"It's a complicated connection: With both a creditor-debtor and seller-buyer relationship, the U.S. and China are strange bedfellows, CNNMoney reports."
When Chinese protesters were killed in Tiananmen Square, I was 20 years old and spending my summer in San Diego trying (and failing) to make some serious cash. I remember how scary Tieneman looked on TV and I remember thinking how lucky we Americans are compared to so many people in the world. At the time I never thought I could ever visit China. But the Soviet Union was collapsing and a few months later the Berlin Wall came down. 17 years later, in 2006, I had the opportunity to work on a project in Beijing. My first reaction was not one of elation, and upon arriving at the airport in Beijing I was struck by the high pollution, but overall it turned out to be an incredible experience. China has changed a lot in the last two decades. I found Beijing to be most exotic.
My friend and I wanted to see Shanghai for a weekend, but our visas would not allow us to visit places outside Beijing, and the torrential rains in Shanghai would have made it a wet weekend anyway. Over three weekends we saw a few places in Beijing, a huge city. We first visited the Great Wall, which really is great. We spent an afternoon in the Forbidden City, where there is a tiny (and out of place) Starbucks. We spent one Saturday at a huge multi-level market where cloned brands such as Gucci, Louis Vuitton, Rolex, Polo, etc. can be bought for a fraction of the price of the real thing - now that is a what I call free trade! There were cranes everywhere - buildings were going up throughout the city. They were preparing for the olympics. We spent a Saturday in Houhai, a big lake with surrounding restaurants and shops, which were bustling. The economy was hot, but I saw poverty everywhere as well. The Chinese economy is still relatively hot. Today three Chinese companies are in the $200+ billion market value club, and two of them are banks.
I asked our Chinese friend how it is that China can be called a communist country, given that the government allows people to own businesses, real estate, stocks, and they are allowed to make a profit. I was told that the state owns half of every business. So I assume that it's basically like a 50% tax on profits. I don't know what happens if there's a loss. And does the state share 50% of the expenses? I don't know how it's structured, but China's economy is basically a free market system with high taxes, like Sweden and Norway. The Chinese government must have seen the money machine that Hong Kong has been, and they wanted a piece of that. I like to think of it this way: Beijing wanted Hong Kong back, and after London's ownership of Hong Kong ended in 1997, Beijing and Hong Kong got married, and that marriage has resulted in a mix of capitalism and socialism, sprinkled with a little censorship and dictatorship from Beijing.