China coast as factory of the world

This Christmas, as pajama-clad kids across the US wake early to race to the tree, they will probably be shaking boxes filled with toys made in China - especially from China's southeast coast.

Once a set of sleepy low-rise fishing towns, China's Pearl River Delta can now, and in the foreseeable future, be justifiably called "the factory of the world." It's the engine that places China as America's No. 1 provider of the toys beneath the typical tree, the ornaments on it, and - if artificial - the tree itself.

But China's clout goes well beyond the holiday season. Every day, year round, Guangdong province alone - which covers most of the delta - exports $300 million of goods to world markets. That's a third of China's total. Ten percent of all Delta exports are stocked on Wal-Mart's shelves. In Guangzhou, Shenzhen, and their environs, well-paved roads pass through a staggeringly crowded landscape of factories, offices, dormitories, apartments, and streams of migrant labor.

What those Chinese peasants from the poor interior find seems a different country - one of manicured coastal highways, wealthy peasants, nuclear power, and boom-time growth.

Whether China's east coast, an important new hub for global commerce, will continue logging 10 to 20 percent growth rates is a subject of some debate. US central banker Alan Greenspan warned last week that China could overheat if it does not curb its breakneck pace, and recent inflation. Also, a crisis in China's banking system, still handing out a surfeit of bad loans, could bring shudders to the Middle Kingdom, analysts say.

Yet, barring social unrest, a global meltdown, or withdrawal of foreign direct investment ($475 billion since 1998), many experts see little to stop China from advancing its prospects. The creation of wealth in a semideveloping country that now has more than 100,000 millionaires, has far-reaching implications, and is altering the power balance in the region, with China edging into the central role. The east coast is now producing both for export and domestic markets.

"A lot of people talk about overheating and how China will implode, or that it can't sustain growth," says a Singapore-based economist. "I don't see it. What's going to stop them? The West Pearl region is next."

For ordinary Chinese along the east coast, the changes boggle the mind. Locals live in a world completely different from the one they imagined growing up.

Take Lei Pei Jing, a manager in a plant in Xiamen that makes packaging for Dell, Phillips, and Disney products. When Mr. Lei grew up in the early 1980s Xiamen was a struggling city with a sewage cesspool in the middle of town, and constant power outages. Locals remember in 1988 that public buses had wooden floors with holes in them and carried no headlights.

Today Xiamen is a little Singapore, with a towering skyline, parks, resort villas, an industrial zone, a tourist island, and a rolling seaside college campus that is one of the nicest in China. From the coastal road looking downtown, dozens of high-rise apartments are under construction, with 80 percent of them sold.

"It is indescribable the changes in Xiamen," says Mr. Lei. "I could not imagine what I was going to do when I was older, there weren't any opportunities."

Tang Ying grew up in Zhuhai, on the west shore of the delta. In the 1970s, it took Mr. Tang two days to reach Guangzhou - six transfers and a boat ride. Tang remembers listening one night to a Hong Kong radio quiz show that asked: "What local town has one street and one policeman?" Answer: Zhuhai.

Today Mr. Tang is director of the foreign affairs bureau in Zhuhai, which has hundreds of police, dozens of hotels, and factory sites ranging from Canon to Panasonic. He can also drive to Guangzhou in 90 minutes on a new multilane highway.

China's south was always famous for business savvy; that talent was enhanced almost from the day in 1980 when five "special economic zones" were formed, most famously Guangdong, which boasted the first "joint venture" firms.

What's new today is an important consolidation in the Pearl River Delta: an un-sexy but vital element called "infrastructure."

In the next year, new airports, shipping docks and container ports, and a nuclear power plant will open. Two new bridges will link Hong Kong with the mainland, one by 2005. More broadly, Chinese planners are preparing to develop the west region of the Pearl River Delta, currently made up of sleepy fishing villages.

China's relentless improvement of infrastructure, and endless cheap labor, explains why Mexico is not now the source of the great sucking sound. In fact, shifting from a US-centric view of global economics, it is Latin America, Malaysia, and Thailand that are losing jobs and plants to China. Infrastructure and energy is what brings overseas investment, and what allows good to move quickly from raw materials to container ports.

Yet for Chinese planners, the Pearl Delta is still being developed. Guangzhou next summer inaugurates one of the three largest airports in China, Baiyun, or White Cloud - with two runways and a terminal architecturally similar to the acclaimed Incheon Airport in South Korea.

The region already has five airports in a 60-mile radius. A new shipping container port at Yantai, on the upper coast of Shenzhen (run by Hutchison Whampoa), just finished its seventh berth; two more are under construction.

Twenty minutes drive north is the sunny mountain-ringed Daya Bay nuclear-power facility that helps electrify Hong Kong. But two new nuclear reactors at an adjoining Ling Ao facility, set to open in months, and two more set to open in 2006, will feed the world's factory of Guangdong.

A bridge between Hong Kong and Shenzen is already under construction; a bridge will connect Zhuhai and Macao with Hong Kong. (Officials in Hong Kong privately acknowledge that their role as the dragon's head of the Delta, the finance and legal center, is facing severe competition from the mainland.)

China often seems to move glacially, in increments barely noticeable from a Western news perspective. Yet transformation of the east coast has not taken place in generations, but in less than 15 years. Many new entrepreneurs, and the state officials who work closely with them, would have spouted Maoist doctrine and supported antirevolutionary crackdowns during the Cultural Revolution of the 1960s and 70s.

One leading cause of the 1989 Tiananmen massacre was the question of whether economic development was properly following the precepts of communist ideology. After that tumult, paramount leader Deng Xiaoping traveled south to the special economic zones to say the question of markets and commerce would no longer be filtered through the lens of ideology. The trip reenergized commerce, and the east coast has boomed with between 9 and 20 percent growth since.

Now China's ideology is found on billboards outside an industrial park in Xiamen. The bespectacled face of Jiang Zemin, former head of the party, looks benevolently upon these huge words: "Liberate the mind, seek truth from facts, move with the times, be creative and develop."

Certainly cheap labor has moved with the times - to the east.

If the "great sucking sound" globally is coming from China, in China itself, the sound comes from the east. China lost some 45 million jobs after shutting state owned enterprises. China has 800 million peasants.

The east coast factory zone has been a social safety valve. Migrants come from villages in Sichuan, Anhui, Hunan to be trained, work, and earn on the east coast. Huang Huahua, governor of Guangdong, told reporters here last month that "about 10 million" migrant workers cycle through Guangdong every year. Xu Zhongheng, deputy mayor of Shenzhen, says that of some 6 million city inhabitants, only 1.2 million are permanent.

Migrants work for anywhere from 500 to 1200 yuan per month - $60 to $150. What's more, overseas companies are finding constant improvement in the technical capability of the labor. At the Print Rite plant in Zhuhai mostly young women make ink-jet and typewriter-ribbon cartridges. They make the molds that make the plastic parts, a precision operation, and then feed ink or ribbon into the product.

Ian McColloch, who lives in Hong Kong and is a subcontractor for Print Rite, says the work used to all be done in the US. "But US firms got out," he says. "They couldn't compete with China. There used to be a perception of low quality control in China. But the technology capability is high now. The products are really good."