China’s Five Surprises There are currently two views about China
China will be world’s largest economy by 2030.
China’s current rapid expansion will itself slow down its growth rate in future.
These contradicting views stem from improper understanding of transformation taking place in China, more so because of the rapid pace at which the transformation is taking place.
There are five “surprises” in China’s future, which will change the world’s view of China.
“Why Not Me?” Many view China as a producer of “commodities” and a “low cost” and “low quality” competitor. There are however compelling reasons for what China is and what it will be in future - a) Chinese are determined to come out of years of economic and industrial suppression through rapid economic progress b) the reality of progress in the rest of the world– has made Chinese businessmen ask “Why not me?” c) the denial of “materialistic things” for years has increased the materialistic desire, making Chinese desperate to “catch up” with the world, become rich and fast. Therefore Chinese businessmen consciously choose product designs and processes that would be “fast” “mass” and “cheap”, giving China the “low cost” and “low quality” image. But the Chinese are aware of the prices at which their products are branded and sold abroad and therefore question - “If someone else can sell my products at such prices – “Why not me?” Thus China becoming a branded global player of quality lies in the question – ”Why not me?”
Fearless Experimenters China’s current business culture is based on some qualities unique to Chinese businessmen a) “let’s try it” b) “learn from failure” c) “ability to replicate successes” and d) “need for low or no burden of proof for investment”. Their Western counterparts accuse them of imitating products or even infringing on patents, but the Chinese consider it as a part of experimentation and a path to development. These large-scale experiments are bound to lead to incremental innovations now, which in the long run lead to truly Chinese innovations. There are other developments in China which should help Chinese progress from being fearless experimenters to constant innovators - a) quantum jump in the number of engineers and scientists graduating b) efforts to quadruple the number of technical universities c) increased grants to educational institutes to help them reach world-class standards d) increased spending on R&D making China the 3rd largest spender on R&D in the world.
China’s “Brain Gain” A long lull in formal education has left China desperate for qualified managers, leading to large-scale import of foreign-trained knowledge and business leadership. China is also looking forward to Chinese who have made a mark abroad to come and participate in China’s economic development. Chinese abroad who had high degree of faith in their people in China, even when things were not conducive enough, have returned home, not surprisingly, and contributed heavily to China’s current economic success. The willingness with which foreign professionals and Chinese abroad have come to China’s rescue has made China realize that in the long run it can sustain its “brain gain” only by creating an environment, which makes people comfortable both inside and outside China.
Out from Guanxi Many outsiders are still of the view that to succeed in China a) you need to have connections – guanxi, in the party and b) you need to be an ethnic Chinese. These views are no more valid. Industry based restrictions, particularly in core sectors, still continue, and with promises for relaxation in the due course. But there is more transparency, than ever before, in industrial administration and policies. There is greater level playing field for foreign investments and enterprises in many industrial sectors. The government and the private enterprise place greater emphasis on quality of management and good corporate governance practices. Privatization and relaxation in the costly and stringent labor laws are signs of liberalization in China. China, therefore, is no more a country of Guanxi – connections.
China’s Overseas Ambition A noteworthy trend is the entry of Chinese enterprises into some developing countries. The objectives are many a) establish sources for China’s oil and raw material requirement b) establish new markets, acquire brands and distribution channels for Chinese products c) acquire new skills and technological expertise. The entry followed by investments in these countries and introduction of basic Chinese business principles – speed, risk taking, pragmatism has helped some of these countries industrialize. Chinese capitalists believe that such developments will lead to friendly ties with these countries, and making China the provider of choice in these countries..
Renaissance Nation In over 100 years China is making changes, on a large scale, to integrate with the world. Therefore for someone visiting China it will not be a nation that is isolated or inward looking but a country worth admiring and full of practices worth embracing.