Our Chinese Business Manager
Perhaps it’s because of our company’s size – but, despite our good business in China, our Chinese business manager lives not in Beijing or Shanghai, but in Pinner. Aged 63, the year he was born – 1953 – was the year of Chairman Mao’s 60th birthday, the year President Xi Jinping was born, the year of Stalin’s death and also the founding year of our company. It was an auspicious year, you might say. Our agent was posted by the Chinese state metal trading company, Minmetals, to London in the late 1980s, which is how I met him, and after his posting he stayed on. Of an age to have experienced the Cultural Revolution, he is ‘old guard’, with a conservative and non-aggressive approach to business. At the age of 16, in 1969, he was sent to Heilongjiang near Harbin in the far north of China, to work on the land. These were the border-lands with Russia. As young people, one of their jobs, when not tilling the land in temperatures below 40°C, was to defend China from Russian incursions. This was done with sticks, clubs and scythes. For this, he was paid 32 RMB per month, from which 12 RMB was spent on food. After two years he was allowed two weeks holiday to see family, which included two days of travel. In all, he was there three years while others of his contemporaries were posted between seven and ten years. Food was so scarce that at times they shot and killed wolves to eat meat. But he does not talk of hardship. ‘I was young and knew of nothing else,’ he says. Today, I detect, there is a pride in the fact that he was part of a group who helped create the conditions to grow one-crop corn, soya and wheat in these unforgiving lands which now help to feed China.
Metal travel at its best generally avoids beaches – unless, that is - in the form of Zirconia and Rutile - you are buying them. As I travel north at 300 km per hour on the G Train, the experience is akin to being a passenger on a low-flying aircraft. The regimented land in this post-harvest season of November is laid out before me – stooks of corn husks stacked in symmetrical patterns in the flat brown land will later, in deep winter, be used to heat homes; spindly trees almost leafless are laid out in formation like those in Northern France which stand as testament to those who died in the First World War; strange rounded tree-less hills look as if they could be man-made; I see a sudden burst of yellow corn cobs drying on low roofs; we pass goods trains a kilometre long, quarries, concrete and aggregate factories vying for air with petrochemical plants and power stations. It is now standard practice to talk of the polluted air of China, but perhaps I should rather talk of a country that has pulled more people out of poverty and into work than all the righteous charities in the West put together. This is a country in transition which may one day lead the world in terms of renewable energy. It may not look so today – but China has the power to shock us in a good way.
A land where almost everything is for sale but there is not enough to buy
A trip within any country, other than one’s own, can lead us to question well held beliefs. A visit to China asks us to question, for example, whether a society can have too much laisser faire in trade, while providing not enough protection for fundamental industries? In the UKs case, what corporate UK did with our freedom to sell large companies to the highest bidder, despite any national significance, judges us. In metals, the repercussions of the sale in 2012 of the LME may in time be felt for as long as its once illustrious history. In a wider sense it is not hard to see that the Utopian EU was content to allow our heavy industry to migrate East, and for us instead to import the shiny finished articles which add to our trade deficits. We denuded and threw into poverty our industrial heartlands, while giving China a free ride to prosperity. Today, huge state businesses in China, as well as private ones, have made so much profit that their predicament is the shortage of objects to spend it on. For this reason HKEx’s plan to open registered LME warehouses across China is a fearful development. Ostensibly, HKEx has the chance to bring this once glorious instrument of metal price discovery to China. In reality, it will bring gambling, as once opium, was brought to the masses. In our small world of the MMTA we were lucky enough to steer clear of this oncoming train when the Fanya Metal Exchange applied for MMTA membership. Unfortunately for them, Fanya fell foul of our Rule A – that all members must be involved with the consumption, movement, or trade, of metals, but not investment in them. Fanya went ahead in China and floated numerous minor metals that China over-produced which were then marketed in small quantities to widows and orphans across the land via rigged business TV programmes on CCTV. Fanya collapsed after a mere three years owing $6.5 bln. Investors who complained, rather than being heard, were locked up in jail to keep them quiet. One wonders what protection the LME will provide once warehouses are endemic in China? At best, the prices discovered could be skewed as a result of over produced metal dumped in warehouses from Shanghai to Xinjiang; or ramped up by investors, aided and abetted by an unregulated market in investment vehicles. At best, it will be Fanya all over again. If on the other hand history chooses to repeat itself, the result could be just a case of Qingdao multiplied by the number of warehouses the LME chooses to set up.
A metal market not yet ruined by Chinese over-supply
There is, it would appear, a minor metal which China neither dominates nor over-produces – Hafnium. Of course this will not be for long, but my opinion is that we might have another year or two of it. Hafnium (as mentioned in my Japan Diary) can only be liberated from its host by de-hafniating zirconia en route to producing zirconium sponge for nuclear application. The need for production of locally produced nuclear grade zirconium and hafnium for the Chinese nuclear industry is buried in one of China’s Five Year Plans – but unfortunately it hasn’t happened yet. What appears to perplex the Chinese most, in a country where over-production is a state of mind, is that we in the West appear relatively reluctant to meet all their demand. At the heart of it, is the growing need for Hafnium in non-nuclear applications; uses, for example, in nickel base directionally-solidified (DS) alloys for such things as large turbine blades in industrial gas turbines (IGT). As I sit at dinner in China trying to explain what these alloys do, I realise that I am not being understood and need an appropriate metaphor. Without a second’s thought, I borrow my host’s chopsticks to explain what I mean by stacking his sticks, my sticks and Mr Zhou's sticks together in a sheaf. I then explain that a DS alloy is one where the crystals are grown longitudinally, in one direction, like a chopstick, while the hafnium is critical to pinning the grain boundaries. By using this prop it is easy to see that the alloy would have great transverse strength – stacked together you couldn’t possibly break them – exactly what is needed in the rotating part of a high pressure turbine blade. Unfortunately, while I am very proud of my theatrical demonstration, I notice my host wiping down his two chopsticks with his napkin and realise that, in a country where food is more important than religion, I have probably contravened the bounds of Chinese table manners.
A Visit to the Bookstore
At the Beijing Books Building, not far from Tiananmen Square I gravitate to the English section like an American looking for a Subway outlet. It does not matter the country or the time of day I am magnetised to all bookshops. Here students sit on the floor or half prop themselves against the shelves apparently reading entire books they may be unable to afford. As I browse the shelves, I notice I am being followed. It is a young man with acne and thick glasses. As I look up he tells me he is a student and asks in broken English where I am from and, showing me a scrubbly bit of paper, asks I can help him to choose a dictionary. Getting on my knees at the right section and faced with rather too many dictionaries, I feel a great weight of responsibility to try and get this right. I ask if he wants a Chinese-English Dictionary or just an English Dictionary. I see there is a Pocket Oxford and a Collins. Turning the pages I note they are not laid out in a particularly user-friendly way, but either will be more appropriate than the rhyming dictionary which sits next to them. We say our farewells and he says I am the first person from UK he has spoken to. Later, in the town of Dezhou, at a small coffee shop with the most delicious bread, a young man reads while eating a loaf - slice by slice. Bread and pastry is something of a craze here. As my colleague and I walk back to the hotel he rides after us on his electric scooter to ask for a selfie with us. For a moment I think I have a glimpse into the life of Justin Bieber.
Back in Shanghai, after our travels, I return to my favourite park established by E James Hogg in 1914. Here, amidst this bustling City with a population, at 30 million, a third of the UKs total, this is a place of peace and stillness in the light of early evening. A few echinaceas and Black-eyed Susans are still bravely open in November. Old men play Mahjong, the gabbling of roosting sparrows mixes with the shrieks of children roller-skating, or learning to cycle, watched by grandparents, uncles and aunts, mums and dads. In another area just outside the park, couples dance jive as well as fox-trots and waltzes close by each other, practicing steps in peaceful, harmless, relaxation. A young man roller-skates, slaloming and dancing between tiny coloured hi-viz plastic bollards with intricate skill. A street painter, writes Chinese characters on the paving, dipping his brush into a jar. He is writing the beautiful Hànzi pictogram lettering with water which lasts long enough to be read and then fades, which reminds me of the inscription Keats ordered for his tombstone in the Protestant Cemetery in Rome ‘Here lies one whose name was writ in water’. The smell of leaves on damp earth from the many plane trees reminds me of the autumn scent of London that E James Hogg has bestowed here for this incredible city. The freckled trunks shed their bark carrying with them some of the filtered grime and particulate from the atmosphere, transforming Shanghai here to a place of rest and fresh air. As the yellow fan-like gingko leaves fall around me creating a carpet of shapes that children gather and throw like confetti, I contemplate the legacy of a man about whom I know nothing other than his name and realise his legacy for bringing a few moments of real peace for so many, including, tonight, me, will live longer, will be more immortal than the vainglorious attempts of so many others. Perhaps the UN should give up on its often fruitless activities and open 100,000 parks like this one?
Published November 23rd 2016 on www.lord-copper.com