With all its industrial might, should China be labelled an emerging economy?
The second largest economy in the world is transitioning from one best known for its cheap clothes, plastic goods and household electronics to one that is helping developed and less-developed nations alike to build infrastructure.
The bullet trains that took members of the Australian Institute of Superannuation Trustees’ Global Dialogue trip on the high speed rail line from Shanghai to Beijing in five hours are a good example of this. The ride was a joy, if the scenery blotted with clumps of high rise flats was not. The line at 1318km in length was completed in 2011 after only three years work and one can see this speed of development in the unlovely concrete and metal stations on route. The know-how and the cheapness is now being exported to every continent on earth.
Certainly this all sounds like a developed country, but in other ways the trip showed China as an emerging market. Contracts, said one speaker, are often filed away and never looked at again. Guanxi, the all-pervasive term for doing business, loosely translates as loyalty and a moral obligation in business to those you have known longest. This can be more important than what little written business law there is in China, which only dates back 30 years.
Also in terms of development in Beijing and Shanghai, you can be in a slick neon-lit shopping street and then in a slum on the next block.
The trip also firmly answered the question ‘does one need to travel to China before investing in it?’ It would seem madness not to. There is a brusque, speedy way of doing transactions, a directness of language. There is also a lack of public criticism of the government, or more to the point, state-owned enterprises, which make up over 50 per cent of companies on the various Chinese stock markets.
Above all, it hit home the need to have contacts on the ground to help you invest and to give a better reality check on the health of the world’s second largest economy, than those from economists sitting in offices in America, Europe or Australia.
