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This week, President Obama makes his first state visit to China. What kind of country will he find there? We tend to imagine China as a monolith: 1.3 billion people sharing the same language, history, and culture. The truth is far more interesting. China is a mosaic of several distinct regions, each with its own resources, dynamics, and historical character.
As a traveler, teacher, and professional investor who has been exploring China since 1986, I’ve come to think of these regions as the Nine Nations of China (inspired, in part, by Joel Garreau’s Nine Nations of North America). Taken individually, these “nations” would account for eight of the 20 most populous countries in the world.
As China’s economy becomes more integrated, these regional differences are taking on greater importance than ever before. Each of the Nine Nations faces a unique set of challenges and opportunities in carving out its own competitive niche. Anyone who wants to do business in China, make policy towards China, or simply comprehend the dramatic changes happening there should understand the Nine Nations and the role each of them is playing in shaping China’s future.
THE YELLOW LAND
(Beijing, Tianjin, Shandong, Hebei, Henan, Shanxi, Shaanxi)
Territory: 906,243 km2 (9% of total)
Population: 359 million (27% of total)
Per Capital GDP: $3,855
Exports as % of GDP: 16%
China was born on the banks of the Yellow River, where the silt-laden water, rich alluvial soil, and the harvested wheat all share the same yellow hue. This is China’s breadbasket where buns, dumplings, and noodles, rather than rice, are standard fare. But the fertile Yellow Land is vulnerable to droughts and floods, as well as jealous invaders. Since ancient times, its inhabitants have turned to a strong central government to keep them safe behind high walls and embankments. In ancient times, the emperor’s yellow robes symbolized his absolute command over the natural forces—earth, water, grain—that ensure life.
Ruling the Yellow Land is a delicate balancing act. On its own, the Yellow Land would rank as the second most populous nation on earth, with more people than the United States packed into less than one tenth the territory. Its resources, while plentiful, are stretched to the limit. The Yellow Land produces huge quantities of basic staples like wheat, cotton, and peanuts, but is rapidly running short of water. It has rich energy reserves, but over-dependence on coal accounts for some of the world’s worst air pollution.
One resource this “nation” never lacks is clout. For most of China’s history, the Yellow Land has been the center of political power. It can attract talent on a massive scale, giving it immense influence. China’s leaders hope these advantages can turn Beijing into a high-tech research hub and transform a select handful of state-sponsored companies like Lenovo and Haier into “national champions” that can dominate global markets. But the heavy hand of the government can be stifling here. Can the Yellow Land leverage its power to open up new opportunities? Or will a region that fears innovation inevitably fall behind?
THE BACK DOOR
(Hong Kong, Macau, Guangdong, Hainan)
Territory: 231,963 km2 (2% of total)
Population: 112 million (8% of total)
Per Capita GDP: $6,910
Exports as % of GDP: 82%
In Chinese, the “back door” refers to a way of doing business outside the normal, approved channels. The South Sea coast is China’s Back Door, far enough from the centers of power that nobody will notice if you bend a few rules. As locals put it, “The sky is broad and the emperor is far away.” Officials who were exiled to Yueh, as this land was once known, found it a fearful place whose inhabitants spoke strange dialects—Cantonese, mainly—and feasted on snakes, cats, and monkeys. But its clan-based villages, lush jungles, and rocky inlets offered ideal shelter for smugglers and secret societies to flourish. Unlike their staid northern cousins, these freebooters learned to take risks and profit from them. Other Chinese regard southerners as clever, sharp, and a bit slippery. But as rebels and renegades, emigrants and entrepreneurs, they infuse much needed flexibility and creativity into an otherwise rigid system.
The Back Door might be troublesome to China’s rulers, but it has also been useful. When China was closed to the outside world, enclaves like Canton, Macau, and Hong Kong offered safely removed points of contact and exchange. So when Deng Xiaoping wanted to open China’s economy to trade and investment, the Back Door offered an ideal laboratory. If reforms failed, they could be disowned and contained without contaminating the rest of China. In fact, they succeeded beyond anyone’s wildest expectations, transforming the region into an export juggernaut and a model for the rest of China.
The Back Door’s very success, however, poses a dilemma. Now that the rest of China has applied its example, is a laboratory really necessary? The region may have found a new purpose as a playground for Chinese tourists who gamble in Macau’s casinos, frolic at Hainan’s beach resorts, and ride the rides at Hong Kong’s new Disneyland. But there are others who think the experiment isn’t over, that the Back Door still has vital lessons to teach about democracy and rule of law. Perhaps China still needs a few rebels—at a safe distance, of course.
(Shanghai, Jiangsu, Zhejiang)
Territory: 216,008 km2 (2% of total)
Population: 147 million (11% of total)
Per Capita GDP: $6,406
Exports as % of GDP: 58%
Sleek, stylish, confident—Shanghai certainly makes an impression. Its steel skyscrapers look like rocket ships ready to blast off into the future, taking China along with it. Shanghai is a very young city by Chinese standards, but the Yangtze River delta—known in ancient times as the kingdom of Wu—has always been the most commercial and cosmopolitan part of China. Like the Low Countries at the mouth of the Rhine, it is a flat watery land crisscrossed by busy canals linking a constellation of trading cities. The Back Door may succeed in breaking the rules, but only the Metropolis has the wealth and dynamism to entirely reshape them. Its treasure fleets nearly discovered Europe a century before Columbus sailed, and of the Nine Nations, it is the only one to have displaced the Yellow Land—several times—as China’s political capital.
The Metropolis likes to see itself as China’s bright and beckoning future, but the feelings it stirs in other parts of China are decidedly mixed. While its residents see themselves as adaptable and forward-thinking, to many Chinese they come across as arrogant city-slickers—cliquish, crassly materialistic, and slavishly eager to mimic foreign ways. Shanghai had a pre-war reputation as a neon-lit version of Sodom and Gomorrah, and when China was “Red,” the Metropolis paid dearly for its “Black” capitalist past. Consigned to purgatory for over 40 years, the region bore the brunt of the Cultural Revolution and was starved for development funds—essentially frozen in time—until the early 1990s.
The rebirth of the Metropolis did not take place on its own terms. It was the result of a political decision, made in Beijing, to transform the region into a carefully designed showcase of what China could achieve. The state has poured tremendous resources into industrial parks, infrastructure, and Shanghai’s glittering new financial district, attracting huge amounts of foreign direct investment. But this subsidized, scale-driven growth model—where bigger is always better—makes for an economy dangerously prone to speculation. The best hope for the Metropolis lies not in ever-greater capacity and ever-taller buildings but in smaller, nimbler, entrepreneurial enterprises that draw on the region’s distinctive flair for marketing, design, and fashion.
Territory: 569,800 km2 (6% of total)
Population: 110 million (8% of total)
Per Capita GDP: $2,303
Exports as % of GDP: 5%
Tucked deep in China’s interior, Sichuan is a rich agricultural basin the size of France, surrounded on all sides by a ring of nearly impassible mountains. These bamboo-covered slopes are home to the panda, its last refuge from a rapidly encroaching world. For man as well as beast, Sichuan has always been China's place of refuge. Throughout history it has served as a secure supply base for China’s rulers, and a place to retreat and regroup in times of invasion and unrest. In World War II, when Japan occupied all of coastal China, loyalist forces relocated their capital to the Refuge to carry on the fight. During the Cold War, vital industries were purposely located in its remote valleys to protect them from the enemy.
The Refuge is able to perform such a strategic role because it is virtually self-sufficient. The ancient lands of Shu (centered on Chengdu, to the west) and Ba (to the east, around Chongqing) have been blessed with every ingredient essential to Chinese life—rice, wheat, silk, tea, salt, iron, pork. Safe like a tortoise in its shell, the population here prefers a relaxed way of life, composing poetry in teahouses or savoring the region’s famously spicy food. This splendid isolation has a downside: the region attracts little foreign trade and investment—before last year’s devastating earthquake put Sichuan in the headlines, most people outside of China were hardly aware it existed. Brain drain is another chronic problem: the region’s most talented and motivated young people tend to leave, seeking better opportunities elsewhere.