I have just returned from my final MBA elective in China. We had lectures from top speakers and thought-leaders and visited several of China’s top companies. We were constantly told to have a blank canvass approach to China and to unlearn what we knew about the country.
The accepted acronym for emerging markets is bric (Brazil, Russia, India and China), I quickly learned that in reality this should be changed to Crib. The capital C for China as they have already emerged as the World’s second largest country by GDP and are still growing at a fast pace, way ahead of the other Crib nations.
I travelled to Shanghai, Beijing and Nanjing and everywhere I went more and more of my misconceptions (mostly built from western media) were exploded. It was such an eye opening experience that I thought I would share some of the insights I learned.
Myth 1: China can be treated as one country
China is unified i.e. people are proud to be Chinese, there is a single currency and a centralised administration, however you should approach China more as a continent rather than a single country. There is huge diversity in the regions, very different levels of wealth, culture, landscape and sophistication. As a business if you are planning to enter China then you need very good local knowledge and cannot have a single approach to all regions.
Myth 2: China is a communist country
From my limited time in China it appeared that China is a communist country only in name. There is a huge personal wealth creation philosophy, there is a well defined class system, private housing ownership is encouraged, entrepreneurship is thriving and private companies are becoming more prominent.
One of the obvious signs of communism is the lack of democracy. The Chinese Prime Minister is elected by top government officials, very much like the process of electing a new pope. These leaders are in power for 10 years and develop the famous 5 year plans. This creates a long-term mindset and allows for tough decision to be taken in the best interest for future generations. China has very strict 5 year plans and they have proven that they deliver on these plans unlike the election manifestos of many Western prime ministers.
Myth 3: China wants to be like the West
In the West we believe that our way of life is best and that all emerging countries aspire to be like us. There is a real sense that while China likes Western brands it does not want to be Western. China has its own identity and wants to set its own direction. China is modernising but not necessarily westernising.
Myth 4: China does not take pollution seriously
We have all read the headlines that China dragged it’s feet over the Kyoto agreements and many assumed that meant that China did not care about CO2 emissions. However, part of the government’s 5-year plan puts renewable energy at the forefront of their goals. China is investing vast amounts of money into renewable energy and realises that without sustainable energy they cannot keep growing.
Myth 5: China does not take intellectual property seriously
I thought that China’s stance on intellectual property rights (IPR) was very loose and allowed for copyright and patents to be infringed easily. However it seemed that this is quite the opposite, IPR is a new discipline but it is taken very seriously and there are lots of incentives to file and protect patents. Another point that I did not know is that Chinese like to buy real goods (not fakes) in order to show ‘face’.
Myth 6: China is about imitation not innovation
As I seen China’s phenomenal growth I rationalised that it was a pure manufacturing country and that innovation and thought-leadership would remain in more developed countries. Again this is no longer the case, the next 5-year plan is aiming to move China from an imitation to innovation culture, there is an investment in education and incentives for the knowledge economy. Many companies have some of their most advanced R&D centres in China and a recent study by Booz and Co. shows that China is now a leading force in innovation.
This is not to say that China does not have some problems:
- Censorship of the media. Certain topics are not allowed and even online companies are required to filter certain topics and keywords. There is no Facebook and no Twitter, although there are Chinese equivalents.
- Pollution levels in many cities are dangerously high.
- Water is in short supply and this will likely be a huge issue in the future.
- There is widespread corruption in government.
- Some argue that the levels of consumption of raw materials are unsustainable.
- A lack of democracy – however in some situations this actually helps China’s long-term interests.
I had a real romantic image of all the millions of bicycles on the streets, but in reality I saw very few, the roads are filled with cars and electric powered bikes. Yet another sign of China’s progress.
I constantly asked myself the question of whether China was undergoing an industrial revolution i.e. are they developing technology that will allow them to leapfrog the productivity of other nations. I think this remains to be seen.
I did leave with the feeling of nervousness about the prospects for the UK. China is developing at such a rate that smaller countries cannot compete. Will the UK be marginalised within the next few decades or has that already happened?