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Good times always go by fast. As Nora’s summer break drew to an end, she took Jason to her parents in southwestern China before she headed back to Bowling Green for her second year in graduate school. My parents stayed with me for two more weeks before they went home. They missed their other grandkids. As my apartment became quiet again, I started my first fall in Northern China.
Fall is undoubtedly the best season in Beijing. The summer dreary of long and hot days cedes to the cozy vibes of the early fall before the weather turns frigid cold. Evening breeze washes over the city skyline as the trees in parks and along the streets display a stunning array of reds, oranges and yellows. This world famous ancient capital and a modern international city, reveals its grandeur and its unique charm to visitors and residents alike. With a young child and aging parents, the family tours we took during the summer were primarily within city limits. Now with the freedom to go wherever I wanted to go, I took on some of the most strenuous tours. I went to the most challenging section of the Great Wall, climbed its steep steps to soak in the dazzling fall colors of the northern country on the ridges and in the valleys as far as eyes can see. One of my college friends and I drove over a hundred miles to the Inner Mongolia Grassland, a vast part of the Eurasian Steppe, to ride horses and interact with nomadic people to learn about their daily lives, their distinctive culture and tradition.
By this time, I had been with Armstrong for over five months. Sitting in my quiet apartment, I could finally take a moment to ponder what this job meant to me. My H1 B visa was approved in early spring. Although it would not lead to permanent residentship, it gave me up to six years to prove my worth so Armstrong would sponsor my green card application. It also meant that I had triumphantly cracked into the accounting profession which seemed so insignificant to my American classmates. As I reflected on the long, and often time heartbreaking job search I went through, I attributed the “success” to my strong Christian faith. “With God, all things are possible” (Mathew:19-26) rang in my head every time disappointment and despair struck me. What seems impossible to humans is always possible for God. It was this indomitable belief that kept me going. The fighting spirit that came with it, will become the spiritual wealth to stay with me for the rest of my life.
I asked myself how my work could add values to Armstrong and contribute to its success in China market? Up to this day, I still don’t know why Steve gave me the job title: “Asia Accounting Manager” Armstrong has a manufacturing plant in Japan, but I had nothing to do with its accounting operation. I told myself it was not the time to think about the turf. I needed to do what was important at the time.
It is critically important to put the accounting house of any start-up business in order so that reliable financial reports can be generated. Dr. White’s case study of running the accounting department of a fictitious company came into mind. I quickly dusted off some undergraduate accounting textbooks I had with me. It was really the right time to get caught up on what I should have learned before my graduate study. I felt lucky that Western Kentucky University allowed to graduate without knowing all the nuts and bolts about financial and cost accounting. I could put some of the fresh learning into practice in a real company. I shared what I was learning with my staff, too. It turned out to be a very effective in-house training for them.
Soon, we reached the first milestone in the joint-venture’s short history: we sent a set of monthly financial statements to corporate. It became the topic of meetings for all kinds of questions to be asked about the financial performance and financial positions of the joint venture. The analysis of the statements also revealed problems in business processes or wrong decisions that were made and triggered suggestions from corporate and decisions by local management for improvements.
While I was wondering if Steve would ever specify my role and responsibilities, I told myself he might be waiting for me to take the initiatives. At this point in Armstrong history, how to steer its business in China was an uncharted territory. For decades, it had been conducting international business in other western countries. But, this was the first time it set up a subsidiary in a non-market, yet rapidly changing economy.
There are vast differences between the two countries in legal and regulatory framework, business environment, taxes, business risk factors, accounting rules in addition to cultures that always influence how business is done. I felt strongly that I needed to put what was happening in the business in context so that corporate could better understand the issues involved.
Some of what I observed troubled me greatly. In the 1980’s, Individual income tax Law was passed in China. But it did not reach average Chinese workers until companies from western countries significantly raised wages to attract skilled employees. Its collection is through employers’ withholding. Although the law was not aggressively enforced by the Tax Administration at the time, that could change on a dime.
US companies are held accountable for the activities of their overseas subsidiaries. Armstrong sells it products through independent representative. Some of the them openly said they would have to pay some kickbacks to China’s state-owned company’s executives in order to beat the competition. The United States enacted the Foreign Corrupt Practics Act in 1977, prohibiting US businesses from bribing foreign government official in obtaining and retaining businesses. I brought up these type of issues only people on the ground could, to Steve’s attention. He gave full consideration to every issue I brought up, often time, involving corporate legal counsel and our CPA firm.
Almost eight years later in 2016, JP Morgan Chase settled a charge brought by Security & Exchange Commission under the Foreign Corrupt Practice Act by paying $264 million for hiring the so called “princelings’, ie. the well-connected sons and daughters of senior Chinese Communist Officials to obtain and retain businesses. In term of complying with this specific law, Armstrong was way ahead of the curve.
Nora flew back in mid December 1997 for winter break and took Jason to Beijing. I had planned to keep him in Beijing after Nora’s winter break was over. Now, I was in China and could raise him myself. With the second Armstrong joint-venture coming on line, I was busier than ever before. I certainly needed extra hands. I hired a distant relative to help during the weekdays. Jason would later call her “Auntie”. Both her husband and her son were migrant workers in Beijing to run a food truck, while she had stayed home to attend a small parcel of rice field and taken care of her in-laws. I invited my mom and dad to Beijing too, knowing it would be quality time for Jason to bond with grandpa and grandma. They waited no time to get on the overnight train. I signed a lease for a newer apartment, close to multiple parks. It also came with air-conditioners as I learned that Beijing could be very hot in summer.
Jason had turned two years old. He had not learned to speak yet. Whenever I got home from work, he would take story books and open them for me. He wanted me to read them to him. Sometimes I was so tired from long days at work, I really wanted to be away from anything on paper. But, I did not want to push him to TV. A few months later, Jason could burt out a few words. Then he could pick up other words he had just heard like to form short sentences. Before we knew it, he could have a short conversation with us.
I would provide relief to Auntie and my parents on weekends, while training Jason for toilet and giving him bath every night. I read stories to him before I tucked him to bed. My parents would take Jason to the nearby parks as much as the weather permitted. This was the most precious time for them as they knew we would send Jason back to the States that fall.
This was the third trip to Beijing for my dad. He had not been the Great Wall yet. He often murmured the Chines phrase: 不到长城非好汉 (He who has not been to the Great Wall is not a true man). I knew that he wanted to go to the Great Wall. Knowing how strenuous the climb was, I took him instead to the Marco Polo Bridge, another well-renowned historical site, on the far outskirt of Beijing where the first shot of the full-scale Japanese invasion was fired in 1937. To this day, the regret still haunts me that he never made it to the Great Wall. Nora graduated in that May and started a sale job near Bowling Green. My in-laws came to Beijing on their first trip to the United States. They were glad to meet my parents for the second time before they took Jason back to Bowling Green in August.
In the summer of 1998, US President Bill Clinton made a 8-day historic visit to China, the first such state visit by a US President since the Tiananmen Massacre in June 1989. It was a highly choreographed visit by the CCP, starting from Xi’an, the century-old capital of the Tang Dynasty, when the Chinese civilization reached its pinnacle, and ended in Hong Kong which China reclaimed sovereignty from the British less than a year earlier. The CCP intended to send the US President an unmistakable message that China was on a unstoppable path to return to its past glory. It should have been a wake-up call to anybody who cherishes world peace and value democracy and individual rights. The return to glory of a totalitarian regime will be accompanied by external aggressions and internal oppressions.
I took my parents and Jason to Tiananmen Square, one of the largest in the world to witness the historic event. The Square was a fortress on that day with the highest security measure. Layers after layers of fences closed off all the streets that lead to the Square to stage a grandiose welcome ceremony. I bought a binocular from a store on the nearby street. I saw what the entire world was watching on live TV: the read carpet was rolled, the 21 gun salute was fired, and the three branches of of China’s Military: Army, Navy and AIr Force were inspected by the hosting and visiting Presidents.
I could not believe my very own eyes. Nine years ago, this Square was the epicentre of the longest democratic movement in Communist China. It inspired the freedom-loving fighters across the country. Freedom was such a high calling that it was rumored that even pocket pickers stopped stealing during the height of the demonstration. As an active participant of this movement myself in southwest China, I was gripped by any news from the radio or on TV, eager to know how CCP government responded to the demand for democratic reform: free press, free and fair local election, and crack down on rampant corruptions. Internationally, What was happening in Eastern Europe was very encouraging to us. The Polish communist government abandoned its monopoly of power in April 1989. Its first free parliamentary election was set on June 4, 1989. We thought we really had a fighting chance to gain concession from the CCP Central Government. But, In the wee hours of June 4, 1989, tanks rolled in and CCP military stormed the Square and gunned down anyone who stood on the way. Hundreds, possibly thousands of young lives were cut short.
What I witnessed at this moment was an unmistakable endorsement of the brutality of the Chinese Communist regime. It was a betrayal of democratic value to the freedom fighters who had shed blood and tears on the Square. It was a surrender to totalitarianism by the strongest democracy in the world. It was also a wholesale sellout of American working class by our political elites. Two years later, with the blessing from the Clinton Administration, China was admitted to the World Trade Organization(WTO) as a developing country, making its Most Favored Nation(MFN) status permanent.
In the lead up to this historic visit, the US Administrations of both political Parties put business interests ahead of our longstanding democratic values and the job security of American workers. From 1981, the United States extended temporary Most MFN status to China every year, even after the Tiananmen Massacre in 1989, giving unprecedented preferential treatments to China in terms of tariff and market access. In a 1996 floor speech against the extension, California Congresswoman Nancy Pelosi pointed out the ten-fold increase in US trade deficit with China from 1989 to 1995. Under Most Favored Nations terms, US exports to China faced a 35% tariff, while Chinese exports to the US was only tariffed at 3%. US exports to China supported 170,000 jobs, while exports from China created 10 millions in the country. WTO membership for China was later proved to be the Super Heavy Booster for its economy and the weapon of mass destruction of US jobs .
I had the front row seat to the beginning episode of manufacturing decline in the United States. When Gus Armstrong set his sight on China in early 1990s, he saw China as a huge market to sell his products made in Michigan. So, he established a sale office on West Coast in Sunnyvale, CA and hired sales representatives in Shanghai. For years, he could barely crack into the market due to tariffs and foreign exchanges controls. Under China’s Central Bank, the Foreign Exchange Administration(FEA) controls the flow of foreign currencies in and out of the country. Chinese exporters must sell the US dollar, Euro or other hard currencies from their exports to the FEA at the official exchange rates and receive Chinese Yuan in return. Chinese importers must have their imports approved by the FEA so they can buy the hard currencies to pay international manufacturers and sellers. The potential business partners and government officials all told him that he needed to set up manufacturing plant in order to access China market. They allured him with corporate income tax exemption for up to five years. The first Armstrong joint-venture was born in Beijing. Key parts were imported with tariff from Michigan, spare parts were purchased from local suppliers. Local labors, paid at much lower wages than their US counterparts made the finished products.
If the joint-venture sold the finished products to international market, the tariff on the imported key parts were refunded. If the finished goods were sold in China, a 17% value-added tax(VAT) was imposed on the local purchases of spare parts, labor costs and profit margins. Additionally, the tariff of imported parts would not be refunded.
Armstrong soon found out that the tariff, coupled with much cheaper labor made China a very profitable manufacturing base, rather than a huge market it thought the country would be. Slowly, but surely production volume shifted from Michigan to China to achieve higher profit margin. Armstrong is a private company and does not report quarterly earnings to shareholders and hedge fund investors. For publicly traded companies, the pressure to cut costs as always been on, accelerating the wave of “outsourcing” that has led to widespread plant closures in the industrial midwest. Thousands of Americans have lost their jobs, and communities have lost their tax base. Our entire industrial base has been hollowed.
Nora graduated from Western in that May and started a sales job near Bowling Green. In August, 1998, my in-laws took Jason back to the United States for preschool. After successfully setting up and running the accounting operation, I decided to take a step back. I proposed to Steve that I would shift my role to consulting for corporate executives and training and coaching for local staff. I knew that It was a job I would work myself out of sooner or later. Steve supported the proposal and asked me to spend more time in the United States with my family. I would returned four times a year: Chinese Labor Day in May, Chinese National Day in October, Christmas and New Year Day and Chinese New Year in February.
With increased intercompany sales back to Michigan to meet the demand of its US customers, Armstrong China turned in its first monthly profit in late 1998. With the appointment of Kerry Phillips as Asian Marketing Manager, based in Beijing, corporate gradually took off the training wheel for its China business.
In the next two and half years, Armstrong added two more joint ventures, focusing on industrial services to petrochemical and oil refinery industries. I repeated what I had done with the first joint venture to set up and run the accounting operation and hire local accounting talents with English language skills. Nothing war more satisfying to me than watching them grow professionally. But, the toughest moment was failing to keep them in their jobs. If they spoke good English, they usually had ambitious plan to get a degree in the US or other western countries.
Elinor was hired from Pfizer’s China Plant. She started her career with Arthur Andersen, one of the eight Biggest Accounting firms at the time. When her husband applied for graduate school at SUNY at Buffalo, I helped him write his application essay and did a mock interview with visa officer for him. We only kept her for six more month after her husband entered SUNY at Buffalo.
Gina was hired for the third Armstrong joint venture. Her husband was a physicist with a PhD degree from Chinese Academy of Science. Soon after she came on board, her husband was hired to work for a water treatment plant by Orlando Utility Commission in Florida. She later entered Central Florida University. When she was looking for job before graduation, she called me for some advice. I looked at her resume and helped her rewrite it. She got a job at Starwood Vacation Ownership with great Brands, like Sheraton. After we moved to Atlanta in November 2006, I took Nora and Jason to visit Disneyland in Orlando. She insisted that we used her employee free stays at Sheraton. At that time, her husband had returned to China. A few months later, she delivered her daughter without her husband by her side. She returned to China a few years later.
Since Bill Clinton’s visit in June 1998, I continued to watch the rapid rise of Chinese economy. This did not raise any alarm as western countries celebrated it as the sure path toward a democratic society. But, the Chinese Communist Party has never hidden its ambition to destroy free market capitalism and our democratic way of life. They did try to hide its strength early on until Xi JInping came into power in 2012. It is a strategy called: 韬光养晦(Hide your strength, bide your time) to play the long game, ie, using predatory state capitalism to achieve its ultimate goals.
You have to give the CCP the credit for taking a page from the playbook of our industrialization process. A booming manufacturing economy needs highly efficient transportation system and an abundant energy supply. With super low interest loans from the World Bank and International Monetary Fund (IMF), China started a frenzy to build highway, railway, airports and sea ports, and construct coal and hydroelectric power plants. Then, Manufacturers in China, some are US owned, started taking one industry after another by storm.
Consumer goods industries, such as garment, toys and footwear moved production to southern China in the late 1980s. Their US Headquarters gradually became centers for product design, supply chain management, marketing and distribution. When US retail giants, such as Walmart, Target, Homedepot, and Amazon started sourcing directly from China, the raw material suppliers of these industries followed suit for greater operational efficiency.
The CCP central planners used a different strategy to dislodge industries with modern technologies, such as electronic, electric appliance, automobile and ship-building, etc from their origins. It is called “technology for market”, forcing US and western manufacturers to transfer key technology to their Chinese joint venture partners for access to China market. With tariffs, Value Add Tax, currency control and other no-tariff barriers, China became the low cost manufacturing base just as it was for Armstrong. Whirlpool, headquartered in Benton Harbor, Michigan established a joint venture with Beijing Snowflake Appliance Group in 1994, shifting production volume to China while closing US plants across the country. Particularly, for computer hardware industry, Dell, IBM and Hewlett-Packard initially started product assembly in China to take advantage of its cheap labor, its efficient distribution system and preferential tariff. Eventually their chip suppliers, Intel and AMD built foundries in China, too. With industrial espionage and war on talents in these industries, Chinese competitors were able to build their home-grown high-tech industries. Legend, China’s largest PC maker became a global player in the industry and ended up buying IBM PC Division as IBM transformed itself to become an IT and consulting service provider.
Western-educated students returned to China in the mid 1990s’ to start internet portal companies soon after Yahoo was launched. Then, search engine, social media, e-commerce firms mushroomed shortly after their US counterparts came on line. CCP government violated its WTO commitment to open its service industries, offering the protection for these firms to grow without external competition. Even today, China still blocks Google, Facebook and Amazon.
It is worth noting that Wall street has played an outsized role in hollowing American industrial base, usually pitting a new industry in China against the mature one in the United States. Taking pharmaceutical ingredient industry as an example, a US investment bank took majority stakes in a start-up in Shenzhen, using cheap Chinese labor and the lower US tariff to take out its established US competitors. The investment bank took the new company public, then dumped the shares and walked away with astronomical profits. That is why we now rely heavily on China and other countries for Active Pharmaceutical ingredients(APIs).
While Chinese economy was fired up on all cylinders, manufacturing plants in America midwest were bleeding dry. Our politicians failed to understand that manufacturing industries create the most middle class jobs to support thriving families and prosperous communities. They turn the blueprints into tangible goods while fostering the work culture in which people pride themselves on making something they can touch. When workers lose such jobs, they lose self-worth, while their families lose their livelihood and communities lose tax bases.
Every time I traveled back to Michigan, I heard harrowing stories about job losses across the board: from assembly line workers to senior managers. I met Sally, the new assistant Controller at Armstrong in mid 1999. She worked as a Plant Controller for GM in Kalamazoo for over ten years before the plant was moved to Mexico. It took her over a year to find the job with Armstrong. Some GM workers from closed Michigan plants had to take jobs in Indiana plants to keep their pension. They carpooled to commute four hours a day. Some skilled workers were forced to train their replacements in China or Mexico after their plants went overseas.
I could sense that Armstrong employees on factory floor distanced themselves from me during my visits. They believed that I was one of the corporate people who helped build Armstrong joint venture in China that might take their jobs away from them. I was just trying to do a good job. But what I had done threatened the jobs of my fellow Americans. These people could be my neighbors, members of my church or coaches to my son’s sports team.
The consequence of debasing our manufacturing manifests itself in every aspect of our lives. During the height of COVID, China blocked the shipments of masks, gloves and other Personal Protection Equipments(PPE). Some nurses had to use plastic bags, rather than surgical gowns for protection. We don’t even have the supply chain here for all the parts to assemble a bike. Our newest Aircraft Carrier, USS Gerald R. Ford initially had to use electronic parts made in China, putting national security at grave risks.
Communist China has not only dominated the supply chains of many critical industries , but has turned trade surplus into hard currency reserves, mostly US dollar, through foreign exchange controls. The huge reserves have provided CCP with the resources to fuel military expansion, to invest in key infrastructure projects, such as railroads and sea ports, through Road and Belt Initiative(R&B) in order to export its industrial overcapacity and trap the host countries with crippling debt. If the debts can not be paid in full and on tome, China will take the infrastructure assets and turn them into military bases to counter US influence around the world.
China also deploys the reserves to invest in key industries or secure critical economic resources to further strengthen its domination in future industries. Its tight grip over the rare earth mineral supplies is particularly concerning because they are widely used in precision-guided missiles, EV and chip manufacturing. Finally, China has increasingly grown its soft power around the world by establishing Confucius institutes on college campuses on all continents to promote CCP ideologies and narratives. It has become major donors to elite American universities to further anti-America agenda. It reaches overseas to silences its critics on US and European soils through intimidation and harassment even violence.
The skylines of Chinese cities, particularly in Beijing had gone through a total make-up. Skyscrapers sprung up and streets had been widened to accomodate more cars. I had been to the United States, become the father of an American and now worked in the nation’s capital. Any of these was beyond the wildest dream of my childhood. I was thinking of the village I lived for over 14 years and the childhood friends I grew up with.
While visiting my parents, my brother took a day off to join me for a trip down the memory lane. It was a forty minutes drive. The winding dirt road that took me over 30 minutes to walk to school from my village was replaced by a mostly straight gravel road. Birch trees were lined on both sides of the road. The rice paddies were turned into fields for strawberry and watermelon. Along the way, there were a few patches of orchid far in the distance.
Soon, a village appeared through the windshield. My brother told me that was it. The farm houses of clay walls with tiny windows were replaced by storied buildings. The walls were all painted white, while all the roof tiles were all black. When the car stopped in front of a house with a courtyard, my brother said “ Here we are.” It was a modern house with glass windows and a double door. I stepped out of the car to identify where the vegetable garden used to be, where the little pond surrounded by gardenia used to be. I could not trace any spot I once left my footprint. Life had certainly changed for the better for the villagers. But, I could not give any credit to the Chinese Communist Party. It was CCP who tied the villagers’ hands at their back with its socialist policies two decades earlier. Most of the people in their prime had gone to work in factories in faraway provinces as migrant workers, leaving children to their aging parents. Not to disturb its current owner, I retreated into the car.
On our way back, we stopped to see my sister. She was an elementary teacher. I asked how she was doing in her job. She told me that now a teacher had to play the role of a parent to comfort students left behind by their parents. I asker her why these kids were left behind by their parents. She told me these kids had their residencies designated at birth in the villages and towns. They would not be able to attend public schools in places where their parents worked. Talking about social mobility, these kids don’t even have residency mobility in communist China. Their also parents lived in dorms, and were not paid enough to afford apartments.
She once randomly asked her class who the so-called 留守儿童 (left-behind children) were. Almost half of the class raised their hands. She asked them who was missing their parents. One of the girls first said “I want my mom!” Then, they all cried out for their moms. As globalization hollows American industrial base, it hollows some of the poorest Chinese families. Then, I looked at myself alone in China, half world away from Jason and Nora. I was a migrant worker, too.
In February, 2000, after three years of faithful service, Armstrong decided to apply green card on my behalf. I had a huge sigh of relief as my American dream suddenly became so real. But, it took over a year for me to actually return to the United States.
While we were waiting for my return flight to Beijing at Nashville Airport in the Spring of 2021, Jason played around in the terminal building. The moving planes on the airfield got his attention. He ran toward the windows to gaze them as they landed and taxied to the gates. After the check-in for my flight was announced, I held Jason in one hand and carried my carry-on in the other. We moved slowly to the Gate when Jason was still talkative. When I handed him to Nora before the gate, he turned his head aside not to see me disappearing into the boarding bridge. I could see he was wiping off tears. A sense of guilt hit me so hard that I almost burst into tears myself. I walked back and said to him: Come to Beijing to see me in two months. He nodded with tears still in eyes.
It was heartbreaking moment like this that made me think it was time to talk to Steve. Steve agreed to my request and asked me where I preferred to work: Florida or Michigan. I knew where he wanted to be. I said Michigan, where Armstrong took its root and still operated its biggest plant.
Jason and Nora spent the summer in Beijing with me. Our flight was on September 14,2001. After dinner on Tuesday night, September 11, 2001, we crossed the pedestrian bridge over the street to visit our favorite Purple Bamboo Park for the last time before we left Beijing. Sitting in the cafe on an island inside the park, we ordered some dessert and a pot of hot tea. We really enjoyed the evening breeze in early fall that blew over the lakes. We lingered as long as we could until it closed at 9 o’clock. As soon as we opened the door, I heard the phone ringing. Who would call this late at night? I wondered. I picked up the phone. It was my father-in-law. He briskly told me that somebody bombed New York City. I was in total disbelief. We are the strongest country in the world. How could anybody penetrate our air defence and attack the financial capital of the world? I turned on the TV, I saw horrific scene with towering building cloaked in smoke. There were limited information about who and why about the attack.
I went to the office early in the next moring. When I heard the foot steps of Kerry Phillips. I stepped out of my office. Tears in my eyes, I asked him, the only American in the building how this could have happened.
For the first time, I realized how vulnerable the United States could be. I could not comprehend why the United States was so much hated after we had spent so much blood and treasure to fight endless wars around the world, purportedly to end human suffering in these regions.
Our flight was rescheduled after the 911 attacks toward the end of September. We turned to a very different America than the one I left over four and half years ago.
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