The Traveling Economist, Part 1

by Carol on August 7th, 2010

In February 1986 I had a three-hour interview with an English economist who had just come to Hong Kong from China and was thinking of writing a book on the black market. At the time Michael was in his mid-thirties, a tall, dark-haired, handsome man. He had an aura around him which you often feel with long-term travelers who endure months of privation—an offhand, casual, self-sufficient strength paired with loneliness and a need to talk to another speaker of the same language.

Because of its length, I divided the edited transcript into two parts. The first contains his observations of sleaziness, black markets and thievery; the second, his personal reactions to traveling around China under very harsh conditions and talking to people.

Note: The problem of unregistered residents remains a major problem in China. Foreign Exchange certificates were phased out in 1998. To find out more on FEC, check out the link on the right entitled “China’s Foreign Exchange Certificates.

Michael’s story

There is a distinct sleaziness about what is going on in China right now which is reflected in the way people dress and behave. There’s a very crass kind of youth culture. The women dress either a bit more soberly or a bit more flashily than the men. I was surprised to see women going around with furs, particularly in Shanghai with its pre-war image of these really beautiful women. It’s almost like going back to the thirties. There’s a real pursuit of a kind of nostalgia. It’s the hip thing for men below a certain age to dress in a remarkable new fashion. They have their hair permed, they wear long jackets like they used to in Britain in the fifties with tight-fitting, flared trousers and high-heeled shoes—often women’s shoes. Young men all over China affect this peculiar style of dress and behavior. It shades into something I would call “the return of the spiv.” In Britain after the Second World War when everything was rationed, we had people called “spivs,” the black marketeers who came out on the streets to sell silk stockings or whatever. They used to dress in a particular way with a Trilby hat and wide-shouldered gabardine coats and jackets.

In China quite often these “spivs” are engaged in that kind of business. You see quite a few on the train. They’ve got rolls of notes in their back pockets. Generally they’ve been all round China taking products from one place to another. The ones I met were traveling “hard bunk” [second class] and “hard seat” [third class], though they certainly could have afforded to travel “soft class” [first class] if they’d wanted to. I met one guy taking products from Guizhou to Shandong. He had not only been all over China, he boasted that he’d also been outside to Britain and France. How he did it I don’t know, but I’m certain he was telling the truth because he could describe the places quite well.

Most Chinese people don’t even know that Paris is the capitol of France—or even that France exists. As a Brit I’m always surprised that Britain is on the map when other places are not. An astonishing number of people—ordinary manual workers—have mentioned to me that that London has fog and that Margaret Thatcher is the Supreme Ogre of Great Britain. They all say, “Mrs. Thatcher, Mrs. Thatcher, I know. I have often seen her on television.”

A lot of trading seems to be done by commercial travelers. Shops often don’t specialize, for example in electric rice-cookers and electric fans. They buy whatever seems to be in short supply where they are. Maybe they have a salesman who’s traveling around, “Ah great, it’s difficult to find widgets in Hunan Province, but this guy in Shandong just sold me a huge supply at an amazing knock-down price.” You often suspect that they can’t actually get rid of the widgets at the other end, but they might buy them all the same and fill the shop up to the ceiling.

Then, of course, an important part of the way business is done is the black market. If you’re a tourist, you come across the black market straightaway because outside most of the main tourist hotels there are people who will offer to change money for you. These “spivs” want to change local Chinese money for foreign exchange certificates [FEC], which you as a foreigner are given at the bank in exchange for your own currency. The certificates are supposed to be the exact equivalent of Chinese notes, but in practice there’s a considerable difference. I believe the going rate is 1.4 yuan for every yuan of FEC.

A new shop which took only FEC

A new shop which took only FEC

The reason they do this is because ordinary people can get things with FEC which they can’t without them. Those things are mainly imported goods available only at friendship stores [stores for foreigners and privileged Chinese] or special stores licensed to sell imported products. For instance, a person can take illegally acquired FEC to a Chinese shop selling Chinese goods, like Shanghai Phoenix-brand bikes, which are scarce objects with waiting lists, and skip the waiting list by offering foreign exchange certificates to the shopkeeper. Some goods you can get at a cheaper rate if you offer foreign exchange certificates.

The reason for the black market is China’s shortage of foreign exchange. The government tries to ration it by allocating FEC to certain types of people, notably foreigners, as a means of making it more convenient for them. This black market operates not just in privately run stores, but also in state stores. And everyone seems to turn a blind eye to it. It’s only where it becomes either very large-scale or very obvious, too embarrassingly obvious, that anybody takes any action on it.

Indeed this black market extends to a number of things, such as grain ration tickets. That’s perhaps another area where there’s a shortage and where this is got round by having a black market. Grain is rationed. That’s to say mainly rice, but also other staples are included in the grain category. The state buys it from the peasants at a quite high price and sells it in the cities at about half that price to people who present ration tickets. Everybody who’s registered to work in the city and has a local resident’s registration card gets ration tickets for a certain amount of food every month, depending on the kind of work he or she does. This gives the people access to the subsidized grain. But very frequently people fall outside the system.

A lot of those outside the system are people who came into the cities who can’t register. In some cities, maybe a quarter of the population is unregistered. That’s a big section of the population. Lots of people drift into the cities from poor areas in the countryside because they fancy their chances are better in the city. There are also the construction workers in the Special Economic Zones, people who were drafted to work on state projects or hired by labor service companies. I don’t know the exact figures, but let’s say in the case of Zhuhai 50,000 people have come in from the countryside to build the skyscrapers and all the infrastructure there. They have not been able to register and therefore can’t get ration tickets legally. The only way they can live in Zhuhai—and the only way Zhuhai can be built at all—is for them to go out on the street and buy grain tickets on the black market. If the government put a stop to it, all sorts of other things would stop, and the whole economy would grind to a halt. This is the intriguing thing, the way that the government’s legal system lags far behind the actual situation. That’s something I spent quite a bit of time looking into. I was interested in finding out the circumstances of these people and what was happening to them.

The unregistered residents who are very poor—not the traders I mentioned earlier—were driven into the cities by necessity. The way they get by, if they get by at all, is to rely on friends or relatives. You meet a great number of people, particularly young people, who’ve come in and have no job and no income, and they’re supported entirely by friends, living in friends’ houses, constantly worried about their status or whether they’ll be able to get a job. The Chinese call them “black residents”—in other words, illegal residents. I think the government won’t let these people register because officially they’re still very much against large-scale migration into the cities. The authorities want some control over the migrants, some possibility of turning them out in the future.


Just after the Cultural Revolution a lot of people wanted back into the cities when they were released from their duties in the countryside. Particularly a lot of students came back into the cities, and in some cases the local governments were forced to allow them to register—just through sheer weight of numbers, through the strength of opinion, through the amount of influence their parents could exercise. A lot of these students were children of quite powerful people, including party figures, and they pulled strings and managed to get their children registered. But now there’s a more general movement to the city, and registration has still not been possible for most people.

This time I really did notice people who were living like hobos traveling on freight trains from station to station, looking really disheveled, really filthy, hair sticking out all over, wearing rags. When I asked people where they were from, they would generally say they were from some poor farming area, particularly from places in Hunan Province. Even amongst themselves, the Chinese would be commenting on beggars and saying, “Oh, you must be from Hunan,” so Hunan must be fairly well-known for that, whether it’s true or not.

Of course as a foreigner you’re a likely target for whatever beggars might be around. Many Chinese push them away or ignore them. Others go out of their way to put money in the hat. There aren’t many beggars. I think most people would rather stay poor or rely on friends or relatives. There are other, less obvious beggars, people who will try to get money out of you by one ruse or another or practice the general thievery rife in China amongst taxi drivers and others.

There are other black markets as well. You could make a lot of money on bicycles. It’s been illegal for some time to take bicycles across provincial lines for sale by private people, but people were doing it in large numbers. To crack down on the practice the government finally just increased the cost of a bicycle ticket by about three times in one year. So that’s another example of a black market which the government recognizes, but which it has decided to tax rather than stop.

Parking for bicycles

Parking for bicycles

Bicycle thievery is really commonplace. There aren’t very many bicycles that a Westerner would normally think are worth stealing because the difference between one bicycle and another—apart from the make—isn’t really obvious. None of them has gears or particularly good brakes. If you look at what bicycles cost compared to what people earn, then you can see why people steal them. Bicycles are quite expensive things for many people. The police do clamp down on bicycles theft quite a bit. They do get people’s registrations, they have checkpoints in the roads, and they do swoops on bicycle parks. I think keeping track of bicycles are a big element of police work.

There are a lot of police—city police, military police, and transport police—a surprising number of military police. I asked people why there were so many military police when their duties were not exactly obvious. All the people came up with was to say, “Well, it is just characteristic of the communist party to be so obsessed with social unrest. I expect it’s the same in all socialist countries, isn’t it?”

My contact with the police was purely accidental. I had a camera and a whole lot of money stolen, so I had to report these to the police and I had to go through the whole bureaucracy. [Certain items like cameras and watches are registered with customs when you enter the country, and you have to leave with the same items.] The camera was quite a simple matter. I was traveling on a train and someone took it out of the bag on the luggage rack of the carriage I was sitting in, an open “hard seat” carriage. I don’t know how the thief did it or when exactly. So it was very difficult to do anything about that.

The money was more interesting. A Chinese friend was showing me around the town, and right before I was about to get off the bus somebody took my wallet out of my pocket. The doors opened then, and this guy ran off. I’d just noticed that it was missing, and I just turned round to look for it and couldn’t find it. Two people identified the guy who took it. One was this friend of mine, and the other was the conductress of the bus. So the police had two descriptions, and apparently they identified the person pretty much straightaway. I filled out a very long, long form with questions and answers in Chinese and then in English, descriptions of absolutely everything to do with what I’d lost in the minutest detail.

Anyway, they asked me to come back three weeks later after my trip to Hainan Island. I came back, although with some trepidation, because while I was in Hainan I met someone whose friend had had something stolen and been asked to do the same thing. The police asked her to attend the execution of the guy who’d robbed her, who was a professional thief. She refused, and it caused what she described as a rather a nasty incident with the local authorities. They expected her to do it, and they were surprised when she refused. How it ended up I don’t know. I don’t think she witnessed the execution, but they weren’t pleased.

Another point of view, of course, is that if you report these things to the police then you should be prepared to go through with the consequences. But when I reported this thing to the police, it didn’t occur to me that they might execute someone for such a small crime. The advertised executions are usually for rape or for some very large fraud or something of that kind. But in my case the police told me that the thief was not a professional. I steeled myself to go see them in order to ask them to exercise some leniency, but that wasn’t apparently necessary. I asked them what sentence he was likely to get, but they couldn’t tell me. All they were interested in, really, was for me to supply a signed statement on the evidence that would enable them to take the guy to court. So it didn’t come out as badly as I’d feared.

You sometimes wonder whether you should report things or not. Many Chinese people believe it’s useless to report things to the police. Maybe it is. Everyone told me, “The reason you got your stuff back was because you were a foreigner. The police made special efforts. If you had been Chinese the police wouldn’t have bothered.”

Well, obviously my thoughts are affected by my own experience, but I would say without a doubt the crime rate has increased in recent years. The Chinese don’t fear foreigners as much as they used to. [The punishment for stealing from a foreigner is much higher than for stealing from a Chinese.] I had a watch stolen in 1981 when I was traveling around in Guilin. That was taken, I think, by one of the hotel staff. I’d left it on a ledge for a couple of minutes and went back, and it was gone. Thieving isn’t new, but it’s rising.

Chinese people are always extremely careful about their belongings, and they’re surprised that Westerners leave things lying around and not thoroughly locked up. I traveled for a while with a Chinese guy who, every time the train stopped, would rush to his luggage a bit further down the car and wouldn’t reappear until the train started again. He came back on one occasion and pronounced to me in a sententious tone, “A moving train is a safe train.”