Dexter Roberts, former China director of Bloomberg Businessweek, who has been based in China for more than two decades, recently published a new book in Chinese, “Low-End China: The Party, Land, Migrant Workers, and China’s Coming Economic Crisis” (The Myth of Chinese Capitalism. In particular, he examines the realities of China’s underclass of migrant workers, the heroes behind the country’s economic take-off, but who are still only “second-class citizens” used by the Party. He also explains why the hypothesis that China’s economy will continue to grow should not be so easily believed. The following is an interview between our reporter Tang Jiajie and Luo Gu.
The two myths of Chinese capitalism
Reporter: Hello Mr. Luo Gu, congratulations on the publication of the Chinese version of your book in Taiwan. Can you briefly tell our audience what questions the book is trying to answer? What is the “myth of Chinese capitalism” that you want to explain?
Luo Gu: Yes, in this book I want to solve several myths. First, the most impressive aspect of Chinese capitalism is the economic reform, which is the biggest myth. Since the reform and opening up in 1978, China’s economy has been growing, but since 2012, this is no longer the case, and the direction of the so-called economic reform and the Chinese economy is no longer clear.
Another myth that I want to dispel is that many economists who focus on China, or large corporations around the world, believe that China’s middle class will continue to expand and therefore see China as an increasingly important market. But in my book, I talk about how China is unlikely to continue to create a larger middle class due to unfinished reforms in its hukou and land policies, which will also have a huge impact on the Chinese economy.
Chinese migrant workers: “second-class citizens” abandoned by the system
Reporter: In your book, you write extensively about the group behind the creation of China’s economic miracle: the vast number of Chinese migrant workers, and you also study the evolution of the historical relationship between this group of laborers and the Party. As an American journalist who came to China in the 1990s, what was it about migrant workers that intrigued you? How did you go about tracking their stories?
Luo Gu: First of all, as you said, 300 million migrant workers is a huge group, and if you add in their relatives back home, it could reach more than 500 or 600 million people. This group is almost half of China’s population, and they are crucial to the future of the Chinese economy.
To be honest, when I first started covering China in the mid-1990s, I didn’t pay particular attention to migrant workers until I visited Guizhou for the first time in 2000, and went on to write two cover stories for BusinessWeek, one on the wealth gap in China and the second on the great migration of migrant workers. From that time on, I realized how important migrant workers are to the future of China and the future of the economy. I was also fascinated by their lives and the places they came from. Most of them came from the extremely poor inland areas of China, so I went into Guangdong, Guizhou, Hubei, Anhui, Hainan and Shaanxi provinces to do long-term tracking reports on the migrant workers at the bottom.
Reporter: What have you found after contacting this group? What is the biggest misunderstanding of migrant workers from outside?
Luo Gu: I think not only foreigners, but also most Chinese people living in cities, have long regarded migrant workers as cheap labor, thinking that they are a group of people who are willing to enter the cities for production work, accept relatively low wages and poor working conditions, and provide products and labor for the Chinese people or the world.
But now Chinese factories are gradually becoming automated and the cost of moving is causing many migrant workers to start quietly returning to the countryside ……. This is a developing situation. And as people today are discussing how China’s economy can move away from its heavy reliance on investment and move from a trade-driven to a consumer-driven economy, I don’t think China’s economic development can grow in perpetuity if it doesn’t figure out a way to integrate migrant workers (into modern economic development).
In other words, when nearly half of China’s population is not integrated into the economy, it will not be able to stimulate consumption growth and contribute to a domestic demand-driven economic model.
New generation of migrant workers who have ideas, are educated and know technology
Reporter: How has the migrant worker population of the last century changed from the new generation? What is their impact on the future of China’s economy?
Luo Gu: In the past few years, there is a huge change in the migrant workers group. The younger generation of migrant workers, who are relatively well educated, are familiar with technology, have smart phones, use WeChat to communicate, and even have an understanding of China’s labor laws and have ideas about their due compensation. In factories, they face unpleasant or poorly paid jobs, and they also have a higher turnover rate. This is already a very different group of new generation.
Their biggest challenge to the Chinese economy is still how they fit into the consumer economy. But the fact is that they are still seen by the system as second-class citizens and struggle to reach the spending power of China’s urbanites. The Chinese leadership also realizes that this needs to change, but one of the ways we have seen this in the past few years is that the government has encouraged migrant workers to return to the countryside and even tried to shape the archetypal peasant entrepreneur, and a big reason behind this is of course because there is no longer a huge demand for workers in places like Dongguan and Shenzhen. However, driving these people back to the countryside is another big problem.
What’s behind Xi Jinping’s “miracle of poverty eradication”?
Reporter: China’s State Council just released a white paper on “China’s Practice of Human Poverty Reduction” on April 6, continuing to publicize the important results of Xi Jinping’s “war on poverty” and the completion of the eradication of absolute poverty. How do you see this policy?
Luo Gu: I think there is no doubt that the living standards of China’s extremely poor have improved tremendously, and I can understand that Xi and the Communist Party would see this as an important achievement and applaud themselves.
But there are a couple of things about this that I think will be important to keep watching. First, a large part of China’s poverty alleviation program is “resettlement” or even “forced resettlement” of poor rural people, with tens of millions moving from the villages they used to live in to nice buildings prepared by the Chinese government. But after resettlement, it is not clear how these people will be employed to make ends meet.
They used to be subsistence farmers, and now, even though they have been lifted out of poverty on paper and housed in government-subsidized high-rise buildings, there are no sustainable jobs, and economists warn that these people could easily fall back into poverty. What are they going to do in these next few years? How will they live after China’s economy slows down and government benefits stop? That’s a very big question.
Ultimately, the question I explore in my book is not only to eliminate absolute poverty, but to get them started in life and raise their standard of living. Going back to the root or the hukou and land policy needs to be changed, otherwise the rural Chinese peasants will never be able to become part of the mainstream Chinese economy.
Reporter: You spent twenty-three years in China, and now you are back on campus and at a think tank doing research in the U.S. Do you feel that these Chinese experiences bring a different perspective to your research?
Luo Gu: I’ve been away (from the U.S.) for over twenty years, and I’m just now starting to learn from people over here and understand what these brilliant researchers in Washington are thinking and doing. I’m grateful that I’ve had the opportunity to spend a lot of time in China over the past while at the grassroots level, talking to farmers and migrant workers, and those experiences have also been very helpful in the research I’m doing. When I’m looking at a policy, I’m more interested in how those policies will affect people on the ground in China, people in remote areas, and what that means for the larger policy environment.
Reporter: Thank you for the interview.
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