The China syndrome

There is a time-honoured fable in film festival folklore. A ghostly figure in a Chinese robe is said to go about, collecting all the satirical jokes and sayings about the Chinese film industry and putting them in a bag to wait upon the day when he or she can burn them. This bonfire of the aphorisms will mark the time when Chinese film has come of age and liberty, and state censorship no longer exists in the land of Kubla and Confucius.

We festivalgoers all know these gags. “The most successful Chinese director is the one who can’t get a job.” (Meaning, if you triumph at Cannes or Venice you’ll probably be banned in Beijing.) “The most crowded place in China is the wilderness.” “There is an old Chinese proverb...but it’s been banned by the censors.”

We know, too, the last group of victims: those directors of the so-called Fifth Generation – Zhang Red Sorghum Yimou, Chen Farewell, My Concubine Kaige, Tian Horse Thief Zhuangzhuang – who could never win a prize or Oscar nomination without their political masters screaming about the insult to China that their work represented.

When I met Tian in Venice in 2002 he had emerged from a period of disgrace following The Blue Kite, the prizewinning family drama inspired by his own life about the Cultural Revolution. He was rehabilitating himself with a small, beautiful period movie called Springtime in a Small Town.

“The Blue Kite is still banned in China,” he said. But he was optimistic about change. “The government is more flexible today. It allows us to talk about marriage, family, relationships and social themes, even if it is still defensive on subjects like the Cultural Revolution and political dissent.”

He envisaged a time when filmmakers no longer had to keep their heads down while dodging and scheming to please the politburo.

Now here we are with a Sixth Generation. (These numbers refer to succeeding waves of filmmakers after Mao’s coming to power.) Today China’s young directors live and work in a neo-capitalist country where artistic liberty has surely grown up with market freedom. Or has it?

The good news before the bad. I see some signs of hope in the freedom enjoyed by the once-banned director Jia Zhang-ke, now the Sixth Generation’s leading figure. He won last year’s Venice Golden Lion for Still Life and this year’s best documentary prize at the same festival for Wu Yong, his essay on culture and consumerism in the clothing industry.

In the old days both the subject and the success of Still Life, a drama about the depopulation of villages and disruption of lives around the Three Gorges dam, would have earned the movie a banning order and its maker an inactivity sentence. But, says Jia: “Still Life is being shown in Chinese cinemas. My first film Xiao Wu [about rootless youth and petty street crime] was forbidden. But ever since The World [a globalisation allegory set in a giant theme park] I have started to be distributed in China.

“The most important thing about the release of Still Life is that it has started to raise discussion about the kind of things cinema should deal with. People have been brought up in China to see cinema only as recreation or sometimes propaganda. Now they say: ‘This film is telling us something about our lives today. Our memories. Our communities. Should this be cinema’s proper role?’”

Still Life was independently funded, another new departure for the People’s Republic. “When the industry was state-run there were only 16 companies with permission to make movies,” Jia says. “But at the start of the 1990s directors began to find other ways. Today there are about the same number of independent films as those financed by the state.”

Jia sees the Tiananmen Square events as a turning point. “After that, just like after the Cultural Revolution, the position of intellectuals in China got lower. So a self-questioning began, an attempt to redress the balance and to tackle the social and political situation. What should filmmakers be doing? What is ‘independence in cinema’? Out of these questions began to come the answers.”

Jia has been lucky. As a director whose films are seen around the world he has become too conspicuous to persecute. The same thing happened earlier with Zhang Yimou, though his story carries a warning. Zhang’s rapprochement with the government seemed to work two ways. He was free to make films but he started making films that ceased to endanger that freedom. The maker of Ju Dou and Raise the Red Lantern – blazing critiques of political oppression, albeit camouflaged by period settings – was suddenly doing sword-and-swashbuckling romps such as Hero and House of Flying Daggers.

In Venice I catch the actor-filmmaker Jiang Wen. Before he became an acclaimed director with his powerful drama about the Sino-Japanese war, Devils on the Doorstep, which won the Cannes Grand Jury Prize in 2000, he starred in Red Sorghum, the film that made Zhang Yimou’s name.

“On one hand, yes, Red Sorghum shocked world cinema and China,” says the burly veteran. “On the other hand it hasn’t brought lasting change. Before Red Sorghum popular movie theatres were full of martial arts films. After it, they are still full of martial arts films. And Red Sorghum’s director is now making these films himself! So I am not sure who has changed what.”

Jiang is less optimistic than Jia Zhang-ke about the new liberalism. Devils on the Doorstep was banned in China: its director waited seven years before daring to make another feature, a delicate fantasy called The Sun Also Rises, shown at Venice this year. “I prefer not to speak about that [the banning of Devils]. I hope not to have the same problem with this new film.”

Is it true, I ask, that the Chinese authorities were angry at Jiang for taking Devils on the Doorstep to Cannes without permission?

“Yes, it was like that.” And the allusions to the Cultural Revolution in his new film, in the shape of a youth brigade mysteriously weaving through the story, is that a comment on the continuity of Mao’s legacy?

“In China today nobody speaks any more of the Cultural Revolution. But its evils and influence are everywhere even so. In life and on the streets. Historically it is over and obviously no one praises it. But its effects live on.” So, he says, does politically motivated film censorship. “If you want to shoot a commercial action adventure film, no problem. If you want to shoot something that has to do with ideology, that is still hard.”

Another Chinese director, Li Yang, realised how hard when he made Blind Shaft, a film that won international attention for its dramatisation of a murder-and-corruption case in the Chinese mining industry. The story of a boy slain by workers scheming to make a fraudulent claim on his accident insurance had a basis in truth – but that won no favours from the Film Bureau.

“Blind Shaft was never allowed to be shown in China,” Li tells me in Cannes, where he has brought his new film Blind Mountain, another controversy-stirrer about a girl kidnapped and taken to a remote village for an arranged marriage. “I was forbidden to make a film for three years, until this one.”

He had sinned in innocence. “I had been living in Germany and had just come back to China. I didn’t understand all the requirements for making films, so I just went ahead. When the film was completed I was told what I had done was illegal.”

Li thinks there are glimmers of hope even so. “It is now possible to have a dialogue with the people at the Film Bureau. They can say: ‘Oh you must cut out this part’ and you can argue.

“The problem is the long tradition of making propaganda films in China. Many people in the Film Bureau have the view that if a film is political it must be political in the propagandist sense. It must present a good image of China.”

Blind Mountain has had an easier passage than Blind Shaft, though the all-seeing eyes of the Bureau seem to have missed two moments that will startle westerners. We learn – almost as asides – that free healthcare and education have been abandoned in modern China. In the race towards capitalism the country now requires people to pay for schooling and hospital treatment.

The corrupting hand of materialism is seen, by Jia Zhang-ke, as the new totalitarianism. That is the theme of his prizewinning documentary Wu Yong, whose literal English title Useless comments ironically on the now-prevalent Chinese attitude to anything that doesn’t have a value tag on it. (Wu Yong is the name of the line launched by Ma Ke, the avant-garde designer portrayed in Jia’s film. Her clothes are a meld of the historical, the surreal and the peasant-traditional, intended to build layers of cultural memory and social meaning into single garments.)

“The faster China develops economically, the more people are concerned about the monetary value of things,” Jia says. “If it isn’t valuable, it is useless. This applies not just to goods but to feelings, ideas and art. Ma Ke goes against this. Her clothes are not made for fashion or profit but as artworks, to tell a story and create a conception for the future.”

Another filmmaker concerned by the new materialism is Li Yu, whose film Lost in Beijing narrowly missed winning last year’s Berlin Golden Bear. Li’s battles with the censors took place during the festival, by long-distance phone. The Film Bureau wanted scenes cut that related to the film’s critique of consumerism. Lost in Beijing is about a man’s attempt to buy a baby from a married employee he has all but raped.

“Society and people’s relationships are changing so fast in China because of economic growth,” Li says. “They are changing so quickly that people don’t realise it is happening. Marriage, love and family life are becoming part of this.”

The state censors hated the unblinking realism of her portrait of China. “They don’t want people to see dirty streets or prostitution or corrupt healthcare officials. They want to show only an ideal China. They are lying to themselves and to other people.”

But Jia Zhang-ke thinks the Film Bureau’s control-freak tendencies are in retreat. One cause is China’s new access to the freedoms of world cinema: people can see what they are missing.

“Pirate DVDs are a big development. Chinese people are not restricted to the films the state chooses for them or allows them to see.”

For Jia and his contemporaries the call is to follow this freedom, or to build and sustain it in the homegrown cinema. “If there is such a thing as the Sixth Generation, it is the generation that is willing to look in the face of society as it exists in China today.”

That willingness, once established, is hard to intimidate. As Li Yang says, reflecting on the ban imposed on him after Blind Shaft, “They can forbid me to work for three years. But they cannot forbid me to think.”

Leopard of growth strains at state leash

Vanessa Mara edges her giant Caterpillar truck into position and unloads its 240 ton cargo on to a growing pile of purple-blue iron ore next to the crushing plant at Carajas, the world’s biggest iron ore mine that has been cut out of the Amazon jungle.

“My friends say I must really be gutsy to drive this but it is easier than handling a car. You just have to keep to the procedures,” says Ms Mara, who is 26 and previously worked as an office receptionist. “My mum runs a hairdresser and she is very proud of me.”

Ms Mara’s presence – along with that of more than a dozen other women – behind the wheel of monster trucks is one of the more surprising features of the extraordinary recent growth of Companhia Vale do Rio Doce, one of Brazil’s most successful exporters, and it typifies the often exuberant dynamism of Brazil’s private sector.

Meanwhile, 2,000 kilometres away, in the traditional industrial heartland of São Paulo, another driver, Arivaldo Lopes da Silva, uses the waits between passengers to swot up on law, as he prepares to take his 10th public service entrance exam in three years.

The prize – if he is eventually successful – will be a lucrative job as a public prosecutor or even judge. The judicial system may be slow-moving and unreliable but for 49-year-old Mr da Silva, who took to the taxi trade after losing his job as personnel manager with a metalworking company, it offers the prospect of a well-paid and secure future. “Once you’re in, you have stability,” he says. “You retire on full pay. You’re set up for life.”

Two drivers. Two Brazils. One is the highly-productive internationally competitive world of big Brazilian companies, especially those involved in growth export markets, spearheading China-style development and job creation in areas such as that surrounding Carajas. CVRD – as Ms Mara’s employer is better known – has created more than 5,000 Brazilian jobs in the past 15 months alone

The other is the slower moving world of the public sector to which Mr da Silva and millions like him still aspire. It is a world in which the state is the great provider, where opportunity and advancement are in the gift of those who hold the reins of power. And its cost – equal to about 45 per cent of gross domestic product – is one of the main reasons why overall economic growth has remained unimpressive compared with that of other big emerging markets such as China, Russia and India with which Brazil is so frequently compared.

Under Luiz Inácio Lula da Silva, the left-wing president who secured a second four-year mandate with a landslide victory at the polls in October last year, the contrast between the dynamic private sector and stagnant public sector has become starker.

By sticking with liberal macro-economic policies introduced in the 1990s – inflation targeting, a floating exchange rate and primary budget surpluses big enough to pay down public debt – Mr Lula da Silva has presided over a period of unprecedented stability and advancement for the poor. Low inflation, targeted income transfer programmes, an export boom and extraordinarily benign global economic conditions have made him the most popular Brazilian president ever.

At the same time, a complex and unwieldy tax system, a maze of regressive bureaucracy, costly and unjust public sector pensions provision and extremely rigid labour laws all undermine economic efficiency and restrict growth to rates well below those needed to tackle social needs and improve a deficient physical infrastructure. And Mr Lula da Silva is reluctant to embark on politically costly reform, arguing in November last year that “Brazil has already made all the sacrifices necessary … I think that now the Brazilian people should begin to reap some benefit from the Brazilian state.”

In any event, viewed from Wall Street, or the boardrooms and trading floors of Brazil’s own impressive collection of financial institutions, the dynamism of the private sector is forcing the pace of change. “Brazil is enjoying its best times of the past three decades,” says Maílson da Nóbrega, a former finance minister whose consultancy, Tendências, advises a string of private companies.

A constellation of factors linked to what Luiz Carlos Mendonça de Barros, a former minister in the government of Fernando Henrique Cardoso, Mr Lula da Silva’s liberal predecessor, calls three “positive shocks” is pushing through a fundamental change in Brazil’s industrial structure.

First, the rapid growth of China and India since the beginning of this decade has radically changed the world economy in a way that has directly benefited Brazil and other Latin American commodity producers. Asian demand for Brazilian raw materials such as soya, meat and the iron ore mined by Ms Mara has increased prices. Whereas Mr Cardoso struggled with trade deficits, under Mr Lula da Silva Brazil’s trade balance has been in the black to the tune of $40bn per year. The recycling of Chinese surpluses though the world financial system has helped create an ocean of liquidity, keeping interest rates low and encouraging financial investors to buy emerging market assets such as those of Brazil.

Second, Mr Lula da Silva’s decision to stick with tried and tested recipes to control inflation has transformed the business environment. While businesses may complain about persistently high interest rates and what many see as an over-valued currency, there is widespread recognition that these matters are being dealt with on a technical basis by the central bank and are free from political interference. “There is a perception in boardrooms that there is no magic formula to change the interest or exchange rates,” says Mr da Nóbrega.

Inflation has been falling consistently – it is now running at only 4 per cent – and local interest rates have begun to fall, helping spur a sharp rise in credit as mortgages and consumer loans become more affordable. Brazilian companies have seen their cost of capital fall dramatically. With both foreign and domestic investors ploughing money into equities, the São Paulo Stock Exchange index has gone through the roof.

Moribund and widely expected to disappear as recently as 2002, the market for primary offers has been revitalised, with 23 issues completed this year alone. “This is the first time in my life I have seen a shortage of assets in Brazil,” says Winston Fritsch, senior partner at the Rio Bravo investment fund in Rio de Janeiro. “There is a lot of liquidity and capital available.”

And local institutional investors are starting to flex their muscles. In 2006 local pension funds, insurance companies and others controlled funds equal to 54 per cent of GDP, compared with just 5 per cent in 1985. Investment is running high across the economy. The private sector invested the equivalent of 9.3 per cent of GDP in the 12 months to April, more than double the rate of economic growth. The cheap dollar has allowed many companies to import capital equipment. And the increasing overseas reach of Brazilian companies is also yielding dividends in terms of efficiency, as companies begin to import the better practices they see overseas.

The approaching boom in bio-fuels could eventually amount to a third positive shock. Brazil was a pioneer in the development of fuel alcohol in the 1970s and is now the world leader. Locally-developed technology means almost all new cars are able to run on gasoline, alcohol or any mixture of two. With demand set to continue to rise on the domestic market and with the prospect of a boom in global sales should trade talks open developed markets to Brazilian exports, investors are rushing to stake their claim. Unica, the sugar and alcohol industry association, says 77 mills will be built over the coming six years, with investments of $14.6bn already under way. Should this boom emerge, the resulting rush of agro-dollars would have a multiplying effect on the changes already under way.

These changes are not all positive. Current account surpluses have strengthened the currency to such an extent that some traditional export industries such as shoes and textiles are in trouble and others – such as cars – are losing export markets. More manufacturers are buying inputs from cheap foreign manufacturers instead of making them themselves, and have sometimes closed factories in Brazil and opened ones in China and elsewhere.

Mr Mendonça de Barros talks about a slow process of “reindustrialisation”, as the locus of manufacturing shifts to new industries based on raw materials such as soya, meat, ethanol and steel, and to services. Friboi, a meat packer, listed on the stock market this year and promptly bought Swift Foods of the US. DASA, a company of clinical laboratories, has had a similarly stellar rise. Both grew through consolidation in their sectors, fueled by newly-available capital.

Even though this process has caused job losses in traditional industry, the government is accepting change, Mr Mendonça de Barros says. “Why? Because earnings are going up and food costs are coming down.”

But there may be limits on how far the private sector can push the economy on its own. One concern is the sustainability of the recent growth in consumption.

Sérgio Vale, an economist at São Paulo-based MB Associados, says the credit boom, which has boosted housing and big ticket items such as cars and household electrical goods, will run out of steam as consumers reach their borrowing limits. “Family incomes are still relatively low compared with those in other emerging markets,” he says. “The only way to sustain growth is to increase incomes.”

Infrastructure is an even more pressing worry. Companies such as CVRD have done well partly because they control the railway and port infrastructure that take their goods to market. Farmers in Brazil’s centre-west region are less fortunate and face heavy costs because of crumbling roads and deficient port infrastructure.

Bureaucratic delays and a confused regulatory structure have delayed investments in energy. Many economists warn of an approaching energy crisis of the kind that derailed Mr Cardoso’s government in 2002.

One solution would be to encourage private investment in infrastructure. Yet Mr Lula da Silva’s government – which won the election partly by capitalising on widespread anti-privatisation sentiment – sometimes seems suspicious of private capital in this area. Efforts to develop private-public partnerships to provide funds for road building have been largely unsuccessful.

Yet unless the government seriously reforms the public sector it is unlikely to have the resources to address these problems though its own efforts. Because public debt is relatively high, the government has been under pressure to raise more money in tax than it spends.

Resources for additional spending are still scarce. An “accelerated growth plan” launched in January has been criticised as timid and ineffectual. Powerful vested interests prevent reforms that would provide extra funds. Reform of antiquated labour laws is politically expensive for Mr Lula da Silva who counts trades unions among his most fervent supporters. State workers – another pro-government constituency – will mobilise to stop any reform of the pension system.

These problems run deep. Some argue that Brazil’s love affair with the state is an inheritance of the Portuguese colonial system. Others such as Amaury de Souza, a political analyst in Rio de Janeiro, say the dilemma is more recent, harking back to the social and political model put in place by Getúlio Vargas in the 1930s and modelled in large part of fascist Italy. “Lula is the last of a line trying to save the Vargas model: keep the people inside the system happy and bring those who are outside in. It is an impossible compromise,” he says.