China Boom CMS

<p>I don't have all the figures in my head but, of course, people are factory owners and shop owners, China is a private economy. In fact, it has a higher level of private ownership than most European countries, it's not that much lower than the United States, rather, quite comparable. So, yes. It's a capitalist China. And they got there, I wouldn't say gradually, but over time. It happened in different places and in different dimensions, let's say. But, the changes were extremely radical. In 1983, they walk away from the communes. I mean, that's unbelievable! The end. No more commune, no more brigade, no more team. You're on your own. I'm actually dumbfounded when people say, &quot;There was no big bang in China.&quot; I don't know what they mean. For 800 million people, it was a huge bang and, nationally, it only took two years. And, in certain communities, it was six weeks. The commune's there, the commune's gone. Now, every single household is going to contract to the state for their grain. Instantly, eight hundred million tenant farmers. Wow, that's huge! And that's why I emphasize this self-reliance, as well as strong family, that was the foundation on which this growth is built. They didn't lose a harvest. Immediately, productivity was higher. Until the economic reform changes in urban China, in '86, the urban-rural [income] gap was falling. The people in the countryside were quick to figure out how capitalism was going to work for them. So, I think that was a huge bang and we see it. And then, of course, there were other bangs, but that one was the most dramatic.</p>

<p>We did an interesting comparison among intellectual opinion, business leader opinion and general public opinion. Among general public opinion, the big difference is between the young generation -- the single-kid [post-one child policy] generation -- the older generation, and the middle-aged generation. The interesting thing is that the intellectual opinion is further from the public opinion. For example, for the intellectual opinion, there is more negative attitude towards the government, much less trust for officials, and more criticism of policy. Many times, they want a kind of Westernized democracy. But the general public opinion is relatively more pro-government. Even with their criticism or the dissatisfaction with government performance, what they really want is for the government to improve their work. So, it's kind of a suggestion, or a requirement within the acceptance of the system itself, at first. The business group's overall feeling toward the system and toward the environment is, compared to the intellectual opinion, close to [that of] the general public. And, for example, when we talk about social stability, the intellectuals are very suspect of what kind of social stability we have. If we don't have freedom of speech, if we don't have human rights, social stability, itself, is not good. We should revise social stability at first, then we should build a new social order. So, that's basically saying that if the current social order is not just, we should revise it first. So then, we will achieve a high-quality, fair, just social order. That's not social stability, but social justice. So, that's a typical intellectual opinion. But it seems that, so far, the general public and business leaders don't want that kind of revision. In that sense, they are closer to the official standpoint. Many people say the Communist Party would easily form a partnership with the capitalists, whether in Hong Kong, Taiwan, or, also, in China. If the business group achieves success and they have sizeable assets, they really fear social disorder. They want to keep society stable. So, in that sense, the rich would easily develop an alignment with the government. But, the general public, the old and middle-aged, still have the historical experience of the Cultural Revolution, so that's why they don't want that. The younger generation is not really scared of that [revolution], but they don't care. What they really care [about] is &quot;my life quality.&quot; So, it's more like an individual oriented philosophy. So, if we put these two together, it's very hard to win enough public support to really have a revolutionary change of the system. We don't have that of social foundation, especially from the point of view of public sentiment.</p>

<p>Many of my friends, 20 years ago, were very ordinary officials working for the government, or just workers, or even just farmers. But, now, they [have] become the richest people in China. So, why can we see all these ordinary people getting rich very quickly? Sometimes, this also puzzles me. But, sometimes, we can see clearly, because, in China, to be rich is the only way you can achieve social status.&nbsp;Many people ask me how China has achieved its economic record of the past 30 years. I think the single [most] important reason is that the door open and reformation policy has given the opportunity for entrepreneurship. Any person, no matter what kind of job they had before, can start their own business. In China, the only way you can have your maximum development is business area. I think, today, when we look at the Chinese model and it basically is very successful business development. Because, for that reason, in this area, it's like achieving the limitation, the level, that is much farther beyond the other countries, even those that started at the same time. Because, in that country, you have many other way to develop yourself. But, here, the only way you can do it [is through entrepreneurship]. In that sense, I would say China's boom is single-dimensional.</p>

<p>The number of Chinese companies based on Hong Kong were limited. I was looking at the bigger market, and really the domestic market. So how to get the Chinese company to come to Hong Kong and issue shares in Hong Kong was really a big exercise. At that time, the stock exchange was chaired by Mr. Charles Lee. Mr. Charles Lee is a good friend of mine. Actually, he&rsquo;s a lawyer, but he&rsquo;s very well known in Hong Kong and has contributed a lot to the development of the stock market here. 0:28:44. And he actually visited the Chinese government and visited Vice Premier Zhu Rongji around 1991, 1992, and suggested to Zhu Rongji that China should allow its local companies to go to overseas markets, to issue shares in the overseas markets, and raise capital from the overseas market. And he suggested that the companies should come to Hong Kong. And Zhu Rongji thought that was a good idea and accepted his proposal and then, the Chinese government selected a first group of nine candidates to allow them to experiment, to assess the international market, using domestic incorporated companies versus the Red Chips. So, the first one [domestic company] came to Hong Kong in the middle of 1992. That was after the listing, the IPO of Haihong I mentioned earlier. Haihong actually, Haihong&rsquo;s IPO happened in March 1992, whereas the first listing of Chinese incorporated companies in Hong Kong was in June 1992. And we called this class of shares H-shares. H represents Hong Kong, it&rsquo;s the alphabet, you know, H, Hong Kong.</p> <p>So that is the first experience. Originally, when Chinese companies came to Hong Kong, they needed to get government approval. Actually, the government selected the candidates. The selection process was not determined by the market. It was not dictated by the investment bank as to which companies would appeal to investors. The selection process was dictated by the Chinese government. So, whoever had the political connections, whoever could go to Beijing and lobby the relevant authorities and get their approval, or whichever company needed the capital, went to Beijing and got the approval. And the Chinese government just published a list of candidates and the investment banks just call on their doors and try to get the mandate. But then, gradually, the Chinese government found out that this process, this non-market selection process did not work, because sometimes they selected companies which may not appeal to the market, or because the market tastes had changed. So, some companies they had selected may never be able to go to the market because of the change in market tastes. So, gradually, the Chinese government abandoned this selection process and just said that, &quot;OK. Whoever is ready can go Beijing to seek approval.&quot; So, this IPO process is more market-oriented. The bigger boom actually started around 1997. Actually, the successful listing experience of Chinese companies has expedited the corporate transformation, or the corporate restructuring in China. Originally, when you look at the first batches of H-shares (shares listed in Hong Kong), many of them were individual companies, or were regional companies. However, when the Chinese government saw the success of the capitalist experience, they wanted to use the stock market to expedite the corporate restructuring in China. And, actually, that was one of the reasons why Zhu Rongji wanted to experiment [with] capitalism using the stock market. Because he wanted to use the stock market to improve corporate governance, to improve the quality of management, to improve transparency, to improve accountability. That was very successful, actually. Very successful.</p>