Book Review: What China’s Capitalism Means

This article appeared in The Washington Times on February 14, 2011.
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Three decades ago, the Chinese giant awoke from its Maoist nightmare. One‐​quarter of the world’s population joined the world. While today Western nations focus on Beijing’s growing influence on military and political affairs, Karl Gerth of Oxford University addresses the impact of China’s consumers.

The People’s Republic of China (PRC) remains a poor nation, well behind Western industrialized states in per capita income. Nevertheless, the PRC’s total consumer spending of $4 trillion “has surpassed consumer spending in Japan and is closing in on that of the European Union. It has taken China just a few years to learn what took these consumer countries decades: how to spend.”

Mr. Gerth, who first visited the PRC in 1986, well describes China’s almost unimaginable transformation. “Although China remains a nominally socialist country, consumerism is now deeply entrenched in all areas of Chinese life,” he writes. This phenomenon obviously is changing the PRC. But it also is changing the world. He observes:

China is already the largest greenhouse gas emitter; new Chinese diets are endangering species; fake Chinese drugs and airplane components are sold around the world; Chinese companies, backed by their powerful government, are starting to buy out or challenge established global brands, renewing and deepening the world’s commitment to consumerism.

The most obvious beneficiaries of China’s transformation are the masses of Chinese people, for whom scarcity and want were a constant reality. That is no longer the case. Writes Mr. Gerth: “Obesity and waste are just two of the clearly unexpected and undesired consequences of the increasingly unleashed and prodded Chinese consumer.”

The Chinese people exhibit the desire for more just like Western consumers. For instance, the “bourgeois” beauty industry “has now become the fifth‐​largest sector of the massive Chinese economy, trailing only property, cars, tourism, and information technology.”

Anyone who visited China even a decade ago finds a different scene on that nation’s streets. Bicycles and motor scooters once predominated. Now it’s autos. The PRC has developed a car culture. Mr. Gerth observes that “The successful drive to get the Chinese to buy cars has paved the way for the arrival of such other icons of American‐​style consumerism as shopping malls on city outskirts, suburban gated communities, leisure homes in the countryside, and weekend holidays.”

The effects are being felt around the world. China has greatly expanded global production capacity, created cheap “gateway” autos that may increase demand in other nations, raised oil consumption and increased air pollution. He also contends that the world’s poor are paying more for food, as Chinese farmland gives way to parking lots and biofuels consume crops.

The PRC has become a production center for what Mr. Gerth calls “extreme markets.” Wet nurses, brides, endangered species and organs have become commercial commodities. The demand for sex has burgeoned. Adoptive children are a major export and have “spawned an entire consumer industry in China,” with special travel services and hotels.

Unfortunately, the PRC is affecting international markets with its counterfeits as well as its own brands. As a result, Americans and other foreigners have grown increasingly wary of buying goods made in China. For Western companies, the primary issue is intellectual property. For consumers, it’s safe products.

Perhaps China’s most critical global impact will be on the environment. Growing production means increased pollution. Growing wealth requires increased efficiency. The PRC is in a race with itself to ease the impact of 1.3 billion people joining the industrial age.

Although communist states always hosted an influential nomenklatura that used power to gain wealth, in China widespread consumption has created what Mr. Gerth calls a “new aristocracy,” or privileged class. He writes: “Ever greater numbers of Chinese are living lavishly, and publicly so. Now government officials can directly — or indirectly via their friends, family, and even mistresses — convert political power into wealth and live much more comfortable lives.” Wealthy Chinese are likely to go from copycats to innovators, having “begun to redefine international luxury standards and what it means to be wealthy.”

Increasing Chinese consumption also has transformed the Cold War struggle between the PRC and the Republic of China, better known as Taiwan. Investment and trade have drawn the two together, changing both of them. Notes Mr. Gerth: “these Taiwan‐​China flows are now so ubiquitous that they appear almost a natural part of China’s urban consumer landscape.” War seems less likely as a result, but the Taiwanese may find it more difficult to retain their independence as Beijing’s embrace grows tighter.

“As China goes, so goes the world,” argues Mr. Gerth. Nothing is certain in life or geopolitics, but the PRC’s move from communism to some variant of capitalism is likely to be one of history’s epochal events. Much about China will influence the United States and other nations. Hundreds of millions of Chinese consumers will be among the most important factors. Writes Mr. Gerth: “nearly every contemporary problem in China and, indeed, many of the key issues affecting the globe revolve around Chinese consumers.” Where will the future lead? Much will depend on how the Chinese and the rest of us respond to the PRC’s growing love affair with consumerism.