Money Morning Investment Director Keith Fitz-Gerald is currently leading an investment trip through China, taking in that country's culture and scenery, as well as its investment opportunities. Here is Part III of a short series detailing his observations and discoveries.
By Keith Fitz-Gerald
Money Morning/The Money Map Report
YANGTZE RIVER, CHINA – The sky is a brilliant blue, the wind clean and crisp and the China where National Guide Jun Hao works resembles the landscape we're passing – a jumbled mix of the old and new, and a backdrop to a lifestyle that's suddenly changing much too fast.
"It's dramatic," says Hao, sweeping his hand through the air for emphasis. "Yes …that's definitely the word for it."
The rolling hills of China's Yangtze River valley provide the most graphic and concentrated evidence we've seen yet of the change that is modern China.
As far as we can see, there are crumbling old houses built hundreds of years ago and communist-era "flats" – apartments – set low against the hills. Behind them, and set higher, are sparkling new ferro-concrete relocation villages.
But there are no cars, and almost no people visible. Most of the "new villages" don't have electricity or running water. And their residents remain farmers who head out each day to work the dramatically terraced fields that rise precipitously above the gorge.
It's as if the new is fleeing the old, yet somehow remains tied to it. But it's the red lines – and the accompanying signs that read "175 meters" – that are perhaps the most sobering hint of the change that's to come, for the lines and signage serve to warn passersby where the water will be next year when the reservoir of the massive Three Gorges Dam is finally full.
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The surface of the water already has risen up and over the 150-meter mark. It's odd to think that …as we move along the water's surface …there are entire villages – even cities – far below us, down in the blackness, beyond the reach of the sun's rays.
"It's hard to imagine what's happening in China," Hao said, reflecting upon his life.
He was born in a centuries-old hutong – the narrow streets or alleys that are part of life in old Beijing. This one wasn't too far from Tiananmen Square, meaning he grew up among the poorest of the poor.
His family shared their courtyard residence with seven other families – perhaps 35 people in all – in a space designed and built for a single family. There was no running water and only a single community bathroom that was literally just a hole in the ground.
"We were poor," Hao says. "Very poor."
Even so, he says, "my earliest memories are very happy ones." Hao recalls playing with other children as in the alleys as they waited for their parents to draw water each morning.
"We didn't lock our doors – we didn't have to," says Hao. "Our dreams were simple. Any family having a bike, TV, radio or simply a sewing machine was envied."
The first hints of change came while Hao was in high school. Then, during his high school years Hao recalls the first glimmers of change. The Cultural Revolution – with all its pain and chaos – finally came to an end, and true reform was able to take hold.
For Hao, the most magic of moments came when he learned that the farmers were suddenly allowed to grow what they want. That meant he could put food on his family's table. Even today, roughly two decades later, the memory of that singular event is both moving and highly personal for Hao.
He recalls the amazement he felt when the country's domestic "apple" jeans became the Chinese Prada garment of their day. Almost overnight, he says, "the green, black, gray and brown Mao jackets vanished," only to be replaced by fashions that raised more than a few old-generation eyebrows. "Suddenly we could listen to Taiwanese pop music."
"At that point," Hao recalls today, "we knew change was real. In more ways than one."
Hao's father, a career customs officer who spoke French, English and Chinese fluently, suddenly died, leaving Hao – as the eldest son – responsible for everything.
"It was …how do you say …a ‘rude awakening'," Hao says, his eyes misting a bit at the memory.
It was just about that time that Hao's grandfather offered a bit of advice that Hao recalls even today: He told Hao to "eat foreign rice," meaning that Hao should find a career that puts him squarely in front of the changes that would be opening China up to international influences. He also told Hao that he absolutely needed a college education to compete.
"He was a very wise man," Hao says. "Even back then, even though he would not live to see it, he knew my best future would be to get an education and to work with the coming changes rather than [to] run from them."
So that's just what he did.
Stepping Into the Future by Stepping Out of The Past
Hao graduated from high school just after the Tiananmen Square protest of 1989, and began selling newspapers, doing odd jobs, accepting manual labor positions, and working at any job that he could find.
Not only did Hao get into college, he earned enough to pay for his tuition and support his family at the same time. And, in doing so, he became "self-sufficient" – a concept that could not even be imagined by prior generations.
Hao notes that "since before I was born, Chinese have been taught to be part of a collective group. You are always part of something else. Now it's different."
"Now," Hao observes, "we Chinese can be individuals. And, we can have individual value."
That's something, he says that previous generations couldn't imagine. Even now, after all the changes that have taken place, Hao says it's a concept his mother still cannot accept or understand.
During college, Hao finally got his shot at "foreign rice." He took – and passed – the National Guide License Exam. At the time, "it was harder than college entry boards and still is," an elite examination, he notes with pride.
Today, Hao is 34 and is one of China's top national tour guides. He earns more money in a year than his wise grandfather earned in his lifetime. He travels all over China, and all over the world. He's married, and he and his wife have their own flat in Beijing. They even have their own car. A family, for now, isn't in the plans.
"We want one," he notes, "but we're worried about the future."
That's the downside of so-called "freedom of choice;" the freedom to succeed means that there's also a freedom to fail.
That's why "we want everything now," states Hao. "I think we see this in the stock market, too. Most Chinese have had such rapid change that they don't understand that the rest of the world takes time."
"We don't worry about ‘now'," he says, making quotation-mark signs with his fingers for emphasis. "We worry about the future. So we save, save, save."
Hao is stunned when I tell him that American consumers have a negative savings rate – at a time when Chinese savers tuck away 40% of their income.
In a candid moment, Hao says he must look ahead, for he realizes he could be unemployed next year.
Indeed, he's quick to point out that the plummeting U.S. dollar has clearly affected his business.
"I have to quote the trips I plan months in advance," he notes. "As the dollar drops, I make less because the cost of making each tour is going up here in China."
There's an irony with current market conditions that make him feels as if his life has traveled full circle – at least a little bit.
"Now I worry about meat on the table at New Year's, which was the same thing my family worried about when we were dirt poor and living in the hutongs" when I was small and growing up in Beijing.
With equal candor, Hao concedes that this realization means he'll "have to get better at anticipating what will happen" next, in both the near term, and well ahead.
But to be part of China's new economy is "exciting," he observes. He wouldn't change a thing – even if that were possible.
And it's not. The fact that China is changing cannot be altered or stopped. After all, as Hao notes, quoting a famous Chinese adage: "Kai gong mei you hui tou jien."
That means that, "once the arrow is released from the bow, it will not come back."
[Editor's Note: "The View From China" is an investing travelogue chronicling Money Morning Investment Director Keith Fitz-Gerald's current journey through Mainland China. Fitz-Gerald last wrote about
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About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.