The funny thing about my trip to China is years from now I expect to remember it as much for what was going on in the United States as anything I saw in Beijing, Kunming, Shangri-La or Hong Kong. It was tough to be so far away while dramatic events were unfolding on Wall Street. However, I did get the interesting opportunity to see situation from the perspective of another country that has absorbed many of its own financial shocks over the years.
The tone of Chinese reaction to the U.S. financial crisis varies widely depending on who you are talking to. Some party members and government types I met in Beijing were scolding and patronizing. Meantime, businesspeople in Hong Kong and elsewhere seemed highly empathetic. Ordinary people on the street seemed to view the situation with a mix of bewilderment, concern and even anger.
A few common themes did emerge throughout my conversations. First, the Chinese, like many Americans, blame the mess on a lack of regulatory oversight. They believe leaders like Ben Bernanke and Henry Paulson should have addressed the problem sooner. They think the U.S. should take this chance to create a new kind of watchdog system. Also, they hope this new set of checks and balances is a global one. No one in China thinks they won’t eventually be affected by what’s happening in America, and they’d like to see some acknowledgment from us that we are all in this together.
Another theme is that the Chinese cannot believe their eyes when they see big American companies like Lehman Brothers and AIG go down. For better or worse, there would be no bailout debate in China like the one we are having in the United States. In Beijing, they would simply cough up the money. It’s the same thing in Hong Kong, where everyone takes pride in the fact no banks went belly up during the Asian financial crisis.
How do you encourage good behavior in an atmosphere where failure is not an option? The Chinese believe strong moral leadership is needed to avoid financial catastrophes. In China and Hong Kong, entrepreneurs and salespeople can make untold fortunes. However, banking executives tend to be more conservatively compensated. That’s because they’re seen as public servants, good stewards of firms that take a critical role in the country’s development. " Morality first, profits second," is how the approach was summed up to me by Liu MingKang, chairman of China’s Banking Regulatory Commission. Mr. Liu is highly critical of American-style executive compensation packages that reward short-term gains more than long-term prudence. "How can you calculate your credit cost accurately within a short period like one year? Eventually you’ll be fired, but so what? You’ve got the money to support yourself a few years, hovering around the financial world and finding a new job very easily"
Chinese rhetoric about corporate responsibility can sound very appealing, but I found myself wondering if such a cautious approach could ever take root in such a vibrant capitalistic society such as the U.S. Indeed, it remains to be seen whether it can survive in China when this period of explosive growth comes to an end. Moreover, for all their talk about enhanced regulation, I didn’t meet anyone in China or Hong Kong who could tell me with a straight face their regulators would have been able to predict the current crisis. The Chinese don’t have all the answers, that is for certain. Still, I am glad to have gotten a different take on the events rocking the world’s most important economy from people on the front lines in the world’s OTHER most important economy.
