One’s first impressions of China are one of size.  China has 1.3 billion people, 20% of the world’s population.  Shanghai alone has 17 million residents.  And these are people going places and doing things, whether on foot, in cars or on bicycles.  We saw very few people idle.  Economic growth over the past 25 years has averaged nearly 9% per year; income growth over the same period has been 14% (although average income is still less than $1000 US$ per year); and foreign trade is growing at 15% per year.  China currently uses 7% of the world’s oil supply and 27% of all steel products.  It has become the largest trading partner of Japan, Korea and Taiwan and the 3^rd largest with the U.S., recently displacing Japan.  Perhaps the most astonishing statistic I heard (unconfirmed) was that whereas just 12 years ago the tallest building in Shanghai was 24 stories high, today there are 3000 buildings that are 30 stories or higher, and over the next 5-10 years there will be another 3000 buildings built of 30 stories or more!!

It is truly a country transformed.  “Communism is dead” was a phrase we heard from different sources.  Just 27 years back, Chairman Mao led an oppressive, totalitarian regime known for its failed 5-year Plans.  Subsequently, Deng Xiaoping introduced market-oriented reforms and decentralized economic decision-making that have set in motion the present boom.  Jiang Zemin and now Hu Jintao have embraced and furthered these policies.  

As is inevitable from such dramatic change, new issues emerge.  Among them:  how will China deal with the growing disparity between the rich and poor?  Can socialism and capitalism coexist (some suggested to us that Singapore is the new economic model for China)?  How will the assimilation of Hong Kong and its quest for self-governance fit with the one party system?  Does China’s role as a new world power change its diplomatic strategy with respect to the independence of Taiwan?  Is the relationship between church and state one of independence or interdependence?

For the investor, the issues are more focused and perhaps more immediate.  Is China now a locomotive economy or a parasite, sucking up world’s resources for its own good?  Can its growth be sustained or is this a bubble economy?  Is China’s attraction simply about cheap labor and a huge market of potential consumers, or can it mature into higher value-added production?  Will China’s political structure impede or effectively support/manage economic growth?

These are heavy questions. My limited impressions are that growth is for real, driven so far by foreign investment, but eventually by internal consumption; that the process of capitalism is quickly becoming embedded in the mindset and habits of Chinese culture, not to be reversed; that government will seek to achieve moderation of growth and greater balance of prosperity and social needs, but will not revert to the controlled, oppressive policies of the past; and that the economy is, at present, beset by excesses and imbalances that will need to be corrected, with some pain, but the forces of change and growth that underlie it are very powerful and bode well for the future.