version of Peking duck—paper-thin crusted skin, succulent meat. Dessert was three courses—a pineapple sorbet with small fruits, hand-decorated cakes with a raspberry sauce, and a double-chocolate torte with a hot filled center. At the end of the meal, we had to pay cash, because the restaurant did not accept credit cards. But it did not matter—we had enough renminbi to cover the cost of the meal: $10 per person. It was a meal that we will remember for a lifetime—magnificent cuisine in a humble setting served with grace and style by the cook’s extended family.
Even then, nearly two decades ago, this was a bargain. The food was visually stunning, perfectly plated, sensuous, and exotic. It was, in fact, fit for an emperor. Li Shanlin, the restaurateur, is the grandson of the supervisor of the last emperor’s imperial kitchen. His grandfather, Li Shunqing, was lord secretary to the dowager empress and was responsible for the imperial menu inside the Forbidden City.
Born in 1920, Li grew up watching his grandfather prepare imperial-style meals. But after university, where he studied aeronautical engineering, he became a scholar, teaching mathematics at the Capital University of Economics and Business in Beijing. During the Cultural Revolution, when Chairman Mao waged an offensive against intellectuals and party elites, the university was closed. Purged from his university post, he turned to the study of imperial cuisine, refining the recipes that his grandfather had handed down.
Li eventually returned to teaching. But at the age of sixty-five, when he finally retired, he reawakened his lifelong passion for cooking—and he took his chance, opening a three-table restaurant in the family home (figure 1-1). In the beginning, there were no employees; family members served, cleaned, and helped cook. Food preparation was classical, with a sharp knife, perfect ingredients, and a focus on taste, texture, and visual presentation. In this sense, he was way ahead of his time, spurning modern cooking equipment, microwave ovens, and food processors.
Although it was hard to find, Li’s restaurant soon garnered critical acclaim. As a result, it then became hard to book a table. According to the family, Bill Clinton, Jackie Chan, Bill Gates, and the Rolling Stones have eaten at the original restaurant. And, indeed, as we paid, we saw a framed note from Bill Clinton, which expressed his thanks for “a wonderful time.”
Today, if you visit the newest branch of the Li family restaurant, it is equally hard to book a table—but the experience, not to mention the cost, is altogether different. For a start, the restaurant—called Family Li Imperial Cuisine—is hard to miss. It is located just off East Zhongshan Yi Road, Shanghai’s grand riverfront boulevard. The building is magnificent, with a glass and marble interior, a lily garden with a fishpond, spacious private dining areas, gold-plated dinnerware, and a wine list to rival Paris’s finest restaurants (figure 1-2).
FIGURE 1-1
The first Li family restaurant in Beijing
The top-priced set menu is RMB 2,000 (around $300). It features, among other things, scallops, deep-fried prawns, stir-fried cabbage with pheasant meat, bird’s-nest soup, duck with shrimp paste and sesame, and steamed snow frog. This can be washed down with a bottle of a 1990 Château Lafite Rothschild for RMB 16,800 (around $2,700).
Shanghai has become one of the world’s capitals of cuisine, supported by talent, investors, and fresh-food supply chains that did not exist when Professor Li first launched his enterprise. Now, the Li family restaurant successfully competes with other prominent restaurants in the city once known as the Paris of the East, including Jean Georges (from France’s Jean-Georges Vongerichten), Laris (from Australia’s David Laris), and Issimo (from Italy’s Salvatore Cuomo), as well as the restaurant of Ho Wing, the former chef at The Hong Kong Jockey Club.
FIGURE 1-2
A beautiful water garden at the new Li family restaurant in Shanghai
The Li family restaurant in Shanghai is the story of newly affluent Chinese consumers living like emperors: choosing the best food and wine, enjoying haute cuisine in a magnificent setting. It is about pleasure, personal indulgence, and, to some degree, hedonism. The painful years of subsistence living are distant memories that can be put behind with today’s purchases.
The Rise of the Newly Affluent Consumers and the $10 Trillion Prize
In 1992—a few years after Professor Li had opened his first restaurant—Deng Xiaoping, China’s supreme leader, made his famous southern tour of China’s small but booming special economic zones, pushing aside more conservative party cadres and opening China up to foreign investors and to the private sector. Two years later, Gordon Wu, a Hong Kong tycoon, opened a superhighway connecting Pearl River Delta farmland to Hong Kong’s container ports. The farmland soon became factory towns, foreign investment poured in, and China truly began to join the global economy. Through the 1990s, Zhu Rongji, the prime minister, drove massive economic reform programs that prepared China for joining the World Trade Organization, after which investment flows ratcheted up even higher, and China’s growth accelerated.
In the two decades since Deng’s tour, several factors have combined to create China’s economic miracle—the greatest rise in economic productivity that the world has ever seen—a productivity boom that is still under way and that underpins the dramatic rise of the consuming classes. The following are some of these factors:
Welcoming market forces into the economy: letting markets set prices, allowing entrepreneurs to set up shop, and forcing state-owned enterprises to compete with each other. China also dismantled its “iron rice bowl” model of state enterprise (a system in which workers were given job security)—a painful but necessary reform that displaced more than seventy million people.
Making infrastructure investments that expanded the economy’s productive capacity, tapping into high domestic savings, leveraging the system of five-year plans, and intelligently using the state’s ultimate ownership of all land. These investments, coupled with agricultural reforms, also unleashed a migration to the cities, bringing people into urban environments, where much more remunerative employment opportunities existed.
Embracing trade and foreign investment, using membership in the World Trade Organization as a catalyst for driving domestic reforms, and creating an investment environment highly attractive to foreign investors. The ability to leverage Hong Kong’s trading prowess and Taiwan’s technology has been a huge advantage here.
Educating a highly capable workforce of women as well as men, and mobilizing this workforce into the high-growth sectors of the economy (indeed, a physical mobilization of more than 150 million migrant workers within the country), while sending the best and brightest abroad for even more study.
Developing private-property rights, which has led to large-scale home ownership.
India’s economic miracle began with different starting conditions and followed its own pathway, but is no less impressive. Prior to the 1990s, India’s version of state capitalism, the “License Raj,” was arguably even more effective at stifling productivity than China’s Communist system. The Licence Raj system consisted of India’s elaborate requirements for starting businesses, including multiple permits for opening, operating, or expanding an enterprise. At their height, License Raj regulations, red tape, and bureaucracy constrained Indian growth and productivity—and effectively created oligopolies with very high prices in many sectors. Entrepreneurialism was crushed by the resulting government-erected barriers to entry and by corruption. The first wave of changes happened in the 1980s—including changes in the monopoly laws and some sporadic sectoral reforms. In 1991, soon after Rajiv Gandhi was assassinated, the newly elected prime minister, Narasimha Rao, and his finance minister, Manmohan Singh (the prime minister as of this writing), found the old economic system in total crisis, with its foreign exchange reserves having dropped to $1.2 billion. With foreign debt obligations looming,