A trip to Xiamen reveals a thriving metropolis. Madeleine Wackernagel reports on China’s experiment with capitalism
THE brand new, marble and chrome airport at Xiamen was the first surprise. The second, how busy the city was on a Sunday night. Street cleaners were out in force, McDonald’s was doing a roaring trade and everywhere there were people, on foot, in cars and of course, riding the inimitable bicycles.
Xiamen was one of the first cities to take up the baton in the early 1980s when the People’s Republic of China began its tentative experiment with capitalism. As a port city with ready access to South-East Asia, the government saw its potential as an export hub and duly expanded the area qualifying as a special economic zone in 1984. What started out as 2,5km2 in 1981 is now a thriving manufacturing centre covering 131km2 on the south-eastern coast, north of the Taiwan Strait .
Statistics blithely roll off Hui Li’s tongue. The director of the Standing Committee of the People’s Congress in Xiamen is keen to impress: trade has grown from $140-million in 1980 to $6,6-billion in 1996. Likewise total income – up from 180-million yuan ($25-million) to 4,2- billion yuan last year.
Certainly, that output growth is evidenced in the city’s infrastructural development. Says Li: “There used to be a saying that nothing worked in Xiamen, not the taps, telephones, roads or electricity. Now we have a 600MW power station, providing more than enough electricity to cope with private and commercial consumption.
“Telecommunications has also improved; almost all households have telephones, with direct dialling worldwide.
“The only problem still is the fresh water supply, but we now have the capacity to bring in 500 000 tons a day via a new pipe system.”
The new airport is not the only concrete sign of a burgeoning economy. In 1980, there were only two buildings more than 10 storeys high; now there are 100, with another 100 under construction. A new Holiday Inn Crowne Plaza is the only international hotel chain to have set up in Xiamen, but there are plenty of other hotels of the equivalent standard, altogether providing 6 000 beds approved for foreigners, says Li.
Tourism is one of the industries the provincial government is keen to expand – of the four million visitors in 1996, 310 000 were foreign, and Xiamen ranks ninth in foreign tourism earnings among Chinese cities. With direct air links to Hong Kong, Singapore, the Philippines, Indonesia and Malaysia, as well as the Chinese interior, the airport handles 320 flights a week.
The rapid influx threatened to overtake capacity – hence the new airport. Li travelled to the United States, Singapore and Japan “to get an idea of what others were doing and what we needed to do to catch up”. The design was put out to tender and won by a Canadian company, B+H.
The central government has a stake in the development, having coughed up the majority of the $200-million cost of the new terminal, but some loans, including one for $20-million from Kuwait, were also involved.
The contrast between the five special economic zones and the rest of China could not be more marked. Per capita output in Xiamen has grown from 400 yuan in 1980 to 2 000 yuan in 1996, with a commensurate growth in per capita incomes, says Li.
“The wage differential is very high compared with the rest of China,” says Li. “But this is a very developed area and living standards are much higher. We hope Xiamen will become a model for the hinterland, and act as a bridge, bringing potential investment to the interior of China.”
Chinese commentators are not willingly drawn on the real state of the economy, skillfully evading questions pertaining to the difficulties surrounding reconstruction. While they may admit that the interior is still very backwards, they obfuscate on the detail. One economist assured us that China was now able to feed itself; unemployment was estimated to be very low (no official rate is given); and inflation was on target to drop to 6% this year.
By contrast, Li is only too happy to relate Xiamen’s successes. Historically, the city has always been an important trading post, with close ties to Taiwan. The value of foreign enterprises comprises 76% of the total industrial output, with investors from countries as far flung as Britain, the US, Japan and Korea, although Taiwan still accounts for the lion’s share.
Investors are encouraged to set up joint ventures with the provincial government, although some wholly owned foreign companies do operate in Xiamen. The Holiday Inn, for example, is managed from Hong Kong, while the two branches of McDonald’s are a co-operative franchise enterprise. The sweeteners are worthwhile – no tax for the first two years, and 7,5% for the next three, depending on profitability. There are no restrictions on repatriating funds and with labour costing a fraction of Hong Kong rates, manufacturing is blooming.
John Chi, head of Taeco, an aircraft engineering group that specialises in airplane modifications, is doing a roaring trade: “With land prices and labour costs so much lower than in Hong Kong, we can afford to charge much less – on average 30% less – so we’re winning over new customers all the time.”
To date, the company has invested $63- million in Xiamen, but after only three years of operation is considering a second hangar to keep pace with demand. Its production schedule for this year is already booked up, and new airlines are due to come on board. With space for two aircraft, it services Japan Airlines, Cathay Pacific and NorthWest; Singapore Air is waiting in the wings.
Chi echoes other Chinese businessmen in his optimism, and, having lived in Hong Kong for years, he knows the potential force of Chinese capitalism. Growth in the 21st century will be concentrated in the Pacific Rim countries and China looks all set to be at the heart of it.
— Madeleine Wackernagel visited China and Hong Kong at the invitation of Cathay Pacific