Tiger Woman on Wall Stree (18 page)

I
T WAS GOOD TO SPEND TIME WITH MY FATHER ONE ON ONE
—healing, actually. I flew back to Shanghai to continue my research, this time taking a special interest in modern Chinese culture in order to understand what exactly had gone awry underneath this seemingly brilliant economic miracle.

  *  *  *  

Up until Mao’s takeover, China had been a religious state. Whether it was Buddhism, Taoism, Confucianism, or a local folk religion, everyone had something to believe in. In feudal China, turning your nose up at the local deities was considered suicide to your fortunes. But after 1949, the Communists put an end to all things religious (except for the religious reverence of Mao, of course). Marx had proclaimed religion to be “the opiate of the masses.” For decades after Mao took power, religious people were heavily persecuted.

Beginning in 1978, Deng’s Reform and Opening Up focused exclusively on economic development. If the Maoist era had not
been enough to squash the growth of spiritual beliefs in China, the crush of Tiananmen ensured it. After the 1989 massacre, Premier Li Peng made it clear that business would now be the only activity that Chinese people could safely engage in. And so, dismayed and heartbroken, and eager once again to put their past behind them, the Chinese turned to the one thing they knew to be secure, safe, and infallible: money.

The unstoppable growth that ensued made this proposition easy for Chinese people to swallow. As more and more people saw their wealth and their quality of life lifted beyond what they had ever dreamed of, it became reasonable to ignore any lingering gripes about the lack of shared beliefs and personal freedom of modern Chinese life.

In dismissing the importance of social rights in favor of uninterrupted economic growth, though, the government unwittingly signed a social compact. In effect, this compact promised that as long as the Chinese people focused on getting rich instead of building a fair and free society, they and their children could enjoy the ever-improving fruits of their labor.

Just as no one could have foreseen in 1980 the amount of wealth China would enjoy by 2000—the skyscrapers, the ever-present Audis, the iconic Rolex watches—no one in 1990 could have predicted the ultimate cost of China’s singular focus on wealth. The result was that the Chinese people hold very few truths to be “self-evident”—there are no commonly agreed-upon values on which to base a constitution or belief system. Social values remain weak because the system does not encourage citizens to believe in a power higher than the state—and given the personal tragedies and inequalities that many Chinese have witnessed in the last 30 years, the state is hard to believe in.

The party sees the very existence of a higher moral authority as a threat—and with good cause, since spiritual beliefs are often what give people the confidence to oppose an earthly power. One
of China’s deadliest civil wars of the last 200 years was the Taiping Rebellion from 1850 to 1864, in which a man claiming to be the younger brother of Jesus Christ turned 30 million people against their
Qing rulers
. In modern China, joining religious institutions can still be dangerous: Chinese Christians still must register every time they enter a church, and joining “cults” as defined by the state can get them in serious trouble. While China’s wealthier classes now have some freedom to quietly explore religion, the bottom line remains that the party is the highest law of the land—not a constitution, not absolute morality, and certainly not a god.

  *  *  *  

Most Chinese people have become too preoccupied with their own pursuit of wealth to value the spiritual. This trend has left a silent majority feeling disconcerted—including even my sister and her husband. Although Jasmine values her car and iPhone, she also seeks everyday ways to remind herself that there is more to life than luxury goods. So Jasmine and her husband study Buddhism and work some of its practices into their lives when they can, such as buying fish at the market and releasing them into the rivers near Shanghai so they aren’t sold and eaten. There are still plenty of inconsistencies in trying to be a spiritual person in modern China—I’m not sure if the fish can actually survive the polluted water, for example, and Jasmine also happily goes to Morton’s steak house in Shanghai for a porterhouse.

The focus on wealth has the unfortunate side effect of drawing attention away from ethics. Wealth does not always come at the expense of morality. In China, however, the singular focus on catching the mouse has robbed China of a societywide interest in fairness and decency. Cutthroat competition, starting in the classroom and carrying into the workforce, leaves little incentive for people to behave themselves unless it is in some way profitable.

The irony is that—as I’ve witnessed throughout my interactions with private business owners and managers—most Chinese want to make ethical choices. China’s harsh business environment and lack of legal enforcement, however, means that the unethical choice is often the only way to survive. Cheating and corner cutting are the norm.

In industries where innovation drives growth and market share, such as technology and healthcare, China’s culture of lawlessness hinders innovation. If you create something commercially compelling, it is nearly guaranteed that others will copy it and undercut your pricing. As I mentioned earlier, that is why most private companies spend a far lower portion of their revenue on R&D than American peers in the same sector. For example, off-patent drugs make up about 97 percent of the
market in China
. That proportion is less than 75 percent in the United States, even at the peak of a generic wave in 2012, when half a dozen major patents expired. The reason is that in China, it is far more lucrative to reverse-engineer, copy, or steal a drug formula than to create one from scratch and seek patent protection. In the long run, this atmosphere prevents Chinese companies from moving up the value chain in industrialized manufacturing to create more advanced and profitable products.

Most Chinese people are quick to admit that something in the past few decades has gone awry in their country. The media and social networking sites are filled with stories that illustrate how lacking China is in shared beliefs and social trust.

In the early 2000s, an old woman became infamous for suing a stranger who found her lying on the sidewalk and took her to the hospital. The woman said that he had pushed her down while rushing to catch the bus. Her injuries cost tens of thousands of U.S.
dollars. While there was no evidence to convict him, the Nanjing court still ruled in her favor. The reason was that, according to the judge, no ordinary person would help someone whom he found on the ground unless he himself had caused her injury.

In 2010, a Xi’an college student ran over a young mother with his car, then flew into a fury when he saw her noting his license plate number. In order to avoid being sued, he stabbed her to death (he later received a death sentence himself). That same week, a drunk college student at Hebei University also hit and killed a pedestrian. He ignored the incident and continued on his way to drop his girlfriend off at her dorm. When he was finally forced out of his car by security guards, he invoked his father’s status as a local official in a phrase that went viral on the Internet overnight: “Go ahead, sue me if you dare—my dad is Li Gang!” In the end, his father couldn’t save him from a multiyear sentence
in prison
.

And while those young, wealthy drivers with fathers in power have solicited the most attention, they are not the only ones who are morally lacking. In 2011, a two-year-old girl in Guangdong was run over by a vehicle, then passed by nine other onlookers before her mother found her.

Every country has drunk drivers and murders. The United States is one of the worst models in that regard—it ranks high among developed countries for crime and homicide rates. What is special to China is the distance that strangers put between themselves, as if helping a stranger even on her deathbed were not worth the risk.

And so it is in business.

  *  *  *  

In the summer of 2008, tens of thousands of babies became violently ill from
tainted milk powder
. Subsequent investigations revealed that China’s top dairy companies, which were enjoying
inspection-free privileges
from the government, were churning out contaminated products.

The backdrop of the milk scandal revealed yet another powerful example of how the government created distortions by intervening in the market.

In 2008, the growing costs of cattle feed and facilities began to squeeze profit margins in the dairy business, and farmers began to raise the price of milk. To keep consumers happy and control inflation, however, the government imposed price controls on the dairy sector.

Mengniu, a publicly traded Chinese milk producer based in Inner Mongolia, saw its share price fall 30 percent between mid-October and mid-November 2007 as the company’s profit margin was squeezed by government price regulations and rising costs. To preserve their declining profits, milk suppliers in China resorted to an intuitive cost-cutting scheme: adding water to their liquid milk products. At the same time, a legal but harmful chemical called melamine was added to inflate protein levels and disguise that the milk had been diluted.

When the news broke that a dozen infants had died and tens of thousands had been hospitalized from watered-down, chemically adulterated formula, parents in and outside of China stopped buying
Chinese dairy products
. At least 11 countries halted all imports of them. Chinese consumers—including my sister, a mother with a newborn at that time—were too scared to touch any domestic dairy product. To be safe, they were more than willing to pay a big premium to buy imported baby formula. Leading Western dairy companies such as Wyeth, Mead Johnson, Abbott, and Nestlé profited from the Chinese consumer confidence crisis.

The melamine scandal became one of the largest food safety events in recent years, according to the World Health Organization, all for “simple, basic,
short-term profits
.” Managers in the dairy industry were arrested. Several were sentenced to life
imprisonment, and two were sentenced to death. Those held accountable were the highest-ranking members of the companies, CEOs and CFOs. No one who dealt directly with the product was punished.

The parents of the sick and dead children held a press conference in early 2009. For doing so, five of them were detained by the police and sent to labor camps, the typical punishment for someone bringing attention to embarrassing
court cases in China
.

China’s food security issues extend far beyond milk products. Cooking oil bought in the store is often laced with oil and food waste gathered from gutters. Farmers overdose their fruits and vegetables with pesticides to increase the yield; some use dirty industrial water from paper factories to irrigate their wheat. Cottage industries have sprung up around creating “eggs” and “beef” out of paraffin, cheaper meats, and chemicals.

These disgusting practices have landed China in a paradoxical situation. Chinese people have more discretionary income than ever before. They spend more these days on everything: food, fashion, and entertainment. But at the same time, they have lost faith in domestic products. As a result, multinationals are perfectly positioned to seize the growing piece of pie. Global food brands including Nestlé, Mars, Dove, Kraft, and Heinz price their products higher, yet are met with unabated enthusiasm.

Like many visitors to China, I too experienced the effects of the poor environment. Even in China’s cleanest cities, on the southern coast far away from the industrialized north, I felt the toll of the pollution. During almost every visit to China, I would come down with a sore throat—apparently my lungs had already been Americanized—and food poisoning, even though I was very careful about what I put in my mouth. Once I took a spotless, modern, and comfortable high-speed train, which zipped along from Beijing to Shanghai at an impressive 186 miles per hour. After eating a boxed meal—beef, cabbage, and rice—one hour later I was so deadly sick
that I couldn’t move. I figured later that what the sweet young train attendant had served me was a meal past its expiration date.

My parents and my sister repeatedly warned me not to drink milk from China, not to buy fruits or vegetables from the farmer’s markets, and to avoid local pork or chicken even at the fanciest restaurants. I couldn’t help but wonder: If one couldn’t eat dairy, fruit, vegetables, or meat, what did locals live on? Jasmine and many of my local friends subscribed to delivery services to have organic vegetables grown on a farm outside the city sent to their homes every week. Even so, Jasmine wasn’t sure of the quality—after all, in China it wouldn’t be hard to pay a regulator to have your food certified as “organic.” I was also advised not to exercise outside: according to my doctor friend, jogging in China’s thick polluted air takes the same toll on your health as smoking a pack of cigarettes.

“How do you deal with this? It seems like China is no longer livable,” I asked many friends in China, mostly young professionals and entrepreneurs.

“We try to make money here but live somewhere else!” They would laugh it off the concern with a shrug. Many of them bought houses in Hong Kong, London, New York, Vancouver, Melbourne, or California (recently, even Detroit has captured Chinese investors’ imaginations)—especially after the housing crash in 2009 made overseas real estate much more affordable.

  *  *  *  

Unfortunately, deadly food products aren’t the only shocking quality problems in China. A bullet train crash in Wenzhou in 2011 took the lives of 40 passengers and further showcased how corner-cutting can come at the cost of human life.

The accident was allegedly brought on by the perfect storm: negligence by the railway builders and inspectors, a design fault in the train’s
signaling equipment
, and a thunderstorm. In their rush to build a domestic train manufacturing industry and fulfill
the government’s demand for indigenous innovation, the Chinese engineers had made fatal mistakes while reverse-engineering a Japanese signaling system. Only in retrospect did Chinese recognize the danger inherent in the hasty way the railways had been constructed. Liu Zhijun, a minister who was infamous for pushing his project teams to work around the clock, had led the build-out of China’s high-speed railway. His workers even nicknamed him “Great Leap Liu” for his fervent commitment to the
railway’s rapid construction
.