»  The New York Sun

April 14th, 2004

  Selling the Rope

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Losing the New China: A Story of American Commerce, Desire, and Betrayal
by Ethan Gutmann
Encounter Books; 240 pp. $25.95

Ethan Gutmann lived in China for three years, from late 1998 to late 2001. He went there with the hope of making a TV documentary about how capitalism and globalization were going to democratize China. He came back much wiser and sadder. In Losing the New China he presents a cold-eyed look at the Beijing expat scene, at the realities of doing business in China, and at the psychopathology of the modern Chinese state. This is a fascinating book, though a deeply depressing one. It is filled with keen insights into China's current condition and direction, and with accounts of the eagerness, on the part of the American business world, to sell China the rope with which they plan to hang our friends on Taiwan — and us, too, if we get in the way.

Just five months into his stay, Gutmann witnessed the Beijing demonstrations that followed the bombing of China's Belgrade Embassy by U.S. planes. His accounts of the rage among younger Chinese people follows familar lines. He gives a fresh perspective, though, on the determination of the Chinese Communist Party to wring every drop of moral capital out of the incident in order to bolster their position as the standard-bearers of Chinese patriotism. There is a delicious story about the American Chamber of Commerce in Beijing on their annual "door-knock" lobbying trip to Washington DC shortly after the bombing. The AmCham representatives agreed to a breakfast meeting at the Chinese embassy in Washington. Someone suggested a moment of prayer to begin the meeting. The cameras of China's state TV network were rolling, and the footage of the assembled businessmen sitting with their heads bowed in the Chinese embassy was broadcast all over China, with a voice-over explaining that this was the American business community offering humble apologies for the Belgrade bombing.

So it went for the duration of Gutmann's stay. Every encounter he witnessed between foreigners and the Chinese state apparatus had the same hall-of-mirrors aspect to it.

Was the whole game an illusion then? Given what I have been describing — a sinkhole market for the majority of American companies in China, duplicitous Chinese partners, a tedious and intrusive bureaucracy, a counterfeiting operation that is so deeply entrenched that it makes up nearly a third of the Chinese economy, and an economy where even basic numbers such as GDP growth are suspect and driven by political wish fulfillment — with these kinds of problems, why was there continued involvement in the Chinese market?

The answers he comes up with do not reflect well on American commerce. There are basically two kinds of players here. There are firms like Cisco and Motorola, who can offer the Communists technology that will improve surveillance of their own people and strengthen their military. Then there are consumer-products companies, for whom China is really just an export platform. These latter are, says Gutmann, often in deep denial, insisting that they are "retailers" selling products to the Chinese people, and keeping a glossy showroom in Beijing to promote that image. In fact, very few American firms have been able to make a profit selling to the Chinese consumer market. Any firm that attempts to do so sees its revenues follow a bell curve, peaking when their product is new to the Chinese, then dropping off fast as the counterfeiters get up to speed. Yet still they insist they are retailers.

What company wants to say openly that they are in China for the export platform — a very successful export platform consisting of well-controlled, incredibly hard-working labor that costs next to nothing? What company wants to trumpet that they are moving factories out of the States at record pace? Or that they don't care about our spectacular trade deficit with China?

Gutmann is merciless with the kinds of self-deluding gulls who are taken in by the Communists and their lie-of-the-month: "village elections," WTO compliance, etc., etc. Here he is, for example, dealing with a friend who parrots the "convergence" line — the idea that under the surface, China is becoming more like the U.S., because just as we have Democrats and Republicans, they have reformers and hardliners, who compete just as our political parties do.

I asked my friend if [this scenario] was any different from, say, rival gangs such as Bloods and Crips. They compete … But are these gangs accountable to the ghetto? And who elected them to run the ghetto by fear in the first place?

Here is the modern Chinese state in all its insolent, cynical brutality. It is a values-free zone:

One senior government adviser is reported to have said: "We still don't stand for anything. We are not a democracy, we are not communist. We are just big."

Though Gutmann spends most of his time in Beijing, he catches glimpses of the other China. After taking a wrong bus in Guangzhou, he ends up at an out-of-the-way railroad station that serves the interior.

Spread out over a massive square were literally tens of thousands of people simply sitting passively in the midday sun. Their hair was uniformly matted as if unwashed for months. A policeman grabbed a peddler woman crouching a few yards from me. Peppered chicken legs tumbled out of her plastic bag while the policeman began pulling her by the pigtail, cracking her head against the concrete pavement.

If I have quoted Gutmann much more often than is proper in a book review, that is because he is exceptionally quotable. His writing style is uneven, especially in the early pages, but when he gets a flow going he can be spell-binding. And he is a terrific journalist, squirreling his way to the heart of the most complicated things. He knows where all the bodies are buried:

Motorola's allotment for bribes was approximately $60 million a year in 1995, about 3 percent of budget …

His chapter titled "Who Lost China's Internet?" is the best brief account I have read of this tangled topic (and, at 46 pages, not actually so brief), which reflects so much shame on so many American corporations. His last chapter, on expat sexual exchanges with Chinese women, draws a devastating picture of private morality in a nation whose prevailing ethic is, as he says, "narrow-minded materialism." If you think that Communist China is our friend, or our "strategic partner," or converging on Western-style liberalism, or a glittering business opportunity, or the coming Great Power of the 21st century, read this book and have your eyes opened.