American Corporations in China

He was the Number 2 son in a farming family in rural China.  Number 2 grew up in the 1860’s during a time when the British Empire traded Opium, grown in India, for Chinese silk, tea, porcelain, gold and silver.  The drug money flowed freely to Europe.  This imbalance in trade drained China’s treasury and decimated her economy.  (It's taken China over 125 years to recover from this disaster.)          

Number 2 left his ancestral home to look for work.  Tied securely around his thin body was a homemade money belt.  In it were two small gold coins and a few coppers.  His father had told him that the money would last him a few weeks, more if he were frugal.  Head east, his father told him.  Find the fishing village where the Foreign Devils have landed and settled.  You are clever and smart, his father said firmly, I’m counting on you.  The farm can’t support all of us.

Number 2 was just eleven years old when he left home to find work. 

Upon reaching the fishing village of Shanghai, Number 2 looked for the money changer.  He found the white-haired banker in the village square.  The old man weighed the gold coin and declared it a worthless fake.  Hands trembling and shaking with shock and fear, Number 2 handed his remaining gold coin to the kindly, sympathetic old man.  This time the scale balanced.          

To conserve his small hoard of silver coins, Number 2 ate plain rice without any meat or vegetables.  At night, he slept in doorways.  After two weeks, he still couldn’t find a job.  Hungary and feeling desperate, Number 2 woke one morning on the doorstep of a grocery store.  He saw a broom leaning against the doorway.  With no job to go to and no prospects of any to be found, he shrugged his shoulders and began sweeping the front steps, then the porch, then the sidewalk.  Doing something was better than doing nothing.  It was against his peasant beliefs to waste his life in idleness.  

Satisfied with his handiwork, Number 2 replaced the broom and waited for the store to open.  He would spend his last few coppers on food.  He didn’t know what he would do after his money ran out.  But he would think of something.  Besides, he thought, the worst thing that could happen to me is that I’d die of starvation.   

When the grocery store opened, the Owner offered him a hot steaming bowl of congee mixed with bits of thousand-year-old egg and strips of finely diced pork.  “Eat,” the Owner said, “in return for your work.”

From that morning on, Number 2 swept the store inside and out before breakfast.  Then he helped the grocer display the stalls of vegetables that flanked both sides of the front door.  But his most useful function was in serving his customers.  He picked out the best and freshest vegetables for his clients, the ripest of fruits and the best cuts of meat.  Number 2 knew these things because he had helped his father slaughter and butcher pigs and chickens, and he had grown fruits and vegetables since he was seven.  

The customers adored this friendly helpful young boy.  The store prospered.

Number 2 was given a bed inside the store, so he had no rent; the grocer and his wife shared their meals with him, so he didn’t have to pay for food; and in time, he received a salary for his exemplary work and valuable services.

After sending half of his salary home, Number 2 saved every penny he made.  In time, he opened his own store.  But he never forgot the kindnesses shown him when he first arrived in this sea-side fishing village.  (During the New Year celebrations, he would bring gifts to his benefactors along with little red envelopes stuffed with money for their children.)  He treated his workers the same way he had been treated, with kindness and respect.  And he rewarded his employees as fairly as he had been.  

Number 2 prospered.  And as Shanghai grew, so did his grocery business.  By 1900, he owned and operated six grocery stores in an area that is now the heart of downtown Shanghai.  He also bought land and built housing for his employees.

My Great Grandfather and his wife had six children.  Car-lo Sun was his oldest.  Life in Shanghai taught father and son the power of western business practices.  The European powers had crushed and humiliated China by importing cheap opium in exchange for gold, silk, tea and porcelain.  And when China objected to this unsavory import, the European powers had used modern weapons to enforce their will.  China not only lost the Opium War, but she also lost a lot of precious territory. 

Like most proud people, Great Grandfather Sun wanted to modernize his country.  He decided to send his eldest son, Car-lo, to an American University.  China, like America, is a big country and he thought that a railway linking one end of China to the other would unite the land and facilitate commerce.  

Car-lo Sun graduated with a degree in Railroad Engineering from Cornell University, class of 1911.  Car-lo returned home to build a Railroad.  

Over the last hundred years, generations of Chinese students have returned to China with the hope and desire of restoring this once great nation to its former self.  Yet, since 1911, little had been accomplished to modernize this ancient land.  Only in the last twenty-five years has China made any real progress.  And this progress can be directly attributed to two things:  that American and European Multinational Corporations saw China as a teeming nation of 1.3 billion consumers; and that the Chinese, like Number 2, have long dreamed of building a modern China.  

But China demanded a price of entry to this huge marketplace.  Multinationals could only do business if they entered into joint ventures with Chinese companies by investing their hard currencies.  The upside for China is that the hard currencies allowed her to build the factories and that the on-the-job training of Chinese employees would transfer knowhow and best practices faster and more efficiently than generations of abstract book learning.  The upside for foreign Multinationals is that they would share in the profits.  (Today, the successful Multinationals are awash in cash.  GE’s revenue in China for 2009 grew at a rate of 12%.)  The days of trading drugs for gold and silver are over, at least in China.     

Now, all the world has to do is to find a fair way to achieve a balance of trade among nations.  Clearly, judging from the history of the Opium Wars, a one-way trade is economically and politically untenable.   Let’s hope we’ve learned something from our past.