Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 34

China beyond the myths and stereotypes

I first visited China in 1991, and travelled over much of the country, from Kashgar in the west to Beijing in the north-east. It was a fascinating experience, as even though I had missed the Mao era it was still ‘old China’. It was a grimy place with unhygienic city centres. Local party despots ruled and talent was wasted in meaningless jobs.

I visited China again in 2007. In the intervening years, entire city centres had been bulldozed. Residents were forcibly relocated to high rise blocks. Mistakes were made. Suzhou, once described as the Venice of the East, had become unrecognisable.

I have read many articles that focus on Western style indicators such as growth, inflation, unemployment and manufacturing. I have also heard that China was building cities that nobody lives in and roads that lead nowhere. So I returned again last month to see China again, and to ascertain whether clients should be increasing their investment in Chinese companies, or in companies that do business with China.

However, I found myself thinking that these investment questions were inextricably linked to much wider economic, political and sociological issues.

Is the West the best?

Western-style capitalism has just created the biggest global financial meltdown in history. Even though some say the worst is over, many Western nations are burdened with massive debts and southern Europe faces record unemployment and social unrest. The population in most developed economies is ageing to such an extent that it is difficult to see how governments will have enough workers paying tax to fund pensions, health and welfare.

The ability of Western economies to solve these massive issues is hamstrung by the fact that governments serve for such short terms. The new Coalition Government in Australia may only have three years in office to make a meaningful contribution, and for the first nine months, it will be saddled with an obstructionist senate. Obviously, no such problem exists in China.

I believe that economists and investment managers view China through 21st century Western spectacles. Is it reasonable to judge a country on the same parameters as a mature economy? China is undergoing an industrial and technological revolution that has not been seen since Britain and America industrialised in the 1800s.

The Chinese are subject to stereotyping - they are rude, they can’t manage people, they’re not innovative … but these stereotypes can obscure the truth.

Think long term

Let’s address the ‘can’t innovate’ stereotype first. Anyone who has travelled on the German-built Maglev train from Pudong Airport to Shanghai cannot fail to be impressed. It could travel the 56 kilometres from Campbelltown to the Sydney CBD in just seven minutes. It runs at up to 430 km per hour using magnetic levitation propulsion.

It strikes me that Chinese city planning and infrastructure strategy is diametrically opposed to Australia’s and much more sensible. Let me give you two examples. First, until recently, Shanghai had separate railway stations serving the north, south and west. Fares were cheap but the trains were crowded and slow. Their solution was to build a station on the outskirts of the city and run super fast trains. The people now have a choice. They can use the old network at low prices or pay more for a faster, more comfortable trip.

This strategy has been amazingly successful. Trains to cities like Nanjing are almost completely full. It's a similar story with the Pudong Airport link. Either you can catch the super fast Maglev for 40 yuan ($7), which takes seven minutes to reach the outskirts of Shanghai, or you can use the slower metro for just 7 yuan. Contrast that with Sydney Airport where services have been outsourced (sold) to a company that cares more about profit than about providing services. Airport bus services have been stopped and roads diverted or closed. There is a choice between an expensive cab fare and an expensive train fare.

The second example is that the Chinese recognised long ago that they had to expand outwards if they were going to cope with population expansion. They are building new, tasteful buildings; they have planted trees and shrubs and grass. Meanwhile, the NSW government is adopting a 'medium density' housing solution based on knocking down houses and building units. It scars our suburbs, exacerbates our road and infrastructure problems and lowers our quality of life.

Obviously, China’s methods are not faultless. Was the 1990s destruction and the forced relocation justified? Was the ‘one child policy’ really necessary? What about the human rights issues and corruption? The Chinese would probably argue that they had no choice. Democracy and unrestrained capitalism in a country with 1.3 billion people was never going to work. Many would starve. If you have any doubts, read about the industrial revolution in Britain. In 1801, only a quarter of the 9 million population of England and Wales could be described as urban. By 1850 the population had nearly doubled and was mostly living in towns. By the 1911 census, the population of England and Wales had exploded to 36 million. Cities grew unabated. Rich people got richer, and the poor had a miserable life.

Imagine an uncontrolled Chinese population rising at the same rate as it did in 19th century England. That would mean four billion people in a country made up in large part by desert and mountains. Imagine uncontrolled growth and pollution in Chinese cities.

China’s system has worked relatively well. Its cities are not as grimy as they once were. Practically no-one spits in the street anymore, and I hardly saw anyone smoking. This is an incredible change in behaviour. Beijing looked polluted in 2008, but I didn’t see much evidence of serious pollution on this trip. The other noticeable factor was that the traffic wasn’t all that bad, and urban planners seemed to have ensured there were still bicycle lanes. I sense a desire to close Sydney CBD bike lanes. If China had as many cars per head as Western nations, the result would be 550 million cars and over 1 billion cars in the future.

What I witnessed on this trip seemed to be responsible government – state-controlled capitalism with centralised planning and social welfare programmes. It doesn’t conform to Western economic theory and political ideology and it can be a ruthless regime, but it seems to be working for the majority. The question is – can they keep it going?

What will the future look like?

Most dictatorships go off the rails eventually. Think Stalin, Hitler, Africa and South America. Also, as economies develop, people become dissatisfied with government intervention. Already, many of the educated Chinese people I spoke to thought the government too intrusive.

And China is a difficult place to do business. Contracts are frequently broken or ignored. Economic statistics are unreliable. Corruption still appears to be a major issue.

In 50 years’ time, will China resemble America, Europe, Japan, Korea or something different? Should you be investing in Chinese companies or in countries and companies that could benefit from China? Or should you stick with companies that you know more about? I was never going to answer all these questions in one trip, but I left with more confidence in the future of China than I expected.

 

Rick Cosier is a financial adviser with an independent financial planning business, Healthy Finances Pty Ltd.

 

  •   3 October 2013
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

Why China and Russia's partnership threatens the West

How powerful are Xi Jinping and the Chinese Communist Party?

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

banner

Most viewed in recent weeks

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

Latest Updates

Retirement

Why it’s time to ditch the retirement journey

Retirement isn’t a clean financial arc. Income shocks, health costs and family pressures hit at random, exposing the limits of age-based planning and the myth of a predictable “retirement journey".

Financial planning

How much does it really cost to raise a child?

With fertility rates at a record low, many say young people aren’t having kids because they’re too expensive. Turns out, it’s not that simple and there are likely other factors at play.

Exchange traded products

Passive ETF investors may be in for a rude shock

Passive ETFs have become wildly popular just as markets, especially the US, reach extreme valuations. For long-term investors, these ETFs make sense, though if you're investing in them to chase performance, look out below.

Shares

Bank reporting season scorecard November 2025

The Big Four banks shrugged off doomsayers with their recent results, posting low loan losses, solid margins, and rising dividends. It underscores their resilience, but lofty valuations mean it’s time to be selective. 

Investment strategies

The real winners from the AI rush

AI is booming, but like the 19th-century gold rush, the real profits may go to those supplying the tools and energy, not the companies at the centre of the rush.

Economy

Why economic forecasts are rarely right (but we still need them)

Economic experts, including the RBA, get plenty of forecasts wrong, but that doesn't make such forecasts worthless. The key isn't to predict perfectly – it's to understand the range of possibilities and plan accordingly.

Strategy

13 reflections on wealth and philanthropy

Wealth keeps growing, yet few ask “how much is enough?” or what their kids truly need. After 23 years in philanthropy, I’ve seen how unexamined wealth can limit impact, and why Australia needs a stronger giving culture.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.