A new book on China’s Rise: Shock and ore

James Kynge – The Financial Times

Copyright The Financial Times
Published March 17 2006
By the time I got there, there was only the scar. A scar of ochre earth 25 times the size of a football field. A dozen excavators pawed ponderously at the soil as if absently searching for something lost. The place where one of Germanyís largest steel mills had stood since before the second world war was now reduced to a few mounds of twisted metal scrap. I approached a man in workerís overalls by the side of the road. He was hoisting a huge metal segment of a pipeline on to the back of a truck. After he had settled it in place, I called over to him. He said he had dislodged, lifted and loaded 14 segments like this already and now there were only three left, enough for another weekís work. Then it would all be over. I asked him where the pipeline was going. He straightened his back and made as if to throw something in a gentle arc far into the distance. ìChina,î he said.
The rest of the equipment had gone earlier: the oxygen converters that were housed in a shed 60m high, the hot rolling-mill for heavy steel plates that stretched out over one kilometre, a sinter plant, a blast furnace and a host of other parts. They had all been packed into wooden crates, inserted into containers, loaded on to ships and then unpacked again near the mouth of the Yangtze River. There, on the flat alluvium beds of that mighty river, they had been reconstructed exactly – to the last screw – as they had been in Germany. Altogether 250,000 tonnes of equipment had been shipped, along with 40 tonnes of documents that explained the intricacies of the reassembly process. The man in overalls shook his head at the convoluted nature of it all. ìI just hope it works when they get it there,î he said.
The ThyssenKrupp steel mill in Dortmund once employed around 10,000 people. The communities of Horde and Westfalenhutte, where workshops clustered around chimneys that could be seen from all over the city, had depended on it for generations. People had made steel here for nearly 200 years, and when the drums of German conquest rolled in 1870, 1914 and 1939, it was this corner of the Ruhr Valley that supplied first Prussia and then the German empire with field guns, tanks, shells and battleship armour. A pride in practical things was evident everywhere. A stumpy-looking, 19th-century iron blast furnace, with a notice explaining that it had been brought over from England, stood as a monument by one of the gateways to the former plant. Nearby, a plaque memorialised a local engineer.
But on a warm, bright afternoon in June 2004, Horde was clearly no longer the pounding heart of the Ruhr. The place looked laid-back, becalmed. A few people sat in the sun outside an ice-cream shop on Alfred Trappen Street, digging to the bottom of their sundaes with long spoons. Up the road, women fished into a wire basket outside Zeeman Textiel, a discount store, inspecting T-shirts for 99 (euro) cents. There were three solariums in the vicinity and a tattoo parlour advertising its ability to emblazon the characters Ai, Fu and Kang, the Chinese characters for love, wealth and health, on to the bodies of its customers. But both the solariums and the tattooist were shut.
I had come to try to understand how life was changing now that the steel plant was gone. But my inability to speak German was a handicap. I tried calling on local officials but they were unwilling to talk. People on the street, when approached, seemed to find my questions unwarranted. So I went to the Lutheran Church and phoned each of the five pastors listed in a leaflet to invite them for a coffee. Pfarrer Martin Pense was busy, Pfarrer Klaus Wortmann was out of town, Pfarrer Bern Weissbach-Lamay did not answer, and Pfarrerin Angela Dicke would have been happy to help but it was a holiday, so sorry. Pfarrer Sven Frohlich, a softly spoken man, was ready to give me a few minutes on the phone.
The death of the steel mill, he said, had been the slow but inevitable result of a loss in competitiveness. In the early 1990s, when efficient South Korean steel plants were undercutting the world, Horde steelworkers were agitating to work a 35-hour week. Then the reunification of West and East Germany took its toll by forcing the government to raise taxes and by acting as a drag on general economic activity. By the mid- 1990s, the ultimate fate of the Horde plant had become an issue of debate. To start with, the management reacted as managements generally do: it discussed merging with a competitor to derive operational synergies, cost reductions and improved competitiveness. But by 2000, when global steel prices were in a slump, all talk of rescue faded away. There seemed to be little that could be done.
Pfarrer Frohlich said that the Lutheran churchís congregation had moved away as thousands of steelworkers lost their jobs, and the community, though not poor, had sunk into a kind of numbness. Young people did not seem to feel the pull of religion in spite of the strenuous efforts, evident in the church newsletter, to lure them into all sorts of community activities. ìOur identity is lost,î said Frohlich. ìAnd that is the most important thing that can be taken away from somebody. It could take more than a decade to recover it.î
According to ThyssenKrupp, the Horde plant would have been closed regardless of whether a buyer for it had been found. But others have had their doubts. The Chinese pounced so quickly on the purchase, signing to buy it just one month after the plant was idled, that some in Horde suspected a behind-the-scenes deal. Whatever the truth, it was not the Chinese acquisition so much as the events that were to follow that stunned the local population. As if out of nowhere, nearly 1,000 Chinese workers arrived. They dossed down in a makeshift dormitory in a disused building in the plant and worked 12 hours a day, seven days a week, throughout the summer. Only later, after some of the German workers and managers complained, were they obliged to take a day off out of respect for local laws.
Their industriousness alone was enough to give the hardened workers of the Ruhr pause for thought. But there was something else. Locals started to notice the Chinese deconstruction teams high up – 40, 50, 60m above ground – on exposed walkways, swinging up ladders and clinging from scaffolding poles – all without the use of safety harnesses. The spectacle became a local media sensation. Some referred to it as the ìultimate Chinese takeawayî, and on the day that a reporter from Deutsche Welle, the German broadcaster, was there, a Chinese worker was spotted dangling by a thin wire from the top of the 98m-high Horde Fackel chimney. ìHave the Chinese acrobats come to town?î he asked in his dispatch.
By the end of 2002, in less than one year, the Chinese had finished the dismantling job – a year ahead of schedule that they had agreed with ThyssenKrupp and a full two years faster than the German company had initially estimated the job would take. Shortly before it was time to leave, a diplomat from the Chinese embassy in Berlin arrived to address the labourers. ìThe Chinese are known in Germany for washing dishes and running restaurants,î he said. ìWhen our companies want to do business here we sometimes have to beg just for an appointment. But through your work you have earned the Chinese people some face.î
A few weeks after that, they pulled out, having invited local German officials and site managers to a banquet cooked in four different styles reflecting the four home towns of the deconstruction-team chefs. The dormitories and kitchens they had been using for a year were left scrupulously clean and tidy, save for a single pair of black safety boots. These boots, it turned out, bore the brand name Phoenix and were made in China. That was curious, said Germans who had worked at the steel mill, because the plant the Chinese had just taken away was also called Phoenix, in commemoration of the way that Dortmund had risen from the ashes of bombing raids in 1944. Nobody could tell, however, whether the single pair of forgotten boots was an oversight or an intentional pun.
Eighteen months after the Phoenixís migration, I stood in the lounge bar in Zum Brauhaus, a hostel on Alfred Trappen Street, where the landlady introduced me to a man called John. He had been born and brought up in the UK, in the northern industrial town of Bolton, and had been posted to Germany with the British Army a few years after the war. He married a German girl, and they moved to Dortmund, her home town, after he left the army. He had worked in the steel mill for more than 20 years but, now that it had gone, he took a philosophical view of its departure. The Chinese economy was booming, whereas Germanyís had reached a plateau. If they could put the Horde plant to profitable use, then maybe it was a good thing that they had bought it, he said.
But there was no denying that the Phoenixís loss was keenly felt. You could see the psychological displacement in a small park at the lower end of Alfred Trappen Street. There, around a monument to a synagogue that was destroyed during the war, groups of unemployed steelworkers sat under spreading beech trees with their cans of lager in plastic bags. John held a thumb to his lip and made a sucking sound. A future without heavy industry was going to take some getting used to, he said. Nobody had a clear idea of what would take its place. The only thing that the local authority had come up with so far was a plan to redevelop the area that the steelworks had occupied into a lake larger than the Binnenalster in Hamburg. It would feature four small islands and a tombolo. Around the sides there would be the moorings for a marina, rows of upscale restaurants and nearly 200ha of parkland. But so far the marina scheme had not received a positive reception.
As John was talking, another former steelworker, a large, powerfully built man in his forties, joined the conversation. ìLet me ask you,î he boomed. ìDo we look like yachtsmen to you?î
The flight of the Phoenix made Horde one of the first communities on earth to feel the convulsive force of a rising China. Before that, it was true, there had been plenty of soundings emanating from Asiaís rising giant, but few of them had amounted to more than tremors on the seismic scale. In 2001, when the buyer of the Phoenix was negotiating the deal, China had not yet joined the World Trade Organisation and, although its economy was certainly a driving locomotive for Asia, it had yet to develop a world-class punch. Indeed, my assignment as a journalist for the Financial Times in Beijing had been taken up mainly with domestic issues. I had spent a lot more time researching and reporting on how the world was affecting China than on how China was affecting the world. The story then seemed to revolve around the large inflows of foreign investment, the latest intrigues among the modern-day mandarinate that ruled from within a forbidden compound in the centre of Beijing, and whether or not you could or should trust the official statistics.
Then, quite suddenly, or so it seemed, China became an issue of daily international importance. It is difficult to pinpoint when, exactly, that transition took place; perhaps it was late in 2003, or maybe it was early the next year. I could not be sure. In any case, it was unlikely that there would have been any single moment when everything changed. An object as large as China cannot turn on a sixpence. Nevertheless, in my imagination at least, there may have been a tipping point. It occurred during the several weeks from mid-February 2004 when, slowly at first but with mounting velocity, manhole covers started to disappear from roads and pavements all over the world. As Chinese demand drove up the price of scrap metal to record levels, thieves almost everywhere had the same idea. As darkness fell, they levered up the iron covers and sold them to local merchants who cut them up and loaded them on to ships to China. The first displacements were felt in Taiwan, the island just off Chinaís southeast coast. The next were in other neighbours, such as Mongolia and Kyrgyzstan. But soon the gravitational pull of a resurgent Middle Kingdom was reaching the furthest sides of the world. Wherever the sun set, pilferers worked to satisfy Chinaís hunger. More than 150 covers disappeared during one month in Chicago. Scotlandís ìgreat drain robberyî saw more than a hundred vanish in a few days. In Montreal, Gloucester and Kuala Lumpur, unsuspecting pedestrians stumbled into holes.
It was not the first time that a great power had telegraphed its arrival in an unusual way. The first inkling the British had of the 13th-century Mongol invasion of Europe, for example, was when the price of fish at Harwich, a harbour on the North Sea, rose sharply. The explanation for this, people learned later, was that the Baltic shipping fleets, abruptly deprived of sailors required to fight the enemy approaching by horse from the east, had remained at its moorings. That had reduced the supply of cod and herring to Harwich, and prices had risen accordingly…
… The sea voyage of the ThyssenKrupp steel mill ended 5,600 miles away from Horde at a small, windswept port on the alluvium beds of the lower Yangtze River. The water was wide and sluggish here, and deep enough for all but the largest sea vessels to dock. A few hundred metres inland from the riverbank, the plant had been reassembled. I recognised it immediately. It looked somehow cleaner than in the photographs I had seen of it in Germany, although that may merely have been an illusion created by the white sands and metallic grey skies surrounding it.
The company that had bought the plant was called Shagang, ìsand steelî after the distinctive physical environment in which it had blossomed from its humble beginnings as a village workshop in 1975. Chinaís entire national steel output had then been scarcely more than that of Dortmund alone. In the intervening years, though, business had taken off. The workshopís expansion had first consumed the village that built it and then usurped the neighbouring town. Now everyone in the area seemed in thrall both to steel and to the former peasant farmer with a rudimentary education who had turned a backyard furnace into one of the worldís most efficient producers. His name was Shen Wenrong.
I stayed at the Steel Town Guest House, just down the street from the Sand Steel Hostel. The receptionist told me that everyone was thankful to Shen. Without him, she said, this place would be nothing. Now it was full of the incongruities of industrialising China. A five-star hotel with an external mural of mythical goddesses in floating gowns was under construction in the reed beds by the river. Its name, locals said, was to be Heavy Industry Hotel. Not far away, a restaurant called Sweet Water stood beside mounds of stinking rubbish rotting in a canal. Wide new boulevards had been built in another part of town, but a dearth of manhole covers had turned driving into a slalom with consequences. And in front of a sports hall, there was a scale replica of the iron bull that stands in front of the New York Stock Exchange on Wall Street. On its plinth, a poem written by Shen Wenrong had been carved into granite: The bull will rush forward without whipping,/Once in flight it covers a thousand miles./We ask the golden bull; Why are you like this?/But the bull can fly over oceans too -/Only then should you call it a miracle.
The townís name was Jinfeng and it had the air of a temporary encampment. Most of its inhabitants were migrant workers, the peasant farmers who flooded in from their villages to find work for around 40 cents an hour. There were about 30,000 of them in Jinfeng and shortly after dawn they tramped in long silent lines to the steel, cotton and glass factories that held the promise of a future free from the 1,000-year tyranny of their fields. At dusk the factories would disgorge them back to their dormitories; a sullen, twilight army. The local economy bore the imprint of their presence; shops selling hard hats, metal toecap boots and lengths of rope lined their route to work. There was also a discount garment shop for those who wanted to smarten up before triumphant trips home. A pair of leather shoes with a fashionable square toe was on sale for $4 and patterned T-shirts were going for 10 cents.
A bit further on, I dropped into a liquor store and was attracted to the poetic names on several bottles of white spirit. One Drop Fragrant (90 cents), Cool River Destiny (75 cents), Eastern Crossing (95 cents), Boiling Ditch (60 cents), Drink Happy 100 Years ($1.10). The last one I looked at was called Ordinary and it cost 20 cents, but just as I picked it up the shopkeeper called over to me. ìDonít drink that. You couldnít stand it. Itís for migrant workers,î he said.
Later that afternoon, near the Steel Town Guest House, a white truck moving at the speed of a milk float came down the road playing a jingle and a recorded message from a speaker on its roof. ìJinfeng Cinema. Outstanding Song and Dance. Travelling Performance. Five OíClock Start. Donít Miss It,î the message said. In the passenger seat, a young woman with rouged cheeks and her hands interlaced in front of almost naked breasts was ìcasting the beautiful eyeî to passers by. On the other side of the road, a truck carrying iron ore juddered to a halt, its driver and passengers craning to get a better view.
Before coming to Jinfeng, I had spent weeks trying to secure an invitation to Shagang to see Shen. But at every step I had been thwarted by a man called Wu. When I phoned him to request a visit, he suggested that I send a fax. I did. But he told me it needed alterations. I made them. Oh, and there should be a list of questions that I wanted to ask, he added. I wrote them. When my documentation was finally to his specifications, the stalling took a different tack. Things were busy now, he said. Next year might be a better time to visit. Besides, Jinfeng had no good hotels, and transport was inconvenient….
…Shagang bought the steel mill by paying its price in scrap: $24 million. Its transportation by land and sea from Dortmund had cost $12 million and its reconstruction (plus the purchase of the land) another $1.2 billion. All told, it came in at about 60 per cent of the cost of buying a new plant and, by reconfiguring it, Shen was confident he would be able to squeeze 3m more tonnes of annual output from it than the Germans had managed in Dortmund. When it started producing at full tilt, it would more than double Shagangís current capacity, catapulting the company into the ranks of the worldís top 20 producers.
If Shagang had decided to buy a new plant, not only would the cost have been far greater but also it would have taken about three years to make and one or two years to assemble. By comparison, Phoenix was indeed a fast, low-maintenance horse. Shen said he had the advantage during negotiations with ThyssenKrupp because, although steel prices worldwide were in a trough in 2001, he knew that demand in China was set to balloon over the following two to three years. The Germans, he said, were just happy to find a buyer. They could not have been expected to foresee that an extraordinary upsurge in Chinese demand in 2003 and 2004 would propel global steel prices to levels at which Phoenix in its original Dortmund setting would have made a handsome profit.
All in all, the Germans had been very co-operative, Shen said. Both he and Qi Guangnan, the chief engineer who had packed up the plant in Horde, had an admiration for their technical knowledge and their trustworthiness. And clearly, they had loved their factory, said Qi. He recounted how a big, middle-aged German who showed him around had started sobbing at the door of the sinter plant. ìHe had worked there for 20 years,î Qi said. But the great thing about the Phoenix plant, as far as the Chinese were concerned, was that back in Germany it had supplied steel to Volkswagen, the car maker. In China, few firms as yet had the technology to make automobile-grade steel. There was a market to be had in substituting for the expensive imports of auto-grade steel, especially now that car sales nationwide were in an unprecedented boom. Volkswagen itself had a large plant in Shanghai, which was not too far away from Jinfeng. Shenís vision, then, was simple. Cars designed in Wolfsburg would still be built with steel made from Dortmundís fine technology – only the whole process would unfold within the span of the delta where the Yangtze meets the sea.
As I left, I was accompanied to the gate by Wu, whose resigned expression was accentuated by the weight of his bushy eyebrows. He had been with Shen since they grew up and, as we walked through the plant, he spoke of the memories he was seeing in his mindís eye. The place where we stood on the factory forecourt had been a bed of reeds when he and Shen had first started out. And somewhere lost in the mass of buildings was the site of the farmerís shack where Shen had lived out a childhood as poor as it was possible to be in one of the worldís most impoverished countries.
I thanked Wu for taking me around. He said it had been no problem. ìOnly next time,î he said, ìsend a fax.î
James Kynge is a former Beijing bureau chief of the FT. This is an edited extract from his book ìChina Shakes the World: the Rise of a Hungry Nationî, published in the UK by Weidenfeld & Nicolson on March 30. The book can be bought at a 25 per cent discount for £13.99 plus p&p through the FT ordering service at 0870 4295884 or at www.ft.com/bookshop
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