Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
7490140
label
The China Trader - Julian Sobin interviews with Stanley Marcus, Michel Oksenberg and Dwight Perkins
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
7490140
sourceUrl
contentType
document
title
The China Trader - Julian Sobin interviews with Stanley Marcus, Michel Oksenberg and Dwight Perkins
citationUrl
creators
Marcus, Stanley, 1905-
Oksenberg, Michel, 1938-
Perkins, Dwight Heald.
Sobin, Julian M.
collections
United States - China Business Council Records
Publications and Research Files
subjects
China
Interviews
International trade
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
7490140
coverageEndDate
logicalDate
1977-08-31
month
8
year
1977
coverageStartDate
dateQualifier
ca.
logicalDate
1977-08-01
month
8
year
1977
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
5587842c90071150
ocrText
The original documents are located in Box 373, folder "The China Trader - Julian Sobin
interviews with Stanley Marcus, Michel Oksenberg and Dwight Perkins" of the U.S. -
China Business Council Records at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 373 of The U.S. - China Business Council Records at the Gerald R. Ford Presidential Library
Marcus -1-
Sobin:
I am Julian Sobin and I am in New York with Mr. Stanley
Marcus of Neiman Marcus or Neiman Marcus, part of Carter,
Hawley, Hale.
Marcus:
Yes, we are an autonomous subsidiary of Carter, Hawley,
Hale of California.
Sobin:
Which was Broadway Hale at one time.
Marcus:
It was Broadway Hale and now Carter, Hawley, Hale named
after three of its principals with divisions in Los Angeles
where Broadway Stores do the largest retail volume in the
Los Angeles area. The Emporium division in San Francisco
does the largest in San Francisco Bay Area; Walden Books,
the largest single book seller in the nation. And the
Neiman Marcus group, the largest group of stores in Canada,
Holt Renfrew and Bergdorf Goodman in New York.
Sobin:
I had no idea the extent of it, that panoply of splendor of
all the stores you have everywhere. You were at the very
first fair attended by Americans in the spring of 1972,
weren't you, Stanley?
Marcus:
That's right.
Sobin:
How did you get that invitation do you think?
Marcus:
By talking to anybody and everybody who would listen to me
about China and I mean anybody. I talked to a Pakistani
Trading Company. I tried to talk to the Chinese and I
wrote, I think, 18 letters to Ottawa and never got an answer
GERALD
FORD LIBRARY &
to one of them. Finally one day a fellow called me up and
he said, "Are you interested in China? I've started a
Marcus -2-
trading company and we represent a large number of
American companies selling to China and we thought it
might be a good idea to have you, if we could do some-
thing for you." I said, "Well, I wouldn't trust you
to buy anything for our stores." He said, "Oh I don't
mean to buy for you but I think we can get you into
China and you do your own buying. And it will give us
somebody who has a chance to buy something and so from
that point of view you would be useful to us." And I
said, "O.K." This was the week before the Fair opened.
The day the Fair opened I received a telegram saying you
have received an invitation. Proceed at once to Hong
Kong to pick up your ticket. I said, " I want something
more than that." I said, "I want something official."
He said, "You'll have to take my word." So I gambled on
it and my wife and I flew to Hong Kong. We went to the
China Tourist Bureau; our tickets were there and we were
in China the next day.
Sobin:
Incredible. Were you intellectually interested at first
or were you commercially interested or a combination of
both?
Marcus: It was a combination of both. I had a long, long interest
in China and great respect and as anyone who has ever
studied Chinese history and art must have and I also believed
FORD LIBRARY & GERALD
at the time that America was hungry for anything that was
Marcus -3-
Chinese and that belief was proved out when we brought
the first things in from China. We had almost a sellout
within five hours of opening our collection.
Sobin:
If I remember correctly the rumor had it that you bought
some pretty fancy Mandarin robes and things like that,
didn't you?
Marcus:
I bought every fine quality Mandarin court robe that there
was for sale.
Sobin:
Isn't that amazing!
Marcus:
You may be interested in a little story connected with this.
I went up to the Canton Trade Fair and I asked the Director,
or the man who had been assigned to me, I said, " I would
like to see some antique robes." "Well," he said, "we
don't have any antique robes." And I said, "Well, I'm
sure you must have them." And he said, "Well, they are
too expensive." and I said, "What do you mean they are
too expensive?" "Who said so?" " Well, "he said, "Macy
buyers said so."
Sobin:
I'll be darned.
Marcus:
I said, "Let me be my own judge."
Sobin:
He hadn't heard of Neiman Marcus, had he?
Marcus:
Oh, listen, Neiman Marcus was as completely unknown in
China as this Chinese man's name would have been known
GERALD
FORD LIBRARY +
in Trenton. We spent close to a million dollars on that
first trip there.
Sobin:
You must have been the largest single buyer of all the 30
Americans who were there that first Fair.
Marcus -4-
Marcus:
Probably so because I was buying high unit things. I
was buying precious jewelry. I was buying antiques as
well as commercial, contemporary products and since they
had only given me one admission invitation I had to double
in brass and I was running from the embroidery linen section
to the antique section to the jewelry section.
Sobin:
That first Fair, the things that you did bring back, did you
make some errors buying some things?
Marcus:
oh, of course. You can't help but make errors buying in
any market and buying in the Chinese market you are apt to
make more errora because they don't understand you and you
don't understand them and I think you drink so much tea in
between purchases that you get waterlogged.
Sobin:
That's right.
Marcus:
There were differences in sizing requirements so I stayed
away pretty well from any wearing apparel. I didn't think
any of the wearing apparel was really of great interest.
I was mainly interested in things for the home and jewelry.
Sobin;
Furniture?
Marcus:
Bought some furniture. Had a bad experience with it. It
all split.
Sobin:
You mean the veneer pealed off?
Marcus:
Well, it came apart. This was bamboo furniture.
GERALD 8 FORD VIBRARY
Sobin:
I see.
Marcus:
That was one of the unhappy experiences but you have to
expe t some of that.
Sobin:
Have the Chinese corrected that, do you think?
Marcus -5-
Marcus: I didn't go back on furniture. I left that alone.
One of the problems that I had was in embroderied
tablecloths and, of course, you know their embroidery
is fabulous. They copied the Swiss apensel work, put
the Swiss out of the hand embroidery business right
after World War I and I thought we could do a very
big business on that. These were expensive cloths that
had to sell from about $500 to $1500 each, and after I
had written my first order and thought that I had been
very extravagent the head of the section said, "Sorry,
we can't accept this." "This is below our minimum."
And I said, "You didn't say anything about minimums."
"What are the minimums?" "Ch, you have to buy 12 or 20
of each pattern." And I said, "That's going to make it
very difficult." So I reworked it and showed it to him
again and he said, "Still below minimum." I said, "Well,
this is all I can buy. All I can sell." I said, "Why
do you have to have a minimum? These are hand-made articles.
You're not setting up a machine to produce them." "Oh,"
he said, "well your order takes this much space" and he
indicated with his hands about 24 inches. He says, "Our
boxes are this big." He had to fill the box.
Sobin:
Or they would rattle around.
Marcus:
Then I came up with probably the most brilliant idea that
had been contributed to China. I said, "Why don't you
GERALD R LIBRARY FORD
make a special box that's 24 inches?" I said, "I'll
pay you extra for the box."
Marcus -6-
Sobin: What did he say?
Marcus: He said, "Well, I'll take it up with the committee." The
next day I came back and I had set a precident in China.
They were making a special size box.
Sobin: They adopted your idea. That's marvelous. Well, you
concentrated at that early Fair on these expensive robes.
Marcus: I bought these 19th and 18th century robes.
Sobin: Were they that old by the way?
Marcus: I didn't buy any of the 20th century ones and I didn't
buy any of the damaged.
Sobin: More than a hundred years old?
Marcus: Yes, oh yes.
Sobin: Because I had the idea the Chinese wouldn't sell anything
more than a hundred years old.
Marcus: Oh, yes, they wouldn't in porcelain. They were limiting
porcelain to 19th century and most of it from about 1850
and on up which still brought it in duty free.
Sobin: Right, over a hundred years duty free, right?
Marcus: Yes, but in the robes, and I frankly have never been able
to fully explain why they let the robes go at all.
Sobin: Were they as much as 200 years old?
Marcus: Some of them were as much as 200 years old.
Sobin: Were they on display at the Fair?
Marcus: No, they were packed away in a little side room filled with
mothballs.
Sobin: But you knew what to ask for?
Marcus: Yes.
GERALD R LIBRARY FORD
Marcus -7-
Sobin: Did you buy jade?
Marcus: No, I bought some jade.
Sobin: But you bought some jewelry, you said. Some antique
jewelry?
Marcus: I bought quite a bit of antique jewelry.
Sobin: What does that mean?
Marcus: Well, for example, old coral, jade necklaces, mandarin
necklaces with all of the accoutrements on them that
were made out of coral, jade lapis, even perforated por-
celain, very fine porcelain. I bought wooden beads; I
was interested in buying antiques both for the fact that
they had a rarity and also because they came in duty
free and with the non-preferential treatment of Chinese
goods, you know what import duties do.
Sobin: Laci of Most Favored Nation treatment?
Marcus: Yes, and that ...
Sobin: Your embroidered pieces, they carried a duty, didn't they?
Marcus: Oh, everything can, the maximum duty. Embroidery is high
enough even on the Most Favored Nations basis but.
Sobin: But you still had no trouble marketing them.
Marcus: No, we still sold them but coming back to the tablecloths
I found that they would shrink. I wrote a letter of
protest and they replied back that I should know that
cotton would shrink; and I said, "Well, you are ab-
FORD
solutely right. I should know that it would shrink
&
GERALD
LIBRARY
but you,as a seller, should also know that in selling
Marcus -8-
it, you should advise me that it would shrink because
I was very specific in my sizes and I even paid extra
price to get them made a little bit longer so you knew
that there was a problem of size and you should have
forewarned me that your goods were not preshrunk. Well,
there was never any adjustment made and I just had to
Sobin: You had to just swallow it.
Marcus: Swallow it.
Sobin: But for somebody who follows you, well maybe they have
learned by now that things have to be preshrunk or told
to the perspective customer but somebody who concentrates
on that kind of article could get into serious trouble,
right?
Marcus: Oh, could be bad trouble.
Sobin: Maybe this is 3 1/2 years later, almost 4 years later,
they may have come to grips with what our market requires
so that they can avoid trouble. I think rather they have.
Marcus: I was a bit in hopes that we would see more light industry
people in this country or in Europe for that matter
studying and seeing exactly what the requirements
in the free market are because I have great sympathy
with the Chinese in trying to suddenly understand what
a free market is. One instance that occured, I was
buying baskets in a room about this size and there was
a Lady Chairman of the committee, as you know all of
FORD is LIBRARY GERALD
Marcus -9-
the purchasing is done through a committee rather than
through an individual, and I pointed out the baskets I
wanted to buy and she said, "I am sorry. Those are all sold
up." And I said, "Well, I'm sorry then; it's been nice to
meet you. And the man I was with talked nicely, even
said, "Sit down, that's not the way you do business in
China; you have a cup of tea and we'll have a discussion
and maybe the Lady Chairman will consent to let you have
it." So I had some more tea and she said, "Why don't you
buy the baskets on that side of the room?" And I said,
"Because my customers wouldn't like them." She said,
"How do you know they haven't seen them." And I said,
"Well, I'm the head of my company and I have to interpret
their desires through my eyes." She says, "Well, if you
are the head of your compamy, you can buy them and tell
them to like them."
Sobin: In a controlled economy, this is what's done, isn't it?
You behaviour condition your customers to buy what you
want them to.
Marcus: This was beyond her comprehension that I couldn't order
them to like them. So when you run into that, then you
know they've got an awful lot to learn about what the
GERALD
& FORD LIBRARY
free market is all about and the only way they'll learn
is by coming over and seeing it for themselves. They
won't learn it from me telling them over there.
Sobin: They are pretty clever people though, don't you think so?
Even at that very first fair when they first encountered
Marcus -10-
us. Didn't you think they handled us very well because
they must have been tense and alarmed at their first
meeting with us too? The first time they had seen
Americans.
Marcus: You know that first meeting we arrived the day that we
mined Haifong and that wasn't a very comfortable day and I
was called into a special meeting.
Sobin: Free exchange of ideas.
Marcus: Yes, and I thought I was going to be thrown out.
Sobin: The chemical corporation, whose guest I was, cancelled
meetings with the few of us who had appointments with them
for two days sort of as a protest for that. And that was
the only way we heard it was from the Chinese, wasn't it?
Unless you heard it in Hong Kong before.
Marcus: I had heard it in Hong Kong before I came in and I started
not to come in and I talked to a friend of mine at the
Consulate who is a China Watcher and I said, "Do you
FORD de LIBRARY 074839
think it's safe?" and he said, "Oh, absolutely." He
said," If you go in at their invitation, they will treat
you perfectly; you are their guest."
Sobin: You were never harrassed or
Marcus: Only at this one meeting when I was delivered a lecture.
Sobin: We did have a lot of political discussions, didn't we?
Marcus: Yes.
Sobin: Whereas at this last Fair it may interest you to know
that this is the 2, 4, 6, 8, the 8th Fair since then that
you couldn't provoke the Chinese in any political discussion
Marcus -11-
at all. I tried and I remember the same Chinese who
would not get me on the business and kept me on politics
at earlier Fairs, this time said to me we have a lot of
friends here; we are very, very busy; please get down
to business. Really. Anyway, you came to the Fair
in the spring of '73, too, and the autumn of 173.
Marcus: Yes, the spring and winter of '72 and then the spring
of '73.
Sobin: Did you follow up with better business?
Marcus: No, my business declined after the first year. I found
less antiques.
Sobin: They didn't have enough available for you?
Marcus: That's right and they wouldn't let me go through -- well
they did let me go to Peking as a result of the fact that
the Japanese had come in and bought everything.
Sobin: Yes, tell us about that.
Marcus: I went to the head of the light industries and I said
I had learned that an aggressive approach is far better
than a submissive one as long as you are polite and fair.
Sobin: And fair, right?
Marcus: I said, "You know you brought me over here under false
pretenses." And he said, "What do you mean?" I said,
"Here's your invitation and it says antiquities. I've
come over and there aren't any antiquities." "Oh," he
said, "you're mistaken. There's a whole room." And I
& FORD LIBRARY
said, "Come with me; I would like to show you." And I
GERALD
took him up there and the room was bare, absolutely sold
Marcus -12-
out and I said, "There are no antiques." And he said,
"Well the Japanese have bough: them all. You should
have come earlier." I said, "You should have invited
me earlier; I came as soon as your invitation came." I said,
"I want to go to Peking." He said, "Well, wait here until
the end of the Fair and we will talk about it." I said,
"No, we are not going to wait until the end of the Fair
because if I can't go to Peking where I have reason to
believe I can buy antiques, I'm going to go to London and
go to Suthebys." And he said, "What is Sothebys?"
I said, "Sothebys is a great antique house that will be
having an auction of Chinese antiques sometime this week,
probably November 26th." I knew that they always had a
sale the last week in November. He said, "Come see me in
the morning." So I went back in the morning and he said,
"You're right, Sotheby is having an antique sale on the
26th. You can go to Peking tomorrow." And so I went to
Peking.
Sobin: He wanted to keep you out of the hands of the competition.
Marcus: Yes, I went to Peking and I bought antiques just as I had
been led to believe. Then I tried to go to Shanghai but
I couldn't finesse that one.
Sobin: You didn't succeed, but you did go to Peking.
Marcus: Yes.
FORD
Sobin: And you found
...
GERALD &
LIBRARY
Marcus -13-
Marcus: And found at that time a very good selection of
antiques but by the third time, in 173, the prices
on those antiques had just gone out of the window.
I found that the Japanese who were buying them were
not antique dealers. They were textile merchants,
macbinery merchants, who had been told that Chinese
porcelains were good speculation so as long as they
were at the Fair they were buying 25 pieces, each
one of them, and before you knew it, they had driven
the price completely out of the
...
Sobin: I remember very well. They put their chop, or their
stamp, on everything and then they owned it.
Marcus: Well, I looked at the tickets on them and they weren't
from dealers in Kyoto or Tokyo but they were, from Kobi
and Osaka and those are not antique markets so they were
private speculators.
Sobin: Just traders of all kinds who jest decided that they
could privately speculate and probably that was a very
good speculation for them for that time, wasn't it?
Marcus: Well, except they bought at the top.
Sobin: Oh, did they?
Marcus: And the market cracked on them and of course the Japanese
economy went to pieces just about that time.
Sobin: '73 or early '74, right. The bargains were in the spring
and autumn of '72.
GERALD R FORD LIBRARY
Marcus -14-
Marcus:
'72, yes.
Sobin:
The last bargains. There haven't been any since.
Marcus:
Not to my knowledge. Now on the commercial contemporary
goods that I bought, the first year they were great be-
cause people had never seen these animal baskets and by
the time 173 came along, you could see them in every
other store on every other street in America.
Sobin:
With pandas on them.
Marcus:
Because the Chinese had not learned that you can kill
a market by overselling as well as you can kill yourself
by underselling when you get to consumer goods and you
make an article so common that you immediately get price
cutting and then it becomes unprofitable so nobody buys
it. So I've been curious to know how China has reacted
to the recession because obviously they must have felt
the recession just as other countries in the world did.
Did it soften them at all in price?
Sobin:
The spring of 1975 was the bottom for them. That is in
my opinion I think they had many fewer visitors; their
prices were still very high and it seemed to me that from
what they said they didn't understand recession. This had
all happened so very quickly. Then finally in the autumn
Fair of 1975 they reduced their prices on everything very,
very sharply and I think they picked up a lot of business
FORD LIBRARY &
as a result and I don't think we stumbled over each other
to buy because the total business was only 55 million
Marcus - 15-
dollars. You know large enough to go to a Fair for,
but not really large in the light of our foreign commerce.
I think their prices are relatively good. but I think
China was viewed by most of us as a place to buy bar-
gains and it is no longer a place to buy bargains. That's
really the truth of it.
Marcus:
I don't know any place in the world that's a place to buy
bargains.
Sobin:
China may have been the last place but with the problems
of doing business in China, the problems of quality some-
times, plus the fact that they really aren't onto our way
of doing business sufficiently yet and so on, then if you
are going to buy goods at market prices and you can buy
them somewhere else then China is not the place to buy
them. On the other hand, we all want to make sure our
foot's in the door and we are on to how to do business
with them.
Marcus:
I think China has tremendous potential sources of
profitability once the Chinese really understand how the
FORD
&
LIBRARY
American, or not just the American, but the western
GERALD
system works.
Sobin:
Free enterprise societies work.
Marcus:
Yes, they have to understand that no retailer, no President
of the United States can make an American consumer buy
anything she doesn't want.
Sobin:
Right.
Marcus:
Secondly, they have to learn that timing is a matter of
Marcus -16-
great importance. The Christmas order coming in at
Easter is worthless and probably the hardest thing
for them to learn is that the American market is a
very fast market, much faster than European or English
markets because in Europe the lifespan of an article
can last two or three years. They don't do as much
advertising, as much promotion; there's not as much
competition. But in the United States an article that
is new can have its birth and death in one year.
Sobin:
I know and it is in the interest of the producer to ob-
solete it.
Marcus:
You go back to them ard say well, he says what about
buying this and you say well, it's finished. Well
he says it just came out.
Sobin:
Yes, of course.
Marcus:
It's very difficult for them to understand how it can
become a dead item so quickly.
Sobin:
Don't they also have a problem with the idea of levels,
as we advance the product in value through wholesalers?
They don't understand why it doesn't go directly from
them direct to the consumer.
Marcus:
Well, I think all manufacturers, manufacturing countries,
have that difficulty of understanding the function of the
wholesalers. The wholesaler provides a very useful
FORD
function for them at certain stages of their development.
GERALD 8
LIBRARY
There comes a time when they can live without the
wholesaler but he provides a very useful service in
Marcus -17-
the formative industrial production.
Sobin:
Do you think now that the kind of activity in which
you are engaged gives way to the great big chains like
Sears Robuck and Woolworths and J.C. Penney and so on?
Is that what is happening now in your opinion?
Marcus:
I think that's pretty much what is happening now in the
way of contemporary goods. What they have to offer in
antiquities, I don't know. At the present time we have
a buyer in the air on his way to Peking and in a couple
of weeks I'll know what is being offered. It's entirely
possible they may open up and sell some 18th century
goods but there has been no evidence of that nor is there
any evidence that they don't have it; only the Chinese
have the answer.
Sobin:
They must have it but whether they make it available.
Marcus:
They have been certainly moving out their latest production
first.
Sobin:
And that sort of article that the latest production is not
something that you are really interested in selling.
Marcus:
I would be interested in contemporary production if, for
example, they would let us come in with a group of intel-
ligent designers who could help them modernize certain
forms or certain designs to meet contemporary usefulness.
FORD d LIBRARY 014830
If they'd let us come in with patterns that we know are
correct for sizing, to meet the requirements of American
customers and say yes, we would like to have this made
in this piece of silk and we will buy 2,000, 5,000 units
Marcus -18-
made to these specifications and we are going to check
your sample and then we are going to expect everything
to come in the sample that's approved. If they would
let us do that, then we could go in and create our own
exclusivities and not be worried about having the same
goods in the J.C. Penney store or
Sobin:
Do you have reason to believe they won't let you do that?
Marcus:
I think that there will come a time when they'll welcome
it. I'm not sure whether that time has been reached; I
would suspect that peihaps it has.
Sobin:
Yes, I think you could persuade them to do that.
Marcus:
Because that's going to be the real future of the utility
of the market to American stores.
Sobin:
I think that they would be loyal to your designs and so on
if you gave them to them too.
Marcus:
I have complete faith in them. I think they are extremely
honest people and I have enjoyed doing business with them.
Sobin:
Was there a hiatus in the business? You mean you did
business through 173?
Marcus:
173 and I haven't been back since then.
Sobin:
No, but does that mean you haven't done any business with
them, too?
Marcus:
No, not directly.
GERAID F FORD LIBRA
Sobin:
Don't you have an agent in Hong Kong?
Marcus:
We have a regular Hong Kong agent who handles our shipping
of Hong Kong made goods.
Sobin:
But is it really important for you to go personally?
Marcus -19-
Marcus:
Not necessarily personally.
Sobin:
Somebody who reflects your ideas.
Marcus:
But some senior executive of our store and several
buyers because most of the senior executives are more
specialized than I am.
Sobin:
But do you desire to go back yourself, don't you, per-
sonally?
Marcus:
I'd like to go back again if I could be assured of going
into some of the provinces where I have been led to
believe that there are small production of items that
would be ample for our requirements but too small to
take to the Canton Fair and I would love to get our
hands on some of the folk art.
Sobin:
Even contemporary?
Marcus:
Yes. Contemporary folk art that's being made in Kwangchou
or in Tsientsin or in other places.
Sobin:
Chungking even, western China, especially maybe some of
the autonomous republics that have their own customs and
legends.
Marcus:
That's right.
Sobin:
You go as Neiman Marcus now with your special needs and
according to your special posture on the industry. Does
Carter, Hawley, Hale go too?
Marcus:
Oh, yes the buyers from Broadway have been going every
year and they have been very successful.
Sobin:
From the Broadway stores?
Marcus:
From the Broadway Stores.
GERALIC F FORD LIBRART
Macus -20-
Sobin:
Now this is a different kind of merchandise.
Marcus:
They are buying fashion merchandise but in a much lower
price range.
Sobin:
And in larger volume?
Marcus:
And larger volume, yes and they are buying furniture.
We don't have a furniture department but they would be
buying furniture, other things as well.
Sobin:
By the way, when you said you bought some bamboo furniture,
rattan furniture, is what you meant I guess. Did you also
buy any traditional Chinese furniture?
Marcus:
Just a few old pieces. The furniture was so sold up you
couldn't get anything if you wanted it.
Sobin:
In China.
Marcus:
Yes, in China. They were sold out by the time I got there.
Sobin:
To other foreign visitors.
Marcus: Yes.
Sobin:-
What sort of advice might you give to other speciality
stores? In other words the great big chains are all there
now --- Federated is there, Allied is there, but there
must be a whole host of smaller speciality stores around
the country. Do they have your buying ability too? They
don't I'm sure.
Marcus:
There are lots of speciality stores that are operated by
people with great ability. They are going to have trouble
getting, meeting the quantity requirements.
Sobin:
Should they aspire to go or do you
GERAID R FORD LIBRAGI
Marcus -21-
Marcus:
I think everybody wants to go to China.
Sobin:
I know they aspire. I wonder if they should; everybody
wants to go to Peking.
Marcus:
I think frankly that the average small store would be
better off not going to China and buying qualities that
he can absorb from Hong Kong and paying the Hong Kong
middleman's profit and buying what he can digest rather
than going to China and having to buy enoughto fill the
case.
Sobin:
Right, that's correct.
Marcus:
Second thing if he does go to China he should take with
him an extra load of patience as you know. This is no
place for the impatient buyer.
Sobin:
And prepare to be frustrated.
Marcus:
And prepare to be frustrated but if you take the patience
along and know in advance that things are going to be
slower than America because they have a different system,
then you won't get so frustrated.
Sobin:
In spite of the need for enduring both those non-attributes
or something, we still all want to go back to China, don't
we? How did your wife enjoy it?
Marcus:
Oh, she enjoyed it very much.
Sobin:
Did she go on all three trips?
Marcus:
Yes, she made all three trips.
Sobin:
Did she buy some things for herself?
Marcus:
0h, she went in the government stores.
GERALD LIBRARY a FORD
Sobin:
Friendship stores?
Marcus -22-
Marcus: Friendship stores and in Peking in the small antique
shops.
Sobin:
Lily Chang.
Marcus:
Lily Chang and bought some things and reminds me of the
things that she should have bought that they wouldn't
ship. In Canton, for example, I went into the government,
the antique store that.
Sobin:
Canton Kwangchow antique store?
Marcus:
And saw some marvelous garden stools, rounded up about
15 of them, the prices were marvelous and then I said,
"I'll pay you for these and here's where they're to be
shipped." "Oh, no, we don't ship; you take them with
you." Well, you know, a garden stool weighs about 90
pounds and 15 of them, I said, "How can I take them?"
He said, "That's your problem." I said, "Well then,
cancel the order."
Sobin:
I'm happy to tell you that has now been solved although
the garden stools are probably not there anymore because
now they have a shipping service and no matter where you
buy anything you can call the shipping serveice, pay them,
they will weigh it, and you pay them in advance and they
& FORD LIBRARY
will ship it wherever you want. When we go next time, if
RAID GERALD
you're not there, we'll look for your garden stools and
buy them for you, if you like. I have to ask you, almost
in closing, what happened to your acpunture models?
Marcus: Well, we had a complete sellout. I was there in November
Marcus -2 3-
just after the catalogue came out and we couldn't
get delivery on re-orders so I went to the Friendship
Store and I saw a whole bunch of them there. So I
bought about 200 of them at retail and lugged them
back to Hong Kong; we shipped them by air; we, of course,
lost about $5 on each one, but we filled the orders.
Sobin:
That's wonderful. Well, I hope to visit with you in
China again soon, Stanley.
Marcus:
I hope so.
Sobin:
It's been very, very kind of you. The sort of thing
you do one has to be even more circumspect than in
buying traditional minerals, or metals, or raw mater-
ias and so on. So I am very grateful to you for this.
Would you like to just close with some wisdom for
would-be China traders in your area -- to frighten
them off or invite them.
Marcus:
Oh, I think it's a great experience. China has much to
teach us and I have great respect for Chinese people. I
have great admiration for what the government has ac-
complished even though we may disagree philosophically
about the method of the economy. I think it's a miracle
to behold and you have to see it to really believe it.
Sobin:
Indeed I agree with all of that, Thank you very much,
Stanley Mar cus.
GERALD a FORD LIBRARY
Cksenberg -1-
p28
I am Julian Sobin in Ann Arbor, Michigan with Michelle Oksenberg
Associate Progessor of
AUG 19 1977
Political Science
Political Science at the East Asia# Studies
Center for Chinese Studies
Center for Chinese Studies. I have to distinguish in universities
which have this kind of a senate do you all give yourself different
names so that you don't have to name the university, do you think?
Center for Chinese Studies, anyway, part of the University of Michigan.
Part of the obscurity of academics
You're not so obscure these days. In fact, you're more visible
than ever, aren't you?
Well, I don't know.
How did you like being on the Barbara Walters Show - or is it
called the Jim Hart Show? Or Today Show?
The Tosay Show
I bet it was fun. You looked like you were enjoying yourself. You
weren't ill at ease at all were you?
Not at all. I enjoyed it.
Did you wish you were in Peking instead
FORD a LIBRARY OFRALD
Oh, sure
And broadcasting from there?
Yes, although there were certain frustrations in going on a trip
like that. It was fun seeing - I learned a lot about the television
industry, what its like, the limitations.
Sometimes that knowledge is dangerous especially if you consider
that those people who actually condition America, the American public
Oksenberg -2-
us, for example, view themselves as some kind of experts. For
example, Barbara Walters, I think, really thinks that she is an
expert on China, She's told lots of people so. Having been there
twice, once on the original Nixon visit and **** then the Ford
visit.
Well, she has certainly, shes developed some feelings about it.
I think there are differences if I may say between personalities
on the television though. Jim Hart is not that way, I dont' think.
No, no, ** no. He seems like a rather humble person
Very nice, I like him.
He was a wonderful successor to Hugh Downs, no I think it was
FORD
Hugh Downs. No, Frank McGee.
8
Frank died
GERALD
LIBRARY
Although that was a towering loss *** for the show.
Of course, it was, I'm addicted to that program in the morning.
The morning is an important time for me just to sit and read a
lot of newspapers before going to the office and so forth. I'm
one of those fellows who gets in a little late and I watch the
Today Show almost from beginning to end and from 7 to 9 so I
watched you a lot. Hows that and I learned a lot from you too.
I wish there was a better communication between the business
community and you people in the academic world especially because
in the sense of not being able to, not being able to extracite
business from politics and sociology from human relations and all
the things that are impots and get facted in a trade with China.
Well, I feel very strongly that academics at this point have a
Oksenberg -3-
tremendous amount to learn from businessmen too who have been
involved in China trade. I think that afterall, 25 years, we
had been without direct contact with Chána and a study of China
for many academics is sheerly an intellectual exeráise. I re-
member very well the night before I went into China for my first
time.
When was that, Mike
Summer, excuse me, December of 1972. And I had taken my tape
recorder as we all do and I was sitting in the hotel room in
Hong Kong and I decided that I would tape on the evening before
I went in what I thought I was going to see in China so that I
could compare
Aren't you disciplined. That's wonderful.
08 8 FORD VIBRARY
So I sat down and this is a very sobering experience. I had*
studied China then for 12 years. I had begun graduate school
in 1960 and I turned the tape on and normally I have no problem
of talking, and all of a sudden I had nothing to say and I realized
that China was simply an inteblectual abstrattion in my mind and
that the range of possibilities for me as to what I really was
going to see was so great that I really had very little idea what
precisely I would see and 80 I knew some of the cities that we were
going to so I thought well if I didn't have anything of a general
nature to say, at least I would say well what did I think Canton
or Shanghai would really be like and all that came on that television
screen in the back of myMmmind was the word the letters CANTOI N,
nothing to fill in. I realized I had been a huge fraud. And here
you, but you people have had a tremendous direct experience, You've
Oksenberg -4-
learned about the mechanisms through which the Chinese conduct
business, you have a feel for some of the sapabilities and limits
of the Chinese economics and therefore political systems and this
is very important and you are a major source of information.
Well, that is nice of you to say that but you know, flattery isn't
very good if you inhale it too much
That's true.
I suppose. I vżáw the relationships - I need your confirmation
of thès that the relationship in the absence of normalization of
relationship and really free access on both sides is that the
trade people are on the vanguard really of the relationship as
it goes on now and its a people to people trade relationship, isn't
that what it really is now?
Well, its people on our side as you know on the Chinese side, I
don't think you would call it a peoples relationship although thats
what the Chinese like to call it
They're visiting ys you know
QERAL & FORD IBRARY
Thats true. But nothing that the Chinese do in their relations
with people outside the country is unmediated, all goes through
some form of estate
I'm really aware of that. Let me ask you this. When you did go
to China, December of 1972 what do you view as your purpose. Were
you there to confirm all the things you had been studying for all
the yyars and you thought you could do it and 80 on. How dould you
do it in a superficial overview over a couple of weeks
Very superficial, you're quite right. Well I went for several
reasons. One is that I was a member of the National Committee on
Oksenberg -5-
US-China Relations and we hoped at that time to facilitate formal
cultural ties.
You went under their auspices.
Under their auspices. But secondly I went as a scholar primarily
to gáin some broad visual impressions of China, of the sort that
I've just been mentioning and so I just, I did not consider it a
major research opportunity, but mainly an opportunity to get a
feel for a land which I am devoting my life and then in a much more
specific way I went with some rather disciplined questions in my
mind about a few specific areas in China and ask people about
those areas.
Could you really fill out your learning, your
FORD LIBRARY &
A great deal
Really
Yes, I'll tellyou the reason. I've done, I've spent two years
in Hong Kong interviewing migrants from China and I also have
read the Chinese press and talked to other visitors to China and
so one, I use the opportunity to zero in an a very specific way
in areas where I've done a certain amount of research just to see
whether I was on target and whether my informants were precise as
to detail and there was no problem there. I had an interview with
people from the ministry of water concerns and for example, I in my
research had sensed some of the politics of water concern. It
seemed we were able to get down to business very rapidly. The
effect of the great leap forward on water conservacy. Another
thing that I had been doing a great deal of research on, their
methods of the general subject of methods of communication within
the Chinese bureaucracy and 80 I was able to have some very good
conversations and I found I was checking the reliability of my
informants and it turned out to be generally, fairly accurate.
But question weren't you likely to get more accurate information
maybe from the migrants you interviewed in Hong Kong if they were
articulate enough to express their opinions then you were with the
conditioned responses that you inevitably got when you were on
your visit.
I would say, yes, that the chance to do interviewing made the trip
much more worthwhile but no, there were also the two have to be
taken together.
Of course
And I wouldn't choose to say which was the more important but I
found, for example, that I could ask questions in a non rutinized
sort of way and get unprepared responses,
Do you really think unprepared or do you think that they had sort
of taken into account whole ranges of questions you might ask if
they had done such great homework
Oh, they Hnew who I was.
FORD LIBRARY & OFRATO
with
Mike, I have the feeling **** the Chinese that if you are a person
of some academic importance, professional importance you are likely
to appear on the newspapers later or something, the Chinese are
really super cautious about the way they prepare for your visit
and the way they handle you on your visit because they think you
are going to get back in to the press again and they really are
going to try and condition you.
I did, let me give you a couple of instances where I think it
was unplanned. I went walking very frequently out of my hotel
Oksenberg -7-
You know you get up at 5, 5:30 in the morning. The bicycles
are beginning to whiz off to work. I walked out and on two
occasions, 3 occasions, was invited into a peasant house. Now
I could have walked, in 2 occasions into a peasant house or into
a peasant headquarters in the village because we were out on the
edge
Somebody accousted you or you accousted them
No I accousted them, they just invited us out. And then in Peking
#this could not have been prepared. We were just walking around,
you would have to prepare the whole entire neighborhood which I
I mean its possible but I think its highly unlikely, and I was
with someone who was interested in quilts, American nice woman
from Lexington, Kentucky and she makes quilts so we went into
the courtyard and said I have an American friend. This lady likes
to make quilts. Thank goodness my Chinese held up; I could re-
member, the wofd for quilt and the lady looked at us and said, "Come
on in." We came in and not only that but she invited us into her
house, shut the door, and began to talk to us and her son was there
getting ready for middle school. He spoke English. He said why
don't you practice English with my son. Now thats not - it made
an impression on me very definately.
Can I ask you a question? I'm going to tell you a true story now.
O.K. and I am going to tell it very, very briefly. I know a man
who had an argument with the Chinese over some trade difficulty.
He went to Canton between Fairs; he took another gentlemen with him;
antoher American who spoke Chinese. The man is inveterate and
GERALD LIBRAR
Oksenberg -8-
constant cigar speaker, almost adicted. The Chinese gave him
a hard time *** on his renogiation of the contract or whatever
and he ran out of cigars. He got fed up and said he was going
to leave. He and his American friend went walking on the street;
they passed a typical Cantonese Canton candy store for kids right
on the street, a stall shop. Sitting before his eyes out of the
blue was a great big box of Cuban cigars. In the candy store,
he said, "My bord, look what's here and he bought the cigars."
O.K. went back to the hotel, he stayed five more days, he exhausted
the cigars and he went home and he concluded his business and
everything was alright. He came back again; he went straight
to that store; never heard of them, never heard of cigars in
their whole life before. Just the two Americans walking on the
street on a Sunday when one American was trying to persuade the
other oh, stick around for a few more days. Now that's a weird
story, isn't it. O.K. I consider this man to be very authorative,
and very reflective, and very honest and so forth. Is it con-
ceivable to you that you never would have gotten to that home
and watched that child get dressed for middleschool if it had
FORD
&
not been contrived in some way?
GERALD
BRARY
Well, I think that is a fascinating story with cigars although
cigard=are availbble.
Of course, they are but not in this candy store for kids. They
appeared and vanished just at the proficious moment. I dont know.
Well, I don't know.
How can you account, Mike, just I want to make the cheese really
Oksenberg -9-
I heard Margaret Heckler, congresslady, congressperson
from Massachusetts speak and she told a divorse case story.
Stan Lubman wrote a story for the Wall Street Journal a couple
of years ago, exactly the same style, the same case, the same
circumstances, everything, ## why?
Well, the Chinese are certainly capable of putting on shows for
visitors but I also
Did they put on a show for you?
I think that in this particular instance that I have sited, I would
be hardput to say yes. I think in an instance of that sort, ra=ther
the entire citizenry of China at that time had been told that
American friends were welcome and that they should be treated
cordially.
How did they know that you were an American?
I told them.
GERALD
Oh, you told them on the street.
Oh, yes and I think that was very genuine but I do think that there"
have been circumstances that have been programmed because in several
of the places that I went, have these spontaneous type conversations.
T,ey said, oh, we welcomed President Nixon here. You must realize
that because President Nixon came here, is the reason that you
are here right now. Now that was clearly part of the explanation
but I think its wrong to think that China is a totally regimented
society in which everything is planned.
Oh, I dont' think that.
And, alright so if that is the case, then there are encounters for
an American that are somewhat chance. I'll give you another example
Oksenberg -10-
that struck me as totally opposite and not planned to give you
a sense of what can be planned. My Great Wall of China story
is that I was on the wall the first time and you know being in
China brings out the politician in me, there were kids all over
the place and all, you go out shaking handsand all, this and so
there was this guy and I went up and shook his hand and there is
a lot of graffiti on the great wal 1 of China and he was scratching
his name on the wall and I saw Ting Sin #4807 and 80 I shoo his
hand and
said guess where I come from and he said Albania
At thatime it was not unusual a choice; there were Albanian visitors
and I said no, I come from America and he just looked at me and
usually when you say you come from America you surprise, pleasure,
there is a reaction. But this man was absolutely stoic, stone face.
see
I said, you must think its strange to ** an American. He said
no. I said well, am I the first American you've ever seen. He
said no. Oh, I daid, do you work in one of those factories here
where a lot of visitors come. He said no. I am thinking nothing
but silent American friendship, right, So I said, oh, well have
you seen Americans that have come to Peking, have you seen Americans
recently. He said no, I said where have you seen an American before.
He said Korea.
Well that was pretty
GERALD FORD IBRART
That was not planned.
When we sat there for a minute and the conversation got generated
again
What happens if somebody puts graffeti on the Great Wall? Do
you think there is a penalty for doing that?
Oksenberg -11-
Evidently not, its
Did you ever see graffiti on a bamboo tree? I have
Have ** you in Canton?
Yes. In fact I have some pictures of it really up close and in
one of them says" Chen loves Chen"
I"n't that nice? That's why I say its not exactly a regimented
society.
Well, you know, I think China is full of stories like this. All
of us have experienced. And in some way or another they all bear
on each other and overlap each other and tell a tale and they all
tell us how to do business coming from the vantage point from
which we are conversing this morning. What about, is it politics
in China?
Oh, you bet. Politics at all levels.
GERALD FORD (BRAR)
Now if there is politics in China. What kind of an atmosphere
is created in which foreign trade can be conducted with an ongoing
purpose in the framwwork of a lot of politics which means that
things are changing quickly.
Sure. Well you know, first let mw answer that in a very broad
way and then we will get much more specific I suppose but I think
its very important to businessmen to realize that not only are
they hoping to earn money quite legimately in therrë trade with
China but they are partaking of a historical moment in which for
the first time in man's history probably, unless one goes way,
way back, commercial transactions between China and westerners
are handled directly, (a) not through Arab middlemen or (b) are
based on genuine positions of national equity in terms of power.
Oksenberg -12-
This is the first time since 1840 that Americans and Chinese
are interacting without American troops on the mainland of
ia with the exception of Korea, of course and some bases re--
maining in Thailand. So the stage is very, the setting is very
different than it has ever been before and what we see really
is in a historical sense the west and the east particularly
the west in China searching very delicately in a historical
process for the terms on which an equal relationship is based
and they are not going to be based ultimately, it seems to me,
on principals that are entirely stipulated by westerners. Now
that is very difficult for a businessman you realize because
businessmen have grown up in a western cultural tradition. They
are used to western modes of trade; they have western modes of
doing business. Now when the westerners came to China in 1840
they found the situation so frustrating, so obnoxious that they
decided to use force to alter the means of trade and make it more
favorable to them 80 they could do business in a western style.
Well, we are not going to do that anymae. Thats. And yet as
you well know, I'm sure knowing you Mr. Sobin that you have done
a great deal of reading on the 1840's in China, the way trade was
carried out in Canton, theres been a very curious return in some
ways for that period of time when Canton is open for a short
period of time and westerners are allowed in.
R FORD IBRAST
They move the Fair to the hotel. They have moved the railroad
30
station to the hotel and they are compounded again.
That's right. I mean its a tremendous return so its frustrating
but I think its worthwhile ****** doing and it is worthwhile doing
Oksenberg -13-
not just as I say for money but because I think that the future
of mankind depends upon being able to establish a genuinely
mutually acceptable pattern of commerce here. You are talking
about how one forth of mankind is integrated into a new kin;d
of world community. That's not satisfying for how you do business
I only pause for a minute because the Chinese would resent that
statement you know that we are trying to integrate them
No, I said in a changed, in an altered world community, didn't
I, integration in a altered world
They want to play a very substantial and important role
Absolutely and make a contribution to that
GERALD 8AARY
I the kind of posture and construction of that community
Exactly. Thats why I use the term altered world community be-
cause it is not going to be a community **** the terms of which
we will entirely stipulate.
For business people the hostilities that exist between the Soviet
Union and the Chinese, does this bear on the trade posture in
practice that exist betwwen us and the Chinese now, do you think?
Yes, certainly.
Has this been brought about in part because of that hostility?
Yes, although one has to partly give a historical explanation
here that is to say that the initial years of Chinas trade pattern,
history of
the initial years of the Peoples Republic involved a trade orientation
toward the Soviet Union that dimisheanished, as you know, in the
late 1950;s and it diminished partly for political reasons but in
addition diministhed because the kind of things that the Soviets
had to offer the Chinese were not necessarily suited to China and
Oksenberg -14-
then the Chinese went into a period of loss of general trade
and now have moved out ofagain and I think one reason that they
have moved out to the particular countries they've moved is con-
cern with the Soviet Union. The Chinese seek to use trade for
political purposes upon occasion, not always, it can be a marginal
calculation so I think that the Chinese, in particular, look upon
their trade with western Europe and with Japan as a way of solidfying
relations with the common market countries, with Japan and with
more solid relations hopefully will encourage those two areas of
the globe in* particular to remain firm in their resistance to
certain Soviet overtures. So I think it is important and I also
think in an indirect way that is hard to measure because as you
know we know so little about China; we have no statistics of any-
thing to speak about that China's military expenditures because of
the sign of Soviet dispute had been rather high which means that
money that could have been devoted to economic growth has had to
be spent on military expenditures and so I think that China's need
for imported technology, their need to hasten their economic growth
rate, has been intensified because of military expenditures and so I
FORD
think this is an indirect consequence and sign of Soviet dispute.
I see it in a very practical sense something like this, Please
LIBRARY
tell me what you think of this idea. The Russians, the Soviet Union
is an economic force in third world affairs, for example, *** doesn't
have a lot of upgraded things, they have an added value to a lot
of their resources which have a great appeal to consumers. Witness
the fact that their own people, I think, *** suffering by looking in
store front windows we read in the papersă all the time and have
Oksenberg -15-
sometimes more money to spend than goods available and 80 forth
So it is reasonable that between the Chinese and the Russians,
they both come from this great mass continent, if you like, that
they share natural resources in common and therefore whatever they
are going to trade in naturally, even now during the period of
**s hostility things which they need from each other which neither
one of whom may have enough indígious supply of so they have a
trade treaty between them for what 2 or 3 hundred million dollars
even now, don't they, Mike. And therefore there is trade going
on. There's an airline that goes between Moscow and Peking, right,
theres a railroad that goes between Moscow and Peking.
Yes
GERAID & FORD IBRARY
And there is communication. The Russians have the largest embassy,
I am told, in Peking. Very large indeed and so theres all kinds
of communication going on because it seems to be with that great
big border they are inevitably going to learn to live together
someway maybe there is going to be some kind of a coexistence but
something. Now on the other side, the Japanese, the Chinese used
to tell me in the early stages of American friendship with them
we are very concerned with the rise of Japanese militarism. They
are our natural enemies and always have been historically for great
periods of time as were the Russians by the way, Iguess and they
said we are very concerned about economic dependency on the Japanese
because in veew of proximity and the fact that the Japanese have
no natural resources to speak of and because of the mutual need
they produce all kinds of goods the Chinese may need, high levels
of technology and skills that the Chinese yet don't have, for example
Oksenberg -16-
the Chinese have a lot of raw materials that they felt the
Japanese might strip them of raw materials at the raw material
level before they could add value to them and upgrade things and
so forth. You know, how does this all interact? And where do we
fit into thès? The Americans
That's a huge question asked by a man of vision. Let me see
whether I can just comment in general. I think it is true that
the basis of trade between the Soviet Union and China is not
terribly great. In addition in short to the militiary problem
you mentioned in addition to the dispute which minimizes trade
the economic rationality of #trade is not there. I dont think
the Russians have a t the present time that much to offer the
Chinese with one exception I would like to emphasize this in
some ways the Soviet economy is more easily geared to trade with
China perhaps than other economies because the Soviets may find
it easier to barter. Now Japanese conglomerates find it easy to
barter but some, but also the Russians are not as oriented as
our textile manufacturers are to changing fashions six months hence
and so there may be a more nature#, shall we say, governmental
compability for trade but lets just put that in abeyance. I don't
think thats an overriding consideration. Let's not forget that.
I think basically the Russians just don't have that much to offer
the Chinese. I agree with you that the Japanese have a great deal
to offer and I think you have pointedout the areas and that there
FORD
is a complimentary there, Its very important. There may be at
LIBRARY
some point in the future a certain degree of rivalry between the
two economies too in their search for markets particularly in
Oksenberg -17-
southeast Asia or at least some Japanese worry about it. I
also think you are quite right in saying that the Chinese are
concerned that they wish, let me put it another way, the Chinese
do not wish to duplicate the errroes that they had made with the
Soviet Union ******* becoming excessively dependent on one partner.
They are moving in that direction with Japan. As you know 25% of
the total trade now is roughly based with Japan whereas for Japan,
China is less than 2% of Japan's total trade
Sure
try to
So I think that the Chinese will pressury diversify as much as
source
possible particularly with Western Europe as an alternative *****
of technology, source of supply. The way they have handled. their
airchaft purchases is a very good example. Where the United States
fits into this, I think it should be put in thefollowing context.
First of all some of the things which we have to sell the Chinese
are still in my opinion if I may give a political view, are unfortunately
so still on the list of things that can't be exported. These are
particularly the areas where we have a world wide or a technological
FORD
advantage.
Areas in which we really excel.
GERALD LIBRARY
Computers, aerospace technology so we can't sell to them. I hope the
day comes when we treat China as others. Secondly as long as we do
not have full and normal diplomatic relations with Peking, given
the fact that I earlier mentioned that Peking links foreign trade,
foreign policy, I think the Chinese are going to look upon us as
a residual supplier. We are increasingly coming to that position
as a residual supplier. Howerer, third, I think the UNited States
Oksenberg -18-
still represents a country of interest to China given the Chinese
anti-Soviet basic posture at the present time, given the parallel
interest that the two countries have, the Chinese are not ****
interested in shutting the door entirely on the United States 80
due
that they will give #éconsideration to American buyers and sellers
when they feel that there# is a good reason for it. Now only a
very strong economic rationale, the prices are right and second-
arily when the political reasons seem right in the sense of trying
to keep a sense of momentum. Now I must say that I don't think
the Chinese have been as politically astute in dealing with the
Americans on trade as they might have been. As you know, once
again, we have become veery clearly a residual supplier of grain
to China. I think thats a mistake from the Chinese point of view
because I don't think they're building up a domestic lobby to
improve China policy in thw way that the Russians have done. The
Russians have really developed within the United States a very
important political sector. They have cultivated the American
farmer in effect and even if the secretary of state would like to
use grain as a source of foreign policy against a source of strength
against the Soviet Union because it is very hard to do so. Well
I think the Chinese have bugun to cut back on their level of purchases
in the United States at too early an era, too early a time. They
should have let that trade go up a little bit before they began to
FORD
express their displeasure but I'm managing their foreign policy OFFICER for
GE
LIBRARY
them and I shouldn't be doing that obviously.
Excuse me for interrnpting. There's antoher significant view that I
think some people have about the cancellation of the grain last year
Oksenberg -19-
for example and that is that the use of the word cancellation
for us in business, this is a real shock because the notion was
that if the Chinese can cancel something so can we Americans in
a declining market or something. That's what they did and it was
never published as to *** how they settled those grain purchases
which they cancelled from Cook Industries in Tennessee. I guess
they paid a substantial penalty although no one has ever admitted
it but I think the failure to admit it orpùt in the press somewhere
a subsidity of the United States government for political reasons
to pick up the tab for the Chinese so as a matter of fact I wrote
a letter to the State Department at the time and said since you're
not going to announce it perhaps you haven't settled this at all
with the Chinese and American exporter in anyway why dont you take
it out of the frozen assets or something like that you know.
Because I wanted to know if I could do the same thing. I" other
words if I have a dispute with the Chinese instead of waiting for
money from China could I take it out of the frozen assets here or
would the Chinese permit it or would the Americans permit it and
vice versa if you like. That's a rhetorical question. The point
is I th ink they did another disservice in any case because they
disgraced something that they have so carefully constructed with us
and that is that the contracts, the contract and there is never any
deviation from it and so forth. We all keep our words. How can I
think they keep their words. I've wondered so much about those
cancellations.
BALO FORD LIBRARY
Well, I don't know enough about the grain deal to know whethe you
Oksenberg 920-
are on the mark and what the terms of the contract were and 80
on.
Well, the minute the cancellation yielded to publicity, however,
it leaked out, I think there had to be an explanation for how it
was settled in any case. What about, let me ask you this question
from the standpoint of a political scientist when I first went to
China I was hearing about all the three great impediments to
*** normalization of relations, Taiwan, lack of most favored nations
treatment of their exports, and the claims problem. Then MEN sort
of faded into the background someway, they dealt with it in someway
its there obviously all the time but I guess they finally, maybe
they just weren't aware bt the fact that Nixon couln't settle it,
it world take Congress to settle it but I remember they reminded
Americans you business people are also politicians because you
vote to, you elect a friendly president and a hostile congress
which fails to grant most favored nation treatment. The chaims
problem is suppose is being negogiated in the background all the
time. I can't imagine why that isn't settled.
As I understand it. The Chinese are simply not responding to American
eagerness
******** to settle the issue. We have hade a detailed proposal to
them, theres just been no response.
GERALD
BRARD
Why not?
Well they linked now ultimately all of this to the Taiwan issue and
This problem to the Taiwan issue
They wish, it is my understanding is, until we have normal diplomatic
relations with China there will be no progress on any of the other
Oksenberg -21
issues and that includes not only the problems of the commercial
realm, the problems of the cultural realm as well.
In any case the point still being discussed with Americans now is
the Taiwan issue. For example at the last Canton Trade Fair while
I could engage no Chinese business negogiators in any political
discussion which I tried very hard to do because thats my want if
you like, I received phone calls in my hotel and have even seperate
meetings or evening meetings with officials of the Fair and officials
of the CCPIT who had combed my company, mMy family of companies
literature and found on page 142 of a book we had published about
the food problem of the world because we are an agricultural company
references that alluded to Taiwan as a nation or scmething like
that as if there, in the way that they presented it to me was we
you
know you don't have a two China mentality, Mr. Sobin, must have
a chief somewhere who does, or perhaps your company does, but at
least your printer does because he's careless in what he says.
The Taiwan issue has again come to the ford. I suspect and I think
there is good evidence for this that the Chinese feel the United
States has not lived up to its committments made in the Shanghai
communicate mssued during Presiden t Nixon's trip to China in February
1972 whihc pledged continued American progress.
ALL FORD IBRART
But the Chinese very well know in their astute way why we haven't
done any
on the Shanghai Commonacate.
But knowing is not necessarily to be equated with giving up trying
to put pressure on
So you just think they keep the pressure on all the time, do they?
They feel that they have to and they feel probably within a year and
Cksenberg -22-
a half to two years the issue will be settled but it requires
constant pressure because they are aware of the domestic resistance
and without that pressure little will happen. I mean the point
4
is that they didn't put much pressure on for two years, 1972, 1978,
75, very little pressure was given as was stated. Taiwan was not
raised in any particular converstaion.
No, not particularly at all.
And the United States didn't do very much so I think a lesson that
they have learned from that is that unless they put pressure we
will be quite content to go along for a long, long period in this
way. I think they felt they have to do a certain number of things
to keep proding on this issue.
The Chinese sometimes say about themselves that they are the most
developed of the less developed countries. Thats the way that they
have described themselves to me. They always tell me how backware
they are and how much they can learn from us and so forth which is
both humble and condensending
Well they are though, you know. I think once you've looked upon
CHina not as a country but as a continent and
Sort of diffuse, you mean.
(RAID GERALD LIBRARY FORD
Well, diffuse in size but also containing within it all of the
problems that one sees in the globe of today and there are areas
of China where afterall very highly developed. They have the
steel mills at Shangyon, the oil refinieries outside of Peking,
Changhai itself, a respectable highly developed Asian economy in
Shanghai and yet there are areas of enormous rural povery so I
think it pays to think of China as an exercise in world government
Oksenberg -23-
and sort of what would China look, I mean say sure, it is correct
to say China is a developed country. There atre areas as I say
that are enormously developed and if one looks upon China as a
world government and make an effort almost at world government.
as
After all you know there are many people living in Chana today,
as
*** almost live in the entire world a century ago. So if you
look at it as a world government then theyire problems are how
to try to maintain unity in a country that has as many of the
tensions as we see in the worldat large partioularly the tensions
betwen what we now call the north and south, the developed areas
and the backward areas for China there is essentially the problem
of trying to retain some sense of balance, retain some sense of
equity Between the urban areas of the country and therural areas
and I think thats crucial to an understanding of almost everything
that the Chinese do, underlying their problems is an effort to
maintain unity and to have progress in a country as large and
diverse as China is. I don't mean to say that China is totally
has all these cleveges of the world at large but after all ethnically
they are homogeneous, linguistically in a written form of language
they are linguistically homogeneous but still there are those
*p* aspects.
They, this balance that is so delicate between the urban and the
FORD
rural
Yes
GERAID
RAID
LIBRARY
is characterized in part by the fact that the urban has to visit
the rural frequently and to learn from the rural dector
Thats right
Oksenberg -24-
Now do the rural people learn from the urban?
of of course, technology, entrepretural spirtt although I wouldn't
want to underestimate the entrepretural capbbilities but particularly
in a technical realm because Chinese agriculture remains a crucial
problem in the development of China and any effort to keep a
suitable rate of economåc growth in China is going to entail the
modernization of Chinese agriculture. As you know it is still a
very traditional form of agriculture although in the last 10 years
it **** has developed rapidly and where is that technology going to
come from? Where also is an entrepreuneral spirit going to come
from? Entrepreneural in a sense, the Chinese in many ways have
been taught over the millimium to live in harmony with nature.
Nature was regarded as an enemy to be sure through flbods, drought,
but the idea was to adapt oneself to the rhythm of nature. This
is sort of the dowest influence on China. Now a nation in order
to continue to develop, in order to have an agriculture that* *
feeds this rapidly expanding population, the Chinese have to have
confidence in themselves that they can triumph over nature and
that requires an enormous cultural transformation for China, too.
You know the paintings, traditional Chinese paintings, a good way
to look at this. Youknow I like Chinese art very much and the
traditional Chinese scrolls of the
dynasty and the ming and
these towering mountains, beautiful scrolls, and then if one approaches
the painting, one realizes that there are human beings nestled at the
FORD
foot of the mountain looking very small in proportion to the
Overawed by nature
GERALD
Overawed ********* well its man, you would say overawed because you're a
Oksenberg -25-
westerner. I would say maybe, as a China scholar in his proper
proportion to natúre, harmony with nature. The Chinese, even
the Chinese paintings, the Chinese also painted, not all Chinese
paintings were scrolls of mountains and landscape, but the Chinese
also #painted fruit as westerners. Another comparison, but when
the Chinese painted fruit, the fruit was natural, hanging from
the tree, but not this kind of Dutch Flemish kind of school, the
fruit plucked and put in a bowl, you know, and very ready to
be consumed by man and so that epitomizes the Chinese philosophy
which in a curious way, I think, we westerners increasingly admire
and see the wisdom of but which for China at this stage in life,
in this stage of their development, they must begin to reject so
I sometimes think of China and our own United States as two ships
almost passing in the night as it were. You know when the westerners
first came to China and had contact with the Chinese most westerners
were involved in science, technology and the Chinese were studying
the humanities and now if one looks. at the situation today ****
where are some of the brightest of our people going into, into
the humanities and reflection about deeper philosophical questions
and the Chinese
GERALD
LIBRARY
Theres a great movement here back to the naturel.
That's right, exactly and now the Chinese are putting their best
fforts into science and technology.
hell, when you say the Chinese you mean the Chinese who are moving
the country forward and mechanizing it and industralizing but=the
great body of Chinese really don't have ang strong awareness of
Cksenberg -26-
technology, do they?
Well I think that they have already, the bulk of the Chinese
peasantry have already begun to have contact with the first
stages of modernization of Chinese agriculture. After all all
Chinese rice production has need seeds, electric pumping in many
portions, not all portions, fertilifer, widespread, so, yes there
has been made the beginnings of technological transformation of
Chinese agriculture into many areas of very modernized form.
Do the Chinese strive in the search for self-reliance at every
level de you think to make every little village in every little
unit, if you like, in all #their society and all the geography,
an intact, self-sufficient social economic political unit?
I think the Chinese have varied on this issue. Its a very im--
portant issue for the Chinese. I think they are moveing away
from it. I think we've seen the peak of that in China because
of the problems of economy scale and the problems of quality pro-
duction and the problems compared of comparative advantage. I
think for all of those reasons the solution of a self sufficient
commune is nice in theory but the Chinese have severe problems
, with it too,
GERAIN FORD LIBRARY
I hope the Chim se are moving in the direction, of something that
alot of ***** corporate management technology here has learned
ever the years to have a central big prototype plant which makes
things which feeds sattelite plants in other parts of the country
for example. This makes sense you know and then each one, it becomes
economically viable where theres need for reasons of comparis**tive
advantage or proximity. Raw materials or labor or something then
Oksenberg -27-
maybe it grows big itself and has sattelites of itself and 80
forth. This seems to be a very effective way in highly indus-
tralized protected markets, like the United States, thats what
we really do here in a large part.
Well, I think its very hard to compare China and the United Stated
in many ways. I think, basically, the Chinese problem is this.
First of all the transportation system is not highly developed so
they have to develop a pattern which places minimum burden upon
transportation. Secondly 80% of the Chinese people live in the
countryside still and they have to search for a pattern 6f develop-
ment which keeps most of the people in the countryside and min-
imizes the urban difference that we were talking about. And that
requires a distinctive Chinese path.
What about the idea that when people were expelled during the
Cultural Revolution? Some of the people in leadership positions
I have heard, expelled by the Communists, rose to positions of
commune
leadership in the COMMUNIST because they were natural leaders,
FORD, IBRARI
administrative
The Chinese press has given a great deal of publicity particularly
youths who have been sent to the countryside and become leaders
but we don't have adequate aggregate statistics to know precisely
what-was going on there and if one looks at the statistics the
Chinese themselves provide one notes that a large number of the
people who were sent to the countryside did not become leaders so
F*** From the standpoint that a political scientist is a scientist
or are you an artist just to be like that. Are the Chinese trying
to influence our elections here, our presidential elections? I
senberg -28-
noticed they invited Senator Jackson. He seems to be a strong
candidate. If I were the Chinese, for presèdent
I think the Chinese, yes, I think the Chinese would not mind
affecting the course of American domestic politics
And they can't possibly enjoy having a president who doesn't
have a friendly congress.
That's right. Well, you know the Chinese, its very hard for the
Chinese it seems to me to visualize the world beyond just as its
hard for people in Washington to visualize the world beyond and
I think if one looks at the history of Chinese foreign policy over
the past 25 years, there has been a great tendency of the Chinese
to overestimate their leverage to effect outcomes of other countries
but thats not unique to China.
Of course, what kind of advise do you think you could give as a
political scientist, seriously to the business community who, which,
expresses and feels great alarm over the big investment that we
made in getting interest in Chinese business and the Chinese in-
FORD
terested in us, trips
CHALD'R
I think there are risks. 0 cannot underss imate, one should not
rather, underestimate risks involved in the instability of the
Chinese political system but I would still encourage those investments
as basically financially sound. I think that they in a
comparative
B
sense, the Chinese political system is probably as stable, if not
more, than most around the world. I wohldn't care to compare Brazil
and China, for example. Over a longer period of time I think the
Brazil is much more volatile
Well, there is a volatility to China but there is a great volatility
Oksenberg -29-
in Brazil as well because the regime is not as interested in
minimising social, chances for social unrest, so that's very
important to keep in mind. We've had our fingers burned in
more than one place and I, 80 I would say that first, and secondly
I think the Chinese have come, and this is what you meant by saying
the Thinese are the highestof the underdeveloped countries.
Most developed
Most developed of the less developed countries. I think that the
Chinese may very well be on the verge of a májor take off in
economic development. They have a very well disciplined labore
force and I think its worth being on the ground floor of that
market and there are risks entailed but I think it is a ground
floor. Its going to be growing. It certainly is the pblicy
of your company
Oh, of course and I think thats the right corporate stragedy for
påanners in all your big American corporations. Thank you very
much for four very fine advise, Mike.
FORD
Perkins -1-
pzl
Sobin:
I am Julian Sobin of Boston, Massachusetts in the office
in the Littaur Center of Public Administration at Harvard
University with Professor Dwight Perkins of the Harvard
Economics Department and acting director of the East
Asia Research Center. How does that all connect, Dwight?
Littaur and the Public Administration, East Asia Research
Center and Economics Department.
Perkins:
If I try to describe the Byzantine structure of the Harvard
administration we would be here all day and we would never
get on China trade. Basically the East Asian Research
Center is research and the Economics Department is the
teaching. Teaching wing of it as all teaching is done
through regular departments.
Sobin:
But you teach economics, don't you?
Perkins: I teach economics but I teach about the economic development
of the less developed countries broadly as well as about
China in particular.
Sobin:
Does that mean that you view China as a less developed
country?
Perkins: The Chinese themselves call themselves a developing
country. They're poor; they happen in many respects the
most interesting, not only the largest, but the most
interesting developing country. They have tried all
the things that other people have just talked about.
There are a lot of developing countries that are quite
a bit richer than China at least in terms of average
GERAID R FORD LIBRART
Perkins -2-
income; the Chinese distribute it better.
Sobin:
A country with the technical competence as the People's
Republic of China which has satellites flying around
and the ability to produce nuclear weapons that doesn't
necessarily mean per se that they seek hegemony, does it?
Perkins: No, not at all. They have basic defense commitments that
they have to meet. If they are going to defend China they
feel and I think accurately; they are going to have tc have
their own nuclear arms and they are going to have to have
their own missiles and they are going to have to get them
as fast as they can. Certainly this kind of developing is
a straight defensive move at the moment at least and is
likely to be so for some time.
Sobin:
They haven't shown any imperialistic tendencies in the
modern Chinese history, have they really?
Perkins: No, I would say their whole posture, oh particularly true
over the last decade or so, has been very defensive and
in fact one of the things one discovers when one goes and
discusses foreign policy with them is that there are many
areas now where the United States interests and their
interests coincide at least as far as Southeast Asia is
FORD LIBRARY & OF
concerned. Their principal interest at the moment is
keeping the Russians from doing what they pereeived Dulles
tried to do in the 1950's,
Sobin:
Just by way of a flashback for a moment, Dwight, what are
your credentials to teach in the area of East Asia studies?
Did you ever live in China?
Perkins -3-
Perkins: I've visited China and I've lived in, it depends on
what you call China, but not in the People's Republic.
I've lived in Hong Kong and of course, worked in Malaysia
and Japan and Korea and around the borders of China, but
I've travelled there twice. My main credentials come from
20 years of study and I know both the Chinese language
and history, and of cour se as a professional economist.
Sobin:
But you really set out to be an economist? Is that really
your primary
Perkins: Well, I started in the early 1950's actually with interests
in China and there was a question of how I could combire
that interest in China with something that was practical and
that to me meant economics.
Sobin:
Let me ask you the most obvious question of all. Do you
view foreign trade as a arm of foreign policy in the
Chinese sense these days?
Perkins: I look on foreign trade in China as primarily an arm of
their economic development program, not as an arm of their
foreign policy program and as I see their foreign policy
program is primarily oriented toward broadly speaking the
defense of China, the holding off of the Soviet Union in
various areas. They use trade and they use the promise of
trade to encourage nations to have better relations with
FORD LIBRARY de
China but I don't think that's the main focus of their trade
GERALD
at all. The main focus of their trade is they need certain
Perkins -4-
kinds of materials and equipment for their economic
development program, particularly in areas of advanced
technology and in certain key raw materials if they are
going to have the development of these areas rapidly at
a reasonable cost they have to purchase them abroad.
Sobin:
But you don't really mean that they don't ever export for
political reasons.
Perkins: Oh they sometimes expar t for political reasons.
Sobin:
Even staying away from oil for the moment.
Perkins: Oil, I think they exported in order to earn foreign ex-
change again but they use it politically particularly
vis a vis the Japanese. And I think actually oil is
a good case. It illustrates, I think, the way they
use it. They need the foreign exchange. Oil they can
get, whatever it is -- 12, 14 dollars a barrel.
Sobin:
They stay a little below the OPEC price, don't they?
Perkins: I've heard it both ways and you probably know better than
I do, but because they are close to Japan they get certain
transport advantages and so on but I'm the wrong person to
ask what the Japanese are actually paying. They pay
something around the O.P.E.C. price. In any case, they
are making a fair amount of money. They have a real
foreign exchange shortage at the moment. They need that
foreign exchange. On the other hand they also very much
FORD LIBRARY &
do not want the Japanese to get involved with the Russians
in these Siberian oil and gas deals and so they are not
only selling to the Japanese for that reason but they are
Perkins -5-
giving a promise of much larger sales to the Japanese
in the future. They don't normally talk about the long
term future in such specific terms but they have talked
with the Japanese about much more substantial sales in
the future. I think largely to keep the Japanese from
saying we'll have to go to Siberia in order to get
away from our dependence on O.P.E.C. or on Iran and
Saudia Arabia.
Sobin:
And Indonesia too. The Japanese too are depending on
some Indonesian oil too.
Perkins: A little although they are overwhelmingly dependent on
the middle east right now.
Sobin:
So the Chinese delivery of oil is still a drop in the
bucket to the Japanese, isn't it?
Perkins: It's a drop in the bucket now but it could conceivably
be much more.
Sobin:
What is it up to now? About 10 million tons a year
GERALD R FORD LIBRARA
Perkins: I think it is approaching that.
Sobin:
From the best sources that you have available, what is
the total Chinese production?
Perkins: You're talking I think in the neighborhood of 60 million
tons -- 60, 70 something like that.
Sobin:
Looking forward to 200 million tons in 5 years or something
like that, do you think?
Perkins: 200 million tons in five years may be a little optimistic.
Perkins -6-
no one knows, of course. I don't think the Chinese
themselves really know and in any case, they haven't
given people accurate projections.
Sobin:
Then they're still exploring, aren't they?
Perkins: They're still exploring very actively. They're drilling
very actively. When the CCPIT delegation from China was
down in Texas they were buying petroleum equipment and
drilling equipment of various kinds. There's no question
that this is an area where they're going to give a major
push and 200 million tons within a decade certainly is
well within the range, one would say even likely.
Sobin;
And that would bring them up to the level of what? We and
Saudia Arabia are the tho big producers in the world and
200 million tons a year from China now would make China
pretty much.
Perkins: It would make China one of the largest.
Sobin:
Yes, one of the three largest, right?
Perkins: It certainly, China will be one of the world's major
producers within a decade which is not quite the same
thing you are saying that China is going to be one of
the world's major exporters.
Sobin : Indeed true. Of course, and as their own economic
development proceeds they are always going to look after
themselves first, aren't they?
Perkins: I don't think there is any question they will have very
FORD
a
GERALD
LIBRARY
heavy use particularly as their own transport system develops.
They have been purchasing trucks at a great rate. They are
Perkins -7-
building trucks at a great rate, tractors. They are going
to have very heavy use for petroleum within China and
furthermore, if they really tried to export the bulk of
their product they would break the O.P.E.C. price and
in any case the price would fall so far that their in-
centive to export would be greatly reduced so the only
reason the O.P.E.C. cartel has been able to hold up as
well as it has because Saudi Arabia in particular and in
a lesser extent Iran of the others has been willing to
cut back production because they're earning so much
foreign exchange that they can really do this without
any great loss but there is a limit to how far Saudi
Arabia is going to cut back and if China starts pouring
Saudi Arabia's levels.
Sobin:
The delicate balance of supply and demand and this is
the cartel system.
Perkins: And the world is awash in oil right now as it is.
Sobin:
I know it is. Indeed true and it is a miracle the price
is staying up.
Perkins:
I mean you can see the Saudi Arabians are very reluctant to
let it go up further.
Sobin:
Let's go back for a minute to this business of the Chinese
desire to have foreign trade at all because I've heard so
many times that the gross national product is something less
FORD a LIBRARY GERALD
perhaps than 200 billion dollars which is about a sixth or a
Perkins -8-
seventh the size of our foreign trade
Perkins: Of our foreign -- of our G.N.P.
Sobin:
I mean of our G.N.P. and that the foreign trade component
of the gross national product is only 5% or something
like that. Is that right?
Sobin:
You really get into a messy measurement problem because
they calculate foreign trade figures in dollars and for
Chinese GNP is calculated in Chinese currency and reconciling
those two is no mean trick but if you go through that kind
of calculation I think you are probably talking about
exports plus imports over G.N.P. ratio is closer to 7,8
maybe even as high as 10%. That ratio is actually not
much different than it was 15, 20 years ago and is not
all that much different than it was in the 1920's and
30's actually if you go back recently looking at the
figures there's been no sort of decline in China's foreign
trade ratio. It's small because it's a big country.
Sobin:
But you assert that mest of the export practice stems
from their need for goods that they have to pay for in
hard currencies and therefore they have to export to get
the currency. What about the fact that in some ways they
support a substantial foreign aid program?
Perkins: The Tanzanian railroad is the biggest single item. Of
course, there they tried very much to tie that aid to
Chinese goods as do most other aid givers. The only
GERALD R FORD LIBRART
difference is that there is not as wide a variety of
Chinese goods to tie it to as there is say to the United
Perkins -9-
States or France or Germany when they are giving foreign
aid. I'm not exactly sure of all the arrangements they
use with Tanzania, for example, but I believe the Tan-
zanians had agreed to buy a certain quantity of Chinese
consumer goods and other products in order to make up
the foreign exchange deficit that otherwise would have
occurred to the Chinese. So the Chinese don't use very
much foreign exchange in their foreign aid. They do
use some but mostly it's tied to Chinese product.
Sobin:
By ommission do you mean that there was no component
of foreign policy influence when they handed out that
largesse?
Perkins: Their aid program is like everyone elses. It's over-
yhelming orientation is toward foreign policy goals.
It has very little to do with economic.
Sobin:
And where are they influencial in this way? Where do
they give out this kind of aid? In Africa? Are they
helping Uganda, for example do you think?
Perkins: There are several countries in Africa. In terms of
money Tanzania Railroad is by far the largest. There
was periods, for example, some years ago when they were
giving Cambodia aid. I assume they will be giving
Cambodia aid again. They of course gave a certain amount
of aid to North Viet Nam during the war.
Sobin:
Haven't they helped Pakistan too?
FORD de LIBRARY GERAID
Perkins -10-
Perkins: Oh Pakistan - very definitely.
Sobin:
There has been a substantial influence through aid to
Pakistan hasn't there which is part of the reason why
Pakistan is so oriented toward Chinese socialism and
again by the practices in this funny world we live in
the next door neighbor India practices soviet socialism.
Perkins: I think that the aid really follows though the other
reasons for good relations between the two, that is both
China and Pakistan want the relationship for the same
reasons as a counterbalance to India in a sense and to
a lesser degree the Soviet Union and therefore aid is
a way of helping solidify that relationship rather than
the reverse.
Sobin:
Just come back to oil for a minute again. Do you think
there is any prospect at all of our buying oil from
China in the foreseeable future?
Perkins: I suppose anything is conceivable but I would think that
they wouldn't sell very much to us. The advantages of
selling to Japan both in economic terms because the
transport is so small but also for the political reasons
that the amount of oil they could sell to us would be a
drop in a bucket compared to what we need. It could be
a much larger share of the Japanese demand and it might
well have some political effect and given that they can
GERALD
FORD de LIBRARY
sell the oil in both places for roughly the same price
Perkins -11-
Sobin:
Isn't it too easy for the Chinese to do almost all
their business with Japan?
Perkins: They do do, of course, their largest business in Japan
and I don't see any reason why that is going to change
at any time in the future regardless of what happens
say to such things as normalization. On the other hand
there is a lot that the Japanese don't produce.
Sobin:
Yes, but people don't always supply the things they
produce. They can supply things which others produce.
For example, I do. At this Canton Fair I had an ab-
solutely startling revelation and it was the fact that
Mr. Sobin in the absence of normalization of relations
and your failure to observe the conditions of the Shanghai
Communique and so on you have been a wonderful buyer and
you are an old friend of ours now and so forth, we would
like to invite you to sell us something and we don't want
anything from the United States in your line but we in-
vite you to sell goods to us from other countries. I
said from where. Oh, how about from Europe. I said ,
"How about East Europe?" They said, "East Europe is O.K.
too but don't affront us by leaving the marks on and
FORD
GERALD P
LIBRARY
ship the goods from a western port." "How about Japan?"
"O.K." "How about the Soviet Union?" "Without the marks,
Mr. Sobin."
Perkins: Well, I think they have gone to these kind of exercises
Perkins -12-
in different variations with traders for a long, long
time. Games that used to be played with Japanese
firms and they had all these dummy firms that were, you
know, on friendly terms.
Sobin:
Because of Taiwan.
Perkins: Because of Taiwan and the free normalization and so on.
One's impression in the Japanese trade is that they ended
up buying pretty much everything that they wanted to buy
from Japan.
Sobin:
Political reasons again.
Perkins: Well, they wanted to buy the products for economic reasons
but the way in which they bought them they frequently used
politics in a fairly active way. They didn't go buy 10
Boeing airplanes because they wanted to have a political
impact on the Boeing Company in the United States. They
bought 10 Boeing airplanes because they wanted to open
up international air routes and a number of others. Now
they wanted that for political reasons.
Sobin:
When I first got to China in early '72, Boeing came a
couple of days later the first negotiating team and
I remember there were only a few of us there and they
said here's a guy in the chemical business, let's talk
to him because we can't see how the Chinese can possibly
pay us for what we want to sell them so maybe we'll get
FORD LIBRARY de
this guy on the side of the barter with us. He looks
GERALD
Perkins -13-
as if he is capable of buying some raw materials to
make some chemicals or something. What a lack of
judgment or knowledge of their ability to buy and
pay in cash deals and so forth. Did we really know
so little about them even as late as April of 1972?
Perkins:
You mean the average trader?
Sobin:
Well not just the average trader. Boeing is not an
average trader.
Perkins:
I think there was a tremendous level of ignorance about
how to deal with China in the early years. In fact there's
still a high degree of ignorance.
Sobin:
That's what I'm really asking. Do we know that much more
now?
Perkins:
Well I think some people know that much more. If you are
looking at a long term trend in terms of what the Chinese
are buying and what they are likely to buy, I think the
people who work in China had a pretty decent idea of what
was going to happen even before the early 1970's. There
were a lot of people that said the projections that people
were making at that time were wrong. Well several of the
economists have made such projections. I was not one, I'm
happy to say. They did misjudge the grain market but in
terms of the other products they had the right general
magnitude. They predicted what the Chinese were going
GERAID 8 FORD LIBRARY
to buy and that's about what the Chinese are buying this
year, for example, several hundred million dollars.
Perkins -14-
Sobin:
You know we traders fumble around with products and we
don't know much about what is going to happen at a
Canton Fair until the Chinese lead us into it because
the minute you cross the bridge you really are guided
by them. They begin and end all conversations and
change the subject when they want to and you go on
their time frame.
Perkins:
In terms of what they are going to buy at any particular
fair clearly their whole bargaining strategy is to keep
you in the dark until the last possible moment.
Sobin:
How true, how true.
Perkins:
No one can predict that in October they are going to buy
so much of a particular product but you can say is that
over the next five or ten years they are likely to move
in certain broad directions.
Sobin:
The Chinese are proceeding into a new five year plan
Have you been looking into this and trying to prophesize
what may be its ingredients.
Perkins:
Well, of course, they don't publish the five year plans
anymore. They used to back in the 1950's so that you
can't get a lot of very specific information but what
you can do is look at what is happening to the trends
in the economy and you can look at where
the real
bottlenecks are appearing. For example, you know that
GERALD
FORD LIBRARY 3
in spite of massive effort and very heavy expenditure
Perkins -15-
that agriculture is their big problem sector. Well,
they still depend very heavily on agricultural products
for their export earnings. It is logical to assume
that as they find alternative sources of export earnings
they are going to try to cut back on export of agri-
cultural base products and that therefore as time goes
on, this isn't necessarily going to happen next year,
but one would expect to have it happen over this five
year plan and over the next one.
Sobin:
But this is also our opportunity to step into the breach
and supply them with things that they need to support
this program for correcting agricultural difficulties,
right? They are modernizing agriculture now - is that
an accurate description?
Perkins: Yes. Of course a large part of their agriculture modern-
ization program relies on local resources. They are
going right now quite heavily in the direction of
agricultural mechanization and I think there is no
question that they would be interested in certain kinds
of mechanization in the United States. Certain American
companies could probably supply specialized equipment
in limited quanities but the vast majority of their
equipment is going to be supplied from small scale and
medium scale plants in China.
Sobin:
Does that mean that they buy prototypes and cut it down
to scale in a village somewhere or a small commune? Is
GERALD RALO 8 FORD LIBRARY
that what you mean?
Perkins -16-
Perkins:
They don't necessarily buy prototypes. They do have
their own agricultural machinery research organizations
and these people design machines. They clearly look at
the experience in other parts of the world and use that
as a base and in things like tractors you would probably
find very similar types of tractors elsewhere but then
they will make design adjustments to those and for other
kinds of equipment such as rice transplanters that are
basically developing those completely on their own be-
cause there aren't any really good rice transplanters
anywhere else in the world.
Sobin:
So they may be in the vanguard of people who make good
rice transplanters.
Perkins:
They may be in the vanguard of those who make cheap ones.
The Japanese have some very expensive ones that the
Chinese I don't think will ever use.
Sobin:
As they modernize agriculture in accordance with a saying
I heard somewhere " we only automate enough to keep full
employment" they are freeing people now aren't they for
other jobs?
Perkins:
Yes, althoughthe area where they are putting in most
of their mechanization is during that brief period of
the year when they have very heavy demands for labor.
When you have double and triple cropping and now in
FORD
GERALD &
LIBRARY
large parts of say the Yangtze River delta, tripèe
eropping, you have very heavy demand for labor when
you are harvesting that first crop and planting that
Perkins -17-
second crop. The harvesting, the threshing, the
processing the food, transporting it to the market
-- all this takes tremendous amounts of labor and
at the same time you are having to transplant the
next crop, prepare the fields for that crop. All
this takes labor and often it has to be done in a period
of from two to three weeks. During that period if you
can mechanize you can do an awful lot more than you could
if you don't mechanize. Now they aren't mechanizing all
activities. You still see very labor intensive activities
in the winter where they will build huge tunnels for
drainage purposes just by chipping rocks into shape and
things like this. I saw a 7 kilometer tunnel this past
summer which had been built by one village with almost
no mortar, huge thing, and they had done it by chipping
rocks into shape to make it sort of a Roman arch, but,
you know, no machinery. The only machines, if you call
them machines or tools, would be hammers and so on.
Sobin:
Are the Chinese good farmers, do you think, Dwight?
Perkins:
Yes, their yields in areas where they have adequate
supplies of water are comparable to the best yields
anywhere in the world. They are comparable to Japanese
yields. In a sense, you know, that's a very great
accomplishment but it is also a very big problem because
FORD
it means that further advances mean that they have to
GERALD &
LIBRARY
go beyond that level and that makes it expensive.
Perkins -18-
Sobin:
A hundred times as difficult and very expensive.
Perkins:
Right.
Sobin:
Is it true then that great countries almost as large
as the United States there isn't that much arable land
at all?
Perkins:
They feed 800 million people on an acreage that is
substantially smaller than is available in the U.S.
I can't remember offhand; figures are easily available
but they have about a little over a hundred million
hectares.
Sobin:
How many acres in a hectare?
Perkins:
Two and one half. 250 million, 260 million acres, some-
thing like that. I think that comes to about a third
of an acre per person and that is not very much land.
You have to feed these people on that kind of land;
they do it but they do it by achieving very high yield.
Furthermore, a lot of that land is lousy land. A lot
of that land varies from western Nebraska down into New
Mexico and a lot is very dry land.
Sobin:
And requires a lot more care.
Perkins:
It requires care. It requires water except a lot of
this land doesn't have water and bringing it in requires
a massive capital investment.
Sobin:
Let's change the tact just for a minute. I remember
after World War II, a few years after, I heard Lady
GERALD 8 FORD LIBRARY
Jackson, Barbara Ward, the great British economist speak
here in Boston and she said what a good thing it was
Perkins -19-
for our world that the Russians immediately postured
and the Cold War began. They became the Western
World's built-in accelerator, I think that was the
expression she used, usually after a war there's a
great period of quietude and decadence sets in and
so forth until you get motivated enough. Now, is
there any truth, do you think, to the fact that the
Russians are China's built-in accelerator?
Perkins:
There's no question that the Chinese use their enemies
to mobilize the people and in that sense the Russians
provide, as in a sense the United States did earlier,
provide very useful bogy-man. On the other hand, I'm
convinced the Chinese really are worried about the
Russians and they spend an awful lot of money on mil-
itary equipment because of this. No one knows precisely
but as good a guess as any, they spend 10% of their
national product on their defense program. If they
didn't have to spend anything like that, they could
have that much left over for investment purposes and
their growth rate would be that much higher. It's like
the difference between Japan in the 1950's and 60's
FORD
when they were spending less than 1% of their gross
&
GERALD
LIBRARY
national product on defense and Japan in the 1920's
and 30's when they were spending nearly 10% or some
such figure on military expenditures.
Sobin:
Well, has China's foreign trade posture then, do you
Perkins -20-
view it as having been affected by the competitiveness
and hostility with the Soviet Union? Is that what you
are saying?
Perkins:
Well the main effect on the foreign trade has been to
cut off trade, or limit trade, with the Soviet Union to
a very, very small amount.
Sobin:
How much? Two or three hundred million dollars?
Perkins:
Something like that.
Sobin:
That's not so small.
Perkins:
When you consider that back in the 1950's over half of
China's trade with the Soviet Union and over 70% was with
the Soviet Union plus eastern Europe.
Sobin:
They have a trade treaty.
Perkins:
Yes, and they eertainly have a continuation of trade.
Sobin:
Yes, and communications between each other. Witness
the airline. They fly to each others capitals.
Perkins:
The airlines do go. They still have embassies. They
don't speak much but they occasionally have had negotiations
over the border although they don't get anywhere.
Sobin:
Over the next five or ten years what kind of trends do
you foresee in buying and selling?
Perkins:
We are obviously guessing at this sort of thing. I think
the agricultural problems -- I mean I don't want to ex-
GERALD 8 FORD VIBRARY
xagerate their agricultural problems. They're keeping
food going at a rate faster than the population. The
population growth rate is coming down but that pressure
Perkins -21-
on agriculture is going to continue to push them toward
reducing their dependence on agriculture exploits but
if they are going to do that, they have got to find a
substitute. Well, petroleum is one major possibility
but the problem with petroleum is that there are limits
both because of their heavy domestic demand and because
of the fact if they export a whole lot, the price of
petroleum won't hold up.
The area where they have had
the greatest success, where they have had very rapid
development, of course, is in industrial development
that does not depend on agriculture.
I mean in machinery.
They have so many machine tool plants in China of various
kinds that our delegation that went this summer we had
a person who had done all his work on the Chinese machinery
industry. He thought he knew all the plants in China and
FORD a LIBRARY GERALO
we started reading the signs on all the machines and 90
plus percent of all of the plants that we were looking
at, he had never heard of.
Sobin:
Plants with export ability.
Perkins:
Many of the smaller plants don't but I think the larger
plants, I mean you're talking about a very large machine
building capacity.
Sobin:
There have been machine tools sold. They have made a
sale of machine tools to this country.
Perkins:
Of course they have exported full machine tool plants to
Perkins -22-
places like Pakistan but it's not just machine tools;
it is the whole area of industrial development. They
have been growing at about 10% a year now for, well more
than 10% if you throw in the early '50's, but for 25 years
this is a very large sector.
Sobin:
How do you account for the fact that they buy earth
moving equipment from Bucyrus-Erie for example? Are
they not making that kind of thing or do they want
these things to use as prototypes to copy or what?
Perkins:
I think there is much more to it than just copying. It
depends on which peice of equipment. If they are only
going to buy a few pieces of equipment, you can be pretty
sure they are going to do it just .to copy it but you take
the earth loading equipment, they bought a great deal
more than that and I assume that much of that is to be
used to expand their transport system. They've had a
very great extension of the road system, for example,
in China. Now most of that is done by communes using
labor. I wouldn't be surprised if muh of this earth
moving equipment is to be used in this sparsely populated
aread where you can't do that. They also though import
trucks on a regular basis because although they do
produce trucks and they are increasing their production
FORD
d
LIBRARY
of trucks, this is clearly an area where they have had
GERALD
a lot of problems. They really don't have an efficient
truck manufacturing capacity.
Perkins -23-
Perkins:
Everywhere you go in the countryside now, or at least
in the richer areas, all of these communists tell you
oh, we'd love to buy a truck. They clearly have the
money to buy a truck. It's not that; it's just that
they aren't available and so what they do is they use
their tractors instead and they tack on carts behind
the tractors and they still use a lot of human and
animal pulled transport in China and all of these places
would just love to have trucks if they could buy them.
Sobin:
They really lack transportation ability anyway and
delivery systems, don't they? I understand they have
a smaller railway system than India has, for example.
Perkins:
Yes, I think that is probably true.
Sobin:
Are they building rolling stock, do you know?
Perkins:
Oh, yes. I don't know what the quanity of deisel
engines they produce but they went over to deisel some
time ago now. You still see a lot of steam engines
on the tracks, but they were all built in the 1950's
or before or imported and the like.
Sobin:
Have they been buying any trucks from the United States,
do you know?
Perkins:
I don't offhand know.
Sobin:
I don't think GM has made any sales to them directly
from the United States although GM has so many interests
FORD
oversees I know Japanese plants partly owned by GM and
GERALD &
LIBRARY
I know they have sold engine parts partly owned by GM
and so on.
Perkins -24-
Perkins:
That's the kind of thing where normalization could make
a difference. For example, you would probably be much
more apt to deal directly although again it's a question
of the extent to which GM is making competitive trucks.
Sobin:
You mean that because of the lack of narmalization of
relations we are deprived of a certain amount of business
which might accrue to us if we were better friends and
demonstrated that friendship.
Perkins:
My feeling about the Chinese is that if there is something
only
that can be obtained in the United States or can only
be obtained in the United States with the proper quality
and at reasonable cost, they will go to the United States
to buy it regardless of the normalization or not but when
they can buy the same thing elsewhere at almost the same
price they tend to steer away from the United States.
Sobin:
Do you think that there is much that they have to buy
here for the reason that we caneget an export license
that they can't buy elsewhere?
Perkins:
They have been buying whatever it is several hundred
million.
Sobin:
But they made an arbitrary decision to buy the 707's
for example. They could have bought more Alsuian 62's.
Perkins:
But that is a classic case. I mean the 707 is so much
better an airplane than anything the Russians make.
GERALD & FORD LIBRARY
Perkins -25-
Sobin:
So you think that most of the things they've been buying
from us.
.
Perkins:
Computers might be another area where our technólogical
advantage is so great that they clearly would prefer to
buy from us.
Sobin:
But conventional things, you don't think they really are
available for us to sell just because the Chinese say
well you're not that good a friend yet.
Perkins:
Well, I think at least they buy less than they would
otherwise. It certainly is overstating the case to say
they don't buy at all.
Sobin:
Dwight, what is China's likely growth and how will it
affect trade, more specifically our trade with China?
Perkins:
Well, I think they are likely to continue growing at a
fairly rapid clip, 5 and 7% a year depending on political
disruption. Trade will grow along with it. I think we'll
grow along with it too. We'll grow a little faster if
there is normalization.
Sobin:
And do you see now perceptible patterns that we could
pass along to fellow friends in China's foreign trade.
Perkins:
Well, China is going to continue to import the frontier
technology items that they need for copying. They are
going to continue to import certain key materials that
they can't produce at home. They will continue to import
GERALD P LIBIRAT FORD
certain other bottleneck items for a period of time like
steel and chemical fertilizer and then they are going
to buy the plants to produce them in China and probably
Perkins -26-
then reduce their imports.
Sobin:
Dwight, is there a reasonable chance and expectation
for the United States for some rewards in trade for the
typical American entrepeneurial businessman, the
propreitorship, if you like, as there is for the big
corporal apparatus like General Motors and DuPont.
Perkins:
Sure, but that depends on what they are selling and what
they have to offer. The Chinese deal at both ends of
the spectrum.
Sobin:
Fine, thank you very much, Dwight. We have learned so
very much from you today.
FORD LIBRARY de GERALD