In Singapore, there is a museum called the Asian Civilization Museum. And the star attraction in this museum is a sunken vessel from about 850 AD during the Tong Dynasty. The vessel is a small dhow, a boat that is used in the Arabian Peninsula, but finds its way through the Indian subcontinent and then into Southeast Asia. It sunk in an island called Belitung just outside of Java today. And in 850 AD, it had 60,000 pieces of ceramic and porcelain in the dhow.
Singapore and Southeast Asia uh play an important role in the trade between China and the Western world to India and then onto the Arabian Peninsula and then to the west. And this dao was in the waters of Southeast Asia and it gives us a glimpse of how important trade was even then. The content of the Dao contain many forms of porcelain. Some were meant for rich people with very good finishing and many were industrial quality porcelain and ceramic.
Thousands of pots and plates stacked up in the same way as it would be stacked up today for industrial manufacturing and distribution around the world. China has had a history of being able to manufacture in the thousands. There are many things about China today that are no longer true. It is no longer a dynastic nation. It is no longer ruled from the mandate of heaven down, but it’s from the will of the people up.
But there is there are some qualities about China that has brought it through civilisation to today from 5,000 years ago from 7,000 years ago. And one of the most important quality of the Chinese civilisation is the ability of an entire people to work together to create value in the economy. Even before the Tang dynasty and the Han dynasty in the Qing dynasty, all of us remember the Terracotta Warriors.
And you can imagine what it involved in terms of the thousands of villages who in that area where the Terracotta Warriors were found who were engaged in the industrial job of creating thousands of soldiers and an entire army for a funeral procession which we now know to this day. And this ability to manufacture to specifications and to do that in large quantities is an special Chinese DNA that we know to do to this day.
But what’s also important about the Chinese DNA is its ability to interact with other civilisations. Even during the Tang dynasty, some of the potteries demonstrate a very high level of interaction with other civilisations. Potteries with Islamic or Arabic annotations on them. Pottery that has the symbols of other cultures. And way down the ages, the Chinese ceramic industry has been able to respond to demand and needs from other civilisations.
Even as long as 600 or 700 years ago, there were western demand for Chinese pottery where the western royalties would send their requests for the potteries to carry their emblems, carry certain specifications and the messages had to travel down the silk road, whether it’s the land silk road or the water silk road to a specific village in China to be able to design and produce the pottery to very specific demands in the courts of England, Germany and even the post Roman Empire.
The pottery making civilisation originated in the northern parts of China, Chang’an, which is where the Belitung sunken potteries originated. and then moved down south a little bit. Why pottery? Because China had something that was natural to the ground and that is loess soil and so they made the most of it. If there was iron ore in the ground, it is in all likelihood that the industrial revolution would have started in China.
And it took the pottery making traditions and civilisation to a high degree of specifications. And it f it moved further down south to a small town just not very far from Shanghai called Jingdezhen today. And by that time the pottery civilisation had moved from the Tang dynasty to the Song dynasty and then to the Ming and to the Qing dynasty. And if you went to Jingdezhen today, you will be blown over by the thousands, not hundreds, thousands of pottery manufacturers.
In the same way as if you were going to Guangzhou today, you’ll be blown over by the thousands of industrial manufacturers selling to the rest of the world. The question it puts at the back of our modern minds today is that if there are thousands of manufacturers pottery, why hasn’t the pottery civilisation collapsed on itself through sheer commoditisation? In other words, when you have thousands of pottery, the value of pottery should reduce to zero or to almost nothing.
The answer is uniquely Chinese that the western civilisation does not understand. If you were in the US today, commoditisation means that Walmart comes into your town or your village or your city and wipes out all of the nuances of the traditional shopkeepers, the small businesses that add value through creativity uh and innovation and commoditise the whole industry. And that is why a lot of western civilisation today looks boring because they’ve commoditised just about everything we do today.
But Chinese civilisation in the pottery industry, thousands and thousands of young people enter this industry today and it still hasn’t collapsed. And the way they explain it to me is that the value is not in the pottery. The value is in the artisan who adds value by his choice of the soil that he uses, the material that he uses, by the glazing that he uses, by the design that he puts on, by the artwork that he puts onto the pottery or even the purposes for which the different potteries are made.
And so an entire civilisation is able to hold together and still deliver value despite mass commoditisation. Why is this important? Today there is mass commoditisation in the Chinese economy. How many EV car manufacturers do you think there are in China today? Five? Ten? Fifty? One hundred? It’s 130 and more. And you would imagine that this would result in mass commoditisation that should result in the collapse of the EV industry.
At the “Liang Hui”, the two meetings that are taking place in Beijing this week, the big discussion is that with mass commoditisation, China might well not be able to hold prices. And that’s the speech we had this morning from professor Chong Chun who said that prices need to hold up. The economy needs to hold up and it has to hold up not on the basis of inflation but on the basis of value creation. If we take the western lens to value creation, we will miss a magic about China and that is that individual artisans are still able to hold their value in an economy that is increasingly being commoditised.
So what does that mean to us today? We discussed about the impact of AI. And what will AI do to all of your institutions? It’s going to commoditise you. It’s going to make you irrelevant. There will be nothing that you can do in your bank that the other bank cannot do. Not only that, it’s going to change the formula of the relationship from you being a producer of financial products to the end user who’s going to decide the products that are relevant to himself.
In other words, the power of the relationship is going to be turning around. And so all of us in this room tonight going to have to think about what our world is going to look like when our products, our services, our institutions are increasingly commoditised. And it’s just as well that we have our dinner here in Shanghai tonight in China at a time in its own inflection point. China today accounts for 30% of the global manufacturing.
It is larger than the next four countries put together and still growing. But that growth endangers China’s economic formula in that it’s absorbing the cost of manufacturing of the rest of the world and it might collapse on itself. Professor Zhang Jun this morning said that the trade surplus of China today is $1.1 trillion and China annually accounts for $4 trillion worth of global trade in manufacturing.
But then there’s a secret in China and that is that in the supply chain each of the players will find their own differentiation and then they will form communities that add value in different ways and invent new things the the rest of us can only dream of. And so while we are here this evening, let’s also take stock of where China is and where we are in our own journey to commoditisation and the impact that AI will have on us.
There is a lot to learn and what is really wonderful about being in China is that we can draw from the civilisation itself. the traditions that has survived over thousands of years and still being perfected. And we hope that we can all carry that with us into our own traditions.
