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In May 1989, my husband and I visited Shanghai and Beijing as guests of the government of the People’s Republic …

In May 1989, my husband and I visited Shanghai and Beijing as guests of the government of the People’s Republic of China (PRC). This was our first visit to China.

We knew that there had been sporadic student “unrest” at Chinese universities during the month of April and that May 4, the night of our arrival in Shanghai, was the seventieth anniversary of the original May 4 student movement that had started in Beijing to protest the Chinese government’s “humiliating” policy in ceding rights in Shangtung to Japan.

On May 5, the China Times of Taipei and the People’s Daily of Beijing both reported in their Chinese editions that university students had demonstrated on May 4. This we did not know until we were back home.

Although we had been told that we were to stay at Shanghai‘s Jinjiang Hotel, we were whisked away to Xijiao, a top-level, government guest house located on nearly 500 acres between the airport and the city. Its limited TV channels carried no English language news. A telex received in Beijing from a Gillette Company employee illustrates the partial isolation. “Concerned that unable to locate you in Shanghai…no record of your registration at Jinjiang… Hilton, Sheraton, Peace, numerous others and U.S. Consulate…”

We were instructed to take a 7:30 A.M. train, May 5, for Suzhou to visit that city’s famous “little gardens.” I had expressed our interest in Suzhou‘s gardens when planning this visit with the Chinese Consulate in San Francisco. In Suzhou, we also visited a government-run silk factory where 80 percent of the machines were idle. Our foreign office guide said that the reason was a lack of power. The transportation of coal for government-designated uses is a problem because other users will pay a higher price.

Later, in a room that could seat 100 people, we watched a fashion show “to give six young women practice” in modeling. We sat around for about two hours in a lovely garden waiting for a 6:00 P.M. train to Shanghai. We were told all tickets for seats on the earlier trains had been sold.

On May 6, we visited Fudan University and learned that the University’s average pay to professors was 130 yuan a month, with a scale from 70 to 300 yuan. With the official exchange rate at 3.72 yuan to the dollar, some professors are probably leaders of the student unrest. The grounds of the university were pleasant and on May 6 quiet. That the students sleep six to a room and have little money to spend also adds to student dissatisfaction.

We were very well briefed at the Municipal Archives in Shanghai and had a quick look at Shanghai‘s harbor and walked along the “Bund.” The old European-style bank buildings ring the waterfront. The director of Shanghai’s Institute of Foreign Affairs, Shi Qi, wearing a Mao suit, hosted an excellent dinner for us four alone (hardly a Chinese banquet) at the Jinjiang hotel and we also attended a Chinese acrobatic show, visited the Temple of the Jade Buddha and walked through the Shanghai Art Museum. Later, in Beijing we visited the Forbidden City and climbed the Great Wall. Our hosts had arranged an excellent tour.

In Beijing, we talked and had dinner with Ambassador Chai Zemin, vice president of the Chinese People’s Institute of Foreign Affairs (CPIFA) and former ambassador to the United States. Qian Qichun, PRC’s minister of foreign affairs, who was briefed by Chai just prior to our visit, also spoke with us. We asked about the PRC’s anticipated relationships with Hong Kong and Taiwan and joint ventures with the U.S. Both answered that Hong Kong and Taiwan may have different economic systems from the PRC’s but eventually there would be one China, dominated by the PRC. The PRC’s scheduled talks with Gorbachev would be about the precise lines of the two countries’ mutual borders. Qian stated that joint ventures and economic reforms were successful.

Minister Qian was especially concerned that there be continuing availability of loans from the Asian Development Bank (ADB). Although the U.S. contributes 16 percent of the ADB’s revenues for loans, second to Japan‘s 50 percent, the foreign office could not recall that the U.S. gave anything. It was obvious that the first loans made by ADB in 1987 for $133 million and subsequent larger loans in 1988 had opened PRC’s eyes to a new source of hard currency.

Both Chai and Qian sought praise for PRC’s then restraint in the face of the sporadic student uprisings. They gave no evidence that they anticipated that the general population would support the students to the degree that they did on June 4 in Beijing. Although Deng’s successful economic reforms in the 1980s had meant an annual 10 percent increase in national income, increasing inflation, mounting last year to 20 percent, virtually wiped out the gains. The Beijing Review, May 1989, carried an enlightening article, “A Modern Marriage,” that describes an urban, two-worker family’s standard of living:

“Our biggest problem was housing. In Chinese cities, work units usually provide inexpensive housing… in some cases four or five people from three generations were living in one 15-square-meter room. Our combined salaries were less than 200 yuan a month… We thought we might have to continue living separately in single-sex dormitories… One of the problems of being an intellectual today in China is that wages are low… So my husband had to take on extra work to meet expenses” (pp. 16, 17).

We were in Tiananmen Square, May 8 and the afternoon of May 9 and at both times it was quiet. The only massing of people was a long line to view Chairman Mao’s body on display.

What are the prospects for U.S. business in China after the Tiananmen Square massacre of June 4? Although China has 22 percent of the world’s population, as compared to the United States‘ 4 percent, China‘s national income per capita was $310 in 1985. Our exports to PRC were $6.19 billion in 1988, but to Taiwan were $26.4 billion and to Hong Kong, $10.5 billion. Together these two countries have less than 3 percent of China‘s population. The long run, potential market of China with its 1.2 billion people by 1990 is huge, but its low per capita income makes it impossible for most today to purchase Western goods. Political and economic instability and widespread corruption do not foster new joint ventures. China‘s ability to repay debts and buy new imports is questionable. Many U.S. companies are requiring upfront payment before shipping goods.

The PRC is trying hard to get foreign businessmen to return, negotiations are easier, and many Japanese who primarily are traders with little capital invested in PRC have returned. However, businessmen from the U.S. who do invest capital and Hong Kong businessmen-who account for 60 percent of PRC’s foreign investment-are more wary.

By the third week of June, some U.S. firms sent their American employees back to their PRC offices, but without their families. Kentucky Fried Chicken has reopened near Tiananmen Square. Hewlett-Packard has reopened its 250-person office in Beijing and its 60-person office in Shanghai, but with limited hours and staff. However, the establishment of new U.S. financed factories, stores and restaurants has nearly halted.

In Hong Kong the stock market fell 22 percent the day after June 4. Hong Kong and U.S. business recognize that television and fax machines may change the odds but armies are more powerful. Despite the long-run market appeal, although trade has resumed, the investment of new capital even in the border province of Guandong has not. U.S. businessmen, like their Taiwanese counterparts, question the viability of “two systems, one China” and have adopted a wait-and-see attitude.

Rita Ricardo-Campbell, Ph.D., is a Senior Fellow of the Hoover Institution at Stanford University and a director of The Gillette and Watkins-Johnson Companies. Her latest book, Issues in Contemporary Retirement, coedited with Edward Lazear, was published in 1988. She is a member of the President’s Economic Policy Advisory Board and served on the National Council on the Humanities.


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