Micro-enterprises then and now: Why I left China

I couldn’t help but laugh when I saw that China plans to encourage or subsidize small private businesses. The government’s attitude towards small businesses was very, very different back in 2013.

The Bo Xilai case in 2012 had made it quite clear that China’s leadership was not stable. Bo Xilai ruled Chongqing like a tyrant, rebuilt parts of the economy into his private patronage system, treated the police as his personal vassals, and treated the law with contempt. Bo’s downfall could have been a step in the right direction, but it was not.

When Bo fell, a veneer of law was utilized, but his true crimes were political. Reviews of criminal cases brought by the Bo administration did not happen. Businessmen who had been stripped of their assets didn’t get the opportunity to challenge those seizures. Policemen who stood up to the insanity, or just got caught sideways, are still sitting in jail, in all likelihood.

In 2013 the signs weren’t obvious, but there was enough of a shift in tone that I began to develop my plans for after-China. The new government was in my thinking ‘true believers’, and therefore they were going to take policy to extremes. By ‘true-believer’ I mean someone who believes that their ideology is flawless, and will carry that ideology to its natural breaking point. The opposite, in other words, of pragmatism.

I remember very clearly that the internet got strangled. Google, which was always dicey to use, became simply unusable. The soft blocks that had been used, off and on, for years became very hard blocks. Even yahoo email became all but unusable.

Google was always a bit of a dirty secret in China: It was officially taboo, but it still was extremely useful for a lot of people, and not just foreigners. This is the distinction between true believers and pragmatists, true believers consistently strangle the golden goose. Google made a lot of money on ads in China, then and now, because consumers and businesses use its services to make money, including a lot of exporters.

In 2014, in Shanghai at least, another huge change in policy was implemented, where mobile food stalls were kicked out of public areas and indeed out of the city. No corner was safe from the chengguan, the local city inspectors. The vast majority of food options that people had at many subway stops were simply gone.

As I’ve been thinking about this piece, I realize just how radical that is. Imagine a China with no food stalls. Imagine a huge subway station, with only a generic wonton shop and a KFC. A park with no candied crabapples.

The food stalls, the famous street food of China, disappeared. The government, which isn’t willing to give licenses to such tiny enterprises, used the pretense that the vendors didn’t have licenses to chase them away. I knew these people, this was their livelihood, and of course the snacks were delicious. Now they were out of work and I was left hungry. It's a small thing, but the raw irrationality of it was shocking.

I saw the inspection teams loading up the drum of a roasted corn and sweet potato vendor and take him and it away. They were all just following the law, in their eyes. To them, it made sense. Today, after all they’ve done, the government has made quite a mess for themselves. Speaking of inspection teams, the CCDI is still out there, grinding away.

In some sense it's never changed, this has always been an irrational government. Once upon a time foreign news broke the story that people were living in the Beijing sewer system, the government response was to seal off the manholes. I suppose the Beijing authorities weren't worried about maintenance of the system.

Political problems get attacked with any irrational approach, and the fact of effort to address the problem is enough. Efficiency, effectiveness, are secondary concerns. One need only look at how the government manages the low-end population, ie the people who drive the economy forward. If the leadership seems to be saying level an entire area, then that area and probably more will be leveled.

Other things were changing. Cheaper hotels that once would take a booking suddenly refused me as a foreigner, they said that the local police took away their privilege to host foreigners. It had long been a standard of modern China that discrimination in business was forbidden (recall that in the older days foreigners had different prices from Chinese), but the rules meant nothing, and the police were happy to flex their muscles.

Once I was traveling and was desperate for a place to sleep, but hotel after hotel denied me. One place told me they had a new registration system, a computer scanner basically, and it only worked for those with Chinese identity cards.

Certain national news struck home: Training centers would randomly be targeted by police, for whatever reason. One foreigner was arrested and deported because their working visa was not from the same company as the training center they were in, at that moment. As someone who has ducked into any number of training center classrooms to teach for an hour or two, this was disturbing.

In Beijing aspiring models were invited to come for a job interview, en masse, only to be deported for violating their visas. Of course during that time there were any number of foreigners in Beijing with tourist or student visas working in some capacity, sure we can even call them illegal workers if we’re being haughty. China had and has an extremely simplistic visa system that is hardly fit for a first-world economy.

In those days countless workers had to do visa runs to Hong Kong, the process was annoying in a sense but perfectly easy, spend perhaps 3 days in Hong Kong and get your new tourist visa. The alternative, a proper working visa as a foreigner, was only permitted for firms in certain sectors, and there were many restrictions. The economy benefited but the government didn't loosen regulations.

But just stop to think about it: People with a tourist or student visa are forbidden from going to job interviews? That’s just silly, the law doesn’t support this outcome, the economy itself couldn’t support that outcome. Did they offer them fake illegal jobs? How many people get a tourist visa and then try to find work when they arrive? I know I have!

This was just a government without rules for itself, flexing its muscles. The law increasingly did not matter, what did matter was some sense of ‘righteousness’. A small scandal in Shanghai happened when two students accused a professor of being improperly supportive of the Party. He had to retire, because when you wave the red flag you are untouchable. The professor had to explain himself, not the students. Bo Xilai raised the red flag, and this forced Xi Jinping to also establish his red credibility.

Living through it, I could feel that the new regime (Xi Jinping took power in late 2012/early 2013) was radical, so I didn’t delay in thinking about my future. New weird government propaganda started popping up. At first it was a paper-cut girl dreaming her Chinese dream, there was one mural I remember appearing, not a lot in Shanghai, in my recollection. On the new trains they had a little video with her as well.

Then came the 12 'core socialist' values campaign, which got everywhere, on every wall and bus stop. While it was not a leader's face, it was still a change from the decade plus I had been in China. This was the first time that the propaganda started to really spread, outside of the occasional banner and the walls of construction sites.

One anecdote stands out, from 2016. I had jumped in a shared uber in a 3rd tier city, and we were rolling along listening to some foreign music on the radio, something mellow from the 70s that I recognized but didn't feel inspired by. Suddenly the song ended abruptly, in the middle, and a new, Chinese song played. That song had lyrics that were incredibly simplistic, with everything being 'red': My heart is red, the country is red, and so on. Then, it played again. That's the way the government works now, abruptly, chaotically.

Of course also during this time the abuse of the Uighur began in earnest. Any family that had members abroad came under suspicion. Those members abroad were 'requested' to return, and if they did not the entire family could be imprisoned or detained. However even if they returned the suspicions remained and detention was also a common outcome. Uighur families had to allow Han into their homes to 'watch' them.

Witnessing the internment of a vast group of people was shocking. What kind of outcome can one expect when a million people or more are warehoused? Consider the costs to the government. How can that be unwound?

Not entirely unsurprisingly the warehousing led to forced labor. If you can't trust them, you can't release them, so now someone profits from them, ie Bingtuan, the quasi-governmental organization in Xinjiang. This is a huge stain on China's professed values and will doubtless cause great trouble for the nation in the future.

This paranoia was not limited to minorities, although minorities were treated more harshly. Overseas study was no longer favored, and parents and students were 'asked' not to go abroad. Tuition remittances abroad got harder and harder. Indeed transferring money abroad for any reason became harder. The government seemed to work on the basic and incorrect concept that any transfers out deplete China. I knew a very successful business owner in Shanghai that wanted to buy out the foreign assets of a European firm. She told me it was too hard to get money out; your money is yours until you try to remove it from China.

Today, and we see all the effects of these ruinous policies. Over-capacity in many industries. Falling house prices due to overbuilding. The government is pumping money into the stock market right now, billions of dollars, in a futile attempt to revive the zombie bourse.

Because the level of the Shanghai Composite in political, and is not allowed to send any signal of weakness. I remember State Propaganda cheering as the board rose and rose, determining that 5,000 was a good number for China. Then when the board dropped in 2015 a new policy was implemented: The board was not allowed to drop below 3,000, at least not by much. And so, the board died. Just like Hong Kong's vibrancy and economic power have died.

That's why this moment in time is so important: The political imperatives have brought us to this moment, where economic realities lay directly ahead.

The clash will be history-defining.