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Over the coming six months, I travelled across China visiting factories that owed amounts under these bad loans, often meeting with the local governments in charge of the area. Many of the loans had been in arrears for years and the relationship between the lender and borrower had broken down completely. Just having a new face to negotiate with often unlocked a knotty situation. At first I felt that the work could bring a lot of benefit to local communities: the factories could be released from their debts for a partial repayment; clearing out the backlog might open up the possibility of new loans; the restructuring assets could make them useful again; and management teams might get an infusion of new talent. But some of the cases were much murkier. I heard that one of the borrowers had been held under house arrest; at another, there’d been riots when a local bank had tried to seize machinery. After a while I became uneasy about the effect of some of the settlements on the local community or the individuals concerned.
During those months, as I worked in the plush offices at the bank during the day and returned to the hutong in the evening, I noticed the city beginning to change, gradually at first. When we moved into the courtyard, even though we were in the midst of an enormous city, we felt somehow connected to nature and aware of the turn of the seasons. In winter, it was so cold that the children sometimes wore coats in bed; by summertime, it was sweltering and flash thunderstorms flooded the courtyard, sending us retreating up the steps to listen to the rain splashing on the clay tiles above our heads. In the local vegetable markets, pots of pickled vegetables or white cabbage lined the stalls throughout the winter, and in the late summer, we’d find cut flowers, lotus root and ginger. But the changes around us gathered pace as the city began to modernize. I’d often notice that an old restaurant had vanished and a mobile phone outlet had appeared in its place, or that a corner shop had been demolished to make way for a wider road.
In the early days I hardly noticed, but the pace became more rapid. Suddenly a long line of shops had gone; then the whole side of a road would disappear. I heard rumours about an old woman in Xicheng District, on the west side of Beijing, who had chained herself to a tree inside her old courtyard as an official read out the eviction order. She’d lived there for sixty years and had nowhere else to go. Grabbing my bicycle, I rode over to see what was going on and found a sea of rubble with the odd solitary tree standing where the old courtyard gardens had been. Window frames and roofbeams lay scattered on the ground; broken saucepans and smashed pots sat among the heaps of shattered tiles.
Once Beijing won the hosting of the 2008 Summer Olympics, there was an inevitability to the fate of the old city. Twenty billion dollars had been set aside to upgrade the capital, and for several years large sections of it vanished behind the perimeter fences of construction sites. Huge areas of the ancient city disappeared forever. Miles of old alleyways and winding backstreets fell beneath the hammer. A hundred thousand workers poured in from the countryside and swarmed over the old buildings, uprooting ancient wisterias from courtyard houses and dumping them on the heaps of broken bricks outside. Ornate doorways were torn away; tiles were pulled from roofs. I sank into a kind of siege mentality and shut my mind to what was happening. All around, the air shook with the roar of bulldozers and I could feel the distant pounding of pile drivers through the ground beneath my feet. I heard that more areas of old hutongs in the north had disappeared, but I couldn’t bear to go and look. All around us, an ancient way of life was dismantled brick by brick.
One day, we came back to find that a character I had seen written inside a circle on hundreds of other courtyard walls was now painted on the wall of our own.
The character means ‘demolish’, ‘strike down’, ‘strip’, or ‘tear apart’. It was the only notice we had that the bulldozers were about to move in. At first I put up a fight; a famous author had owned the courtyard in the 1930s, but of course my argument that the old building should be preserved because of its historical value fell on deaf ears. Then I told them we’d refuse to move out. ‘Wo bu zou le!’ I said. I’m not going anywhere! But the old woman at the Street Committee just shrugged and squinted at me briefly before adjusting her glasses and turning back to her newspapers. ‘Hao ba! Xingqi san ting shui le!’ she said. Okay then! Wednesday the water will stop! So I sat in the courtyard as the workers climbed onto the roofs around me with their hammers and picks, and bits of old tile and plaster fell down onto the lawn beside my feet.
Nowadays, the view from the top of the hill behind the Forbidden City is often obscured by smog; the air of the Beijing summer is opaque. Down below, the traffic snarls and tempers fray. Cyclists clutch at their mouths and turn their faces away from the fumes. In my mind’s eye, I fly westward across the mountains, out towards the dusty orchards, the country villages, and the crumbling loess soil on the plains of central China. Beijing is a vantage point to survey all the desperate activity across China; inland, millions toil in search of a better life. Miners descend in black cages; workers hack at rock faces and dig tunnels for the next intercity highway. Engines roar and sirens scream; the rivers inland have run completely dry, their beds a mass of smashed rocks covered with thornbushes, and there are no trees. Dead fish float about in filmy water. Plagues of river rats ravage the crops, deserts devour the fields, and acid rain falls across the land.
On Beijing’s old foundations, a new metropolis of vast proportions has been thrown together in a few years. Glass spikes rise skyward and elevated highways dominate the landscape now. In a few small areas of Old Beijing, around the lakes and drum towers of the Ming Dynasty city, the government preserved the ancient courtyards, but they cower in the shadows of high-rise apartment blocks. The alleyways there are clogged with rickshaws full of shouting tourists. China has moved on as it prepares to take on its new role in the world. Beijing had become less foreign, less different, and consequently – for me – less interesting.
I had begun to feel doubts about whether I was doing the right thing at the bank. Besides, the children were growing up so quickly. I felt a growing sense of inevitability about a move back to England. But it was with a heavy heart the following summer, after nearly twenty years in China, that I called a shipping agent and we started the journey back.
We had found a place in a small rural village tucked in among the hills at the foot of the Yorkshire Dales. It was close to the place where I had grown up, and at first I enjoyed the familiar sight of the stone walls arching across the fields as they rolled up the dales, the grass clipped short by the sheep, the smell of bracken and heather. Lorraine seemed relieved to be back in the fresh air and countryside and quickly gathered a menagerie of animals around her. She stocked up the vegetable garden and left grain in the little dovecot. The children threw themselves into the outside life, racing in horse shows, falling out of trees, and galloping through the mud in the hills and in other people’s gardens. Three cats and an indeterminate number of horses joined the two dogs we brought back from China.
Stupidly, we chose an old house that was far too big for us and needed an enormous amount of work. The place was so infested with field mice that even the cats despaired; the window frames were rotten and after poking around in the cellar, we saw that part of the foundations were propped up with stacks of newspapers dating from the 1960s. I discovered a row of buckets in the attic for collecting the drips, and throughout the interminable damp of the first Yorkshire winter, the rain cascaded through the roof and ran down the walls, short-circuiting the electrical outlets and providing impressive blue sparks around the light switches. Downstairs, the coal fires barely took the frost off the carpets and the wind howled through the shutters. After nearly twenty years in China, it was tough to adapt to such a different life. I found it difficult to re-engage and fit in.
Over the following months, I took long walks in the countryside in the drizzle, musing about China and slipping about in the mud with the two dogs from Beijing. My mood recovered slightly with the onset of spring, when the banks along the country lanes were scattered with snowdrops and then daffodils. But I still found it difficult to reorient my thinking to the old English ways. How do you explain to one of the local farmers that if your dog strayed onto their land just to enjoy chasing the odd sheep, they would only respond to instructions in Mandarin? I’d often end up yelling at the dogs outside the village post office; they’d cock their heads and look at me in bemusement if I said ‘Sit!’ but were instantly responsive to ‘Zuo!’
Lorraine hardly fared any better as she tried to make new friends, and was regarded as eccentric by the locals. She had kept up her Chinese diet and once, when she went to buy eggs early one morning, the postmistress sniffed and asked – quite rudely, I thought – whether she’d had garlic for supper the night before. In fact, Lorraine ate a kind of Chinese boiled rice porridge for breakfast each day, flavoured with spring onions and spices. So she eyed the group of nosy customers who had gathered at the end of the wooden counter and said, ‘No, I just had raw onions for breakfast.’
In the early summer, the trees awoke and birds filled the hedgerows. On my daily run through the woods, I’d often pause by an old rickety stile and watch the wild deer jumping through the cornfields or the rabbits diving through the thickets. But my mind always flew back to the dusty skies and congested cities, the dry riverbeds threading across the plains, the persimmon orchards out by the Ming Tombs, and the ancient rice terraces on the hillsides where generations of farmers toiled in the squelching mud. I felt stranded at the opposite end of the earth, so I was in a restless, searching mood when I suddenly received that call in the quiet coach, asking me to go back to China.
3
WHEN THE HORSE HAS REACHED THE EDGE OF THE CLIFF, IT’S TOO LATE TO DRAW IN THE REINS;
When the Boat Has Reached the Midst of the Stream, It’s Too Late to Plug All the Holes
Traditional peasant saying
On the same day that I’d received the call from Mina, Rufus Winchester had driven his hybrid-electric car across Hyde Park towards Mayfair in the perfect summer sunshine. Tall, regimental, uptight, and buttoned down, this former British Army officer was an energetic and blustering serial entrepreneur who had survived a string of botched business start-ups. Things had never quite come right for Captain Winchester. But now, he thought to himself, we’re about to hit the big time.
His company, IHCF, had finished its first fund-raising and had signed up nearly €100 million from investors. Together with his partners, an assortment of earnest, well-meaning, and moneyed Englishmen, he had rented a large Georgian mansion in Mayfair as an office and set about hiring a team. Just like an Old Boys Club, the new headquarters had a ballroom on the first floor with high, corniced ceilings, but all the real work took place in cramped attic rooms where the juniors toiled behind computer screens hedging carbon credits in the City. Downstairs, the founders floated about between oak-panelled meeting rooms with the effortless self-confidence that comes from a good public school education. Excitement about carbon credits had just taken hold of the financial markets and IHCF’s fund-raising had been splashed across the front pages. Winchester took in a deep breath, pushed back against the steering wheel, and smiled. He was in the right place at the right time and he knew it.
Immediately after the first hundred million euros rolled in, IHCF had turned its attention to China. Winchester knew that over the past two decades, thousands of new businesses had sprouted up along the coast of China, and that, together with the old state-owned factories in the rustbelt cities of the north, they were cranking out greenhouse gases like there was no tomorrow. It was fertile ground for Winchester’s new firm and in a couple of months his team had found several big projects in China. By the summer, they’d initialled their first transaction. It was a landmark deal to buy a big tranche of carbon credits from a chemical factory in Quzhou, the biggest ever attempted by private investors. There wasn’t enough money in their first fund to cover the contract so they had to go out and find more. Eventually they managed to syndicate the deal with their chums in the City.
It had been three months of exhausting and stressful work, but they’d finally lined up investors. Deutsche Bank had agreed to underwrite the financing and they were ready to sign the contracts. It was a real coup; a big chunk of the first hundred million would be invested well ahead of schedule and the investors were happy. But much more exciting was that they had ‘circles’ around another €500 million from some big European pension funds to put into a second, much larger fund. ‘Just close that deal in Quzhou,’ Winchester thought to himself, ‘and the money’ll come rolling in. If we get those Dutch pension funds signed up, we could end up with a billion and we’ll be the largest carbon fund on the planet!’ It looked as though the last pieces were sliding perfectly into place just at the right time. But then they got a message from Quzhou. Chief Engineer Wang had called unexpectedly from the chemical factory and said that he wanted to change some key terms of the deal.
When they heard about Wang’s last-minute demands, the investors in the syndicate started to waver. It seemed as though the entire financing structure would collapse. The millions that Winchester had lined up from the Dutch pension funds started to crumble in his hands. It looked as though they might lose everything. A few hours later, I got the call from Mina.
At the end of the conversation in the carriage just outside York, Mina had insisted that I drop by at her offices as soon as the train arrived in London. I could see from the address that IHCF was located in one of the most expensive areas of London, so I had hesitated; I’d come down to London to see friends and hadn’t expected to go to a meeting. I was covered in stubble and in need of a haircut. My glasses were twisted out of shape from one of the children standing on them and I was wearing a pair of torn jeans and a thin cotton jacket that was a bit ragged about the elbows, but I had an hour or so to spare so I took the tube over to Mayfair. IHCF’s offices were in a long row of handsome merchant’s houses near to the American embassy; ornate iron railings ran around the ground-floor balconies and a row of Grecian urns stood out along the roofline. Underneath a white portico, a flight of stone steps led up from the pavement towards a highly polished black door. I’d heard that Condoleezza Rice was in town that day so the roads around Bond Street were blocked off and snarled with traffic. I was glad I hadn’t taken a taxi.
I grasped the brass knocker and, after a few moments, there was a click and the door swung open. Inside, a hallway led towards a pair of tall double doors of elaborately inlaid mahogany. There was a marble fireplace on the left with vases at each end. Pale grey panelling reached up towards ornate plaster mouldings on the ceiling. I sat down next to a low glass-topped table strewn with magazines – Country Life and Horse & Hound – crossed one leg over the tear in my jeans, and waited.
After about ten minutes, the double doors burst open and a tall blonde woman bounded in. ‘How you doing? Thanks for dropping by,’ she said, pushing back her hair with one hand and balancing an armful of files on her hip with the other. ‘This week’s been a nightmare!’ she said shaking her head. ‘Let’s grab a coffee and I’ll fill you in on the details.’
We walked through the doors, up a wide staircase towards the back of the building and out onto a terrace, where we settled on a stone balustrade overlooking a garden. There were neat flower beds and clipped box hedges and a lawn that spread out under the shade of an enormous plane tree. Overhead the skies had cleared; the sun’s fading light fell across the leaves with the familiar sharpness of early evening at the end of a perfect summer’s day.
‘Right,’ she said, folding her arms on top of the stack of papers in her lap. ‘We’ve got a bit of a tricky situation here.’ She paused, drew a breath, and looked rather intently at me. ‘It’s like this. We signed up to do the carbon deal I told you about in Quzhou. It’s about a hundred miles inland from Hangzhou. Hangzhou is down on the coast, just south of Shanghai near—’
‘Yeah, I know where Hangzhou is,’ I interrupted.
She paused and glanced at me briefly before continuing with the story.
‘Okay, so we found this big chemical factory out in the sticks,’ she continued. ‘It’s enormous – you wouldn’t believe it – something like eighty thousand people stuck in the middle of nowhere. The factory’s behind these big walls and no one can get in or out except through the gates at the front. I think most of the workers live inside. The factory makes solvents, plastics, that kind of thing, and right in the middle, there’s a reactor that makes coolants, you know, for air conditioners, fridges, and the like. The waste product from the coolant line is really bad; it’s a greenhouse gas that’s thousands of times more potent than CO2 and they’re just venting it all into the air.’
‘Well, can’t they get rid of it somehow?’ I asked.
‘That’s the point; they can use incinerators to burn up the gas, but they’re only available in Japan. We’ve signed up to buy carbon credits so the factory can use that income to get loans to buy the equipment. We both initialled the deal a month ago, but it’s huge. Our first fund wasn’t big enough to cover it so we organized a syndicate to come up with the rest of the money. We ended up with about twelve other investors. I can tell you,’ she said, rolling her eyes, ‘getting them all to agree at the same time has been like herding cats!’
‘But why would anyone want these credits?’ I asked.
‘There’s a huge new market for them in Europe and Japan. Under the Kyoto Protocol, governments have capped the amount of greenhouse gases that businesses can emit; if they go over the cap, they have to go into the market and buy up extra permits. Prices are expected to rise as the caps on emissions get tighter. Anyway,’ she said, reverting to the story, ‘they were all about to sign the formal documents, but Wang just called our rep in China and told us he wants to change the terms. Now the syndicate is wobbling and the whole thing looks like it’s about to go belly-up.’ Her nose wrinkled. ‘Fifteen rounds of negotiation, everything was agreed, and now he wants to change the deal.’
‘Sounds familiar.’
‘I was hoping you might say that,’ she said. ‘We’ve been working with a law firm in Beijing and when this all blew up, they gave us your number and said you might help.’
‘Any clues why he suddenly wants to change the terms?’ I asked.
Mina was stumped. Wang was the chief engineer of the chemical plant in Quzhou and seemed to be leading the negotiations even though he had no legal background. But there were others involved as well. She told me that there was a Mr Tang, who seemed to be deputy manager; Mr Yang, who looked after contracts; a Fang, who was in charge of the factory; and a Zhang, who did the accounts. ‘This is ridiculous,’ she sighed, pulling her hair back again, rubbing her eyes, and fumbling around with some name cards. ‘It’s just all so confusing.’
‘Anyway,’ she went on, ‘it’s Wang who’s just called and he wants to change a whole bunch of clauses. Wouldn’t normally matter, but some of them require changes to the financing. You can imagine – as soon as Wang said he wanted more changes, Winchester went ballistic. There’ve been so many different deals along the way that everyone completely lost it when they heard Wang wanted more changes and that they’d have to go back to the syndicate; they’re all terrified that the Chinese side will just walk away from the deal, find another buyer, and leave us stuck with commitments to the banks and nothing left in China.’
‘Well, I can understand that,’ I said. ‘But what do they want to change? Price? Delivery? Any other of the key terms of the deal?’
‘We just got a message from Cordelia in Beijing saying that they want to change the volume under the contract – the number of credits we have to buy – and the investors are all wobbling. There have been so many changes that they’re all starting to think that nothing will stick.’
‘Cordelia?’ I asked. ‘Who’s that?’
Mina explained that Cordelia Kong was a Chinese broker who had introduced her to the project. It seemed that she had established a strong position in the new markets out there. She’d been one of the first movers in the carbon space and had a network of contacts in the ministries in Beijing. But Mina found her to be erratic; after making the initial introductions and running a brief auction for the factory, she seemed to lose interest. She would disappear for long periods without leaving contact details and then suddenly burst back on the scene without warning. Now it looked as though she’d gone down to Shanghai on business but no one could find her.
‘She just sent a message telling us to speak to the Chinese party directly,’ Mina continued, ‘and now her mobile is off. I’ve been calling her office, but they can’t find her, either. I can’t believe it! We’re paying Cordelia a ton of money and she just disappears right when we need her. I heard some Japanese buyers are visiting the factory in a few days; they might even be there already,’ she groaned. ‘If we lose this deal, I’m stuffed!’
‘Okay,’ I said, ‘so we just need to slow everything down, put everything on hold. Try to freeze things where they are now and buy some time till we get out to Quzhou.’
We talked it through for a few minutes and figured that we should send a message out to the factory immediately. If we told Wang we were coming to visit him in a few days, it might stop him from making any final decision to go with one of the other buyers. But it was nighttime in China so we couldn’t just call him. I figured the best thing to do was type out a message in Chinese and fax it over. That way, Wang would find it first thing in the morning. So we trooped upstairs into one of the attic offices. It was crammed with people squinting into computer screens, with electric fans on each desk trying to blow the heat out of the tiny windows.
Mina introduced me to her boss, a pale, wiry New Yorker who tugged at an unruly mop of black hair as he talked about Wang. ‘There’s a standard way of doing these deals,’ he said, shaking his head. ‘I’ve done it a hundred times at Merrill. Just stick to the term sheet, keep the lawyers on a tight leash, and the deal’ll get done. The Chinese just don’t seem to get it!’ he said.
‘I’m not sure it works quite like that over there,’ I said.
‘Why not?’ he replied blankly. ‘It does everywhere else.’
I sat down at Mina’s desk and pulled over a computer but there was no Chinese software to write up a letter. It wouldn’t look right just to send a handwritten message and anyway I hadn’t brought a dictionary. I was stumped. I suggested sending a draft in English to Cordelia’s translator but there was no way Mina was going to agree to that.
‘She’s hopeless!’ Mina said. ‘Last time she dealt directly with Wang, it took a week to sort out the mistranslations.’
‘Okay, so I’ll write it in English but use Chinese-style sentence structures,’ I explained. ‘I’ve done it plenty of times before; that way the translator knows exactly how to put it into Mandarin and we’d be sure that a clear message gets through to Wang by the morning. We don’t have a minute to lose.’
Mina was sceptical but there didn’t seem to be much alternative, so I started typing and two minutes later handed her a piece of paper.
‘I know this looks a bit odd, but it’ll go straight across into Chinese, no problem. The translator won’t be confused by it. Just put it on company letterhead, get your CEO to sign it, and send it over to Beijing. The translator can add in the Chinese in these gaps and you can get her to fax both versions down to the factory first thing in the morning. It’ll be fine.’
‘Er … perhaps you should explain this to Winchester,’ she said after reading the note. ‘I don’t think he’d sign this for me.’
She took me down to Winchester’s office and left me outside the door. I knocked hesitantly and a voice from inside barked, ‘Come!’ Inside, there was a couple of worn leather-backed chairs arranged around a fireplace, with a table strewn with teacups and a plate of half-eaten scones. On the sideboard, a decanter and some glasses stood on a tray next to a couple of old sherry bottles, and over the mantelpiece there was a photograph with rows of men in uniform graduating from Sandhurst.
‘I hear Mina called you in for a recce,’ said a tall man, folding up a copy of the Daily Telegraph and rising stiffly from the desk. Behind him, a set of French windows opened out onto the garden and the breeze ruffled a few papers on the desk. On the wall, there was a large map of Eastern Europe, a sign, perhaps, that the Cold War was still in full swing in Mayfair. ‘Jolly good,’ he continued. ‘Jolly good. Tiresome business, this – the old girl seems a bit down on her chinstraps so it’s good to have you on board. There’s a lot hanging on this mission, you know.’ He paused and looked at me more closely. ‘In mufti today are we?’ he said, raising his eyebrows and peering at my clothing as if over a set of imaginary spectacles.
‘Er, well sort of,’ I replied weakly, scratching the stubble on my chin and trying to cover the holes in my trousers. ‘Let’s just see what they want first, shall we?’ I said, trying to sound more cheerful. I handed over the letter.
Respected Chief Engineer Wang: Hello!
My side, at the day in front of now, received your valuable side’s telephone and felt ten-out-of-ten happy. We straight through believe, through twin sides’ effort and sincerity, our project fixedly will succeed. Now, if your side, amongst a hundred busy things, pulls out a length of time, my side shall grasp fully empowered representative Project Director Mina and send her respectfully to visit your valuable factory for friendly negotiations on top of the spirit of mutual benefit and equality also. According to my side’s arrangement, Project Director Mina arrives at Hangzhou at the day behind tomorrow. Ask valuable side to confirm that arranging.
Ten thousand things just as you please!
Delivered from,
Winchester
Winchester didn’t get much beyond the bit about ‘receiving your valuable side’s telephone and feeling ten-out-of-ten happy’ before he swelled to a purplish hue, and I found myself abruptly dismissed from the room. I heard later that as soon as I left, he called Mina over an intercom and exploded. At first he refused to sign the letter, ranting that it looked as though it had been written by a six-year-old and demanding to know how she could have contemplated asking such a dishevelled-looking halfwit to represent the company in China. But eventually peace returned to the offices; the letter was rearranged into a more recognizable form, Winchester signed it, and it was sent over to Beijing. Wang replied the next morning. By the following evening, only a few months after arriving back in England, I found myself on a plane out to Hong Kong.
