On December 5th, I spoke with Lord Wei at Asia House in London on the impact of China’s middle class to the West and the meaning of a new Chinese Dream. Sir John Boyd, chairman of Asia House, introduced Lord Wei and me at the event. Below is the speech I gave at the event.
Thank you, Sir John Boyd, for your kind introduction.
First, I’d like to thank Lord Wei and Asia House for hosting my book launch here. It’s such an honor for me. Thank you very much!
This is my second time in London. London is a special place for me because, as a native Chinese, my first exposure to the Western world was through Dickens’ novels and Shakespeare’s plays. I remember the first time I visited London in 1993, I made a point to visit the Dickens House and Shakespeare’s home.
Today, I come to London at a very different time. The West’s economy is faltering. The eurozone debt crisis is looming large. Yet, I believe the biggest story of our time is not Italy’s default, or occupying London. Although these events are very significant, there is another story that has far-reaching implications – the rise of China’s middle class.
Do you know that the Chinese middle class is already five times the size of the UK population? In fifteen years, the Chinese middle class will reach 800 million. It will change the dynamics of the world we live in, and have huge impact on everything – our life, our jobs, our economy, and the world.
Today, I’d like to talk about three things: First, I will tell you a little bit about myself – who I am, and why I wanted to write this book. Second, I will tell a story about people I interviewed in China to give you an idea what it is like to be middle class in China. Third, I will discuss briefly the main thesis of the book: “the Oneness of the World.”
During the speech, please excuse my references to my adopted country across the pond, because it’s part of my experience. I hope I would not offend you by that.
Well, I am originally from China and grew up in a city called Hangzhou. How many of you have been to China? or Hangzhou? For those of you who have been to China, you would know that Hangzhou is known for a beautiful lake called West Lake.
I grew up hearing people say that Hangzhou is a paradise on earth. But I was oblivious to its charm. The stillness of the water seemed lifeless to me, and I was desperate to leave the country.
Twenty years ago, China was a very different place. We had very little information about the outside world. I was studying in college at that time. By chance, I came across class reading materials that included Abraham Lincoln’s “Gettysburg Address” and Martin Luther King’s “I Have a Dream” speech. It was an epiphany for me. I may not have fully understood the significance of these speeches, but something in them touched me profoundly – all I knew was that I wanted to go to that great country!
In 1989, I went to the United States to pursue my graduate study. To me, it was a dream coming true. A couple of weeks after I arrived in the States, I went to Washington DC for a conference. I was very excited to visit the White House, national museums, and memorial parks. As I stood at the Lincoln Memorial and read the Gettysburg Address, the reality that I was really in a free country finally hit me. I found myself at a loss for words.
Later that afternoon, I took a walk on the National Mall. Along the way, I bought a sandwich, and was about to sit down on a bench to eat my lunch. I was thrilled to see birds flying so closely around me. Suddenly, a bird dove toward me. Before I realized, it grabbed a big chunk of my sandwich and flew away. I was shocked, and thought to myself: “This is indeed a country of freedom. Even a bird can pick on me.”
In China, this would be totally impossible. All the birds are afraid of people. They would never dare to be near any person, not to mention to rob food from a human’s hand. Otherwise, they would likely end up on someone’s dinner table.
I remember, when I was a child, I saw a young boy who caught a bird, wrapped it in wet mud, and choked it to death. Then he threw it on a hot coal stove and cooked it for his dinner. We were all excited, screaming and jumping around while we watched the boy roast the bird. It didn’t occur to any of us that this was inhumane, cruel, or perhaps even a violation of animal rights.
In a country where food was rationed, some people were starving, and eating meat was considered a luxury, the concept of protecting animals did not even exist back then.
Twenty years later, China has changed to a very different country. Each time I go back to China, I see amazing changes. It struck me that when I left China 20 years ago, there was no Chinese dream. I had to leave my country and go to America to pursue my dreams of a better future. But today, many young people in China can start their own businesses and have a lot more opportunities.
At the same time, however, I found increasing fears in the West about China’s spectacular growth. While some fears might be legitimate, most fears are unrealistic or due to misunderstanding. But these fears can be a self-fulfilling prophecy, and they are a source of global instability.
As a Chinese native and an American citizen, I feel compelled to bridge the difference in understanding between China and the West, because I believe the world’s stability and prosperity will depend on how well China and the West understand each other , trust each other, and learn from each other.
So, The Chinese Dream, taking its title from the American Dream, shows that many of these fears are misplaced. It deconstructs many myths about China, and offers an alternative view that the rise of the Chinese middle class provides a balancing force for the world economy and is a catalyst for us to realize our global oneness.
In writing this book, I traveled all over China and spoke to more than 100 people. The book features interviews of Chinese entrepreneurs, rural migrants, office workers, managers at state-owned companies, executives at foreign-owned firms, Communist party members, and government officials. In order to gain a clear view of China today, I also provide a careful analysis of social and political forces at work in Chinese society, as I take you on a journey to many places that reflect my own life-changing experiences.
Now, I’d like to tell you a story about Chinese consumers.
On a trip to China, after passing through the security check at San Francisco International Airport, I went into the first duty free store I saw on the concourse – Gucci. I saw two Chinese women trying on different pairs of shoes. Because they spoke my native tongue – Mandarin, I knew they were from China.
One of the women brought a pair of shoes that cost $475 without any hesitation. After they left, I chatted with the saleslady at the store. She told me that many Chinese had bought luxury goods in recent years. The day before, she sold a purse for $1,200 to a Chinese woman. The woman bought the purse for her daughter, who was studying in college in the States. She wanted her to impress their neighbors when they returned home.
After I boarded the airplane, I settled into my seat in economy class. Then I saw the woman who bought the Gucci shoes walk down the aisle, carrying many fancy boxes from Gucci, Versace, and Fendi. I thought to myself, if I could afford a pair of shoes for $475, I would be sitting in first class.
I was curious. So, I started a conversation with her. I learned that she worked in a government agency in Beijing. She and her friend were in a tourist group that toured eight U.S. cities in 12 days. She said many luxury products she bought were for her friends – they gave her a shopping list before she came.
I knew people who worked in government in Beijing making about 5,000 yuan a month, which was about $800. How could people with that income afford luxury goods that cost thousands of dollars?
Here are three truths about Chinese consumers:
First, Chinese have more money than you think. Chinese households hide “grey income” that is never reported. For example, many state companies give big bonuses that are not accounted for as official salary.
Second, Chinese are status conscious people. They would pay premium prices for products and services that can enhance their “status.” But for products and services that their neighbors and friends cannot see, they would be very price conscious. For example, the woman who bought Gucci shoes would not spend more money on first class airfare.
Third, the next big opportunity is in smaller cities. Recently, I visited a second tier city in Western China, called Chengdu, with about 5 million population. At Chengdu’s downtown, you can see big signs for “Cartier,” “Louis Vuitton.” Chengdu’s retail was booming. And China has hundreds of cities like that.
A recent Credit Suisse report indicates that Chinese consumption will reach $16 trillion by 2020, and China will become the largest consumer market in the world. This shows how big the opportunity is in China. That’s why I said the rise of China’s middle class is the biggest story of our time.
Now, I’d like to spend a few minutes to discuss the main thesis of my book: The Oneness of the World.
Because I am a Chinese native and American citizen, I have straddled two cultures and lived at the crossroads of the East and West. My personal experience tells me that the differences between the East and West are more complementary rather than contradictory.
For example, for years, the Chinese economy has been heavily dependent on investment and exports. Many Chinese save a big chunk of their incomes for a raining day. On the other hand, people in the West have been spending beyond their means for decades.
We know that the West’s economy is imbalanced with excessive borrowing. The Chinese economy is also imbalanced – but with the opposite problem, such as over-saving.
Both the Western and Chinese economies need to rebalance, and this process has already begun. The Chinese middle class is creating enormous opportunities for Western companies selling into China. As this process unfolds, the Chinese economy will rebalance from over-saving, and the West’s economy will, hopefully, rebalance from over-spending.
When major economies, such as the UK and China, with opposite strengths and weaknesses can rectify and fortify each other, the world will be able to thrive on a virtuous cycle of globalization. This is what I mean by “the Oneness of the world.”
To summarize what I said, the rise of China’s middle class is the biggest story of our time. It will inevitably disrupt the world, as the dynamics of the global economy, environment, politics and culture will be altered. But The Chinese Dream offers a hope. It calls for the recognition of “unity in diversity’, and shows the incredible opportunities that await the world, if a spirit of oneness and understanding can be brought to bear on relationships between China and the West.
In closing, I would like to leave you with a final thought, which goes back to the reason I wrote my book The Chinese Dream.
I love China, because China is the country where I was born and grew up, the country where I have blood connections, and the country that has made me who I am.
But whenever I am in China, I find I love America more than ever, because America is the country where I have found my dreams, the country that gives me a new spirit, and the country that has made me more than who I am.
I believe that the world is becoming increasingly interconnected and interdependent. As I said earlier, the world’s stability and prosperity will depend on how well China and the West understand each other, trust each other, and learn from each other.
So, I invite each one of you, and encourage you, in whatever endeavor and capacity, to make a difference by becoming a bridge between China and the West, because the world’s stability and prosperity depend on it.