those in other countries, with those in other countries feeling more excited than threatened by their
interactions and trade with China.
Reuniting China by regaining the territories that were taken away during the “Century of Humiliation” was also a
very important long-term goal. Progress was made by Deng along these lines when in 1984, after a lot of haggling
with the UK, it was agreed that Hong Kong would return to Chinese sovereignty in 1997, with its “one country,
two systems” approach. Then in 1986 China reached an agreement with Portugal to obtain Macau’s return to
Chinese sovereignty in 1999.
In 1984 I had my first direct contact with China. My direct contact since, along with the facts I’ve learned, has
affected my perspective. Because these interactions have been so valuable in helping me gain my perspective and
would help you understand my perspective, I will refer to some of them when relevant. At the same time, because I
don’t want to be indiscreet, I won’t pass along information that I believe those who gave it to me wouldn’t like to
have passed along, and I will avoid mentioning the names of any people now living.
In 1984 I first visited China at the invitation of China International Trust Investment Corporation (CITIC), which
was the only “window company” (which means the only company that was allowed to freely deal with the outside
world), to explain to them how the world financial markets work. The company was set up as an extension of
Deng’s “reform and opening up” policies and was run by an old Chinese capitalist, Rong Yiren, who chose to stay
in China even after his family business was nationalized. CITIC was set up to learn about and experiment with
dealing with the outside world and capitalism.
China was very poor and backward then. However it was immediately clear to me that its people were
smart and civilized. In this regard it wasn’t like most other undeveloped countries I was used to because the
Chinese backwardness was due to the people simply not knowing about or having access to what was
available in the outside world and because they were operating in a demotivating system. For example, I gave
$10 calculators as gifts to people, including the highest-ranking people, which they thought were miraculous
devices. At the time people couldn’t choose their careers or their jobs, they received no financial incentives for
working well, all businesses (including small restaurants) were government-owned and bureaucratically run, there
was no ownership of property such as one’s home, and there was no contact with what the world had to offer in
terms of best practices and products.
Because it was clear that the closed door was a barrier that led to two different economic levels to exist in China
and in the developed world, it was clear to me that the removal of that barrier was just beginning that would
naturally equalize their economic levels, like unconstrained water naturally seeking the same level. It was easy to
visualize that change happening. I remember being on the 10th floor of CITIC’s “Chocolate Building,” giving a
lecture and pointing out the window to the two-story hutongs (poor neighborhoods) and telling my audience that it
would not be long before the hutongs would be gone and skyscrapers would be there in their place. They didn’t
believe me and told me, “You don’t know China,” and I told them they did not know the power of the economic
arbitrages that would happen as a result of opening up. That opening up was the biggest force behind the high rates
of improvement that we saw over the last 40 years. While the opening up created a great natural opportunity, the
Chinese made the most of it and performed even beyond my highest expectations. They did that by making and
implementing Deng’s reforms, supported by uniquely Chinese cultural influences. These reforms freed up the
Chinese people to achieve the exceptional results laid out in Deng’s plan. Globalization and the world wanting to
include China in it also helped a lot. The expressed goal at the time that I heard a lot of was to “break the iron rice
bowl,” which was to not provide demotivating guaranteed employment and assured basic benefits and to replace
them with more incentive-based compensation.
Deng was a very smart, eager learner who was helped by knowledgeable outsiders to produce China’s
economic advances along its desired development arc. He also directed his policy makers to learn from
outsiders in the same way that he did. That is how I and many others got invited there. It is also why Deng turned
to other world leaders, especially leaders of the “tiger countries” who were culturally aligned with China,
especially to Lee Kuan Yew of Singapore, for advice. I remember having a dinner with the head of China’s
MOFTEC (which was their ministry of commerce) in Beijing in which he rattled off lots of details about things
like how Singapore’s airport ran (e.g., how long a passenger had to wait to get his bags at baggage claim), how
those in Singapore achieved such great results, and how China was going to implement those practices. Many
years later I had the opportunity to host Lee Kuan Yew at my house. At that dinner, which included some other