I just returned from 10 days in China where I visited Shanghai, Hang Zhou and Beijing. The trip opened my eyes that China today is nothing like what we see on the evening news or learn about in school books. Economically China looks like America in the 1950’s and is progressing towards the 21’st century at light speed. At the same time there is no freedom of movement, no freedom of information, and only the tiniest of seeds for a representative government.

Let me start off by painting a picture for you.

• It’s a typical Friday night around midnight

• I am in the Hard Rock Café

• In Beijing, China

• Listening to an all Asian band from the Philippines

• They are playing Lynyrd Skynyrd’s, Sweet Home Alabama and it’s a very good cover

• All the while, two beautiful Russian prostitutes are throwing peanuts at me because I won’t let them sit on my lap. (prostitution is legal and accepted)

This is when I realize China is 180 degrees from what I expected and Americans are asleep to the challenges and opportunities we face as China races into the 21^st Century.

Everywhere I went the people were eager to learn who I was and why I was there. Even though I had an interpreter I rarely needed her. I quickly learned that in the cities English is taught starting in grade school and that everyone is eager to test their English skills. In many cases I found the Chinese speak better English than many Americans. Even the road signs and directions in the train stations were all in English and Chinese. They were always in complete sentences, with punctuation and no slang.

There were a number of eye opening experiences on the trip. The most dramatic being the hotels, restaurants, and shopping centers are over staffed by American standards. Imagine the service when a restaurant has two or three waiters/waitresses for every table and the hotel has 10 people behind the check-in counter 24 hours a day. On top of that imagine all those people actually appearing eager and happy to be working in a restaurant or hotel. China’s number one asset is without a doubt the educated, English speaking workforce. We will never be able to staff our hotels and restaurants with this many people, but it wasn’t really the number of people that made the difference – it was their attitude. I kept thinking the eagerness, positive attitude and optimism I found in China is what Americans have lost, and need to find again.

It is a mathematical certainty that China will be the largest economy in the world. I met with the Chamber of Commerce in Shanghai and they believe the per-person GDP in the city is about $5,000 USD and their goal is $7,000 USD by 2010. They believe the country as a whole is growing at over 9% per year. Assuming this is true and that the US can manage 3.5% growth then simple math tells us that China will be the largest economy in the world before 2013. The result will be a significant shift in economic power and a huge blow to the ego of America.

In the back of my mind I always knew China would be the biggest economy in the world simply on the power of 1.6 billion people, what I never realized is that it’s less than a decade away.

This significant growth holds both opportunity and challenges for America. China has a growing and eager to consume middle class. There are many American companies already in China meeting this new demand. There are Starbucks and KFC’s around every corner. However, the initial indicators are that the Chinese are attracted to European brands more than American. Nestle is everywhere with drinks and snacks of all sorts while Coca Cola and Pepsi are rare.

This growth is also driving up the global prices of steel, concrete, oil, and lumber. The amount of construction underway is mind boggling and the majority of the materials are imported. While I was there I heard that 1/5 (one fifth) of the worlds construction cranes were in Shanghai alone. One of the chief drivers behind all this construction is the 2008 Olympics, but the billions being spent on infrastructure will help China continue its hyper growth well beyond 2008.

The biggest trade issue facing China is the recognition that intellectual property has value and that they can not just copy brands and ideas. One of the little eye opening experiences I had was a conversation with a local business person on why soda cans still have the pull tab instead of the pop top. He believed that the reason was that the pop top design was patented to ALCOA and that so far they had been successful in keeping the design from being copied by Chinese aluminum can makers. (Just to be clear none of this has been confirmed it is purely hearsay).

I did notice that every can that had the pop top was imported and every can made in China had the old pull tab so there is something going on there. Given the HUGE amount of consumer goods I found available in the markets that are clearly counterfeit it is going to be an uphill battle. However, a battle that needs to be under control before the Olympics in 2008 and the World Expo in 2010. The last thing China wants is for the world press to lead its Olympic coverage with pictures of counterfeit Nike shoes and Gucci handbags.

As the trip progressed and I spoke to more and more people I began to formulate the idea that China is walking a thin line between capitalism and communism. It is clear that increased trade and economic freedoms have lifted millions, maybe hundreds of millions of people out of shear poverty. However, the government has witnessed the lessons of the former Warsaw pact countries where economics and politics collided and uncertainty is still the norm. China is moving in measured steps towards capitalism which must include a representative government all the while trying to avoid the shear chaos that followed the fall of the Soviet Union.

My advice is go visit China as soon as possible. It is changing at light speed and I guarantee it will exceed your expectations and open your eyes to challenges and opportunities. I hope that if enough Americans visit we can import the positive attitude and optimism that the American worker lost years ago. There is no doubt, as trade barriers come down and technology allows us to communicate easily the American worker is going to have to work harder and more efficiently than we have ever dreamed if we want to maintain our standard of living.

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