Interviewed By Emmanuel Daniel
Prolific author Edward Burman talked about his book “China: The Stealth Empire” in this in-depth interview that analyses the Asian nation’s rich history, its rise to power and what possible future awaits it.
Author Edward Burman has lived in China for 15 years. For him, this country that has the world’s largest population is still hard to understand.
In his book “China: The Stealth Empire,” Burman wrote how the world’s second largest economy has managed to inconspicuously spread its influence to the rest of the world.
Burman however warned that what started out as a peaceful rise to power slowly turned into displays of belligerence. “It’s become warlike, rather than peaceful,” he said.
The author talked about the country’s ruling system, why he thinks the people are probably not capable of originality, as well as the impact of COVID-19 on its international image.
The following key points were discussed:
Emmanuel Daniel (ED): I'm very pleased to be able to speak today with Edward Burman, the author of 21 books. But the one that caught my attention is “China: The Stealth Empire”. I want to speak to him as an investor, as an academic, as a social entrepreneur, as well as a writer in a number of historical dimensions not just in China but in other places where he's lived out of the United Kingdom (UK) like in Italy, Iran and draw from his rich depth of insights on history and the current sociological and economic developments taking place today. Thank you for joining us today. Give us a sense of the holistic experience that you've had with China that resulted in this book, “China: The Stealth Empire”.
Edward Burman (EB): Well, this book is quite old. It was published 12 years ago and it was an attempt to understand for me, what China was at that time. So I began by looking in the very distant past because I believe China is such a long-standing development cause that you can't just look at a few years’ past and understand what it is. I wanted to see what China's position had been in the world in the past, for example, under the Emperor Qianlong at the end of the 18th century. It accounted for around 30% to 31% of the world’s gross domestic product (GDP) and is a very powerful economic entity. The Chinese themselves often speak of the last couple of hundred years as their period of humiliation, in which they lost this economic power to new powers such as Britain and also the other European countries and the USA. So I wanted to understand where all this came from? What makes China so distinctive? Simply to understand how the people thought and how indebted they are, often without realising it, to ways of thinking of the past. Because this culture is so deep, that even today, I encounter in friends talking about the coronavirus, some very strange ideas, which are much more than medieval magic and ancient medicine than modern technology can offer in China as well. So there's a kind of mindset which is partly anchored in something very ancient and partly trying to become very new. This I found rather interesting.
ED: The interesting thing about that particular book out of your 21 books, “China: The Stealth Empire” is that it looks at everything from its empire days. You talk about the Ming paradox, right down to finance, branding, sports, nationalism and foreign policy today, or at the time that you finished this book. So you obviously went through a journey of trying to understand the essence of what Chinese civilisation is, Chinese society is. Then you came to some tentative conclusions in 2008 when you completed the book. Let's use that journey to help guide us. So what were your initial conclusions about China as a civilisation? Not China in the context of any current issues that it deals with but China as a civilisation, in essence.
EB: That it was very solid, underlying the problems that it's had over the last 100 years: problems of revolution, problems of the early years of the Communist Party, which are very difficult. In the last 10 years before I wrote. We had begun to see something very new but based upon a very old way of looking at things. One of the interesting things for me from that book I have to say, sadly, arrogantly, is I got quite a lot of things right. For example, I was already writing about Gwadar in Pakistan, an Indian Ocean port that they want to develop. They wanted to develop the Pakistan railway system. They were already thinking about controlling the South China Sea much better. So I think the main difference in the last 12 years is what was called by everybody – including then President Hu Jintao – a peaceful rise of China, has now become a little bit more belligerent. It’s become warlike rather than peaceful. Things have changed in perspective in that sense. But basically, the lines are still the same.
China wants to grow. China has a very strong sense of humiliation and wrongdoing against it in the past and the desire to return to be number one, or at least among the top two or three powers in the world, which it already is. This has taken 20 to 30 years. These are not things you can do very quickly, obviously. But most of the things that are happening now were already happening then. I’ll give you one small example. One of my favourite books is about modernisation of China by Sun Yat-sen, who understood the importance of a railway link between China and Europe even in the 1920s. So they've always been looking in this direction. The idea of Gwadar was to avoid the problems of Taiwan, of the South China Sea and to be able to export to the West without going through the most dangerous, difficult, easily controllable place on the globe in terms of sea which is Singapore in the Malacca Strait, and to avoid that completely, that would have been very easy to block. So they've always had this idea of becoming more important, of recovering the power, economic strength and military power which they once had. Now it's entering a new phase. You must have seen hundreds of graphs that economists show of China rising and the US slowing down. So around 2028 or 2030, they said China would overcome the USA as the world's most important market and in terms of GDP. Now we have this disease, which has levelled more or less everything and just changed very dramatically the way people think about China and the things that China now has to do to reach this objective, which I don't think they can do, by the way.
ED: Just on the point of the desire to expand, I don't want to use the term belligerent but if we were to go back to Admiral Zheng He who in 1371, started the whole flotilla of Chinese vessels going out peacefully to demonstrate the sincerity of China over the rest of the world. It had its own characteristics at that time. It gave more than it took. It wasn't belligerent. It wasn't going out to conquer territory. It just wanted that recognition of being a powerful state. In fact, right here in Southeast Asia, in Malacca, the sultans used to give the Chinese emperor a gold flower every year. In exchange, the Chinese emperor will send him ships of goodwill. That respect was very important for the Chinese civilisation as a whole. So how many of those themes do you think continue today?
EB: Well, those ships, I'm not sure whether they were completely simple and not completely without objectives. But they were basically a statement of power. What they wanted to show to the emperors was tribute. The foreign powers were supposed to be part of China, in the sense of at least paying tribute as all of the countries in Southeast Asia did for many centuries. In the list of tributary countries in the 19th century, for example, Britain was included as part of the tributary system. When Lord Macartney – who I write about in the book – arrived in Beijing, they saw themselves, Macartney’s British Embassy as going to do a deal with China. To show China how powerful they were, and in a certain sense, takeover power. The Chinese simply saw them as bringing gifts as tribute. Just as the Indians might have taken a few elephants 500 years earlier. They brought some jewels and clocks and technology, which actually the Chinese already had as a tribute.
I think today, there's still this element of tribute that everywhere, in a certain logic as they say in China, “under heaven”, tianxia. Everywhere in the world belongs to them, in some sense, so everybody owes them tribute. This is why I believe very strongly in the book, in the sense of stealth empire that although you can't go around the world nowadays with gunships – even ships of that size – and say you are mine, you belong to me, you can insinuate yourself. You can gradually find a place through overseas investment, overseas students, overseas Chinese communities all over the world. You can gradually enter into the world system but from the point of view of Chinese superiority, it means entering – filtering if you like – into the rest of the world. The tribute idea, which is very ancient, goes back to the Han dynasty.
ED: So therefore, would you make a tentative perception that the Chinese expansionism was benign compared to Western colonialism in the last 200 years?
EB: Yes, certainly. When I wrote the book, it was benign. I'm not so sure today. We've seen some very strong examples of the way in which exploitation in Africa, for example, is not so much different from what we did in the 18th and 19th centuries – we European powers, not just Britain. So there are obviously some rather negative connotations as well. It's not simply gentle, benign, it's a matter of trying to get other countries to pay tribute, to recognise, to join China, for example, in the United Nations supporting for, voting for, in order to give them more diplomatic coverage for their actions. This is something that's become very strong, more aggressive, under the present president of China than it was.
ED: So take us through that transition that has taken place from the historical China to the current China. What do you think is the transition that has taken place in the last 20 years that has made China fundamentally different from what it was historically?
EB: First of all, being able to generate huge reserves of cash and finance, enormous foreign reserves, which gave China a lot more power to deploy investments, to purchase or invest in other countries. The belief that it was possible to equal all the major world power, especially the USA, which has always been their victim. I'm very intrigued that the geographical understanding of the Chinese is really quite limited. That most of them couldn't point Italy out on a map, certainly not Sardinia, because they've always been very focused on the USA over the last half century.
ED: There is about 200 million, now it must be about 300 million Chinese a year, who go on holiday then come back to China. Even that percentages as it is, is large enough for that to be a body of knowledge as it were. But I get your point. The Chinese mind is more preoccupied with anything American.
EB: With the USA. The number one place for them to go to visit or to live is always the USA. I've never met a Chinese that has expressed a desire to live in Italy.
ED: That's an interesting point that you're bringing up because I think with a population of 1.5 billion, there is enough critical mass of sub-communities who are not necessarily interested in Italy. So I do come across Chinese who would rather buy a house in Spain than anything American. Then there is a whole cohort of Chinese who like Australia. I was even surprised that there is a large number of Chinese who go to India to do yoga every year. There is a number of gurus in India who are very popular in China. So when you get a population of that size, the subgroups are sizeable. I would even say that they are more distinctive and have a certain critical mass that you can actually create a Chinese tourism business around any of these subcategories. I get your point that as a country, they are preoccupied with the US and that they're preoccupied with this whole idea of superiority with the US and that may even be predicated in wrong terms.
As I was telling you before we started this conversation, the whole preoccupation is who's going to define the next phase of technological development and so on. China is this, China is that, but they still buy the technology from the US. And all of the technology exporting companies in China are very dependent on selling in the US. If that export market didn't exist, that whole dimension would drop and the south of China will look very different if five companies won’t make money in Shenzhen.
EB:When you talk about these big companies, they're not really exporting at all. It's original equipment manufacturer (OEM) for American companies. It’s not quite the same as exporting Chinese products to a large part of what are counted as exports are not really exports in a traditional sense.
ED: And therefore even more dependent, right? As part of that process. Let's keep on this theme of that transition that has happened. You served as an advisor to the Xi’an City Wall Heritage Foundation. So you have a very strong sense of what China was historically and at some point, that started to change. Take us through that transition. Also because I tend to go back to some of the historical dimensions like Admiral Zheng. His voyages were to get a sense that what I think we're looking at is a country that wants serenity but not necessarily dominance over the rest of the world. But you’re saying that has changed over time. So take us through that phase, how that transition happened?
The rise of China
EB: Well, I think it happened when an awareness came to China that it was powerful enough to really challenge. This happened probably around the time of the book. It happened in the first decade of this new century, when production increased, when they had huge advances in technological production. When in fact, the five companies you're talking about began outsourcing to China. This was a very important moment. But some of the very old cities like Xi’an, for example, nobody knew where that was 20 years ago. No Europeans. It became famous because of the wall and because obviously of the terracotta warriors, about whom I've also written a book, by the way. That gave them tourist money in order to start thinking about other ways of developing the city. But again, the way of doing that has been a little bit unusual. They haven't actually developed anything technological in Xi’an. They have good universities. They have good young people. They have a good labour market. But it's a bit like what the American companies have done in Shenzhen.
One of the biggest employers in Xi’an at the moment is Samsung, which built a huge factory for manufacturing. This is another example of what I'm not quite sure if it can go to exporting or not. But it's investing or getting foreign investors to move production to China, which then re-exports their assembled products. In that, they began to understand, with a huge amount of money available, a huge amount of land also available for these things, with country leaders and provincial governors understanding that this was a way they could develop the country very rapidly. Also in the automobile industry, for example, which almost didn't exist at the beginning of this century. There's been huge advances, again in Xi’an BYD, which has actually been invested in by Warren Buffett about 10 years ago and now produces electric cars is another very good example. But that's been using US technology. It's been now using Chinese-made batteries. But the technological background is not Chinese. But because of the huge number of domestic customers and the possibility of producing cheaply, these indices have taken off so a city which was pretty poor 40 years ago is now one of the leading cities in China. I'm talking about Xi’an, because of all this new investment, because of new technology, because of new businesses, very recently, in terms of 2,000 years of China.
ED: So what you're saying is the foreign capital, the foreign technologies provide the anchor from which different parts of the country have been sprouting. An interesting thing about China is that since 1900, it's probably experimented with a number of different political systems from emperor to the republic, to some form of democracy. Even the communist regime had different iterations over time. There was Mao Zedong and then there was Deng Xiaoping and then there's a collective sort of things and now there's something else.
So, if you were to compare China and the US in the last 100 years, you might even say that China has tried different systems in order to find the one that is most suited. For all you know, we are actually experiencing the most credible, sustainable, political and social model for China right now, and the US is dysfunctional because it's sort of stuck to that two-party system in that 100 years. Do you see that as a transition? And how would you categorise the political and social transactions that have taken place in China?
Suitable form of government
EB: I would call it geological in the sense that it's like a huge mass, very gently forming. You cannot, after 2,000 years of fairly continuous government form with continuous laws: the Civil Code, the politics, the economics, the way of life – you cannot suddenly change that in a few years into something else. It's obvious that from the end of the Republic to the end of the Qing Dynasty, it's taken a long while to find the right form. You may well be right that this is the ideal form. I'm not convinced of that. But it's obviously for such a huge mass of people who were in huge poverty, huge difficulty 100 years ago, it's a very remarkable change but it's taken a long time to find the right format. This is rather obvious. So my feeling is that it hasn't finished. My feeling right now is that even the process has been dramatically hit by the present problem of coronavirus, that there will be implications out of that over the next 5 to 10 years, which nobody knows. I can't pretend to know what will happen. As you said before, talking privately, economists, for example, have no idea at all what's going on. Actually, the task of the economist is to explain the past rather than to predict the future. You need data to be able to work something out. Now, when we're talking about 5 to 10 years ahead, it's very hard. Even I, for example.
I wrote a book about the internet in 2003, which was very successful in the USA and in England. It was called “Shift!: The Unfolding Internet – Hype, Hope and History”. It was about the change of paradigm shift in communications and everything. And up to a certain point, I think it's very good. The end, I got it all wrong for one very simple reason: that I had no idea. I was considered an expert. But nobody could imagine social media. Nobody could imagine the kind of things that extra bandwidth and speed would make possible with social media and much more immediate connections. It was totally impossible. In other words, the next 15 or 20 years was unimaginable, literally. And I think that's what we've got in China today. That it's unimaginable. It's very hard.
ED: As a historian and also as an investor before, what do you put your finger on what you're looking out for to tell you what the future is going to look like? What do you think are the indicators we need to track in order to construct how this is going?
EB: In the present case, you mean? The great thing about coronavirus is it forces the truth out. So it's made us rethink a lot of things that we have assumed to be rooted, like the eventual overtaking of the US economy. We have learned, for example from the Japanese originally, this concept of ‘just in time’ in manufacturing, which is now completely unimaginable in the future. Just in time in the old sense.
I remember going to a mobile phone factory in Tianjin a long time ago. This was manufacturing for at least a dozen different companies – Motorola was one of the customers that I remember – where parts came in from Singapore, from Japan from Korea, bits and pieces in the morning and in the afternoon, these were shipped out as phones to San Francisco. That kind of ‘just in time’ with no warehousing, no storage, just producing very smoothly and rapidly is now just about impossible. And now it is impossible right now. I don't think it will ever come back as it was because there will be huge changes in the way logistics work. There'll be huge changes in outsourcing, huge changes in how much companies are prepared to put in a place which they can't control.
There are new technological advances which are very exciting for me. And I think it will have a dramatic influence in the next 5 to 10 years but not immediately. I give you one example of this, it’s 3D printing. Now, 3D printing up to now has been mainly the things that architects building little plastic buildings to show off their new designs or for real estate agents. Now we have new companies, highly sophisticated companies in the USA with a couple of them connected with professor from MIT, who can do 3D printing using molten metal. So the ‘just in time’ means in the corner of the office and does not require transport, the payment of taxes, custom services and all the other complications of sending things backwards and forwards to a place which in any case is becoming a bit expensive. In terms of manufacturing, a lot of it is already moving into cheaper countries. I think this will break totally new logistics and artificial intelligence, together with 3D printing, will break completely the traditional business model of manufacturing.
ED: Do you think that the Chinese in their current configuration are capable of originality?
EB: I'm not sure. Probably not. Partly because, for example, the one weakest thing about all of the Chinese technology, which you have mentioned indirectly talking about companies in Shenzhen, is that they cannot produce sophisticated microchips. These all have to be imported. This means that it's difficult to be original. And so to be able to change, to have total originality, you will need to use new chips, new inner workings if you'd like to do something totally original. My answer is probably no.
One thing the Chinese have always had is the advantage of size, of economic power, to be able to put in production or develop ideas which somebody else has had. Of course, there are original ideas in China. I've seen quite a lot. I used to visit maybe 15 or 20 companies a month at one time trying to find out new technologies, new ideas that we wanted to bring into Europe and maybe go to the stock market. There were all sorts of problems. There was nothing that was really totally superior. I'm talking about small to medium-sized enterprises (SMEs). I'm not talking about very large companies. Obviously, they can do much more original activities. It's very hard to think of something in which they're way ahead.
ED: You've written 21 books. You've lived in Iran, you've lived in Italy. What is an ingredient of originality? And what have you seen in terms of originality in different civilisations that you have become accustomed to? How much of that is expressed in China? Let's drill down a little bit on that.
EB:In the past, in Italy, some of the most imaginative, inventive things came in construction, the invention of something like concrete cement, 2,000 years ago. That was something that had never been done before. That was an ancient, very interesting idea. In culture, the use of new ways of making colour, which came also in plants and insects brought from India, when the world started to open up in the 15th and 16th century. So the possibility of having new colours dramatically transformed art, which is why you see colours in paintings by Titian, by painters like Raphael, which didn't exist before. That is absolute originality in using things that exist to make something new.
I don't believe in things coming out of nothing. I believe in the mixture of things. Looking back at Chinese history, the most original period was the Tang dynasty that you mentioned before because all societies grow and develop new ideas. All cultures expand when you have interaction, when you have new things coming in and out. The most obvious example even in China is with food. If you don't have interaction of food products, you never have any decent food culture.
You imagine what the people in China ate before around 1600 when they had no peppers, tomatoes, potatoes – a lot of things which simply did not exist. Therefore, what we think of today is a wonderful Chinese food, especially in some of the outlying regions like Szechuan, which was incredibly influenced because there was an exchange with new products coming. Same is true in India. The same is true in Italy, in North Africa, Arabic things, Byzantine things. The tomato from South America and the potato. So this is a very elementary example of how culture is not born from nothing.
One of the reasons I believe China got a little bit stuck was in the not complete closure, but partial closure or negation of the outside world for at least 200 to 300 years. Because internally, by yourself, you just don't change anything. Original ideas don’t come out of nothing. Seeing something new which could be done in a better way or a different way. I'm afraid sometimes I’m a little bit critical when my Chinese friend says, “We have some of the most important inventions in history”. My answer to them is, ‘What are the great, new inventions of the last 1,000 years? That's a bit tricky. It's true maybe they invented compasses, things like gunpowder, but certainly not recently. This is not because they are not capable of invention, of originality. It’s because nobody can create original things out of nothing. You need to exchange ideas. In fact, some of the most interesting ideas recently when Chinese intelligence has been applied to things they've seen in Europe or America and made better. So some social media things are better in China because they've taken something that was basically good and made something superior. That's what they're very good at. It's incremental improvement rather than absolute invention.
ED: In fact, one of the sayings in China is that the US outsources production to China and China outsources research and development (R&D) to the US military. If you were to think about a number of the key defining characters of our period right now, a lot of that comes from the US military: the internet, the drones. So it's almost like you need to be belligerent to be inventive today then have the kind of budget that no one enterprise has. Let's go back to the social configuration. As I said, China's probably tested different types of political systems and social systems since the early 1900s. It seemed to have resonated at a point and it's still morphing, it's still changing today. Ten years ago, I think there was a TED Talks session where a Chinese was saying, “Look at us, we are a fully meritocratic country. You need to be a governor of two provinces before you become a candidate for presidency, therefore, the skill sets are very high”.
China had sort of morphed the British idea of civil service, the administration and the political process into one. Today, in a number of countries, when I have this conversation in Africa, for example, they don't remember the time when these were two different things. The stability in the administration and the representation is what keeps playing out. The Chinese were very proud of the fact that administrative competence was a criteria and it still is. You pointed out in your book that the engineering talent in the Chinese administration is the more dominant influencer, which is good because even social issues are engineering in nature in that way. Where do you think is it now? How is it morphing? What will it turn into?
EB: One thing I always cite – I can't remember the exact number now – is that the largest company with most employees in China is actually China Railway. They're incredibly efficient as they are in managing incredibly complex railway system. This is one of the great achievements. Going back to the other point about different systems. What you said is true. But it's also true that in each of these different systems, the first president of the republic Yuan Shikai, Sun Yat-sen and then Mao himself from when he became leader in Yan’an in the mid-30s. They have always been very strong, traditional, imperial-like figures although they pretended there was republicanism, they pretended a little bit of socialism. Actually, it was always one very strong man who carried through.
A broken system
EB: One of the things I like most, I must say, about the government at the time I wrote the book was that system seemed to be diminishing. There was no longer in the Hu Jintao government a single man who controlled everything. It was a consensual work, a consensual system. At the same time, however, that created all sorts of problems. So a lot of people believe that you need to have somebody very strong. I agree totally with this thing of the Chinese administration system. Although that seems to be changing because the present president plucks a man he needs and puts him where he needs to be, rather than following the traditional procedures. I've heard rumours of a lot of resentment against the old system. For example, in the past when five years before the termination of the presidency, the people who would be the next president, vice president were moved in to the politburo to prepare them after having been the governor of one or two provinces. So they were gradually building up.
What do you think those people think now who’ve been missed out totally? There must be some bad feeling, resentment, because the system is a little bit broken. This excellent system. And it is excellent. I would like to give an interview to the people who were hoping to have moved in to the next generation, who had moved in now to the politburo and see what they think. Because it’s not just 3 to 5 men or women. It's 3 to 5 men and women and hundreds of their followers, and people around them. Their own people manoeuvring into position. It’s a whole generation of leaders, which ought, according to the normal process, to have begun now for the next 10 years. They're out. It’s a little bit broken by somebody who plucks who he needs to send to Hong Kong or to send to somewhere where there's an emergency without too much consideration. People who he trusts. I cannot understand why one man will open so many war fronts simultaneously without realising that is damaging him.
ED: But actually, it's the other way around. He has to absorb both the good and the bad. So that's what he's ended up with.
EB: That's a big problem. Sometimes it's making a lot of fuss about nothing. Also not treating other countries or adversaries in an equal way: threatening here, threatening there, retreating here, retreating there. To the extent that a lot of people inside and outside China really don't know what he thinks. His greatest initiative, for example, the Belt and Road initiative, which was launched in 2013 is floundering. It’s not quite as successful as he thought it was. Now he's damaging himself by introducing all sorts of rules. And by another great thing, for example, I remember visiting some Muslim areas in the west of China, where they were saying they couldn't understand how the Chinese had not realised when they were criticising Muslims all the time that all the countries along the Silk Road from China to Turkey are all Muslim. It's not that easy to keep them happy if you're also acting against them or talking about them in a negative way. It's a kind of a strange combination of knowingness and naivety.
ED: Well, in some ways the West nurtured it because this is one country that has had its cake and is eating it. It signed the World Trade Organization (WTO) agreement and then basically chose who it wanted to give access to and did it so and then closed everybody out and yet benefited from that. It signed an agreement with the International Monetary Fund (IMF) and wanted to externalise the renminbi without liberalising the current account. No other country has been given this privilege. Even right now, the pandemic is called COVID-19, not Zika, not Ebola. Suddenly, every other pandemic is named after a place and it's wrong to call it Wuhan flu. So they basically got what they wanted.
So I'm saying this with a lot of respect and love for China. I'm not saying this with a desire to belittle a very important and rich country which has a lot to contribute to the rest of the world. So the reason for this conversation is really to draw from history, the substance of this country. One of the good things that we need to see come out of it that can make it a player in the global sphere. If they had allowed Hong Kong to exist, they would have been able to experiment with a number of different political models outside the core and implement them back in if it worked. And right now even that's been destroyed. In your studies, when was the best period in China? When do you think that the Chinese civilisation was at its zenith, at its most contributory terms, usefulness to the world, benefiting from the world and so on?
EB: The usefulness to the world is another thing. Well for me, the two favourite times, rather obviously were the very beginning of Tang dynasty in the time of the first two emperors Gaozu and Taizong, which means from around 600 to 650 – Taizong died in 1649 – it’s a half century, in which nearly everything that became wonderful about China was developed: a new political system, a new administrative system of prefectures, a new civil code which continued to exist into the 19th century, a new way of looking at the world, an openness to the world. Above all, trade to India, to Buddhism, even to Christianity, which is quite an extraordinary thing that the famous historians who arrived in Chi’an in 635 weren't killed or put into prison or sent back.
The emperor wanted to understand them. He wanted to know where they came from. What it was like? What sort of military organisation did they have in India? I'm sure he would have found it very fascinating to see for example, how military campaigns and measurements were totally different in India. This is the sort of thing I can imagine, with him sitting down and listening to his monks and his ambassadors, trying to understand the world in an important way. And therefore allowing new ideas: the dances, the music, the musical instruments and also being interested in Korea – in what is now North Korea – and part of part of China, being interested in India in general.
EB: This was a moment of the great opening. A man, who I think, was very energetic and intelligent. This set up what became for 300 years what every Chinese would consider the most important part of Chinese history. But I look back at the first 50 years and think he was an extraordinary man. That was a moment of extraordinary explosion precisely because he came in from outside. His family was nomadic. He was very intelligent and interested in what was happening in the rest of the world. On the whole, I think that's probably my favourite little period. Another one, for some similar reasons, Taizong was very close to Central Asia and India. A little bit later, the first Qing emperors in the first 17th and early 18th century were very closely connected with the Jesuits and with Italy and you have another moment of opening, which I find very interesting. So there too, when you have an opening, you have a man who came from Italy to teach them about geometry. You have an emperor who is the first emperor who ever had precise maps of the country.
To be able to have all of these by exchange, by opening, by discussing. It doesn't mean weakening yourself. You don't become stronger when you isolate. You become stronger when you mix and get new ideas. Then you have this wonderful flowering in the 18th century, when China was the richest country in the world under the Emperor Qianlong, who had a very long reign, 60 or 70 years. He expanded China immensely. That was when Xinjiang became part of China and when Yunnan became part of China. The country was bigger afterwards. He had huge trade with the Spanish, and therefore in South America. The Mexican silver dollar became the standard Chinese currency at that time under him and it was until the beginning of the 19th century. So this was having a currency which was real. It wasn't just a coin that could be remade. It’s real weight was silver so it had real value.
When China is open and strong, as a strong leader, it can be a wonderful country. And it has been more recently as well. Something similar began to happen with the reforms of 1978 and the opening up again. When China opens up, the wealth today, the prosperity of the beginning of this century and even the power that the President today all goes back economically to 1978, to the reforms of Deng Xiaoping, as you know very well was behind a lot of them, the development of Shenzen.
ED: So you’re actually describing moments in Chinese history where you could see flourishing of society, communityand technology. In fact, there were also moments like during the Warring States period and the Three Kingdoms period where just before the Song Dynasty or just during the Song Dynasty when China was essentially three different warring parties, you had gunpowder and stuff like that. Just like the US generates so much of its creativity because of its war machine, war is as much a generator of creativity, but you're also describing that these periods of erudite development then slowly declined. Those declines can be 200 years, these can be 70 years. It just goes through that kind of a phase.
The whole idea of Western civilisation today is how to avoid such declines within short periods by institutionalising as much as possible. How do you think China's going to work this through because the things that it could have institutionalised, like the rule of law, international relations, they’re still subject to a lot of personalities. So, how do you think it's working out like that whole boom-to-bust period? Where are we now? What do you spend your time thinking about? Because from 2008, when you wrote your book, “The Stealth Empire”, you were quite positive when you were ending that book, by the way. Now your thoughts have developed further.
EB: I'm still not negative. I'm just uncertain. I'm worried because I think things are not being done as well as they could be. But to go back to your real question, I don't think there's never been up to now, as far as I know in the world, a civilisation which has not declined. There is always a moment at which decline happens. And it's happened. It's happening right now, even to my own ex-colonial power, which I was born in. There's a very strong decline. Everywhere has declined. So I'm not at all surprised that China declined very powerfully in the 19th century.
After Qianlong, it just had a series of very weak rulers who were not really as good as he was, not as open as he was. And, of course, the rise of imperial powers, which was the start of the problems of Hong Kong in 1840. I think that's almost inevitable.
I believe right now that China is going to have a period of decline. I don't mean next week or next year, I mean in the next five to ten years, we will see that it has not become as important as all powerful as it believes it would be just a year ago. This is the change which has been forced by coronavirus, not by the disease itself, just by the consequences.
ED: Give me a few elements of coronavirus that you think forces this.
The consequences of COVID-19
EB: Well, for example, it's making all Western companies, including the ones you've named and I’ve named, think twice about what they're doing in China. They're looking at ways of moving production, of doing production in a different way. One of the most stunning things for us in Europe was the fact that we didn't even have any production at all of face mask and other protective equipment. It was all made in China. This is a disaster because that's something which you cannot leave totally to any other country. But then we also realised a lot of other things. As we say in English, you have to spread your bets. If you can't move your manufacturing out of China because some can't be moved, but some can be moved, some can be cancelled. We need to find a new balance in business, in business processes between various places in the world. There's no reason at all. So Shenzhen is a very particular case because there's so many component factories and suppliers for the major companies located in what is really a very spread out city but it's very small compared with the whole of China. That is a problem that other countries don't have.
On the other hand, we have to radically rethink our concept of logistics because ‘just in time’ was based on logistics. The logistics of China is awful, as we've just seen. That's another thing that I think will change dramatically in the future. I read something in The Washington Post a few weeks ago that I loved, when a journalist said, “Why do we need a government when we have Amazon”?
ED: That is a peculiarly capitalistic problemat the moment when you have revenue of companies, corporations, larger than all the other countries except the top 10.
EB: There is a very important underlying sense. When we think of the face masks and all those problems, you had the British government fighting against the Italian government to buy supplies in Wuhan, ironically, which is where the most production took place. The French government is also fighting all sorts of other people. You had everybody arguing about what to do. If all of these countries have come together and given a procurement contract to Amazon, I am sure that we would have had supplies exactly where you need them, when you need them, which is what they're very good at. He’s unfortunately becoming a little bit too powerful now. Again, a little prediction of mine. Now that he's finishing his mansion in Washington and owns The Washington Post and is twice as rich as the second richest man in America, I don't think it’ll be very long before Mr. Bezos tries to become president. He’s still young enough and being fairly straightforward for him, I think. But this is a little aside.
ED: Not necessarily aside, actually, that tells you how accessible the US presidency is to anyone walking off the streets. So you actually have diametrically different ecosystems in conflict with each other and both looking at the other and figuring out what is it that we are missing? China is the most organised country in the world today, bar none. So is that a good thing? Is there a different way to play it or should they even try?
EB: So there are other ways of doing things. I cannot give you the answer. Nobody can. Certainly no economist can on what will happen in 10 years’ time. I'm very curious to see because I think there will be dramatic changes as a result of people reassessing the relationship.
ED: Final question, why stealth empire? Does it still apply? Because it's very open and obvious now. It's not stealth anymore.
EB: That's the big change that has come with this new precedent. Because before they did not want to be openly, as you always say your favourite word, belligerent. They didn't want to openly say yes, we're going to take over the world. So they said this is a peaceful and prosperous rise. But now they're being a bit more provocative, a bit more deliberate about it. So if this book will be published, which couldn't be because half of it is ready to be thrown away or at least eliminated, because it's very out of date. But the basic ideas are not.
We just have to eliminate the word stealth from the title because it's no longer stealthy. There was a way through students at universities, through small companies, through communities of Chinese around the world, which were able to bypass traditional supply lines of thought and come into our lives in the US and in Europe, in a stealthier way. They've disappeared or are changing very rapidly.
You see, I've written 21 books. I lived in China for 15 years. And I remember in the preface or in the beginning, I quoted a man who wrote a book in 1920, who said, “After about 10 years in China, people think they begin to understand it. When they've been here 15 years, they write a book about it. After 20 years, they realise it was all nonsense, and they never understood anything”. Because it's not an easy country. And we have the great disadvantage that you and nobody can give a serious, open interview to the real political leaders of the country.
ED: Actually, you just drew a pointer because Bertrand Russell almost said the same thing, which is that just when you thought you understood then you see something that you don't, that may well be the symptom of a society that is willing to change, that's willing to morph in essence. Although you don't see it morphing in institutions. That is sometimes a good thing. The US morphs technologically. It morphs in capital markets, but it doesn't morph politically. So, there's that dichotomy. Then you get people like Jeff Bezos and Bill Gates who are in a position to make changes that governments should be making, not just on national level, but globally, and creates personalities like that. So here you have just like the other large civilisations, China is a large civilisation and it has its contradictions. And I think that for the rest of us, we just need to come to terms with those contradictions but hope that the essence of it still remains positive for everybody.
In fact, your last point that things may not be changing for the better in the next few years is very interesting. And that we need to look at what COVID-19 is doing to us to get a sense of the elements where China is not responding well because on the face of it, it seems to be leading the rest of the world. It knew exactly what to do when the pandemic hit. It was the best beneficiary of the Centers for Disease Control and Prevention (CDC) principles when the CDC itself was actually falling apart. That was very interesting. So it was a good student of all the methodologies that were required to survive the pandemic.
If you look at some of the conversations taking place in the US in the need to give up personal liberties, community and even the fact that the police is now being called into question because the way it's configured, it's not suitable for society. Well, that's how the US changes over time in response to changes. So a conflict situation or a dramatic shift is not necessarily a bad thing. What we are trying to make sense of is if it is a linear progression, then all the good things that you've seen in China in the last few years are just going to continue or to be built on.
EB: That I don't think will happen. They’re not meant to continue as they are. The first clear point is that everybody needs new business models. But we don’t know what they are, which is the real problem. I'm sure new business models will come in a few years. But first, we need to cure everybody. We need to stop the disease. We need to count the financial cost and understand what happened. People are already thinking but it will take some time to develop these new business models. Then you will need a new diplomatic model.
The recent talks about creating a joint diplomatic block between North America and the European Union (EU), which would be so massive, it would change the dynamic completely if we had a friendly president, for example in the US. It will change completely the dynamic with China. But even most people don't realise, including a lot of ordinary Chinese people, that the EU is already more or less equal to China and the US in economic power if you put all 27 countries together. It's not a small thing and it's growing. And we have one of the most powerful countries in the world, which is Germany, at the heart of something that can equal and will equal in the future of the power. So, you need a diplomatic reassessment, a business model change, then we will also see social change, which is very important.
You mentioned before all these Chinese who would come to Venice and Paris and who have their own house all over the world, which is very nice. I'm very happy for them. But we have to remember there's still a lot of bad feeling. If you recall that in China, about half the homes in China do not have running water or bathrooms, with lavatories with water in the home. That's a huge number. In that sense, there is a very small, as it always has been, rich belt of China. The people I've seen in the country and very small villages don't go to Venice on a holiday and they have no idea where it is. They don't even want to know where it is. They have much more essential problems, like giving food to their children. So there's a social dimension as well. If there is some economic cost or loss of employment or business, this will be a very dramatic social cost.
The fourth thing which I think is very important, we mentioned the US and China in the beginning. USA has an incredible domestic market with only 4% or 5% of American production is export. They can survive by themselves. China can’t. It's gone down from 60 to 40, I don’t know what it is but still a very high percentage of Chinese GDP. GDP is export oriented. They've been talking for years about Chinese domestic market but it's not growing that fast. So they cannot live alone to the same standard. I think the USA can because it has such an important domestic market, especially if you include Canada. This is another important thing. The only way in which China can really supersede and have something completely new would be to make a dramatic increase in the domestic market that will be linked to very soon high debt, unemployment and other problems as a result of the disease, which will slow down even more the development of a domestic market. That's why I think we can't make any useful predictions about the next year or two. Even airline companies are now saying they won’t know the truth until about 2023. Hotels are pretty much the same. And if they don't know, and they only deal with a very small business or a small part of a business, but a huge country like China can know, or Europe can know about the next two or three years is absolutely impossible to imagine.
The great sadness is that you've been very kind to allow me to talk for so long but I can't really answer your question because I have no idea what will happen in the next five to ten years.
ED: Thank you very much for doing this with me. It's more like a jamming session and intellectual kind of a throwback in order to capture the essence. We're not here to answer questions. We're here to get perspectives. And I think you've given us a number of good perspectives. So we want to capture that as part of the interview. Thank you very much for speaking to me today.
EB: My pleasure.