From Sandton to Shanghai

I lost a few precious years months off my life last year. Thanks to the Ministry of Environmental Protection of the People’s Republic of China and I can even tell you exactly when this happened. Here is the story…

The Ministry of Environmental Protection ranks 84 Chinese cities on a daily Air Pollution Indices basis according to three major air pollutants - sulphur dioxide, nitrogen dioxide and inhaleable pollutants.

According to the stats, Shanghai averaged an Air Pollution Index (API) of about 68 for 2007. The higher the number the higher the air pollution levels, but more on that later.

Beijing is blessed with an air pollution triumvir of heavy industry in the north east, huge annual sandstorms from Inner Mongolia whose sand particulates pick up more pollution and inland proximity away from coastal breezes to disperse the pollution.

As a result, Beijing’s API for 2007 was over 90 and hence the reason why some top athletes with asthma problems are considering staying away from the Beijing Olympics later this year. One such example is Haile Gebrselassie - Ethiopia’s long distance legend - who will not take part in the marathon (but probably in the 10 000 meters)

But if the Olympic athletes have it bad, spare a thought for us brave souls living here outside of Olympic time. We do not have the luxury of cloud seeding (to artificially induce rain), cutting half the traffic off roads and closing down the biggest polluting factories that will all kick off around the Olympics and end soon thereafter!

Now, according to the Ministry of Environmental Protection’s API categorization, Shanghai’s 2007 average of 68 is qualified as good and ‘Daily activities are not affected’ (In China ‘good’ is relative). This means for most of last year, I led a healthy, happy life.

The API scale goes from 1 to 300 with anything in excess of 300 being heavily polluted. According to their website, (I quote directly without grammar amendments!) the effects of heavy pollution to health are that ‘The exercise endurance of the healthy people drops down, some appears strong symptoms remarkably. Some diseases appear earlier.’

Recommended counter measures are for: ‘The aged and patients should stay indoors and avoid strength draining; the ordinary should avoid outdoor activities.’

So, keep in mind that these are the effects of an API of 301. Now on 19^th January last year, Shanghai’s Air Pollution went up to a staggering 412 - the first instance of months taken off my life. If that was not bad enough, a couple of months later on 2^nd April, the API soared to 500 taking with it more of my precious heartbeats.

While pollution is an ugly reality of living in China, it of course does not help getting too paranoid about this either. It is a (big) downside to living here, but upsides abound too. However, if you are living back in South Africa (or any other nice place with daily challenges) and wondering about all the worrying negative externalities to living there, here is some advice:

“Take a deep breath of fresh air, peek out of your window at the blue skies, step outside into warm sunshine and then click here to see Shanghai’s (上海) latest air pollution that has just passed through my lungs.”

(Photo: Julian Hewitt. Getting to Grips with China is not always this straight forward)

There is a popular quote doing its rounds in China at the moment that goes something like this: ‘Visit China for a week and you can write a book, stay for a month and you can put together a sizable article. If you are here for a year, you can probably write a short newspaper story. Live in China any longer and the experience is so overwhelming that you would be lucky to write more than a paragraph.’

As a friend told me the other day, live in China for any length of time and the old Chinese saying of ‘knowing what you do not know’ becomes a truism rather than ‘knowing what you know.’ However, there seems to be no end to people on week-long stints to China if the proliferation of Sino-centric titles at the local bookstore on offer is anything to go by!

On the other hand, there are some smart and super perceptive China old hands (中国通) whose commentary finds ways of slicing through all the noise and getting to the essence of it all. If you are interested in demisting some of the mystery that surrounds the Middle Kingdom, here are two great places to start:

Orville Schell is a long time Far Eastern expert who has written 9 books on China. The Long Now Foundation recently recently hosted a talk by Orville titled ‘China Thinks Long Term, but can it Relearn to act Long Term.’ Orville starts his conversation off with this powerful insight: ‘China is the most unresolved nation of consequence in the world.’ His talk is 1.5 hours in length, so the best option is to download it here or alternatively listen to it online here.

Peter Hessler wrote one of my favourite China books called ‘Rivertown.’ It is a fascinating insight to the life of a foreigner in a far flung Chinese town on the verge of huge change. His subsequent Mandarin skills, inquisitive mind and connection to everyday Chinese people pursuing personal goals in a rapidly transforming society has provided a unique and grounded perspective to Peter’s further writings. You can listen to a wide-ranging National Geographic interview with Peter here.

Straight across from our flat is a captivating view of Shanghai’s financial skyline that speaks of the city’s soaring aspirations. In many ways, these big brash concrete, iron and glass edifices are a sharp rebuff from the elegant sandstone colonial buildings they glare down at across the riverbank.

But for me, the most interesting story comes from the river itself. It is an unpretentious tale whose lead characters ply their daily trade like a silent armada answering the call of the invisible hand. As the late afternoon sun sets into smoggy haze, hundreds of barges carrying their stock of building sand, coal, timber and ore plough upstream through the muddy waters to return days later from some unknown destination - with a cargoless spring in their step as they chug towards the Yangtze River to repeat the cycle all over again.

Ship borne cargo is as popular as rail here. Almost 10% of internal Chinese freight is transported by the myriad of rivers and canals that dissect China’s south eastern seaboard. China has a proud history of navigable passage. Amazingly the world’s oldest and longest canal is not the Suez or Panama Canal, but the Hangzhou - Suzhou Grand Canal that spans a distance longer that Cape Town to Pretoria. It dates back to the 5^th century BC and was finally completed in its present form 1500 years ago - a full 1400 years before the Panama Canal!

Staring across at the daily unfolding river scene is mesmerizing. In many ways, China’s silent armada is a defiant spectacle to behold as they pass through the shadows of the city’s 100 storey skyscrapers. It juxtaposes what China is and what it wants to become - or at least the story that it wants to tell the rest of the world for now. Like so many things in China though, somehow this discontinuous affair seems so natural for a country in the throes of such a defining growth spurt.

(Will the Dubai Burj soon have a Shanghai Rival? Source: Imre Solt)

Shanghai is about first impressions and built to capture not just your attention, but your imagination as well. The Dream of the New China is represented no where else in the country as clearly as in this city. Shanghai is China’s new face for the rest of the world.

Step off your plane at Pudong’s brand new international airport and the Maglev train whisks you into the city at 431km per hour. A short while later you will be dwarfed by the city’s futuristic Financial Centre with half a kilometer high buildings rising out of what were rice paddies not that long ago. It is hard not to be impressed by this sight.

Tourists to China always joke at China’s love of being the best, first, oldest or longest. It is surprising that the Guiness Book of Records were not started here first. Want to ride on the world’s longest bridge, see the world’s highest mountain, biggest company, most populous country with the longest continuous civilization then you have come to the right place. Whether you take all the statistics with a pinch of salt or not is another question.

So, when Dubai announced plans to build the world’s highest building, it must have been something of a slap in the face for Shanghai’s top brass. After all their efforts of cultivating the world’s most modern city out of Pudong’s rice paddies, along comes along a little desert usurper to contruct the Burj Dubai.

The Dubai Burj planners have cloaked their building in mystery and have not announced its exact height yet. However, the monolith is already at 611m (far surpassing Taiwan’s Tapei 101 - at 508m it was the world’s tallest building) and is rumoured to be heading over 800m into the heavens.

Sip cocktails from the 87^th floor Sky Bar of Shanghai’s Jin Mao Tower and the helicopter-like view is magnificent. Look straight down and you will see a golf driving range occupying one of the most prime land spots in the city - a strange anomaly until China recently announced plans to build the world’s city’s tallest building on that spot.

This is where it gets interesting for me. The Burj will be finished in 2009 and then the records will become clear for China and their team of international architects to peruse. China’s new mega structure will start its construction process in 2009 and it is ‘proposed’ to reach 580 meters.

The city planners have always envisaged a triumvir of buildings dominating Shanghai’s Financial skyline. This will be their last shot at another Guiness Book of Records. In something of a faux pas, China’s official news agency - Xinhua - recently claimed that the ‘Shanghai Centre’ would be the world’s tallest building surpassing the Burj which is still under construction at 555m.

My prediction is something of a long shot. Shanghai will definitely soon have the world’s second and third tallest buildings by 2010. Whether building plans ‘change’ to challenge the Burj is something to watch. However, given Shanghai’s large empty office rate in Pudong and the difficulty of building on what is essentially swamp land with a high water table is something to be seen.

Whatever the case, there is no doubt that China would love to occupy number 1 spot to add to all is many other highest, tallest records.

(Platinum Ore. Source: DK Images)

Here is a straight forward prediction for years 2008 and 2009: A Chinese mining company will buy a minority stake in a major South African platinum mine.

China’s automobile production has skyrocketed in recent years. In Beijing if you are a successful government official you drive a black Audi and if you are a successful entrepreneur (or at least want your friends to think so), then your vehicle of choice is a black BMW. Driving a car is a great status symbol and the only difference with most of South Africa’s up and coming black professionals is that in China, you first buy your house, then a depreciating asset.

As China gets richer, so the local vehicle market is hotting up and major cities like Beijing are experiencing huge traffic congestion on roads that were predominated by bicycles a generation ago.

Shanghai is smarter on the car front. Firstly, people are happier to catch public transport as image is not as important is its political rival to the north. Elevated highways, sometimes 4 layers deep and stretching up to 10 floors above the hum drum of congested traffic lights spirit traffic along at a speedier rate. But probably the biggest deterrent is that while an entry level car will cost just over R30 000, you need to participate in an auction process to buy a Shanghai license plate. Without this you are relegated to driving along non arterial roads. At the end of 2007, buying your local Shanghai license plate was a whopping R55 000 - nearing double the price of your car!

China now produces in excess of 7 million cars per annum and is second only to the USA in vehicle manufacture. In 1999, China adopted the Euro 1 emission standard that required all domestically produced vehicles to be fitted with catalytic converters and almost all of China’s vehicle exports are to countries with emissions standards in place.

Currently, catalytic converters account for over 60% of platinum consumption. Only one Chinese mining company on the planet has a direct interest in a platinum mine and this is not even an operational development yet. South Africa has over 77% of the global platinum supply with 50% of this is processed locally.

While platinum was not one of China’s strategic resources, it is fast becoming more important as China powers up the global car manufacturing rankings. All this points to South Africa sooner than later…

I am happy to say that my first big prediction in this blog has come to fruition. On 12^th November 2007, I wrote that:

“By purchasing a bigger stake in Rio, China Development Bank could thwart BHP’s acquisition plans. It would also as the perfect excuse for China to make its first big investment in a major mining stock. This would probably be one of the few times that a company like Rio would actually welcome China taking a significant stake in them.”

Almost 2 months later this is exactly what happened. On 31^st January, according The Wall Street Journal: “Chinalco and Alcoa managed to snap up 9% of Rio by purchasing London-listed shares overnight Thursday, while avoiding leaks that might have alerted the market to their plans and given BHP time to respond.”

The deal was valued at massive USD14.1 and surpassed China’s previous international investment deals by a huge margin. While there is still the possibility of BHP upping the ante, China has a strong hand with its 9% stake in Rio Tinto. This makes future BHP efforts more financially risky and complex and significantly narrows their window of acquisition opportunity. Even if this happens, China will be happy in the knowledge that they have their first ‘super-stake’ in a global mining company.

Living in China is a fascinating experience and gives me an ear closer to the ground. Far from being a mysterious and opaque country that making foreigners perceive, many things are quite straight forward on a macro level in China. It is the micro level that defies comprehension.

On many accounts, China’s interests in thwarting a BHP - Rio takeover are very straight forward. If you understand the dynamics that drive China’s growth and the direct threat that a mining mega merger poses, then the outcome (but definitely not how the outcome is achieved) is more certain. Add to this China’s centralized decision making ability (which means that if something is of national importance it will be dealt with as a key prerogative) and China’s burgeoning foreign reserves mean that all but the biggest deals are out of their reach.

(China has gone from zero to significant international investor in 3 years. Source: Wall Street Journal)