By Harry Greene ’08

 In March, the Chinese National People’s Congress adopted a new private property law, the latest in a series of economic reforms challenging the constitutional characterization of China as a socialist nation. Western media outlets clamored about the latest step away from what Chinese politicians already refer to almost wishfully as “‘socialism’ with Chinese characteristics.” Yet, while much has been made in the media of this alleged policy-led charge towards capitalism, most analyses overlook the societal phenomenon at the heart of Chinese progress—the culture of capitalism already flourishing in the markets and hutongs of every Chinese city.

The Chinese long ago embraced free market economics on a micro level, even as their government clings to the vestiges of “socialism with Chinese characteristics.” This phenomenon holds enormous promise as the impetus for continued political and economic progress, and American officials, in shaping foreign policy, must be mindful of the role of Chinese culture in advancing further economic growth and correcting injustice in the Middle Kingdom.

Capitalism rests on three fundamental principles: the private ownership of property and means of production (as protected by the new law); the freedom to engage in competitive transactions; and the accumulation of profit. Essential to the latter two is a predisposition to the means and ends of this system—that is, a culture emphasizing the spirit of competition and the quest for profit.
In this country, we embrace our culture of capitalism patriotically. “Rugged American individualism” and the oft-touted “American dream” together define the two requisite ingredients for a prosperous capitalist system: a willingness to compete and a hunger to win. In China, while CCP officials discuss “Chinese socialism” and “harmonious society,” regular citizens eagerly embrace the practice—if not the theory—of free market economics. Their culture of capitalism has driven the country’s torrid growth and realized a modern economic miracle.

Chinese capitalistic tendencies are by no means the result of recent economic reforms. Rather, they seem to have lain dormant in China throughout the Great Leap Forward and the Cultural Revolution, which diverted national passion toward more ideological pursuits. This can be seen most clearly in the immediacy with which China embraced capitalism once given the opportunity. Without a culture of capitalism, the Chinese might have taken years to understand and adapt to shifting rules and an evolving economy. In 1979, when premier Deng Xiaoping first encouraged free market policies on a local level, capitalism exploded across Chinese society. News broadcasts from that era show the Chinese holding auctions for lucky license plate numbers with the fervency of citizens in a newly democratic country lining up to vote in their first elections. A single policy spark had ignited the culture of capitalism that continues to fuel Chinese growth.

Today, capitalism continues to flourish throughout China, supported by urbanization, increased mobility, capital inflows, and the underlying cultural affinity for owning and earning. Consider Beijing’s famous Silk Market, the colossal ten-story indoor flea market located near the city’s center and a microcosm of modern Chinese society. Founded in 1985 amidst the fervor of Deng’s opening up of the economy, the Silk Market exudes sheer commercial energy, housing over 1,700 retail vendors peddling everything from pirated DVDs and counterfeit North Face fleeces to jewelry and tea. Thousands of young salesmen rush to and fro, hawking their wares in at least five different languages. “Cheap! Cheap! Pianyi! Barato! Preisgünstig!” They often physically grab customers, pulling them into their booths and away from the other vendors. Then there’s the bargaining: most fundamental to the Chinese economic culture is a seemingly innate fluency with negotiation that would make any economics professor or Wall Street trader proud.

True to the country’s capitalist nature, almost everything in China is negotiable. Whereas Americans bargain only over expensive items like houses and cars, the Chinese haggle over everything from chewing gum to boiled eggs. I remember my first attempt at buying deodorant, after the Beijing summer quickly left me rather uncomfortable. At a toiletries vendor, among green-tea-flavored toothpaste and a tubular washing device purporting to prevent all STDs—”Directions: just use after sex!”—I found a travel-sized imported Neutrogena on display.

“Eight yuan for this,” I offered—roughly one dollar. “No way, no way! Forty yuan!” the salesgirl countered; then, in an insightful analysis of my willingness to pay, “You need this—you smell really bad!” I responded with evidence of my price elasticity and a plea for empathy: “Please, I’m just a poor student. I’d rather be smelly than broke.” In an appeal to quality, she hastily opened the deodorant and applied it to her own underarm, saying, “Come have a whiff. It covers up everything!” I declined, both the whiff and the product itself, foiled by the capitalist spirit of this nation.

In Darwinian fashion, vendors at the Silk Market and across China rapidly adapt and improve their selling strategies. Vendors compete to be most persuasive, most aggressive, or most approachable; vendors of both genders perfect the art of flattery and charm. They invoke carefully rehearsed expressions of incredulity or disgust to use in negotiation. And capitalist motivations lead to competitive learning, as well: if T-shirt vendor Wang speaks only Chinese and English, while nearby competitor Zhang has mastered basic sales phrases in Spanish and German as well, Wang will quickly see his European market share disappear. Indeed, judging only by the sheer number of languages spoken, the Silk Market rivals the United Nations in linguistic sophistication.

Clearly the Chinese have a passion for free market competition. Simultaneously driving the evolution of their economy is the widespread obsession with image and success. Only decades after the class system collapsed into identical hairstyles and Mao suits, many Chinese today take great care to project affluence and class. Embracing materialism in all its glory, they often ask about the cost of others’ possessions while casually explaining the value of their own. While few enjoy coffee, some Beijingers enjoy frequenting Starbucks to sit in the window and be seen; many purchase overpriced logo mugs to impress friends and strangers alike. Many also take advantage of widespread piracy, carrying fake Louis Vuitton bags and wearing knock-off Gucci shades; some even put fake Mercedes and BMW decals on cheap domestic cars. Most onlookers will correctly guess the truth about these accessories, but the lingering doubt proves irresistible to the wearer. Chinese even revel in projecting status through cell phone numbers. Numbers with the digits six and eight are considered lucky and therefore are in high demand, so carriers charge more for these numbers, with the result that a person with a business card riddled with sixes and eights seems exceedingly rich and influential. Fours, on the other hand, are considered very unlucky and base, as that number in Chinese sounds like the word “die.” While not all Chinese believe that six and eight are lucky, all understand that they are expensive, and that the number four, however dangerous or evil, is undoubtedly quite cheap. With cell phone number 4111 3404, I struck out in bars and clubs across the Middle Kingdom.

Given these capitalist tendencies, it should come as no surprise that the Chinese have already embraced the new opportunities for personal success introduced by economic reform. As the PRC allowed for foreign joint ventures and privately owned businesses, entrepreneurs quickly moved beyond flea markets and underground piracy into the realm of corporate innovation, sparking a gilded age of Chinese business that hearkens back to America at the turn of the nineteenth century. In the 1970s, Chinese spoke with awe of such loyal CCP servants at Comrade Lei Feng, the People’s Hero, who dedicated his life to Maoist ideas. Today, Chinese speak with similar reverence of the capitalist successes of their own time.
Consider Yang Guoqiang. Yang grew up planting rice and working construction in the city of Foshan in southern China. In 1997, inspired by Wal-Mart and other tales of Western achievement, he founded a private real estate firm, Country Garden, to take an “assembly line” approach to housing development for China’s rapidly growing middle class. Yang acquires large stretches of distressed public land, slices them into small lots, builds moderately priced homes, and sells individual properties at huge gains. Based on Western business principles and aspirations, the idea worked: in March, Country Garden went public in Hong Kong, leaving Yang and his family with a cool $9 billion.

Another capitalist icon, Jason Jiang, realized one afternoon in early 2002 that he spent nearly ten minutes a day waiting in lobbies for slow Chinese elevators. Staring at an unremarkable seventeen-inch poster, Jiang saw his opportunity immediately: by replacing basic posters with small plasma TV screens, he could display video advertisements to millions of bored Chinese every day. Jiang promptly founded Focus Media, acquired rights to install his screens in scores of elevator lobbies, and inked deals with large Chinese and foreign advertisers. Less than five years later, Focus Media has reached a market capitalization of over $4 billion, and Jiang—who quit his corporate job back in 2002—is now worth well over $500 million.
Far from statistical anomalies, such entrepreneurial success has entirely recast the Chinese economy. While the CCP clings to its endorsement of “socialism with Chinese characteristics,” private enterprise, essentially non-existent prior to 1979, now represents at least a majority of the Chinese economy. Government reforms like the new property law have helped some, but Yang Guoqiang and millions of others clearly discovered ways to innovate and succeed without any private property law in place; Chinese culture, not politics, continues to drive progress in the Middle Kingdom.

Many still consider China a socialist nation. State censorship, rural land seizures, and dusty Maoist rhetoric reinforce the illusion of a planned economy dictated from the top. Trade imbalances, currency manipulation, carbon emissions, and human rights violations often dominate political discussions about China. Indeed, China has a long path ahead as it evolves into a developed, progressive international power, and governments and non-governmental organizations alike should continue to pressure the Middle Kingdom to hasten its political evolution and to ensure basic liberties and protections for its citizens.

At the same time, American foreign policy toward China must recognize the value of supporting Chinese economic progress. Economic growth has already lifted millions from destitute poverty and famine, saving lives on a scale rarely seen in history. While development has been concentrated in urban centers, urbanization and mobility offer new opportunities to the rural population as well. Additionally, the culture of capitalism and the fondness for Western culture and philosophy already budding amongst the Chinese people will gradually lead to a heightened appreciation of basic human rights and justice; already, internet-savvy Chinese look to blogs and proxy servers to facilitate dialogue on liberties and rights, and many Chinese take particular interest in the American political process. In time, this evolving worldview will manifest itself in progressive political and governmental reform as the PRC looks to maintain its grip on power by ceding to popular appeals.

American foreign policy must reinforce this cultural trend by strengthening economic, diplomatic, and cultural cooperation between the two nations; the U.S. stands to gain a strong partner in its own quests while rescuing millions from the backwardness that plagued China during the years of official diplomatic non-recognition. Entrance into the international community has fostered a culture of capitalism throughout China and inspired Chinese to work for prosperity and growth instead of ideological uniformity. The PRC has no choice but to keep pace with gradual reforms. Reinforcement of Chinese economic freedom is the shortest route to correcting social and political injustice in the country; shunning China will only damage its Western-friendly culture and risk a relapse into the horrors of the previous era.

Harry Greene is a senior Economics and Mathematics major in Yale’s Branford College. He spent the 2005-06 academic year studying Mandarin on a Light Fellowship in Beijing. This past summer he interned at a Beijing-based hedge fund that invests on behalf of university endowments and charitable foundations.

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