china 1979

In 1979, I traveled to Beijing for a quick visit and the following year to Guangzhou, Shanghai, Beijing and Tianjin to visit potential sites for a joint venture manufacturing company with Chinese partners. Discussions were held with provincial governments and the newly established China International Trust and Investment Corporation (CITIC). CITIC had been formed in 1979 as a State owned investment vehicle by Rong Yiren under the approval of Deng Xiaoping to bypass the existing bureaucracy. Its aim was to attract foreign capital, technology and management techniques to China and encourage Chinese investment abroad. I had met Rong Yiren on a previous visit. A sister organization, The Shanghai International Trust and Investment Corporation (SITIC), was in the process of being established to promote investment in the Jiangsu Province and Rong Yiren arranged several meetings for me there.

A Last Look at China
A Last Look at China
A Last Look at China
A Last Look at China

Rong Yiren, was born in Wuxi, Jiangsu Province, not far from Shanghai, and was the son of one of China’s richest businessmen in the 1930s, Rong Desheng. In the 1940s Rong Yiren owned textile and flour mills in Shanghai and remained in China after 1949 when the Communists confiscated his family’s assets. Rong Yiren later became Vice-Mayor of Shanghai from 1957 to 1966. During the Cultural Revolution, because of his former capitalist background, Rong Yiren was forced to sweep floors in the factories he once owned. He never joined the Communist Party but was rehabilitated in the late 1970s when Deng took control of China. Rhong Yiren visited Australia several times in the 1980s and I met with him there and in Beijing. He became a Vice President of China from 1993 until 1997 and by 2000 was considered China’s richest businessman. Rhong Yiren died at the age of 89 in 2005. He was a visionary man and one of the architects of the current China.

Wu Zhichao, Vice President, CITIC and Member of the National Committee of Chinese People’s Political Consultative Conference also was very active in promoting investment in China. I met with him several times in Beijing and at his office in the Bank of China Building in Hong Kong.

In spite of all the support and good Government contacts we were not able to overcome the obstacles of investing in China. The major areas of difference were an unreliable power supply, government unwillingness to permit the building of a “greenfield” factory and to choose our own workforce, inflated valuation of land and buildings offered by the provincial governments for their share of the proposed joint venture, lack of access to the local market and a poor internal transport system. As a result, the many discussions and factory visits did not produce a viable plan for investment. We were too early with our visits and more patience was required while China caught up with the commercial realities of foreign investment and trade.

The USA established diplomatic relations with China on 1 January 1979 and in 1980 Beijing was full of American business people and tour groups, mostly overseas Chinese. The lobby of the Beijing Hotel had been expanded with many tables set up for foreigners to sit drinking beer, whisky or gin without meals. Many new restaurants had opened and alcohol was freely available to cater for the foreigners in Beijing. We headed for the British and Australian Embassies for “happy hour” on Friday nights where the drinks were free.

On a visit in 1980, I stayed at the Park Hotel on Nanjing Road in Shanghai. The hotel was built in 1934 as a prime example of Art Deco architecture and at the time reportedly was the tallest building in Asia with twenty-two floors. From my hotel window I could see the lonely grandstand from the old Shanghai Race Course, now the Renmin (People’s) Park. The Park Hotel practiced an “open door” policy for guests. We were asked to leave our doors open at night so the white-coated staff could enter the room without waking us. It was like sleeping in a hospital room with nursing staff walking in and out during the night to check we were still breathing. As I lay in bed in the darkness I could hear snoring and other night sounds from nearby rooms and the quiet shuffle of feet as the staff moved about, occasionally turning a flashlight onto a startled guest. If you sat up in bed the light quickly went out and the ghost-like figure disappeared without uttering a “thank you” or “excuse me”. That was the way it was….

It was a brief visit to Shanghai and the weather was gloomy, like the meetings we had with government officials. Late one afternoon I walked from the Park Hotel along Nanjing Road to the Bund to look again at the old colonial style buildings. They were more gray and lifeless than I remembered. Even my camera could not bring them to life.

In Beijing we stayed two nights in the more expensive new wing of the Beijing Hotel before taking a small bus through the countryside to Tianjin where we stayed at an old State Guest House. The bus trip was long and uncomfortable as we bumped along narrow, unsealed roads crowded with bicycles and carts, bordered on both sides by collective farms. We inspected a large factory offered by the government as the site for the manufacturing facility but it was conditional on the joint venture employing the whole workforce of over five hundred and supporting their families with housing, education and medical care. We needed less than one hundred workers for our plant. The government wanted the joint venture to export its total output at international market prices, regardless of costs, and the “rich” foreign partner to absorb the difference. We wanted to sell the output on the domestic market in China and make a profit.

In late 1984, I left the mining industry and joined another company as Chief Executive for Australia and Asia, continuing my interest in China. In May 1986, I participated in a Senior Executive Forum in Beijing and a banquet hosted by Zhou Ziyang in the Western Hall of the Great Hall of the People. The forum lasted four days with little time off to explore the city. It was a high profile conference and was well attended by Chinese officials from all over the country and senior Australian businessmen and government officials. On the first day of the forum I talked to the largest audience of my life about Selecting Managers from Within the Company. During the Q&A session I was repeatedly questioned about how Western companies handled the relationship between older more experienced managers and younger managers; and what role older managers should play in the business enterprise. There was an obvious tension within the developing management class in China with the younger managers wanting to push the older ones out and the older managers trying to hang on to their positions. On day four I participated in a panel discussion on Developing Enterprise Managers followed by a lively session discussing marketing of Chinese products overseas. The Chinese managers were puzzled why some of their products, with their name literally translated into English, would not sell in western countries. As an example, I advised that products with names like Fat Duck cigarettes and Heavenly Sky shoes would not be a big success.

I am not sure they really understood my sense of humor but told them about the real experience of a brewery that tried to sell Swan beer in Bahrain only to discover its name was translated into Long Neck Goose Beer; and a Japanese company that tried to sell a soft drink with the name Catspis. None of the products were a great success.

It was a challenge speaking to an audience of about 3,000 new and old managers, and holding an intensive Q&A discussion working through a slow interpreter. Simultaneous translation was not available so the presentation lasted over three hours. The dinner in the Great Hall of the People was formal with many speeches from government officials on both sides. My table was noisy, mainly because of the presence of my friend Toddy who always livened up a party after he had a few drinks. Toddy was a trader who had been visiting China almost as long as I had but he was less patient. He represented his own small trading company so was more focused on immediate results than a long-term investment.

It was over fourteen years since I first visited China and the changes were remarkable. Major international hotels had appeared in Beijing and Shanghai. The Jin Jiang Hotel in Shanghai now occupied the refurbished British Gothic-style Cathay Mansions and provided service to the adjacent Grosvenor House apartment building. These magnificent structures, built and owned by Sir Victor Sassoon who also built the Cathay Hotel, were two of the most desirable addresses in the French Concession in the 1930s. They had been renovated and were near Shanghai’s most fashionable shopping district on Huaihai Road (previously Avenue Joffre) and across the street from the Okura Garden Hotel (formerly the French Sports Club and later renamed the Jin Jiang Club). The Peninsula Group from Hong Kong had established its first hotel in Shanghai and, along with the Jin Jiang Hotel, replaced the Shanghai Mansions as my preferred hotels on future visits to Shanghai. The Peninsula Group now has its new flagship hotel located at North Bund on part of the site of the old British Consulate.

Imported Toyota cars were popular as taxis and their mini buses were used for larger groups and on longer trips outside of the cities. Shanghai was vibrant, construction sites were everywhere and the city was clearly on the move even though the central government had given priority to other areas. Most importantly, color was returning to the city. Shanghai always was the center of commerce in China and the central government could no longer hold back its development. Rong Yiren, and the many other senior Chinese bureaucrats who came from Jiangsu Province, shared the same entrepreneurial spirit. The challenge for the Government in Beijing was how to manage the rapid growth of Shanghai and the aspirations of its people. In Shanghai, I had dinner with the resident manager of the Hong Kong and Shanghai Bank (HSBC) at his apartment in the French Concession. He was a great source of information on old Shanghai and we shared the same interests in the history of the city and its colonial era buildings. We talked most of the night, fuelled by my imported Scotch whisky. He introduced me to a neighbor, an old French lady who had lived in the building since the early 1940s. She had survived the Second World War, Japanese occupation and the Communist Government. Her stories about life in Shanghai were enthralling. Unfortunately, I did not write them down so they have been lost forever.

The HSBC manager told me about the history of the HSBC building on the Bund, and his visits to the bank building to rescue old records still protected by the same caretaker from 1949. He showed me some of the bond certificates, issued in the late 1800s and early 1900s, to finance the building of the railways in China. I asked where I could buy the certificates and he suggested I try the little shops in Pedder and Wyndham Streets in Hong Kong. Later, when I returned to Hong Kong, I explored the shops until I discovered some “original” bond certificates. Perhaps, they were the last bond certificates in China! Not concerned about their authenticity I bought one certificate issued in 1868 by the Chinese Imperial Government; another issued in 1911 by the Imperial Chinese Government Hukuang for the Railways Sinking Fund Gold Loan; and a third issued in 1913 by The Chinese Government. They would not be redeemable.

In 1989, the crowds returned to Tienanmen Square to demonstrate in favor of democracy, supported by Deng Xiaoping. The Government used force to end the protests and Zhao Zihang, who had replaced Hu Yaobang as General Secretary after Hu was sacked in 1987 for being too sympathetic to the students, was purged for opposing the use of force. He spent the rest of his life under house arrest and died in January 2005. Deng Xiaoping stepped down as Chairman of the Central Military Commission in 1989, retired from the political scene in 1992 but retained considerable power behind the scenes until his death in February 1997. While Zhao Ziyang was remembered as the “lost reformer”, Deng was the architect of China’s economic reforms and socialist modernization, undoubtedly with “Chinese characteristics”. That suggested economic reform without political reform because China did not want to follow the same path as the former Communist Governments of Eastern Europe and the Soviet Union. When I thought about this and the enormous positive economic and political changes in China, I recalled a conversation with an old Chinese official. We were discussing the merits of socialism “with a difference” and capitalism when I realized he was speaking to me in English. I commented that I had known him since 1972 and he had always used an interpreter, and asked when he learned English. He said: “At school in England in the 1940s.” I replied: “Then why did you always use an interpreter?” He responded: “Oh, Mr Peacock in those days it was not wise to admit that one spoke English.”

After a last look at China I left the country impressed by the changes that had taken place and was optimistic about its economic future. But I still carried the images in my mind of farmers working in the fields, fishermen using cormorants to catch fish, people cycling to work early in the morning, no cars and carts slowly moving goods from the farms and across the cities. China had changed substantially since my first visit in 1972 but it was not wise to talk about the “old days”.

Ken Peacock

Ken Peacock

Ken Peacock, a former senior Australian executive of a mining company, first visited China in 1972 at the end of the Cultural Revolution and before diplomatic recognition by the Australian and US Governments. This was the first of many visits to China during the 1970s and 1980s. In 1978, he traveled throughout China with a trade delegation and revisited Shanghai where he stayed at the Shanghai Mansions Hotel and discovered the “Last Bottle of Gin in China”.