always got. Therefore change but how?

The How of Change

Change in East Asia is traditionally managed through process. It is not primarily a blueprint or set of policies. Rather, it is a series of steps to discover what works to solve real challenges. This is not about policy and power, but about processes to solve problems, many inextricably intertwined. The West rarely thinks about process, only blindly about policy, as if policy is a panacea. Big issues, be they refugees, foreign relations, security, migration, globalization, unemployment or depressed areas are not connected in government pol...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Contents
• Preface
• Prologue: China and an Increasingly Disrupted World
• Chapter 1 Change, The Chinese Principle and the Greatest Show on Earth
• Chapter 2 History, Philosophy, Strategy and Governance
• Chapter 3 20 Essential Ideas for Life, Family, Business and Government
• Chapter 4 Pivots of Change
• Chapter 5 Managing Change — China’s X-Factor
• Chapter 6 The Overseas Connection
• Chapter 7 Wen’s Xun and Wenzhou Theatre
• Chapter 8 Battling within the Party for Change
• Chapter 9 Why Many Misunderstand China
• Chapter 10 Why China’s Economy is Misunderstood
• Chapter 11 Economic Change — The Difference is Night and Day
• Chapter 12 Four Strong Overlooked Pillars
• Chapter 13 Ghosts, Nightmares, Middle-Income Trap and Reality
• Chapter 14 Finding the Morning Sun to Avoid a Chaotic Era
• Appendices
• Bibliography
• Acknowledgements
• About the Author
• Index