China, Inc.
By Ted C. Fishman
Scribner $26.00

In the past few years, we have heard much about China's (PRC) economic boom and conflicting reports about its global intentions. If you have an interest in China's growing clout, "China, Inc.," provides an internal view that examines the roots of this dynamic growth and its future potential. Ted Fishman begins with a dramatic premise, "The World Shrinks as China Grows," and he gives statistics to support China's rise as a competing power.

Fishman points out that the global economy is dependent on China's inexpensive products that find their way into every corner of the marketplace. He outline's how a high savings rate coupled with external investment has generated an expansion in the nation's infrastructure.

He notes that China has partially adopted the model of Japan's Keiretsu (formerly Keidanren) and S. Korea's Chaebol. This model consists of an interlocking relationship among businesses, financial entities, and government institutions that can spur economic growth. However, China has added a different twist to this pattern.

Ambitious individuals utilize their know-how and lessons gleaned from foreigners to start businesses. Of course, communist officials keep close tabs on this strange brew of capitalism/socialism. Some Chinese rags-to-riches stories sound familiar to the rugged individualism found in the American Dream.

Many enterprising individuals have learned through hard knocks how to work their way around the bureaucracy to pursue their goals. Many of these "capitalists" come from the ranks of farmers and small town folks. During Mao's revolution, millions of urban dwellers were forced into rural areas, and compelled to work on collective farms. In recent years, that exodus has been partially reversed. There has been a mass migration from the countryside to coastal urban centers, where millions seek fortunes in frenetic cities.

Fishman describes how China's drive for an independent economy is fueled by bargain basement prices. China has an endless supply of cheap labor, Spartan working conditions, over 300 million people learning English, and a value added tax (VAT) to replace income taxes. Obviously, it can find markets to sell cheaper products.

In addition, just as the Asian Tigers did in the past, the Chinese are pirating every product in sight, and they try to improve on products that they counterfeit. Moreover, China maintains a trade surplus by undercutting competitors, penetrating markets, and screening which business sectors can enter its market.

Fishman contends that eventually some countries could peg their currencies to the yuan, instead of the dollar. He explains how China manipulates its currency based on self-interest rather than fair currency rules. However, Fishman perhaps is a bit too starry eyed regarding China, and he tends to gloss over the dark side of unbridled expansion. Nor does he draw sharp contrasts between communism and democratic systems of governance.

He fails to emphasize the escalating health costs associated with China's explosive growth. Environmental degradation has been staggering due to almost non-existent regulatory laws that could curb industrial and vehicle pollution. This growing crisis is well chronicled in Elizabeth Economy's book, "The River Runs Black." He also doesn't discuss the rampant corruption, as well as rising crime and divorce rates that follow wrenching cultural changes.

While foreign investment pours into China, and China invests in other nations, most laborers are mired in poverty. In China, commerce and nationalism come first, and most of the workforce is expendable. Labor standards are lax, and industrial accidents are common, which leads to social unrest. Companies are currently having a difficult time attracting skilled labor, and in recent years many rural folks are ignoring the mandated one-child policy.

There aren't enough schools to educate a vast population, and most Chinese don't go beyond the sixth grade. Competition to attend high schools is fierce, and many career tracks are difficult to enter. In most cases, connections are needed to succeed. All of these sobering facts can temper the author's exuberance.

Fishman also neglects to mention the scenarios that could transpire if this rapid prosperity fizzles into a bust. Nor does he discuss how China's adversaries and friends view the effects of China's controlled, but growing influence. These external factors could be just as important as internal Chinese perspectives. He could also have touched on how Chinese leaders plan to extend their global strategy.

Fishman briefly discusses religion in China, but forgets to delve into the rapid growth of Christianity. Apparently, a barren communism has failed to provide answers to deeper spiritual questions. In addition, coastal prosperity hasn't had much of an impact on the villages and much of the interior of the country.

In 1956, Soviet Chairman Nikita S. Khrushchev bragged to some Western diplomats that the USSR would outlive all democratic nations. Well, we know how his prophecy missed the mark, because Marxist socialism was, and still is an abysmal failure. The Soviet Union crumbled from within (with some assistance from John Paul II, Ronald Reagan & Margaret Thatcher), and split into 15 states.

In contrast, Chinese leaders are flexing their muscles as they buy up foreign corporations and modernize their armed forces. Yet Fishman barely discusses China's internal reforms, or its foreign policies. However, he does note that the Chinese leadership will strive to play by their own rules as they put a stamp on the 21st century.

Communist officials will use the 29th Olympiad as a marketing tool to enhance China's global image. However, it is important to remember that although China (PRC) is hosting the Games, the competition and the stories are international in scope.

Indeed, it makes sense to view China with realism, rather than through rose tinted glasses, or from an alarmist perspective. Fishman's book could have been more realistic if he had mentioned that India, Japan, Russia, S. Korea, Taiwan, and many other free societies can act as counterweights to China's ambitions.