Investor Q&A

Shan’s cultural evolution

Investor discusses his new book about his ‘wasted’ years in Mao’s last decade


Two contrary influences shaped Shan’s life: Mao Zedong and Janet Yellen

Life is a winding path. That is particularly true for Shan Weijian, who, before becoming one of the most successful financiers in Asia and a professor at the Wharton School of the University of Pennsylvania, was among the 16 million urban youths sent to the countryside to do hard labour during China’s Cultural Revolution between 1966 and 1976. The upheaval of the time not only thrust China into a socio-economic tailspin, but also denied many youngsters a proper education. Between the ages of 15 and 21 Shan lived in the severe conditions of Inner Mongolia’s Gobi Desert where his tenacity and capacity for self-learning were honed. These served him well when the period of turbulence wound down and he was eventually enrolled to study English at college in Beijing. He later studied in the US under the former Federal Reserve chair Janet Yellen and subsequently worked at the World Bank and TPG Capital.

Shan’s extraordinary experiences, including the backbreaking work of growing crops in the desert, are recounted in his recently published memoir Out of the Gobi: My Story of China and America.

Now chairman and CEO of PAG Group, an Asia-focused alternative investment firm, Shan sat down with WiC to talk about the book, the years that he “wasted” farming in the Gobi and what that period taught him about the importance of education.

A lot of Chinese people do not like to talk about the Cultural Revolution. What made you decide to talk so honestly about what happened in that period of your life?

The history of a country informs and defines its present days. That part of history that I captured, at least from my perspective, through these experiences that I had, provides lessons to people of my generation, and to guide many of the policies that you see in China. I felt that part of history is so important that it needs to be recorded and remembered. Besides, my stories are rather entertaining. Some are bitter. Some are sweet. So I thought, I’ll write them down, and people can read them.

Why did it take you so long to complete the book?

Actually it did not take long at all. I started to write the book about 28 years ago when I was teaching at the Wharton School. And then I got very busy, especially after our second child, our daughter, was born. So among research, teaching and having two kids, I just did not have enough time to continue with the project. I shelved it and sort of forgot about it until 2017 when I decided to pick up the pen again. For the first manuscript, it took me only five months.

What would you estimate your daily calorie intake was in Inner Mongolia’s Gobi Desert?

There was no average, no regularity. Supposedly we were given a ration of 22.5 kilogrammes of grain every month. But nothing else. There was hardly any edible oil, few [green] vegetables and certainly no meat. Sometimes we were given enough rations, and sometimes not.

Are there particular foods from that period that you cannot eat even today because you got so bored of it or hated it so much?

It depends on how the food is cooked. For example, I was totally tired of pumpkins – we ate boiled pumpkins day in, day out. But the first pumpkin pie I had was delicious. That was in America. I never thought pumpkins could be turned into something so tasty. But if you ask me to eat boiled pumpkins again, it will be somewhat hard.

In the book you mentioned that you ate quite a few animals, including cats and dogs. And what did owls taste like?

I do not remember, but everything was delicious if you could get your hands on it. If you were starving, everything would be delicious.

Surprisingly, after six or so years living in those conditions, your health was very good, as indicated by your check-up for going to college in Beijing. What can we deduce from that?

When you do physical work, you are generally in good health. Of course malnutrition was a problem for me, which I suspect had led to my sleeping troubles. On top of that I was studying very hard too. But before I was sent to the Gobi when I was in Beijing, I was a rather frail boy. From time to time I would get headaches or stomachaches and I would go to a clinic. After being sent to the Gobi and doing manual labour, hard labour every day, I discovered that I did not fall ill as frequently as when I was in Beijing. People need exercise. I still exercise everyday today.

You described the work in the Gobi as futile, pointless and backbreaking. You mentioned 10 times the amount of seed was required to harvest the grain you were growing. Can you talk about how this period, in terms of all the work you were doing, didn’t make a lot of sense to you?

We were trying to turn the Gobi into a farm. This was very difficult to achieve because the rain and soil conditions were simply not conducive to the growth of crops. And the more barren the land was, the harder you would have to work to try to grow something out of it.

We worked extremely hard. But almost predictably, that place just did not grow things, not even grass, that much. [I reckoned] it was not so much the output that the leadership was concerned about. They just wanted us to work. That was why we wasted so much resources, seeds, fertilisers and effort, but in the end we produced less than what we sowed into the land.

You hear about diminishing returns, right? It could be negative returns if you put too many people into these lands – overworked land. Our work was more destructive than supposedly productive.

In the book you mentioned that your father voiced his disillusionment about you not being able to go to college and your rural relatives talked about Mao Zedong’s leadership not being good. How did you feel when you heard that as a 13 year-old boy?

The words that the peasant relative said to me about Mao not being a good leader were shocking to me. It was the first time I had heard somebody say that. But he had very good explanation. He said we did not have enough to eat. With regard to what my father said, he was simply telling the truth: the reality that we were denied schooling altogether, not only college.

It was unfortunate. I did not feel too much about it at the time. I was small. I did not think about the consequences as much as a young kid. But to people of his generation, of course it was a huge regret. They knew what we were missing and that what we missed might not be recovered. Most people have their entire life wasted because they were denied formal education for ten years.

Do you think they were brave to speak up?

Correct. They were different. One talked about his stomach, the other about the importance of education. It is true that many people did not dare to speak up against anything at the time. The Cultural Revolution taught people not to tell the truth because we could get into trouble by telling it. And that culture, coming out of the Cultural Revolution, was gradually changing. Telling lies became not so necessary.

As a 12 or 13 year-old you saw a school principal beaten to death by a group of teenage girls. How did it effect you to see something like that?

We all aspired to be revolutionaries. As a revolutionary you needed to be tough. I thought [that incident] was gruesome and horrible, but we did not know that they were actually committing murder. They were doing that in the name of revolution.

In our minds, it was a huge conflict. On the one hand, we felt sympathy for the old woman, and we were horrified. At the same time, we thought that the Red Guards were doing the right thing. But it just left such a deep impression on my mind that I would never forget. I can still remember the scene today.

In the section of the book when you were farming potatoes and you were staying with the innkeeper, the latter struck a harsh bargain to give you half a box of matches if you gave him a half sack of potatoes. It’s interesting that even at the height of the Cultural Revolution ‘market pricing’ didn’t totally vanish…

It was a barter trade. No money was involved. I think what I try to write is not so much about myself, or my friends’ personal experiences, but where China stood at that time. It was under a system – either the people’s commune or state-owned farms – where there was no incentive for people to be productive. One had to be politically right, but not productive. And under that system China could not even produce enough to feed itself. We were not any less hardworking than people today, but we were not producing anything because people were put into a cage under the centrally planned economic system. After China embarked on economic reforms and open-door policies in 1978, the cage was opened and eventually removed, and private enterprises were allowed to come into being and eventually to flourish. My book is a description of how that old system failed. It failed in almost every way. That is why we cannot go back to that system. We will have to move in the direction of the market.

What would China be like socially and economically without the Cultural Revolution, which is widely denounced as a “10-year catastrophe”?

China would have been way ahead of itself or of today. The former prime minister of Singapore, Lee Kuan Yew, once told me that Singapore was able to develop because China was not doing so, meaning there was no competition. Otherwise Singapore would have had no chance to compete with a country like China. The reason, he said, was that China had all the talents and the least educated people of old China, went to the South Ocean, to Singapore.

So he said genetically we did not have all the talents from China yet we developed Singapore. And all the talents were in Jiangsu and Zhejiang provinces, which produced about two-thirds of all the winners in the imperial examinations through the centuries. If China did not go through that period of time, if China had started 10 or 20 years earlier, it would have been very different today.

Chinese people as a society value education very highly and are probably innately quite capitalist as well. In some ways can we say that the Cultural Revolution was the most ‘unChinese’ thing in China’s long history?

[Long pause] I do not know. That is an interesting observation. But throughout the centuries, Chinese people could go quite crazy. Think about the Taiping Rebellion, when almost 20 million people died and people became almost religious zealots. And of course the government at that time was very corrupt. Many people could not feed themselves. While the Confucius culture, which had dominated China for more than 2,000 years, teaches everybody to respect their positions in the social hierarchy, central to that belief is the concept of virtue. The ruler has to be virtuous or rebellion will be justified. People can rebel against a system that is not considered virtuous.

It is surprising that people did not rebel against the system during the Cultural Revolution…

Right, because Mao had very strong legitimacy to rule. In Chinese culture, such legitimacy comes from conquest. Every dynasty started with a conqueror, not some royal heir as royal blood was not as much a source of legitimacy in the Chinese history, as say in English and Japanese histories.

If there had been an election in the 1950s and 1960s, I think Mao would have won. He was popular. He was worshipped. He had successfully fought the wars. His prestige was at its zenith, probably more than any other ruler in Chinese history. And he did what he did in the name of the people. Therefore it took a very long time until after his death, even today, for people to recognise that what he did was so ruinous to the country.

What does the Cultural Revolution mean to you personally?

I wish it never had happened. But when you had that kind of experience, you tend to appreciate whatever experiences you have afterwards. You appreciate every opportunity that you have – whether it’s work, life or food.

But I think I would have done better had it not been for the Cultural Revolution. I would have learned more. I would have studied more. I probably could have been a scientist, which was my passion when I was small. I did feel regret that I was never given the opportunity.

In a lot of ways your book is like a petition for education…

Absolutely. Because I consider education as a privilege, which young people take for granted today. When I think about surviving the Gobi, it is not just a matter of living through it. The vast majority of us lived through it. Very few people died. But most people came out without the knowledge and skills for jobs in a changed society. For those of us who continued to study and pushed ourselves to acquire knowledge, even though books were banned and study was frowned upon, we were not as totally lost as the rest – that I consider as ‘surviving’.

One of my messages is that education would allow you to achieve whatever you want in life. Without it, it will be very difficult. I think perseverance is important. It is a necessary condition to succeed. But one also needs to be able to make good decisions based on good judgement. Without knowledge, without experi-ence, you just cannot.

That is why education is so important.

You were quite lucky to have Janet Yellen as your teacher. What did you learn from her?

To be humble. To be very meticulous, very careful in your studies – some of the fine qualities that I observe in her.

Given that you straddle China and America in your experiences, do you find the current situation in which the two are getting into a more acrimonious relationship quite difficult on a personal level?

Not so much on personal level. I think [the conflict] is obviously not good for both countries.

There are some hawkish views in America that the US should decouple with China economically. I think that is thoughtless thinking without considering the consequences. I published an article on January 7th this year in the New York Times called “American companies need Chinese consumers”.

What prompted it was an announcement by Apple that it was going to miss its sales forecasts because sales in China were less than expected. On that day Apple’s stock price dropped by about 10% and the entire market dropped by almost 3%. It is a good indication that the two economies are so intertwined that even a little bad news could wipe out 3% of the entire stock market in the US.

Can you imagine what the damage will be if the two countries try to decouple from each other economically? It is unimaginable. It will bring another great depression – greater than the last great depression.

Economic imperatives would tell us that there will be more and more friction as America feels that the other guy on the block has become too big. But eventually they will have to find a way to live with each other on the same block. Or they burn down the block.

Do you think the trade war might lead China indirectly into the middle-income trap?

First, we do not know how the trade war is going to be resolved. We will have to wait to see the agreement and then we will know the consequences.

But I doubt it is going to set China back. Unlike people who think that this is a zero-sum game, I always think that trade is better than no trade. More trade is better than less trade. And trade war is harmful to all the warring parties. So to the extent they can resolve their differences and hammer out an agreement can only be good for China. In fact, if China opens up more to trade and investment, to restructure its economy along the same lines of economic reform policies, it will be good for China.

What is the greatest problem facing China’s economy now?

As China shifts away from investment-led growth to consumption-driven growth, there needs to be more efficiency in the system. Today it is still inefficient, especially in allocation of resources. The state-owned sector is too large and very inefficient, as we know, but they receive more favourable allocation of resources. On the back of the economic shift, China’s growth rate will definitely drop because investment produces larger multiplier effects than consumption.

So in order for China to sustain growth, it has to find some other sources of efficiency. I think that source can come from the downsizing and privatisation of the state-owned sector. Not doing so will become an impediment to China’s economic growth. And that is the biggest challenge.

Is your book going to be published in China?

I hope so. Some day.

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