China Travels

As I flew into Shanghai Pudong airport , I was wondering what should I write about, what issues do I observe and follow in China – what are the things that matter?

A few minutes later, the topics presented themselves – I hadn’t received my baggage and I had a long night of uncertainty ahead. With another flight to catch 4 hrs later, I had to take up the issue with the authorities there and convey my urgency. Uncertainty or new experiences as some would call, is part of life and increasing.

What’s the issue here? Are the state-controlled Chinese airlines not upto the mark yet? Is it just part of the global airline system which is grappling with ever increasing passenger traffic or was this just my share of bad luck waiting to strike me. Clearly the last one was ruled out, as I noticed a long queue of my fellow passengers claiming their lost baggage. The authorities there had no clue where my baggage was, something unacceptable to me. I wanted them to locate where my bag was, before I would leave.

All airlines in China are state controlled. As my friend Guoping put it, they all have the same boss, Hu Jintao. The control of the state and the social structure have their pros and cons. China has some huge and successful state run companies like China Telecom, China CITIC Bank and COSCO, all in key sectors of growth. There are hundreds of thousands of entrepreneurs too, but most of them have stayed small – setting up their units and growing to an SME level before running into Guanxie and the big government boys.

I cant help but jump onto the now common China vs India comparison. The control by the state has resulted in companies which massive scale and in a lot of cases monopoly or at most an oligopoly. This works well in infrastructure and some key large scale sectors like manufacturing. This is where execution and economies of scale are important. China has ended up constructing for itself great roads, port and power generation plants – the same things that India is still grappling with. I can vouch for the road network in coastal East China. After having travelled 3 different cities and some interior areas, roads all across were great – a great achievement for the government. It just shows that the Chinese government can be efficient and effective when necessary. India has a long long way to go to achieve the levels of development in infrastructure. But then, everybody knows this. The question is what can you do about it? What can the government and we as citizens do about it. The answer lies in execution. The Chinese political system allows its government to execute projects of such scale with less resistance. And when it faces resistance, it overpowers it. The roads have been constructed on a BOT basis and most major expressways collect a toll from its users. But the result is good and I am sure it has boosted the economy by atleast a few percentage points.

Infrastructure projects always need intervention from the government. Due to the long horizon of investment they are not attractive to the private sector.

Now consider the other sectors. The airlines in China still lack that smiling staff which indicates the level of customer service. The food is great in quantity, but I wonder who sets the menu and what about the quality. The point being that services are still not best in class. The service industry typically develops best in free market capitalist societies. As economies mature, the share of services grows and levels of service improve drastically. India has had a fair share of sectors where services are improving greatly. Airlines, telecoms and retail – all sectors have shown tremendous growth and improvement.

So does India need a change in its political system to achieve infrastructure development? Yes and No. We don’t need a fundamental change in the democratic set up. But we definitely need a change in who decides and executes key development projects. We need to make infrastructure independent of the politics. Yes, it will require political will but more than that it will need a push from the citizens, industry bodies and citizen forums. The executive powers for infrastructure must lie with an independent body not associated directly with the government. Probably reporting directly to the PMO. In that case, a strong prime minister and a good budget will get India there, hopefully in the next decade.

The ultimate answer for these developing countries may lie in a quasi democracy, a free capitalist market with an authoritarian execution.