Published: May 2008 What's Next?
The Road Ahead
China's expectations are rising, with no end in sight.
What's next?
By Peter Hessler

The genesis of a Chinese factory town is always the same: In the beginning nearly everybody is a construction worker. The booming economy means that work moves fast, and new industrial districts rise in distinct stages. Those early laborers are men who have migrated from rural villages, and immediately they're joined by small entrepreneurs. These pioneers sell meat, fruit, and vegetables on informal stands, and later, when the first real stores appear, they stock construction materials. After that cell phone companies set up shop: China Mobile, China Unicom. They deal prepaid phone cards to migrants; in the southeastern province of Zhejiang, one popular product is called the Homesick Card. During these initial stages there's rarely any sign of police. Government officials are prominently absent. It's not until plants start production that you see many women. Assembly-line bosses prefer young female workers, who are believed to be more diligent and manageable. After the women appear, so do the clothes shops. It's amazing how quickly a shoe store emerges from a barren strip of factories, like a flower in a broken sidewalk. In the early days garbage accumulates in the gutters; the government is never in a rush to institute basic services. Public buses don't appear for months. Manholes remain open till the last instant, for fear that early settlers will steal the metal covers and sell them for scrap.

Over a two-year period, I traveled repeatedly to Zhejiang, watching factory towns rise from the farmland. Every time, I rented a car and followed a brand-new highway that connected the boomtowns of tomorrow. I drove the road for six months before noticing any clear indication of local authority. That's when I began to receive speeding tickets—$20 each, three or four every journey. They were issued by automated cameras, usually in places where the posted speed limit mysteriously dropped without warning. I collected violations in factory towns all across the province: in Jinhua, known for producing brassieres; in Lishui, maker of synthetic leather; in Qiaotou, famous for buttons and zippers.

Fines were deducted from my deposit at the Prosperous Automobile Rental Company. “It's a good business for the police," the rental company boss told me. Later I learned that individual cops invested in cameras as private entrepreneurs with a stake in profits. The boss told me to memorize the camera locations, but I was never able to do that. It was hard enough to manage every trip so I always returned the car with an empty tank. That was Prosperous Automobile's business strategy: Whenever they rented out a vehicle, they made sure it had just enough fuel to make it to a gas station. If I returned a car with so much as a gallon in the tank, it would be siphoned off and sold—another profit in the cutthroat world of Chinese business.

The poet John Greenleaf Whittier, who marveled at the early industry of Lowell, Massachusetts, described the “city springing up, like the enchanted palaces of the Arabian tales, as it were in a single night." Today it's the factory towns of China that seem to be conjured up from another world. The sheer human energy is overwhelming: the fearless entrepreneurs, the quick-moving builders, the young migrants. Virtually everybody has been toughened by the past; families remember well the poverty of the Mao period. Meanwhile most Chinese have seen their living standards rise in recent years, often dramatically. This combination—the struggles of the past, the opportunities of the present—has created a uniquely motivated population. It's hard to imagine another place where people are more willing to work.

But few Chinese spend much time thinking about the future. Decades of political turmoil taught citizens that nothing lasts forever, which inspires the fearlessness of the entrepreneurs but also makes them shortsighted. The same is true of the Communist Party. During the reform years, authority has become so decentralized that there's little oversight, and most local governments have to find their own funding. They rely heavily on real estate transactions—a city can acquire farmland, build basic infrastructure, and then sell to industry or commercial developers. Economists estimate that cities receive roughly half their fiscal revenue from such sales, and in many places it's resulted in madcap development, financed by loans from state banks. Cadres take advantage of any opportunity for corruption, because the party has a policy of rotating leaders. "Every five years you change the local government officials," Wang Lina, an economist at the Chinese Academy of Social Sciences, told me. "So they know they have a limited opportunity. Do they worry about the next generation of leaders? They have to get it while they can."

Short-term thinking, both individual and institutional, represents one of China's fundamental challenges. Another issue is simply population. In some ways it's a strength: Of China's 1.3 billion citizens, 72 percent are between the ages of 16 and 64. In modern history the nation has never enjoyed such a large percentage of able workers, and their movement from the countryside has turned China into the world's factory floor. In 1978, when Deng Xiaoping initiated free-market reforms, there were only 172 million urban residents. Now there are 577 million—over 40 percent of the population. Social scientists predict that this figure will approach over 60 percent by 2030. Each year roughly ten million rural Chinese move to the cities, providing a constant supply of cheap labor.

But cheap labor isn't always best for long-term development. It's worth comparing with Whittier's century, when American industry and agriculture were revolutionized. Back then the prime motivator was actually a shortage of workers. The U.S. had plenty of land and relatively few people; anyone who saved a few months' wages could move west and farm. Industrialists had to hire unskilled workers, mostly recent immigrants, and they made the most of limited labor. The need for efficiency inspired innovations that changed the world: the cotton gin, the sewing machine, the assembly line, the American system of standardization and interchangeable parts.

China's industrial revolution has followed a different path. There's little incentive to save labor, because of constant migration. Competition is ruthless, but it's not the sort that leads to innovation; most plants simply try to shave down the cost of making low-margin products. Education suffers from a similar low-end approach. Chinese schools have been remarkably successful at basic skills—the literacy rate is over 90 percent, compared with 65 percent in 1982, according to the Ministry of Education. But the conservative curriculum depends heavily on rote memorization, and higher education is particularly weak. The next step is to develop a population that can do more than make cheap goods for less.

The people themselves are desperate for better training. In a Chinese factory town, after the early construction is finished and the machines begin to hum, private courses proliferate: English classes, typing classes, technical classes. In Zhe-jiang I met Luo Shouyun, who had been illiterate when he first left his village; sometimes he had spent as much as a quarter of his income on after-hours training. Now he was a master machinist, with a salary that placed him solidly in the middle class. Another young man had learned Arabic in order to translate for Middle Eastern buyers. An assembly-line worker with a seventh-grade education showed me the book he read at night: Harvard MBA Comprehensive Volume of How to Conduct Yourself in Society. "I'm not mature enough," he explained. "Somebody as young as me needs help, and this book can provide it."

It was remarkable what they accomplished with almost no institutional support. That's another contrast to 19th-century America, when rapid development across the nation also amazed visitors, who described new towns rising in distinct stages. Typically the earliest settlers included lawyers, along with traders and bankers. A local newspaper often began printing while people still lived in tents. The first buildings were generally the courthouse and the church, and lending libraries appeared quickly. If it was a tough world, at least there was some early sense of community and law.

In China, though, new cities are strictly business: factories and construction supplies and cell phone shops. Local governments focus on profiteering, and the Communist Party has always discouraged the kind of organizations that contribute in other societies. This is perhaps the nation's greatest human rights challenge. Westerners tend to focus on the dramatic—dissidents, censorship—but it's the lack of institutions that actually hurts most Chinese. Workers are left to fend for themselves: no independent unions, no free press, few community groups. Through sheer willpower, many succeed, but the wasted potential is staggering. In the reform years China has unleashed its remarkable population; the next stage is to learn to respect this wealth.

In Zhejiang I drove through a half dozen new towns that were being constructed as part of the Tankeng Hydroelectric Dam. More than 50,000 people were being relocated, and the dam would provide electricity for the region's factories. Nowadays energy shortages have inspired a wave of dambuilding across China, where people are relocated into new communities that follow familiar construction stages: the building supplies for sale, the cell phone shops, the garbage-strewn streets. But there's always a police presence, because of the fear of unrest by people forced to leave their homes. And propaganda banners are everywhere. In Zhejiang it was hard not to become suspicious when the Communist Party's slogans suddenly praised long-term thinking: Offer the Tankeng Dam as a tribute today / benefit the generations of tomorrow.

Almost nothing about today's China inspires optimism about environmental issues. National characteristics are potentially disastrous: massive population, weak central government, local authorities that need to raise funds through constant development. According to a World Bank report, China already has four of the ten cities with the most polluted air, and increasingly the nation's problems are the world's. China has become the leading emitter of sulfur dioxide and carbon dioxide. And yet the auto boom has just begun; the nation is responsible for less than 10 percent of worldwide oil consumption.

The fact that China and the world can no longer ignore each other may be the one source of optimism. If these problems are to be managed, collaboration will be crucial. And no one in the developed world should criticize China without taking a hard look in the mirror. The nation has risen by making products for overseas consumption, and there's nothing foreign about the materialistic dreams of average Chinese. An American criticizing China's environmental record is like an addict blaming his dealer.

In Shifan, one of the dam-relocation communities, I joined a family for the first meal in their new apartment. The father was a moderately successful businessman, and he proudly showed me the finished home. It was full of fashionable possessions: a karaoke machine, a 45-inch television, a bed that came with a telephone in the headboard. Most impressive was the lighting system in the living room. A massive chandelier contained nearly three dozen bulbs, and rows of blue lights had been inlaid along the ceiling to evoke the sky. Red bulbs were hidden in alcoves ("They give a warm feeling," said the father). Everything could be flicked on and off by remote control.

For lunch they invited relatives and friends, and throughout the meal everybody complained about the dam. Compensation for lost homes had been too low; promises hadn't been kept; cadres had embezzled. They worried that they wouldn't be able to do business in the new community. "These are very serious matters, and people are upset," the father said to me. All told there were 65 bulbs in that room, and every single one was turned on.