The Silicon Valley of China

On my 3,000-mile journey east to west along China's Route 312, I stumble across the giant city of Hefei. It is almost unknown outside China, but it aspires to be the country's Silicon Valley by 2020, and its aspirations are emblematic of China's future
December 22, 2007

In the US, there are nine cities with more than 1m inhabitants. In China, there are 49. You can be travelling across China, arrive in a city that is twice the size of Houston, and think: I've never even heard of this place. That is how it is for many foreign visitors to Hefei (population 4.7m). I have been travelling to China as a journalist, or living here, for nearly 20 years and visited Hefei (pronounced Huh-fay) for the first time only last year for the book I have just written about the new China. There had never been any reason to come. But as in so many cities in China, the local government is trying to change that. After centuries of inland poverty, Hefei, like all Chinese cities, is opening up.

Like dye dripped upon a piece of cloth, a moderate level of wealth is seeping to inland cities. The new Route 312—which runs all the way from Shanghai to the western border with Kazakhstan—is part of the change, dramatically cutting the journey time for people and goods going to Nanjing, Shanghai and the coast. The spread inland of factories and companies in search of lower costs has helped too, as have remittances from migrants working near the coast. This growing wealth is in turn changing some of the patterns of inland migration. Shanghai is still the promised land for migrant peasants, but there are now more mini-promised lands: regional capitals such as Hefei, or other cities further inland, such as Xi'an and Lanzhou, to which people are travelling to find work because there is now work there. For the first time, some factories on the coast have a labour shortage, and one reason is that people can now find jobs (albeit not so well paid) in China's interior.



This emergence of the inland cities is actually a re-emergence. The countryside has always been poor. But for centuries Chinese cities were far more prosperous than their counterparts elsewhere in the world. The government is doing everything to encourage it. In recent years it has introduced an old Confucian concept into its propaganda. The word it uses is xiaokang (pronounced shao-kang) and it means "moderate prosperity." The new slogans promoting xiaokang are everywhere, another sign of the metamorphosis of the Communist party from persecutor of the bourgeoisie to its ardent promoter. Some economists say we should not refer to what is going on in China as "capitalism," and that a more appropriate term for it is "Leninist corporatism." It is not a true market economy, they say, but still very much guided and managed by the Communist party. Either way, the party in Hefei, as throughout China, knows that the market economy could be its salvation; the party also knows that the inequalities thrown up by the new economy could be its downfall.

The demise of cradle-to-grave healthcare, education and employment has created large groups of losers as well as winners in reform-era China. So alongside the campaign promoting "moderate prosperity," another has been launched, promoting hexie (pronounced huh-shyeh), which translates into English as "harmony." Signs encouraging citizens to build a more harmonious society have sprung up over Hefei and most Chinese cities, sometimes just yards away from signs promoting "moderate prosperity."

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Located just 250 miles west of Shanghai, Hefei is the first city of any size that you hit as you enter the rural heartland of China. In the 1930s it had a population of just 30,000, but in 1949 the Communist party made it the capital of Anhui province. The city became part of the Communist attempt at high-speed industrialisation in the late 1950s, which has left it with a grimy, industrial feel.

Heifa gained a degree of notoriety in 1986 as one of the first sites of post-Mao student unrest. The demonstrations in favour of more political change would spread to other cities before being (peacefully) stopped by the party, but they presaged the bigger protests of 1989, which were brutally put down by the government with the loss of hundreds of lives. The demonstrations of 1986 had been encouraged by the vice-president of Hefei's top seat of learning, the University of Science and Technology, an astrophysicist and well-known liberal called Fang Lizhi. After the crushing of the Tiananmen protests in 1989, Fang took refuge in the US embassy in Beijing and eventually gained asylum in America.

Neither political reform nor political protest has come back on the agenda, in Hefei or anywhere else, since China switched its focus to the economy. Hefei has traditionally been so far off the pace of change that it didn't even benefit from the 1990s boom. "What a dump," said an acquaintance of mine who had lived there as a teacher in the early 1990s. "Terrible place," said another friend who had travelled there to adopt a baby girl in 1996.

Now, though, things are looking up a little. After the three-hour journey from Nanjing across a sea of rural poverty, it feels as if you have climbed on to another island of moderate prosperity when you reach Hefei. The British giant Unilever recently moved its entire manufacturing base here from Shanghai. The city government is trying to persuade other companies to do the same. The rhythm of life is picking up. There are building sites all over, the shops are full of consumer goods, and some richer citizens have bought cars. Most ambitiously, the Hefei government is attempting to turn this unknown city in central China into a major centre for global hi-tech companies.

On my first morning in Hefei, I am met in the lobby of my hotel by Mr Wang and Miss Zhu from the foreign affairs office of the Hefei government.

Until I reach Hefei, I have been flying beneath the radar as far as Chinese officialdom is concerned. On my journey along Route 312 I have neither sought out nor been troubled by officials of any sort. It's very easy to do that in China these days. Just take off, and talk to whom you want along the way. Here in Hefei, however, because I am hoping to visit a high-profile government project, I have contacted the government in advance.

Every province, every city, every town in China has a so-called foreign affairs office, known as a waiban (pronounced why-ban), and visitors, especially foreign journalists, are supposed to contact the waiban if they visit. Few ever do.

Mr Wang, or Section Head Wang as I'm careful to call him, is probably in his late forties and speaks no English. He is an affable guy, not like the kiss-up, kickdown types who are so common in the Chinese government hierarchy. Miss Zhu (pronounced Jew) is probably in her late twenties and speaks English very well. They are both typical waiban officials in a provincial capital, a little cautious in what they say, but friendly and helpful. They both respectfully call me Journalist Qi (pronounced Chee), using the Chinese family name given to me long ago by my first Chinese teacher. Foreigners have many identities in China. I am respectfully called Lao Qi (Old Qi) by Chinese friends who are younger than me. I am affectionately called Xiao Qi (Little Qi) by Chinese friends who are older than me. The Chinese for Journalist Qi is Qi Jizhe, which means "The One Who Writes Things Down Whose Name Is Qi." It's a moniker that I like very much.

Section Head Wang has set up an itinerary to show visitors how his city is going to take over the world technologically. Technology is the new religion of urban China, and no longer just in the coastal cities. Having wasted decades, centuries almost, overcoming traditional objections to progress, and then wasted 30 years convulsing to a Maoist revolutionary tune, the Chinese have finally got themselves into a position where they can begin to take on the world. Everywhere you see signs urging revival of the nation through science and education.

Whether it is space travel, computer software or medical research, scientific progress is a national obsession. Many Chinese-born scientists have returned from abroad to continue their research, not just out of patriotism but because Chinese research facilities have become so cutting-edge. The communist revolution's annihilation of traditional thinking has also made for an unusually free approach to areas such as medical research: scientists can try things that are banned in the west by strict ethics laws. (The first cloned human being is probably already lurking somewhere along the banks of the Yangtze river.)

Hefei's focus, though, is nothing quite so controversial. The city is simply aiming to become a centre for hi-tech companies. Mr Wang and Miss Zhu take me first to an industrial park where the city government has been offering free office space to hi-tech start-up companies, of which there are now dozens. We visit a company developing voice recognition software, and another one doing online conferencing. The second was set up in the US by a Chinese graduate student. When he returned to China, he chose not Shanghai, not Beijing, but Hefei as the location of his Chinese headquarters. Costs are much lower, there are plenty of very well-trained engineers graduating from the University of Science and Technology and other universities here, and the internet means it doesn't matter where they are actually sitting. The building is shiny and modern, the open-plan office humming quietly with the gentle sound given off by a roomful of software engineers. Walking through that office in a city in central China that no one in the west has ever heard of, I was struck by the uneasy feeling you sometimes get in China. I felt for a moment that I could see the future. Here are 300 software engineers, all probably just as good as their counterparts in the US but earning perhaps 20 or 30 times less.

This is not to say that Hefei will immediately achieve its aims. It has a long way to go, and wishful thinking and hot air are attached in equal measures to the government's efforts at turning it into the new Bangalore. But Section Head Wang suggests that I haven't seen anything yet, and after a brief lunch, we head out to the west side of Hefei. On the edge of the city, right on Route 312 as it rolls out of town, is a development known as Science City, another good example of a massive state investment. The site will eventually cover 20 square miles, and planners are hoping it will become one of the biggest hi-tech parks in China. Part of the area being bulldozed to make way for the first buildings was formerly a government-owned pig farm, but it will now incubate hi-tech firms, not piglets. We all have a good laugh about that.

Here I get a full PowerPoint presentation, with a dazzling array of maps, figures and plans. "We want Hefei to become the Silicon Valley of China," says a young manager called Jin Rui. "Through hard work over the next 15 years, we can do it. The project has already attracted $2bn of government investment."

"The start-up phase is from 2004 to 2007," Jin Rui says as he turns off the PowerPoint projection. "The implementation phase is from 2007 to 2010. And 2011 to 2020 is the improvement and completion phase."

I write down the dates of the phases in my notebook and wonder how likely it is that they will be met. Certainly the Chinese government, when it sets its mind to a construction project, can generally achieve it with time to spare. But there is also a lot of aspirational building in China, a sort of "build it and they will come" approach in projects like this and in the attitude towards constructing the nation's extraordinary system of new roads. There's a lot of smoke and mirrors. Build enough shiny buildings, and hope that they will reflect one another and make the place look like Silicon Valley.

Will Hefei fill up its buildings? Or, like other cities, has it overbuilt malls and office buildings? Will international companies want to come here? Are the skills of Chinese software engineers really as good as those of their American counterparts? Is there more to it than the latest hardware? What about the software in people's heads? Can you become a player in the knowledge economy if you restrict the teaching and flow of knowledge?

These questions matter not just for Hefei but for the whole country. If the government can improve the lives of rural people while consolidating the economic growth of inland cities such as Hefei, it may be able to keep China on an upward trajectory. But the questions touch on more than economic growth. They are about creativity and innovation and the freedom of thought that feeds them, which China at present will not allow. It can build all the skyscrapers it likes, but if it wants to cross over from being a growing economic power to being a creative superpower, it will have to allow something more than just the construction of shiny new buildings.

My pre-dinner jog takes me into the centre of Hefei, which is surprisingly pleasant. A narrow river runs through it, and there are small lakes and a number of attractive parks. As usual I am the only one exercising. For a country that regularly ranks among the top three medal winners in the Olympic Games, there never seems to be much spontaneous sporting activity going on in China. Sports officials are hoping to dominate more Olympic disciplines in future. They have announced, for instance, that they are aiming to become gold medal winners in women's field hockey. I have no doubt they will win gold in every women's field hockey event from now until kingdom come, but I have never met a single Chinese person who knows what field hockey is. Sports in China, like capitalism, are noticeably government-led. In the park, I run past a knot of grannies doing a variety of shake-your-booty two-steps to the sounds pushed out by a portable CD player, but that's about it.

For dinner, I had been planning to try the revolving restaurant at the top of the Holiday Inn, but I discover that the hotel also houses an Indian restaurant. Sure enough, there is an Indian manager at the door, and several Indian chefs making naan bread behind a big glass window in the kitchen. I wave at them, and they grin back. The restaurant is about half full, and as the manager shows me to a table, I ask him how the chicken tikka masalas are going down in central China.

"Yes, Chinese people are getting the feel for Indian food."

I invite him to sit with me while I wait for my dinner.

"What do you think of China?" I ask.

He smiles and says, "It's developing very fast."

"Faster than India?"

"Oh yes," he says.

"But is it improving the lives of people here more than the Indian government is improving the lives of Indians?"

"Well, in India there is democracy," he says, identifying the point of my question.

"But does that make it better to be an Indian peasant than a Chinese one?"

He smiles again. "I think democracy is important."

"But is Indian democracy helping to raise the standard of living of the people on the bottom rung?" I press him.

"Yes, I think so," he says defensively.

He doesn't want to have the discussion, which is a shame, because I do, especially in Hefei, where the Chinese government-led model is so much on display. China and India are both huge countries, with populations of more than 1bn people, trying to lift tens of millions of farmers out of poverty. Is the more ordered, government-backed, scorching growth rate model of one-party China a better one for a developing country than the slightly chaotic, laissez-faire, slower growth rate, democratic model of India?

Most westerners side with India because of democracy. Certainly, democracy has provided checks and balances in India that have prevented the crazy political and economic campaigns that destroyed China in the 1950s and 1960s.

But it feels to me as if the word "democracy" leads us to attribute certain advantages to India that do not necessarily exist. Similarly, the word "dictatorship" leads us to attribute terrible things to China that do not necessarily exist there. If the existence of democracy in India meant there was real democracy, with all the checks and balances, and the reduction of corruption, and the freedom to choose, and the delivery of crucial services such as education and healthcare, then India would probably still win the argument. But India, like China, is hugely corrupt, and although Indian peasants can help to kick the highest leaders out of office, it appears that the new leaders who come in each time consistently fail to lift the millions out of poverty.

There are certain improvements in life that go beyond the political system, such as the chance that your child will live to see adulthood, the likelihood that your daughter will get an education, and the probability that you yourself can find a job which does not involve wading up to your knees in a rice paddy for the rest of your life. Chinese statistics are notoriously unreliable, but in many of these areas, even allowing for a 10–15 per cent exaggeration, China still comes out better than India.

You're twice as likely to lose a child before the age of five in India than in China. If you are Indian, there is only a 60 per cent chance that you can read. If you are Chinese, that chance is 93 per cent. If you are an adult woman in India, it goes down to 45 per cent, whereas in China, according to government statistics, 87 per cent of adult women can read. Chinese income per capita is double that in India. Life expectancy in India is lower than in China (63 to 71). The list goes on.

In the 1980s, in the early days of Chinese reform, people used to say, "To get rich, first build a road," and the instruction, though a crude oversimplification, has much truth in it, as I'm finding all the way along Route 312. China's infrastructure is decades ahead of India's. In 2005, China invested $7 in infrastructure for every $1 that India spent.

In short, the Chinese government has until now, in some areas of life, undeniably delivered basic services and provisions in a more complete way than the Indian government. (One brief footnote, of almost no importance alongside the life or death discussion of infant mortality, though it is of passing interest: the model also applies to sports. China's government-led sports programme achieved 63 medals at the Athens Olympics, 32 of them gold. India won one medal in Athens, a silver in shooting.)

There are now two big questions for China, though. First, is it all crumbling? The peasants often say that it is, that "Old Hundred Names"—the name for the long-suffering common people of China—must now pay for healthcare and education, and that the government has stopped providing the very services which speak so well of its development model. The rural boom of the 1980s and 1990s has ended, and despair is creeping back. One sign of it is the increase in the suicide rate, especially among rural women. China now has the highest rate of female suicide in the world, and suicide is the number one cause of death among women aged between 18 and 34.

The second question is this: is it all worth it? The cost of a government having absolute power to push through its policies is immense. Of course, it's admirable that the Communist party has been able to implement vaccination programmes and literacy drives. But the flip side is that the government can push through policies that are not to the benefit of ordinary Chinese people. It can still decide how many children its citizens may have. It can destroy historic parts of ancient cities for redevelopment. And it can build projects such as the Yangtze river dam, which required the relocation of more than 1m people. Even more controversially, it can still engage in a murderous campaign to suppress a relatively harmless spiritual group such as the Falun Gong. In most areas of Chinese life, there are few constraints on the power of the state if it wants to intervene, so everything depends on whether the individual policy the state wants to pursue is beneficial to the people or not.

In India, the cost of some restraint on the government is a slower growth rate. But at least independent trade unions are allowed in India, and some of them have teeth. India also has a free press, which can act as a watchdog on governmental bad behaviour. In China, the press is more free now on social and economic matters, but it can easily be muzzled by the government on any sensitive issue.

In the end though, there is one crucial difference between China and India, and a perfect example of it is coated in black tarmac and runs east and west through Hefei. China is a brutal place to live if you are on the bottom rung, but there is an exit. And, just as important, there is a real possibility of a job at the other end. India's 1.1bn population is rapidly catching up with China's 1.3bn. But India has only about 10m manufacturing jobs, compared with about 150m in China. So there are simply more opportunities in China to improve your life. (And I haven't even mentioned India's restrictive caste system.) The growing service sector in India—in software development, in call centres and service centres—is great if you are already middle class and speak English. But what about possibilities for the hundreds of millions of illiterate peasants? It seems to me that India is trying to reach modernism without passing through the industrial revolution.

Now, as the cost of manufacturing rises in China, we are starting to see some manufacturing relocating to India. The country's retail sector is opening up too, and India is in the midst of other major economic changes. So in the near future, more opportunities of escape from rural poverty may be provided, in which case the balance will tip in India's favour.

I'm disappointed that one of the few Indians in central China does not want to have this conversation with me. So in the end, I have the conversation with myself over dinner, and I conclude that I do not want to be a Chinese peasant or an Indian peasant. But if I have to take a side, despite all the massive problems of rural China, I'll go for the sweet and sour pork over the chicken biryani.

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