I first went to China in 1991 after attending a friend’s wedding in Hong Kong.  At that time the streets of Shanghai were drab and impoverished, and tattered Mao suits and caps were still common dress for old people in the countryside.  All but a few joint venture hotels had cigarette burns in the carpets and paint peeling off the walls,  and when you walked the streets you would be harangued with shouts of “Hello!  Hello!” the only word of English that the average Chinese person knew.  If you answered them a crowd of silently staring pedestrians would gather behind you to hear your strange voice.

Business was conducted in the labyrinths of the Communist infrastructure.  Dirty hulking factories were state-owned and run by managers who had no contact with the market and were forced to do their exports through government-appointed Foreign Trade Companies.  These Foreign Trade Companies, conceived in the old Command Economy model, were also completely ignorant of any marketing expertise: their business education consisted mainly of filling out Letters of Credit and other trade documents, along with the occasional junket to Korea or Japan to “investigate markets.”

There was no such thing as a small businessman in this market, and no entrepreneurs.  It was hardly worth the while of a state sponsored “businessman” to export quantities of $2000 or even $5000, quantities that are happily exported by small South American companies every day.  All production went through huge factories, who would be happy to send you container-loads of silk shirts, but shrugged their shoulders at producing several hundred.  There was never fabric in stock, never any samples, rarely a color chart: basic tools for an export business.  Instead, hundreds of workers with lifetime jobs in state factories sat around drinking tea and playing mah-jong, waiting for that big order to come in.

In the odd cracks of this gray State monolith, a few small businessmen were beginning to emerge.  I remember Mr. Zhang, a fifty-ish man with a quick manner and a constantly twitching sewing machine foot, who had somehow gotten control of a small factory and was producing and exporting hand-painted scarves.  This was 1992, and he seemed exotic at the time, like a Chinese cowboy.  Of the scores of businessmen I met all over China in those first few years, he was the only one eager to accommodate my small quantities.  Others shrugged their shoulders, laughed at me to my face, or even got up and walked out of meetings.  I remember a meeting in Inner Mongolia when my name was mentioned and everyone in the room started laughing.

Gradually, though, the Communist Party decided that the tea-drinking and mah-jong were over.  Those companies that didn’t produce were allowed to fail, and gradually even the productive ones were sold off to their managers or to well-placed Communists.  The Foreign Trade Companies were allowed to sink or swim, and they all sank, as factories were allowed to export directly to their clients.  Before, 150 workers was considered a small clothing factory.  Now their cashiered workers formed factories of 20, or 10, or even three. 

By 2001 the Chinese had gone on-line with Alibaba.com, a vast electronic marketplace where anyone with an e-mail address and a little English can set themself up as a businessman.  Fedex and UPS became established ways of doing business.  One clothing agent joked that she could snap a photo of a blouse in New York, e-mail it to China and have a knockoff back in the United States the next day.

The China of Mao Suits has become a China whose exploding neon opulence stuns me every time I visit.  Cars fill the streets and giant restaurants occupy entire city blocks, three stories high, with 100 cooks and 300 waiters.  Miraculously, they are full every night.  But it’s not the designer-clad elite of Shanghai and Beijing that amaze me, it’s that even the man in the street now has a cell-phone and an electric bicycle.  Teenagers have money to spend, and shop with their friends in the city centers.  The people who once shouted “Hello!  Hello!”  have learned a few more words and now try to sell you fake Rolexes on the Nanjing Lu.  China has arrived.  In fact, it’s pulling out again.

Next: Turbo Capitalism in Shanghai