Will China become the next supremacy?

A thousand years ago China was well ahead of Europe in science and technology. The Chinese were using gunpowder, paper, movable type printing and the magnetic compass. They had perfected the crossbow long before the Europeans. As we have heard, history repeats itself. Therefore, today we may be seeing, depending on how we look at it, either a repeat of that process or a reversal of it. Today the technologies involved are not printing and gunpowder, but computing and nuclear power. Nowadays, the west is the leaders in such technologies.

The east side of the world is growing fast and China is the biggest contributor to its growth. Some people view it as a threat to the US. China has been investing billions of dollars on research, a practice not really supported in the Chinese culture. They are shifting the world’s perception of the “copier Chinese” to the “innovative Chinese”. They have started showing concern for intellectual property. Our visits to Continuum and Yuanfen-flow were impressive purely for their innovative approach. It clearly shows that China will bring innovation into the world. Economists predict that China will pass the US economically within the next ten years. As the table below illustrates, it is true that China will have the highest GDP in the world but GDP alone is not representative of power. There are other factors too. Please click in the picture below to see it clearly.

To become the world leader, China needs to act like one (and more so consistently). Firstly, China’s political system inhibits the country’s ability to take a lead in the world. In our opinion, China’s economy sector is developing at a much higher pace than its political and social sectors. The country has to go through a cycle in order to one day be considered the world’s leader. Once most part of the population leave the poor status, the people will be looking for freedom and human rights. During the Tang Dynasty Li Semin, its most famous Emperor, stated, “Nation’s power comes from the power of its people; if the people are hungry, the country will be weak; if their stomachs are full, it will be a strong nation.” This saying by the emperor emphasizes the importance of taking care of the people of a certain country.   As of today, the state controls most part of the people’s lives. Examples of this control may be found everyday in the news. One example was present today in the Wall Street Journal where the Beijing police arrested group of Christians (news dated 25^th April, 2011) is though not shocking but definitely disappointing and affirms that China has a long way to go (not sure how long) before it takes on position of world leaders. The 30 evangelical Christians were arrested as they attempted to gather outdoors for Easter services and confined about 500 to their homes, continuing a broad crackdown on dissent that has also targeted lawyers, bloggers and human rights activists. Authorities describe the event as an investigation into “economic crimes” Is it really a crime? “This is not a political appeal or civil disobedience. It’s a matter of core faith of these believers,” Mr. Fu said. Should people not be allowed to practice their faith? It is a rhetorical question and we all have the answer including the Chinese authority.

Another very basic example is the one-child policy. Even though the country has 1.3 billion people, this policy has many drawbacks in the economy. First of all, the population starts to become older as the years go by because of the restriction of one child per couple. Second, according to a study done by Citibank, China’s population will halve every generation if the government does not get rid of the one-child policy. If the policy is kept in practice, the population will be less the 100 million one hundred years from today.

Acts like these will be the biggest roadblocks in China’s journey to becoming the super power of the world. There needs to be a change in their political regime. Moreover China’s nationals need to be given freedom, freedom in real sense. People are its biggest asset and restricting them from any such activity that isn’t restricted in any other developed nations is like inviting problem for themselves in the future. Additionally such restrictions will do no good to its image and will make it even more difficult for China to become the world leader.

In the East, there is a saying, “Sun rises from the East and sets in the West; just like power, it never stays in one place.” This is the chance for China to change its political system, reform its human rights policy, and take the lead of the world and take the complete lead from the west and bring back to the east.

By Dagoberto Darezzo, Malik Surani, Eduardo Nunes, and Bo Kim

Who Woke Up the Bear?

“Let China sleep, for when she wakes, she will shake the world”. – Napoleon

Here is China, the second largest economy in the world. Not long ago, westerners saw China as the place where they could take advantage of the cheap labor and explore the lack of human rights to minimize their cost, consequently increasing their profits. As the years went by, the Chinese leaders and the people realized the potential of the country to become a global economic leader.

The speaker from CNNI mentioned the humbleness and the drive for success of the Chinese people. These characteristics were clear for me when I was walking around and “talking” to the Chinese locals. The speaker gave an example that really stood out for me. He said, “In an era where millions of people were let go from their jobs, these recent unemployed people were washing cars on the street or polishing shoes.” In our thinking, this means that China is patient to progress in baby steps to suddenly take control of the world.

The baby steps can be seen in the BOAO forum discussions, especially among the BRICS’ leaders. The BRICS, which accounts for 18% of the world’s total GDP, are creating multi-lateral strategies to fortify the relationships among these powerful emerging economies. The Chinese proposed a strategy to use other currency in trades among the BRICS than the US dollar. If the BRICS use their currency to engage trading among them, it will be a sign of the Chinese dominance in main decisions. And then, what is next? Maybe they want to impose Mandarin as a business language? I particularly think there is no chance we will be seeing this phenomenon in our lifetime. However, once China takes the lead as the largest and most stable country, they will try to impose their customs and beliefs in different countries around the world. This is just what we human beings are. The more we have; the more we want.

Another sign of the ability to become the world most influential economy came from the negotiation exercise we engaged with the Pequim University MBA students. We usually read how the Chinese are reserved, cautions, and not aggressive about negotiations. However, these students demonstrated an exceptional talent in negotiations. Some aggressive, and others not so much.

So, the question we are left with is: What is China’s next baby step?  Or maybe we should say BEAR step…

Cultural Differences

As I walk around town and go around in taxis, I am seeing the tremendous economic growth of this country.  As a native of East Asia, I am fully aware of the potential of the Chinese.  First, unlike other poor countries, a vast majority of its citizens are educated.  This is the point I want to make: Despite all obstacles, you cannot hold down educated people.  China’s ascent is fueled by its educated masses.  As we have seen with Japan (They were also accused of stealing IP from the West in the 60s and 70s) and with Korea, it is only a matter of time before China attains the prosperity of its neighbors.  China poesses the same ingredient as its neighbors: educated masses.  Who would of thought that Japan would rise from its ashes from WWII to dominate the world in key industries such as high technology and automobiles?  Who would thought Korea, once poorer than Kenya would be the only 10^th country in the world with a population of greater than 20 million to break the $20,000 USD per capita?  This is only possible through education.

There are still challenges for China.  Once constant recurring theme throughout our company visits is Guangxi- relationship.  As many of the companies boast about government connections I am left wondering about what it means.  Why is Guangxi so important?  I believe it is because of how insular and murky the society is.  Who would need Guangxi in China if China were an open and transparent society?  It is exactly this.  China is the opposite of America in the sense that nothing is done in the open, nothing can be transparent.  If you do not have connections, you are nothing.  In America, you can pick yourself up with your bootstraps.  Here, this is close to impossible.  If you do not have connections, you are nothing.  So, the one billion plus people because they do not have Guangxi, will be nothing.  This is what I am left with.   This notion of Guangxi runs exactly counter to Confucius’ main teaching: Education knows no class, no boundaries only you will be judged based on your merits.  Guangxi contradicts Confucius.  How long China can maintain a system of two classes, ones with Guangxi and ones without, is really how successful China will be in the future to maintain Social Harmony- the central tenet of the Chinese government.

However, Guangxi can also be used to our advantage, for instance, among our peers in China.  Since the late 1970’s with the implementation of Deng’s one child policy, all our Chinese counterparts of our generation are all single children.  As growing up as a single child, this Chinese generation has grown up without knowing brothers and sisters.

By Bo Kim

Hunger for Recognition and Success

We cannot express how much the Chinese companies as well as their employees are hungry for success and recognition. It was clear during these past two days during our visits to: Hisense, Wheelabrator, and Tsingdao brewery.

The speaker at Hisense made clear that Hisense wants to be the number one brand in the world in the industry. He repetitively mentioned how in the early stage of growing the brand internationally the company is. He said that the company is trying to enter the global marketing by going through the developing economies where they can compete very well with competitors in terms of price. Also, the company has to overcome the perception of “made in China”. People around the world relate, “made in China” with poor quality. Hisense is one of the companies that are trying to change this perception coming up with products with a higher quality than the average Chinese product.

The waste energy company also demonstrated the growth horizon with its new incredible process of creating energy from the city’s waste. As the Chinese government is making a terrific effort to move towards green technology, companies like Wheelabrator is fully in line with the government’s goals, opening the opportunity for a much better government support. In addition, the speaker shared the plans of opening other plants already, supporting the success of the company.

Tsingdao brewery is also looking for growth opportunities. Already the biggest Chinese beer brand by revenues, Tsingdao beer is expanding internationally as well. In 2010 only, the brewery achieved 18billion RMB in total revenues.

From these three visits, we can support our idea that Chinese people are with the drive for success and recognition. They want to be perceived as a developed and “first world” nation.

Continuum + Ford = 成功

Our long time waited day arrived. 26 of us well dressed eager to learn about the business scenario in China. Nothing better to start our visits with a meeting with one of the Big 4 carmakers – FORD.

At Ford, the presenter was very straightforward and informative, leaving our minds wondering about all the issues he put out for us. In our opinion, the most relevant issue presented was the lack of integration and communication within the company. From the issues laid out by the presenter, the main ones were:

• Subtle mark-ups by suppliers
• Parts tourism

In our opinion, company-wide integration and effective communication are the best solutions for this problem, however it takes a very long time to effectively conduct these changes, especially in a company that is very old like Ford.

The second visit was to Continuum, a very innovative consulting company. Its business is about helping customers develop their products and business process in order to achieve an innovative culture. The culture in its own company was very interesting; for some of us impressively attractive, for others not as much. As our classmate stated, the culture like the one in Continuum is not attractive because of the lack of privacy and personal space. Also, she mentioned that she likes to make of her office her home.

As of the company, it is impressive how such a relatively small company comes up with groundbreaking ideas. The computer for children’s education and the diapers in the china market were extraordinary. In addition, we discussed how the culture in Continuum is able to leverage innovation and creativity. In today’s world, innovation comes from shared information, knowledge, and ideas. It was clear for all, how the Continuum office in Shanghai was set up for that.

Interestingly, the two visits today provided us an opportunity for contrast between the two companies. On one hand, Ford is a very old company spread out around the world with little integration and effective communication across the different regions across the globe. On the other hand, Continuum presented themselves to us as a very integrated company where staff actually rotates offices globally to create multi-expertise teams in order to achieve a better level of ideas. Consequently leading to better innovation capabilities.