Investment Biker Page 7

  Earlier in the eighties the Chinese had been happily becoming capitalists. Out in the countryside everybody was building houses. People in the cities were complaining because prices were going up. So the government gave bonuses to the city folk, which it paid for by printing money. Needless less to say, this caused terrible inflation, a boom-bust bubble that soon got out of control. Finally the government cracked down on the money supply.

  As I said earlier, revolutions don’t come from oppressed people, they come from folks whose expectations have been aroused. By early 1989 China’s harsh new monetary policy began to cause hard times. Several months later, people surged into Tiananmen Square to bitch about tight money. Then students, who didn’t know any better, transformed a complaint about a slow-moving economy and monetary policy into a cry for democracy. Most Chinese weren’t all that interested in democracy. They mainly wanted to get rich, like most people everywhere.

  Marx was right about one thing: Money is the root of everything. If you figure out the money, you can figure out almost any political situation. (Most everything else Marx got wrong.) Look at what caused the Boston Massacre. The Boston economy had gone to hell in the early 1770s, with the unemployment rate at more than 30 percent. America’s revolutionaries transformed a protest against unemployment into the higher moral ground of “no taxation without representation.”

  So the Chinese sent their troops into Tiananmen Square—a minor blip in the vast panorama of Chinese history, but a world-shaking event to foreign reporters. The outcry in the Western media so panicked the Chinese government that by 1990 this freewheeling country was a horribly stifling place to visit. The government didn’t want travelers to come away with any negative impressions, so the best thing to do was keep them from seeing much. From the Chinese perspective, though, things were improving. Not only did I find some of my entrepreneur friends whom I had met while on previous rides still very much in business, but monetary and fiscal policies had gotten looser, and the economy was starting to pick up.

  Everywhere on my trips through China I’ve seen signs that the sleeping dragon has awakened. It was a country in the grip of statism that was now throwing off its yoke. Few Chinese any longer believe that the government has the answers to their economic problems.

  Like successful entrepreneurs in many parts of the world, Chinese entrepreneurs are bringing every scrap of energy, money, and technology they can marshall into their businesses. Two decades from now they are going to be among the best capitalists in the world. They may still call themselves Communists, but I promise you they will run circles around most of us. In the south they’re already achieving great prosperity.

  …

  We had the usual confusion that results from crossing a border that sees few travelers. This border had only recently been opened. The officials here had never seen visas or carnets. No one wanted to change dollars into Chinese currency. Although we both had international driver’s licenses, the Chinese weren’t sure if they should accept them or even our international vaccination certificates. We got in. At once there were lots of people around, many more than I had expected. I concluded that the national government encouraged the Han, the country’s major ethnic group, to move out west both to provide a buffer from the Soviet Union’s military adventures and to dilute the predominant Muslim population.

  We drove into Yining, the big border city. The so-called luxury hotel we stayed in had just been finished, and it seemed to be benefiting from transborder traffic. There was lots of beer but no more vodka.

  Two years previously I had noticed that every Chinese town was building a tourist hotel, often spending lavishly on luxurious palaces that made me wonder who would ever rent them. These hotels were part of the wild inflationary boom of 1988 and 1989, which was a forerunner of Tiananmen Square.

  Now the central government was telling the towns that they had to stop building these stupid hotels, that it wouldn’t pay for them anymore. The local party cadre across China had built fancy hotels and office buildings the way the Soviet Communists had built monuments in the heroic style to the Second World War effort in every town—as status symbols, trophies, not on any economic basis.

  I was worried about the road through the Taklamakan Desert, because it had been such a disaster when I had driven through in 1988. That was the five-hundred-mile stretch from Turpan east that I’d described to Tabitha, the worst motorcycle nightmare of my life, a constant struggle over sand dunes, rocks, hills—falling down, getting stuck, digging my way out. We had to go through Hami, a town right smack in the center of it all. I hoped Tabitha would be all right. Hell, I hoped I would be all right.

  Picking our way along the mountainous road we saw strange dark objects—tents, or yurts, made from what appeared to be the skins of goats and bears. We pulled over and stared. Silence, except for the occasional bleat of a goat. A shy little girl with big eyes in a long skirt stared at us. The yurts made sense for these tribesmen, the Uygurs, because they could be dismantled in a hurry and packed on a camel.

  The little girl was five or six and had an older sister, eight or so. We gave them some bread and they looked back over at their mother and the latest baby, mutely asking if they might take it. After she nodded, they took the bread and ran back to her.

  We went over. In the usual combination of sign language and simple English we asked if we could look inside the yurt, which was fine with her.

  At first glance the inside appeared bare, but that was only to a Western eye expecting the clutter of furniture. Along one wall a small cloth-covered table held clean pots and crockery, and hanging from the ceiling was an embroidered, flower-decorated white cloth that could be dropped to divide the inner space. A kettle stood on the bare ground beside a dark purple rug. Several pallets were turned against the wall to serve as backrests. There was a pile of skins, too. After all, this was a cold climate much of the year; they needed them.

  I wondered why I had seen so few of the nomadic Uygurs on both trips, and then it hit me. Like the Eskimos, they were disappearing because of technology and the march of the twentieth century.

  The Chinese were busily building a road from Ürümqi south to Pakistan and another from Ürümqi to the Soviet Union. Many of the Uygurs either worked on these roads or had regular jobs maintaining them. The new roads also allowed tribesmen to get regular work in the cities. Thus there were fewer nomads, and fewer Kashmir goats, and as a result cashmere has become almost prohibitively expensive in New York. An entire culture might be destroyed because of the roads.

  This is how man’s world is, constantly shifting, constantly changing everything around, opening opportunities for some and closing them for others, just like Mother Nature herself, and those who don’t accept it will find themselves swimming against a powerful flood. I know all the arguments of how we must stop the boot heel of progress, how we must preserve the way things were in the good old days. I’m not convinced there ever were any good old days.

  There are those—not me—who would look at this woman and say, “This is terrible, we shouldn’t destroy these people, this culture, this way of life by tempting them with roadwork,” just as we’ve been told we shouldn’t destroy the Eskimos.

  I wonder what the Eskimos and Uygurs would say. They certainly didn’t have to stop being nomads because work in towns and cities opened up. I looked at this woman’s life in these glorious yet windswept and desolate mountains and said to Tabitha, “Boy, I’d be glad the road came to town and I could go and do other things.” I remembered how happy we’d been back in Demopolis when they finally paved the streets. Apparently most Uygurs agree with me.

  That this road-building had driven up the price of cashmere intrigued me. Here was an example of how an investor has to think. If they’re putting in a big road in Pakistan and China, it has to have an effect somewhere. Every time an investor sees a big change coming he has to start thinking, Okay, what does this mean? Where does it lead? What are going to be the economic, political, and
social shifts because of it? And won’t the new railroad to the USSR intensify these effects?

  Well, in thirty years most of the yurts are going to be gone, with the owners of those left charging forty dollars a visit. They’ll fix them up with a bed and indoor plumbing and charge you a fortune to have a genuine nomadic experience, plus you’ll pay more for cashmere. (When I called my office, I had them stockpile two or three cashmere sweaters for my return.) But these would be only the beginning—only the superficial changes.

  Spring was turning into summer. We drove from Yining over the mountains to the city of Shihezi in Xinjiang province, a pretty drive but with patches of bad road. This western province was a sixth of the size of the continental United States, but it had only 15 million people. Compared with China’s population of 1.2 billion, this was nothing.

  The next day we reached Ürümqi, still a big, growing, modern city. The railroad to the USSR was just about finished, which would help the region prosper.

  Out here we feasted on roasted sheep, mutton shashlik, pilafs, and steamed mutton dumplings. Street vendors offered us kao baozi, packets of baked bread dough stuffed with mutton and onions, as well as steaming mutton soups, dumplings stuffed with mutton and herbs, and rice pilafs with apricots, mutton, onions, and carrots. Boiled noodles with a side of sautéed mutton, onions, tomatoes, and green peppers was a popular dish. Delicious!

  Of course I learned to say beer in Chinese. In fact, after this trip, I can say beer in forty languages.

  To my delight, I learned that the Dunhuang-Ürümqi Highway was completed; that old northern route that had given me such nightmarish trouble on my last trip was a thing of the past.

  As I traced out on my map the recent development of highways and railroads through this desolate part of the world, which I still thought of as Turkistan, I saw it was going to be transformed by its new infrastructure. The ancient Silk Roads, once mountain trails fit only for camels, were being replaced by those suitable for long-haul trucks and the iron horse.

  This vast area, bounded east and west by the Caspian Sea and the Taklamakan Desert, by the Himalayas to the south and the Kirghiz steppes to the north, would become prosperous. Trade, tourism, and their resulting opportunities would create dozens of ways for sharp-eyed entrepreneurs to become rich.

  Why hadn’t it happened before? Back in the fifties the Chinese and the Russians had been pals, and spying the opportunities here, part of their military, political, and economic alliance had been to develop an infrastructure to link the two countries. They’d set out to extend the Chinese railroad through Xinjiang province to connect up with the Soviet presence in Turkistan and onward to Europe. Then they’d had a spat, and the railroad was never finished beyond Ürümqi.

  When India went to war with China in the early sixties, it had become allies with the USSR against their new common enemy. To maintain the balance of power, China had aligned itself with Pakistan. Naturally, China and Pakistan needed road transportation in the event that either would have to rush in troops and materials to prevent an invasion from the other axis. The Karakoram Highway, linking Ürümqi, Kashgar, and Islamabad, this seven-hundred-mile joint project of Pakistan and China that also had been interrupted by political tiffs, was finally finished.

  Not only had these projects given local workers jobs, but they would now bring in tourism and commerce. Tribesmen were romantic nomads before because they had little else to do. Now they would have a choice.

  Before this southern route was finished it had been one of the worst driving experiences in the world, less a road than a river of broken boulders tumbling across the mountains. Its completion was a tribute to man’s courage and ingenuity. Part of the route was blasted out of sheer rock faces over deep canyons of the Indus River. In many places workers had to hang suspended by ropes to drill holes for dynamite. More than four hundred men had lost their lives building it, and now small cairns marked their graves.

  It had been dangerous to build and was still dangerous to drive on, for rock slides and flash floods were a constant threat. On their side of the border the Pakistanis deployed ten thousand soldiers just for road maintenance and emergency clearance.

  Now the railroad was being completed from both sides of its northern route by the Chinese and Russians, which would link this area to Alma-Ata and Kazakhstan, and from there to anywhere west—Istanbul, Moscow, London. Turkistan would be open to the outside world in every direction—north, east, south, and west—after centuries of isolation brought on by primitive communication and transportation. I knew that as apparently simple as this railroad and these two new Chinese roads were, they would have major ramifications for the political, economic, social, and historical future of not only Asia, but the entire world beyond.

  Now we drove through real desert, dunes and distant mountains, into Turpan and the Turpan Depression, the lowest dry land in the world. Turpan was a Uygur town with Muslim mosques and domes, non-Chinese in many ways.

  While it was hot and dry, thankfully it was May and not August. In this desert the winds were more ferocious than I’d experienced in any setting, especially on a motorcycle. Last time through I’d had to constantly fight to keep my motorcycle upright. Once I’d parked on the asphalt, and a gust had knocked over my five-hundred-pound machine. I remember watching a woman in a passenger car unlock her door over and over in her struggle to open it, unaware that the powerful wind had kept the door jammed shut.

  What amazed me on both trips through several thousand miles after leaving the border region of western China was the lack of people. Nowhere can you go a hundred yards in eastern China without seeing someone. But out here, eighty or ninety miles inside the western border and on the other side of the hills, we drove scores of miles without seeing anybody.

  It was startling, too, that the cultivated portion of the desert here was greener than on the Russian side, and we soon discovered why. Not only were the Chinese better organized, they had devised a clever system of irrigation tunnels beneath the desert that drew water from the mountains to augment the natural oases they’d built their cities around. Hundreds of years old, these tunnels kept the loss from evaporation to a minimum. I was stupefied, stunned, that the Chinese had not only run them for hundreds of miles but had done so for centuries. In the towns, sluice gates, irrigation ditches, and intricate valve systems sent water when and where they wanted it. They even watered down the roads every morning to reduce dust. With a system that survives to this day, the ancient Chinese had cleverly turned straggly desert oases into prosperous towns surrounded by fertile fields.

  This Chinese ingenuity and conservation contrasted sharply with the Russian use of the Aral Sea over the past few decades. The Chinese had turned the same countryside into a garden that the Russians had turned into an eco-catastrophe. I wasn’t surprised to learn that the Chinese were the first to increase crop productivity by planting in rows instead of scattering seed around.

  A lot of the Chinese success had to do with economic and political organization. The Russians had set into action a system without accountability, and were quickly reaping what they had sown. The Chinese had nowhere to go—no frontier, no Siberia, no Virgin Lands, no conquered territory—so they made do with what they had. They reminded me of societies of hunters, such as the Eskimos and other Native Americans, who lived in harmony with nature because they knew if they killed off the animals, that was it. Some Chinese farmers were so skillful they got three crops a year. They planted right to the edge of the road, using every square inch of land. They fertilized their soil, they rotated crops, they did everything that had to be done to make the land work well for them.

  In Turpan, while we were having a new head gasket made for Tabitha’s bike, I went to the market, an outdoor bazaar. It had beautiful melons, not at all what you’d expect in the middle of the desert, another tribute to the Chinese skill with water management.

  We needed local cash, so I hunted up the black market in currency. Wherever there are exch
ange controls, as there are in China, there’s a currency black market. I find such markets, capitalism in the raw, fascinating, because if there’s one quick and sure way for an investor or a traveler to find out what’s going on in a country, this is it. The price of the currency is to the prudent investor what an X ray is to an experienced radiologist.

  The premium over the bank, or official, rate gives me my most important clue as to what the government is up to. If I can buy five zlotys for a dollar at the bank, but I can get eight on the black market, it tells me the government is trying to foist its currency on its own people, that it’s afraid to let it float on the world market.

  Even without asking I know if a country has currency controls, import taxes, and probably export restrictions. Governments think exchange controls keep money in their country, but they keep it out. If the currency is freely convertible, outsiders will bring money in and insiders won’t be in a desperate struggle to smuggle it out, which they always are if the currency isn’t convertible. Certainly the last place you or I want to put our money is someplace where we can’t get it out. So many other investors feel the same way that no one will come in with or behind us to bull up the market. This simple test often tells me whether to bother exploring a country further for investment.

  If the rate on the black market is five-and-a-half zlotys to the dollar, compared with the state bank’s rate of five, then things might not be so bad. But if it is ten or fifteen to the dollar, then I know the country is in terrible shape, with maybe the collapse of the government or hyperinflation on the horizon. It spells trouble for everybody, massive instability.