Two Faces Of Islam In Asia (II)

Recent visits to Indonesia and the Xinjian province of China, both predominantly Muslim, took on added significance in the immediate aftermath of the September 11^th tragedies and the onset of war in Afghanistan.

My previous forays into the Chinese heartland had not taken me further west than the central province of Sichuan. Most of what matters in China takes place in the eastern half of the country. It holds a majority of the population and also accounts for most of the country’s economic output. This is why cities like Chengdu or Chongqing, though squarely in the country’s center, have traditionally been thought of as China’s “West”.

Though big central cities like these two may lag some years behind their eastern and southern counterparts, their patterns of development are recognizable and they have the feel of other big Chinese cities.

Further west, however, the land becomes arid and cities are located in oases irrigated by the snowmelt from nearby mountains. Urban planning begins to reflect more the constraints of nature and of the western terrain than the voluntarism characteristic of the East. Somehow, even people’s attitudes toward life are imperceptibly affected – more fatalistic and more resigned toward things imposed by a higher order. In Dunhuang, only half way into the west, this change is already noticeable. But Dunhuang it still is a Chinese city with only a small Muslim minority.

The real shocker is Urumqi, the capital of Xinjian province. At first glance, it is a thriving, modern city, with wide thruways and tall buildings. But, as soon as you walk in the streets, you realize that Urumqi is not, in fact, a Chinese city. It is a Central Asian city. The atmosphere of the markets, the attitudes of the vendors are reminiscent of North African souks. The local music sounds Middle Eastern. But most importantly, many of the people do not look Chinese, because they are Uyghurs.

Uyghurs are Turk-looking people that came with some of the region’s migrations. Their language sounds like Turkish and is written in Arabic-looking characters, although I am told it is not Arabic and looks more like ancient Turk.

Traditionally independent and overwhelmingly Muslim, the Uyghurs are not trusted by China’s central government in Beijing, which has tried to “dilute” them by sending to Xinjian province large numbers of Han Chinese. However, the Hans tend to stay in the capital city so that, while Urumqi itself has only about thirty percent of Uyghurs, Xinjian province as a whole has eighty percent. Turpan, a smaller oasis about three hours from the capital, is overwhelmingly Uyghur, for example.

The Chinese government is somewhat paranoid about Xinjian’s ties with its Islamic neighbors. This reportedly is a problem in the smaller and more restive area around Kashkar, which is much closer to the borders with Afghanistan and Pakistan. In most of Xinjian, however, Islam’s presence does not strike a visitor as overbearing.

There are China-specific reasons for this. First, freedom of religion is relatively recent in China: Islam, like other religions, was previously muted. Even now, Islamic schools are not recognized and can only function as Sunday schools – so, children are exposed to ideas and facts that would be taboo in Islamic education. Second, China is a laic society: for example, it protects and enforces women’s right to work and to dress as they like. Finally, the state still exercises some controls on the church. For example, state authorities select among the qualifiers those few students who will be allowed to attend schools for Imams.

As a result of all this, except perhaps in border areas, Islam in China is generally quite remote from that in the rest of the world. I stopped along the road between Turpan and Urumqi, to “chat” with a local Imam. He had only met one foreign Imam in his career, interestingly one from Saudi Arabia. However, that had been several years ago and “my” Imam mostly remembered that he and his Saudi colleague taught almost everything differently. Altogether, this man looked and behaved like the country priest that he was, involved mainly in the daily problems of his flock and far removed from the more political aspects of his religion.

The absence of a deep or widespread Muslim problem was also apparent in the lack of excitement over the events of Afghanistan. People’s attitudes were compassionate toward America’s tragedy even when I said I was French – and they were friendly when I said I was American. (I sometimes alternate between my two nationalities, to see if they elicit different reactions). Despite all this, America’s problems seemed distant and somehow theoretical. The recent tragedy was put in the same bag with the spy plane incident a few months ago or the bombing of the Chinese embassy in Kosovo; those, incidentally, also failed to excite much interest. In addition, there was no evident compassion or sense of kinship toward the people of Afghanistan either.

The real problem with the Uyghurs, which became clear to me after a while, is that they don’t feel they belong in China. Xinjian’s center of gravity is not within the eastern part of China, which is physically and culturally distant. Rather, it is within Central Asia’s former Soviet republics, to which it is more akin culturally and with which it is developing ever-closer trade ties.

Towards the end of my stay in Urumqi, I was taken to the (poorer) Uyghur area of the city for lunch. All the signs (shops, restaurants) were in Russian, with an occasional subtitle in Mandarin. The markets were full of shoppers and traders from the former Soviet republics. And, when we walked into a restaurant, I was addressed in Russian. After much vodka, my companions became more outspoken.

The Uyghurs feel neglected and exploited by China. The region is very rich in natural resources, from oil and coal to gold and other metals. Yet, many Uyghurs feel that the programs promoted by Beijing to “open the West” really are meant to bring that wealth to the East. On the other hand, they are quick to admit that the (theoretical) risks of associating with any of their aggressive and unruly neighbors would be unacceptable.

So in a way, for many young Uyghurs, the situation is rather desperate. They are not starving, but the opportunities for growth and recognition are poor. I checked with some of our portfolio companies to see if they now were or soon would consider producing in Xinjian province. For various reasons not one did, even though most had sales offices in the region. Also, for young Uyghurs, moving to more prosperous regions of China would be complicated and ethnically awkward, while emigrating is even less attractive and uncertain.

Somehow, this is the way in which Xinjian could become China’s Achilles’ heel. Not because its inhabitants are naturally drawn to fundamentalist Islam, but because many are disenfranchised and easy preys for insidious, external propaganda.

To be fair, Beijing is truly attempting to bring development to the region, if only for defensive reasons. But simply throwing money at Xinjian and keeping its population in dependence is not a long-term solution. And aside of natural resources that do not create many jobs, there are obstacles. The region’s labor pool is badly trained and the logistics are awesome, with poor neighbors as possible export customers and domestic markets very distant. The measured supply of water is an additional, ultimate boundary on the region’s development.

I visited a couple of western economic development agencies and two enterprises seeking financing. Many of the projects seemed naï and poorly documented. More importantly, everyone seemed to want to develop similar projects. This, I believe, goes beyond Xinjian and stands at the heart of China’s current restructuring challenge.

Even though they often are nimble traders, most Chinese do not yet fully understand the interplay between supply and demand in an open-market economy. Despite central attempts at coordination, the development of industry in China’s was shaped more by local political power plays than by economic planning. For prestige, many provincial governments facilitated or demanded the building of their own steel, chemical, or automobile plants, without any notion of what these plants’ combined output would be or if there would be a commensurate demand for it.

Now, of course, excess capacity has become endemic, with both domestic and international implications exacerbated by the country’s entry into the World Trade Organization (WTO). Current central-government policy calls for rationalization of production in the state-owned enterprise sector and the closure of money-losing firms. But the vast layoffs required are being fought tooth and nail by local governments that are only now discovering the discipline of profit and worry mostly about the resulting unemployment and possible unrest.

But Chinese ignorance of the market’s logic goes beyond the political arena. For instance, as soon as you buy a pack of cigarettes from one vendor in an outdoors market, ten others surround you, also trying to sell you… cigarettes. Of course, you already bought cigarettes so that you are unlikely to buy more, no matter how hard each one tries to undercut the other’s prices. Yet that’s what they all try to do.

Interestingly, no vendor tries to sell you matches or a lighter, for which you might have a need: the Chinese do not yet have a sense of derived or niche markets.

I was musing about all this at breakfast in Hong Kong with the Chairman one of the best-managed industrial groups in China. He commented that all Chinese tend to be like this.

“Unfortunately”, he commented, “what we have is a country of 1.2 billion people, each one of whom now wants to be a manufacturer… of the same things”. This executive thinks the current combination of oversupply and price-cutting could last another eighteen months.

China is the current pet of economists because it has been relatively unharmed by the recessionary trends affecting the rest of the world. But it is walking a tight rope.With the change due to take place in the country’s leadership over the coming year, enforcement of restructuring measures may weaken, while official statements by Chinese officials may become even more confusing than usual. We remain extremely optimistic about China’s long-term prospects, but the next several months bear watching.

December 10, 2001
^© Tocqueville Asset Management L.P.