Use the past to serve the present

They’re back. Traders from across the Silk Road are again visiting Yiwu.

The small coastal city is China’s largest distributor of small consumer goods. It sells mainly to Silk Road traders. But the city’s exhibition halls were empty when I visited in early July. Stall holders sat outside their empty shops playing cards with each other.

What happened? The government tightened its visa policy ahead of the Olympics worried about security during the event. It wasn’t just Silk Road traders that struggled to obtain visas. American and European bankers and CEOs also faced problems.

In the West, it’s mainly big multinationals like Wal-Mart who buy goods from China. In the East, it is mainly individual traders who are buying goods to supply their own shops or stalls. Individual traders can’t rely on large purchasing networks and so suffered most from the visa restrictions.

But the Olympics are over and it’s back to business as usual. I spoke with a friend in Yiwu a few days ago and the exhibition halls are apparently full of Silk Road traders again.

The visa restrictions were a shock to many. After all, China has adopted a relatively open-door policy in the past decade in order to attract foreign traders and, more importantly, foreign investors. Today, it’s easier for many Silk Road traders to visit China than visit America or Europe. This is particularly true of traders from a Muslim country.

It’s a smart policy. It’s also the reason China has emerged as the world’s most popular destination for Silk Road traders who are buying the type of cheap consumer goods so popular with hungry consumers back home.

But don’t be fooled. China will continue to balance its economic interests against its security interests. The Olympic-related visa restrictions are not an isolated event. I expect China will use its visa policy more frequently in the coming years as way to regulate its economic relations with the rest of the world.

There is precedent. Trade between China and the rest of the world flourished during the Tang Dynasty (618 to 907) as it does today. Yet, the Tang rulers required foreign traders to live in designated areas, specifically a handful of cities, including Chang’an (modern-day Xi’an) and Guangzhou. Historically, the ability to trade with China is a privilege, not a right. The same is true today.

Neither are the restrictions limited to trade. Foreigners may enjoy the privilege to visit China. But few enjoy the right to settle permanently (I exclude ethnic Chinese from my definition of foreigners, in particular ethnic Chinese residents from Hong Kong and Taiwan).

It is a fascinating response to the challenge of globalization and one that contrasts starkly with the West. The Western countries have traditionally welcomed immigrants. Immigration has been a major driver of the world’s largest economies in the past century. Indeed, eight out of ten of the world’s largest economies all accept immigrants.

But might this be changing? It’s tempting to focus on China’s rising economy. However, I believe the country’s reinterpretation of globalization is equally important. Its willingness to put limits on the free flow of people either for trade or immigration might signal a new era for the global economy. The fact the change is taking place at the same time Western countries have, post-911, imposed tighter restrictions on visitors and immigrants is not entirely coincidental.

They say in China, ‘Use the past to serve the present’. It was a phrase used frequently by Chairman Mao Zedong. It still resonates thirty years of his death. The rise of China isn’t just about economics. It’s also about the rise of a culture that has a different view of the world. The implications for the global economy are still largely untested.