Saturday 22 October 2016

€50bn spent on plastic surgery shows the changing face of China

Published 03/12/2015 | 02:30

'The spectacular, ever-changing skyline of Shanghai is something to behold' and is an indication of China's success
'The spectacular, ever-changing skyline of Shanghai is something to behold' and is an indication of China's success

China will continue to become a bigger part of all our lives, whether anyone likes it or not. Having spent the past 10 days in that country, I'm more convinced than ever that the Asian giant will be the world's pre-eminent power by the middle of this century.

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Front and centre in the shift of power from west to east is the quite incredible wealth that is being created in China. This dynamism will almost certainly result - well before 2050 - in the country overtaking the US to become the world's largest economy. If that sounds surprising or odd, it shouldn't - by becoming the biggest economy, China would merely be regaining the position that it held for millennia before it went into catastrophic decline in the 19th and early 20th centuries.

In the six years since I last visited China, the most notable change is in everyday life. Although the spectacular and ever-changing skyline of Shanghai is something to behold, and many indicators could be reeled off to illustrate the scale of the country's physical transformation, what struck me most on this visit was how wealth is now so visible in how people live.

Public transport is always a good place to observe a cross section of humanity anywhere. On the Beijing subway, one can see smart phone-wielding commuters who appear much the same as in the west: the women look as though the time they spend in beauticians is rising faster than the rate at which Chinese factories are churning out cars and computers; and the men are no longer dressed in the tattered trousers of the past, but look much as their counterparts do in any metro carriage in Europe.

Above ground, consumption is more conspicuous. In both Beijing and Shanghai, western luxury brand outlets dominate the downtown areas and it is not uncommon to see twentysomethings roaring around city streets in Lamborghinis.

Last week the 'China Daily' newspaper reported on the latest findings of the country's plastic surgeons. In 2014, seven million people went under the knife, spending more than €50bn for that dubious privilege. The size of the industry is, on current trends, doubling every three years.

These developments are all indicative of the massive expansion of the middle classes. Now, something approaching 400 million Chinese are enjoying the standards of living we Irish enjoy.

But while that may be a huge number, it is still only one third of the population. Among the biggest issues for the communist party regime, in general and in its latest Five-Year Plan, is how to bring the country's other one billion people closer to middle class levels of prosperity.

The scope of ambition of successive Five-Year Plans, and the regime's capacity to deliver on those plans, was brought home to this columnist when - again - taking public transport, this time the train from Beijing to Shanghai.

The 1,200km journey - roughly the distance from Dublin to Berlin - was covered in a little over four hours in smooth, wide-seated comfort (the experience was marred only by the very loud and protracted snoring of a fellow traveller across the aisle).

This miracle of efficient transportation has been achieved from a standing start a mere two decades ago. In the 1990s, the autocrats of Beijing decided that they would become world leaders in high speed inter-city trains. That is exactly what has happened.

But is the transformation of China all too good to be true? Economic analysts have been pondering that question with even more intensity than usual over the past few months.

Since the country's stock markets crashed last summer, the world is asking whether the break-neck speed of economic growth is destined to end in a crash.

Many Chinese are dismissive of any suggestion that things could take a turn for the worse, saying that they have heard it all before in the 40 years ago since capitalism was embraced and standards of living started rising.

One official I met, who was very likely to have been a communist party official (though people's precise relationship to the party is very rarely made clear), rejected any notion that there is a risk of a crash. This appears indicative of a general hubris.

And pervasive hubris is never a good sign - the laws of economic and financial gravity have not been suspended in China.

The reality is that lending and borrowing in recent years have been excessive by any standards. When the Great Recession in the west began in 2008, the Chinese authorities swamped their economy with cash in an effort to sustain the boom. Since then, the growth in lending to businesses and households has exceeded many other economies who subsequently experienced crashes after such excesses. As of now, private sector credit relative to GDP exceeds the level it was at in the US when Lehman Brothers collapsed.

It is by no means certain that the running-up of huge amounts of debt by Chinese companies and households will end in a bust. But the historical precedents do not look good. We should all hope for a soft landing, because a hard landing would affect the entire world negatively, such is the size and importance of the Chinese economy now. But even if there is a crash, what then? Yes, economic collapse could lead to a political crash.

A downward spiral of political, social and economic awfulness cannot be ruled out. The worst case scenario is frighteningly ugly.

But whatever happens in the short run, betting against the middle kingdom would be to bet against history.

A civilisation that has been at the cutting edge of human progress for as long as China has tends to come up trumps over the longer term.

Irish Independent

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