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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)
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.
Per Capital GDP: $3,855 Exports as % of GDP: 16%
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)
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.
Per Capita GDP: $6,910
Exports as % of GDP: 82%
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)
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.
Per Capita GDP: $6,406
Exports as % of GDP: 58%
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)
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.
Per Capita GDP: $2,303 Exports as % of GDP: 5%
Today, the barriers that have insulated the Refuge are breaking down. New ports, highways, and pipelines are connecting Sichuan to a wider marketplace, giving rise to promising new industries like natural gas, snack foods, and motorcycles, but also posing new challenges to the region’s sheltered way of life. How its people adapt to these changes will determine whether the Refuge prospers or becomes, like the panda, an endangered species.
(Anhui, Jiangxi, Hubei, Hunan)
Territory: 707,124 km2 (7% of total) Population: 226 million (17% of total)
Per Capita GDP: $2,402
Exports as % of GDP: 6%
All of the dynamics driving the first four nations converge in the Crossroads. The middle stretch of the Yangtze is a natural transportation and communications nexus. It is the heart of China, pumping the lifeblood of men and material to every other part along capillaries of water, road, and rail. Interrupt this heartbeat—as a freak snowstorm did last year when it hit the Crossroads during Lunar New Year—and the entire country can grind to a halt. But the region’s central strategic position has never translated into political power. Instead, it has always been a zone of competition among its stronger neighbors, a place for their rival armies to march and fight.
The wetlands along the Yangtze and its tributaries supply much of China's rice, fish and fowl, and the surrounding hills are rich in orchards above ground and minerals below. But nearly all of its resources—the electricity generated by the Three Gorge Dam, the copper mined to make electrical wiring—flow outward to fuel China’s more developed coastal provinces. The most important outflow is human. Along with the Refuge, the Crossroads supplies the vast majority of China’s migrant workers, a floating population of 150 million people.
Standing in the crosscurrents of so many comings and goings, the Crossroads functions not only as China’s physical heart but as its emotional heartland as well. When migrants return home, they bring back ideas and experiences from every part of China, which mix and recirculate through the entire body. It helps that the inhabitants of Chu—as the Crossroads was called in ancient times—have long been known for their strong passions and fierce loyalties. It is no coincidence that the popular uprisings that began both the Nationalist and Communist revolutions happened here, or that many of China’s leading reformists and revolutionaries, including Mao, rank among its native sons. But while many things begin in the Crossroads, few ever reach their fruition there.
(Yunnan, Guizhou, Guangxi)
Territory: 810,690 km2 (8% of total)
Population: 132 million (10% of total) * 30% non-Han minorities Per Capita GDP: $1,770
Exports as % of GDP: 6%
The legend of Shangri-La tells of an isolated valley high in the Himalayas, where paradise exists on earth. Local tourism officials claim to have located the real Shangri-La in southwest China, and millions of visitors every year seem to agree. This land is home to some of China’s most iconic and inspiring landscapes: emerald rice terraces, the fairy mountains of Guilin, the raging rapids of Tiger Leaping Gorge. It’s also home to a kaleidoscope of ethnic minorities, usually depicted as singing and dancing in colorful tribal costumes. Throw in a clear blue sky and some banana pancakes, and Shangri-La makes for a heavenly vacation.
Behind the postcard-perfect images, however, lies a darker reality. Cut off from the outside world by jagged mountains and primitive infrastructure, Shangri-La is the poorest of the Nine Nations. Before the Revolution, the region’s main cash crop was opium. Its replacement, tobacco, turned Shangri-La into the main supplier for China’s latest deadly addiction: cigarettes. Meanwhile, Shangri-La still borders Burma’s infamous Golden Triangle, making it China’s primary gateway for illicit drugs and the accompanying spread of HIV/AIDS, which the region’s overburdened health care system is unequipped to handle. The other mainstays of the local economy—logging, strip mining, and land-intensive crops such as sugarcane and rubber—have taken a heavy toll on the environment. All in all, hardly an image of paradise.
Despite these grave problems, Shangri-La possesses untapped resources. Its forests are home to over half of China’s birds and mammals, as well as thousands of rare plant species, some of which may hold the key to new medicines. The region’s lush hills and valleys—the original birthplace of tea—offer ideal conditions for growing tropical fruits, coffee, and flowers. The great lifelines of East Asia—the Yangtze, Salween, Irrawaddy, Mekong, and Red Rivers—all originate in Shangri-La, ensuring a plentiful supply of water for consumption and hydropower. New transport links are being built to expand China’s burgeoning trade with its ASEAN neighbors. None of these opportunities comes without challenges. But for long-suffering Shangri-La, each step closer to heaven is one step farther from hell.
THE RUST BELT
(Liaoning, Jilin, Heilongjiang)
Territory: 801,553 km2 (8% of total) Population: 109 million (8% of total)
Per Capita GDP: $3,724
Exports as % of GDP: 15%
Just over a century ago, northeast China—known to the outside world as Manchuria—was a wilderness of dark forests and frigid snow-swept plains. Its only inhabitants were a few hunting and fishing tribes. The foremost of these was the Manchu, which conquered and ruled China as its last imperial dynasty. The arrival of the Trans-Siberian Railroad in 1898 changed everything, unleashing a flood of migrants and pitting Russia against Japan in a battle to dominate the region. The Japanese prevailed, and in 1931, they made Manchuria part of their empire. They introduced industrial-scale farming and built mines, steel mills, and factories.
After the war, the Northeast (Dongbei in Chinese) was the first of the Nine Nations captured by the Communists, and the region became a bastion of state-owned heavy industry. Its workers were the socialist elite, enjoying cradle-to-grave benefits and an “iron rice bowl”—jobs guaranteed for life. But in the 1990s, market reform cut the legs out from under the planned economy. Obsolete, inefficient factories were forced to close, throwing 30 million blue-collar workers out in the cold. Once-proud Dongbei became the Chinese version of Flint, Michigan: a Rust Belt of decaying industries with no future.
The central government has launched a campaign to “Revive the Northeast,” but it will take more than ambitious blueprints to bring the Rust Belt back to life. The prospect of an implosion in neighboring North Korea is just one of many uncertainties clouding the region’s future. But the people here are survivors. Famous for their rustic manners and boisterous camaraderie—washed down with 120-proof grain alcohol—they embody the fiery spirit of the Dongbeihu, the Siberian tiger. Adapting that spirit to the 21st Century will require new ways of thinking. The port city of Dalian, for instance, is emerging as a business process outsourcing center aimed at the Japanese market. If Rust Belt residents notice the irony of inviting Japanese investors back to revive their former colony, they’re not saying it out loud.
(Inner Mongolia, Ningxia, Gansu, Qinghai, Xinjiang, Tibet)
Territory: 5,205,114 km2 (54% of total)
Population: 86 million (6% of total) * 30% non-Han minorities Per Capita GDP: $2,928
The land beyond the Great Wall has long captivated the Chinese with its aura of danger and romance. Wild Mongol horsemen, silk-laden caravans, and the inaccessible mysteries of Tibet offer a thrilling contrast to the regulated confines of Chinese life. But what really set this region apart are its vast open spaces. The Frontier comprises over half of China’s territory and just 6 percent of its population—a landmass and population density similar to the continental United States west of the Mississippi. Its desolate plateaus, scorching deserts, and snow-capped mountains resemble Nevada or Wyoming more than Beijing.
China’s frontier with Inner Asia has always had enormous strategic significance. For centuries, its overland caravan routes—the famous Silk Road—provided China’s richest trade link to the outside world, while its marauding nomads posed an ever-present threat to the Middle Kingdom. To secure control, China developed an extensive network of military colonies and prison work camps, not unlike Siberia’s gulag archipelago. The region’s trackless wastes hide many of China’s most sensitive military facilities. But the Frontier’s greatest strategic value lies in its largely untapped natural resources: oil and gas from the Tarim Basin and neighboring Central Asia; rich veins of nickel, copper, and coal; dairy and wind farms on the vast open grasslands; and vineyards that may someday produce world-class wines.
Exports as % of GDP: 9%
The key to unlocking these resources is the railroad. By bringing in settlers and connecting them with markets back east, the railroad is transforming China’s frontier beyond recognition. But like America’s Manifest Destiny, China’s “Go West” has a dark side. The natives of China’s frontier—the Mongols, Tibetans, and Muslim Uighurs—see their land and ways of life being swept away by a flood of Han Chinese immigrants. When their anger boils over into violence, as it did last year in Lhasa and this summer in Urumqi, the response is invariably swift and brutal. China’s West is being won, but what will be lost in the process?
Territory: 160,313 km2 (2% of total) Population: 59 million (4% of total)
The 110-mile strait separating Taiwan from China's mainland is one of the world's great flashpoints. So it may seem surprising that the two provinces on either side comprise a single “nation.” In fact, Fujian and Taiwan are like twins separated at birth—linked by heritage, divided by destiny. Fujian has always looked to the sea. Like the ancient Greeks, its inhabitants turned their backs on their rocky soil, venturing out to fish and trade with distant shores. They established colonies all over Southeast Asia, a far-flung network based on dialect and kinship that thrives to this day. Since such voyages were often prohibited by the emperor, the region’s mariners became skilled smugglers. Today, Fujian remains the center of a worldwide traffic in smuggled Chinese immigrants.
Per Capita GDP: $9,432
Exports as % of GDP: 30%
For centuries, Chinese seafarers largely ignored Taiwan, whose fetid rainforests seemed to harbor little more than headhunters and pirate lairs. But a major rebellion persuaded Chinese officials to annex the island in 1683. Settlers from Fujian cleared the jungle to plant rice, sugar, and tea in the fertile volcanic soil, bringing their Min dialect and their worship of Matsu, goddess of the sea. But unity with China was not to last. In 1895, a resource-hungry Japan seized Taiwan as a colony. It was returned after the World War II, only to be cut off once again by the tides of revolution.
The Cold War is over, but the Straits remain divided, perhaps more than ever before. Recent democratic reforms have awakened a new sense of identity among the Taiwanese, many of whom desire complete independence. China has made it clear that such a move would mean a war. But China’s efforts to attract Taiwanese investment, to Fujian in particular, have not gone unrewarded. The Straits may be the smallest of the Nine Nations, but this region is the richest in China, and its two economies have grown increasingly intertwined. Like magnets, Fujian and Taiwan alternately attract and repel each other, pulled together by economic opportunity, pushed apart by identity and ideology. Which of these trends will prevail remains to be seen, but the answer will have a profound impact on China’s future.