China Airborne (11 page)

“Early on, some Chinese people pulled me aside and said, ‘We’re not really sure this will ever work in China,’ ” Joe T said to me, ten years after he began the project. “They were worried about losing face, disrupting the culture of ‘human relationships.’ ” One of his crucial allies was a pilot named Rao Xiaowu, who had flown MD-11s for China Eastern Airlines and gone on to become a senior flight-standards official at the CAAC. (The MD-11 was an even larger version of the familiar DC-10, an airplane with one engine under each wing and a third in the vertical stabilizer, just above the tail.) Rao had experience overseas and understood how profoundly Chinese airlines had to change if they hoped to reach international standards. The second champion was another pilot, Yang Yuanyuan,
¹⁰
who had joined the PLA at age sixteen during the Cultural Revolution, graduated from flight school at age nineteen, and joined
China Southern Airlines, for which he eventually became chief pilot. In the late 1990s, as the cooperative Chinese-U.S. safety efforts were beginning, Yang had gone to CAAC as head of flight standards.

“Yang and Rao made clear that they really did expect this to work,” Joe T said. “They went to meetings and told people at all the airlines, ‘We want you to pay attention, because we want a system that is run to international standards.’ They told their colleagues, ‘If we stick to regulation by “human relations,” we’re going to keep having dead people. It has to be run the international way.’ ” Yang had the authority at CAAC to place key allies in the airlines’ safety department, which he used. “The Chinese have a term, ‘air-drop soldier,’ for someone who is dropped in because of high-level connections but doesn’t know what to do,” Joe T said. “Yang did just the opposite, making sure he had the right people in these roles.”

Neither the Chinese nor the U.S. government had a big budget for the training efforts, so Boeing continued underwriting much of the cost. United Airlines helped as well. In Seattle, visiting teams of Chinese regulators and check pilots watched Boeing train pilots in its simulators. In a special demonstration at United’s simulator center in Denver, they watched a pilot mimic the mistakes and rash judgments of an incompetent airman—mainly to observe how the United check pilot handled the situation and corrected his errors.

“Those exchanges started in 1997, and they have never stopped,” Joe T told me in Beijing in 2011. It was the beginning of the underpublicized but thoroughgoing near-integration of the U.S. and Chinese aviation establishments in safety measures. In 1999, Yang Yuanyuan became vice minister of the CAAC. Three years later, he became minister, and thus the single most influential person in China’s aerospace establishment. Did their
efforts make any difference? Through the next decade, Chinese commercial aviation, while expanding faster than any other country’s, was statistically among the world’s very safest. And it prepared for the surprising next transition the government authorities had in mind.

When Deng Xiaoping met Jimmy Carter in 1979 to formalize the new era in U.S.-China relations, which in turn helped provide markets for the new enterprises that were possible under Deng’s reforms, the per capita annual income throughout China was about a thousand dollars. Over the next thirty years, that went up almost fivefold, a sustained increase unprecedented in world economic history. Most of what has made the country steadily richer through that period has arisen from the following sequence:
farm to factory to bulldozer
.

First came improvements in
agriculture
, through a shift from inefficient collective farms to smaller private plots, plus very heavy use of insecticide and fertilizer (with subsidized water as well). The subsidies meant that Chinese farmers often used even more fertilizer, pesticide, and water per bushel of output than their European or American counterparts. But the boost in productivity allowed a densely populated nation to feed itself, so that the famines that had been its recurring historical calamity—including the disastrous politically induced famine during the Great Leap Forward—were no more. The same improvement also marked the beginning of many modern farm-based fortunes—some of today’s famous rich families in China made their money in the cattle and dairy business
in Inner Mongolia or with pig farms in central China—and reduced the manpower needed to tend the fields, freeing family members to go to the cities for factory jobs.

Then came the
low-cost manufacturing
boom whose effects began to be noticed throughout the world in the early 1990s. This was different from Japan’s modern manufacturing boom, which had started in the 1960s, in that China’s was largely driven by foreign firms. Dell, Walmart, Apple, Siemens, GM, GE—they and hundreds of others shifted and outsourced operations to China, whereas the most important steps in Japan’s development were taken mainly by their own big companies. Because it started its industrialization almost a century before China did, even by the 1960s Japan had big, mature corporate groups—like Mitsubishi, Toyota, Matsushita, Fuji, NEC, Toshiba, plus postwar upstarts like Sony and Honda—that could compete internationally with American and European firms. China still has no counterparts and indeed virtually no globally known brand names.

China’s low-wage industrial boom differed from India’s development through the same period in that it depended much less on an educated workforce, like the software engineers working in Bangalore and Hyderabad, and more on hardworking young men and women straight from the countryside. China’s boom also depended on the roads, shipping docks, and other elements of infrastructure that could get the products to their customers in big Chinese cities and overseas.

Creating this
infrastructure
was itself the third element in the sequence of Chinese development, and a subset of the fourth element,
construction
in general.

Visitors from anywhere, and with special piquancy those from the United States, have to notice how new—how smooth,
how capacious, how modern—the recently finished parts of China’s infrastructure are. Roads, subways, train lines, power stations—they are, in fact, new compared with most of the U.S. and European infrastructure.

It is true that buildings and facilities tend to age quickly in China, because of pollution and, sometimes, shortcuts in construction standards. Early in my time in China, I’d see buildings that I thought were from the 1960s or earlier, and then be surprised to learn that they were only four or five years old. After a while, I learned to apply an “accelerated aging” factor to any structure I saw. For instance, the mammoth and uniquely styled CCTV tower near our apartment in Beijing, which was designed by Rem Koolhaas and which has two slanting black legs connected by an angled upper story, was rushed to completion in time for the Olympic Games in 2008. Three years later, its harshly weathered look made it appear as if it had been there for decades—even before the CCTV news operations had moved in. It is true as well that successive public disasters in China have repeatedly led to outrage over “surprising” defects in construction materials, safety standards, honest inspections, and so on. This was especially so after the Sichuan earthquake in 2008, when thousands of children died in the collapse of shoddy school buildings, and after a high-speed rail crash in 2011.

Still, on average, China’s infrastructure looks much newer, and is often better, than its counterparts in North America and Europe built fifty or one hundred years ago. The heavy infrastructure of U.S. cities on the East Coast was laid down in the decades after the Civil War; that of the Midwest at the beginning of the twentieth century; and that of the West Coast and the Sunbelt in the decades after World War II. The freeways of
Southern California looked wide and new when I was growing up there in the Boomer era. That is how the freeways of China look now.

Simply keeping its existing bridges, freeways, and waterworks from falling apart is the infrastructure challenge for the United States. For China, the heavy investment in roads, ports, power stations, train lines, and so on has been, like many of its other growth strategies, so successful that it has bred a different kind of problem. The consequences of more than a decade’s worth of
over
investment are as important in shaping China’s choices, and its outlook on new industries like aerospace, as the consequences of long-term underinvestment are for the United States.

Part of the success of China’s infrastructure strategy is that it has made every other kind of growth more attainable. When factory wages go up in the Shenzhen area north of Hong Kong, outsourcing businesses might think about relocating to Vietnam or India. But they are more likely to end up heading to Sichuan or Gansu province in inland China, because the Chinese roads and facilities are likely to be so much better than those of any country that has not been building at such a frantic pace through recent years.

Also, infrastructure efforts and the larger construction industry remain powerful growth engines on their own. Charts of the components of China’s growth since the early 2000s consistently show one element that is higher than its counterparts in any other major economy: “capital formation”—essentially, investment of all sorts. New factories, new houses, new roads,
new bridges, new sewer systems, new subways. New everything, with the caveat that these are not goods for immediate consumer use. The advantage for China is that this investment builds future productive capacity, a better life, a richer society, and so on—and in the meantime, it creates jobs for people who are doing the building, and markets for companies that sell structural steel, cement, and every other ingredient.

The problem for the Chinese economy has become its
dependence
on stimulus through investment. If by the early 2000s the American economy had become addicted to cycles of borrowing, overconsumption, and further borrowing to propel its expansion, China’s was addicted in the opposite way, through cycles of overinvestment and the resulting need to export. Once a new factory is built, the construction jobs are over—and people can keep working and getting paid only if there’s a market for what they make. Or if new construction projects begin, which eventually add even more to the nation’s productive capacity. In 2007, before the world financial crisis began, investment and capital projects of all sorts, including construction, represented 39 percent of China’s economy. By 2010, that share had risen to 46 percent—an astonishing increase, even as investment was being cut back in most of the rest of the world. But a
Wall Street Journal
analysis in 2011, which noted this change, pointed out that China could use this tactic to sustain employment only so many times.
¹
The country had become more and more reliant on build, build, build as a way of keeping its people at work, and the longer that strategy went on, the harder it would be to maintain.

Any trend that can’t continue won’t, and at some point the Chinese juggernaut will have to “rebalance” itself with the rest of the world. The typical economist’s scenario for this transition is as follows: As China’s own people get richer, they will buy more
of what their own factories make, plus more of what foreigners provide as well. China’s growth will be more self-sustaining, and less dependent on chronic trade surpluses with the Americans and new roads in every corner of the country.

That’s where China is headed, at least in theory. But for now, it keeps people at work through a heavier reliance on “capital formation”—new factories, roads, shopping centers, power plants,
²
and government and corporate projects—than any other economy, ever;
³
and infrastructure projects, including airports, are an important part of that drive. The construction of a hundred airports at once is a classic illustration of Chinese stimulus through massive investment. The aspirations to match Boeing and Airbus in airplanes, Sikorsky and Robinson in helicopters, Rolls-Royce and GE and Pratt & Whitney in engines, Honeywell and Avidyne in avionics, symbolize the direction in which many Chinese leaders hope the economy will go in order to break its reliance on farms, factories, and construction sites.

By the time of the Beijing Olympics, even as China was increasingly seen around the world as the rising economic model of the age, economists inside and outside the country said, in various forms,
this cannot go on
. This—the Chinese boom—could not go on environmentally, because of the costs to people and the pressure on resources. It could not go on strategically, because of the aberrant relationship in which Americans kept borrowing Chinese money to buy Chinese goods. And it could not go on for reasons within China, because of the social tensions and dislocations it was creating.

There is one particular aspect of
this can’t go on
that got much
less attention outside the country than it deserved. That is probably because it was a weakness that looked like a strength: It was China’s huge “success” in selling so much more to the world than it bought.

In politics, press coverage, and barroom talk, it’s natural to consider exports and the resulting trade surpluses as proxies for individual and national merit. And there’s some truth to that: The broken-down economies of the old Soviet bloc could barely export anything to customers who had any choice about what to buy. Boeing’s, Intel’s, and Apple’s victories in world markets are generally points of pride for Americans. The same is true for Siemens and Mercedes in Germany and for their counterparts all around the world. But too one-sided a reliance on exports can ultimately be as destructive and destabilizing as too little success in selling overseas. To illustrate why, think about the similarity between China around the time of the Olympics and the United States eighty years before. That would, of course, be 1928, which few people outside Holland identify as the time of the Amsterdam Olympics but which many people recognize as the eve of the great worldwide depression and subsequent world war.