China - First impressions of the next global wave
Posted by Grant Brewer on 01 Oct 2005
All organisations need to understand their global context if they are to create successful and sustainable strategy given the unavoidable impact of globalisation in the modern economy. This isn't only applicable to private companies - public sector leaders also need to see themselves as developing a country that will be competitive on a global scale.
China is one country that will have a large role to play in the world of the future - partly because of its large economy (which although currently about 20% to 30% of the US economy is growing at more than twice the rate of most Western economies), partly because its large population creates an enormous domestic marketplace that will fuel this economic growth, and partly because it seems to be manufacturing a part of almost everything you buy these days. As a result, any strategy that responds to globalisation should be acknowledging the role of China. We need to understand China if we are to take the country seriously and develop realistic strategies that either defend against China's growing impact or, better, capitalise on and gain from China's growing influence.
A few first impressions whilst travelling in China might spark some thinking amongst your management team as you go about formulating your strategies. As you do so, bear in mind two frequent comments on globalisation and South Africa that have appeared in this column. Firstly, that South African people's capacity to deal with change is high, as demonstrated by the success of the transition into democracy and by unique institutions of change such as the Truth & Reconciliation Commission. Secondly, that South Africa needs to find its own place in the global economy that plays to our countries strengths and experiences. This will take innovation rather than imitation of other successful economies (either in the West or the East). It is worth reflecting on the immense change that China has experienced and continues to experience - from feudal society to independence, from civil war through communist revolution, from the Cultural Revolution to reform and an increased openness. And all of this change in the last century. That South African capacity to deal with change may not be completely unique.
An inescapable impression of China is that it has existed in some form for thousands of years. The sophistication of ancient Chinese people inspires awe - standing amongst thousands of terracotta warriors in Xi'an that were made 200 years ago leaves one in no doubt about the manufacturing, innovation and organising capabilities of the Chinese. Their cultural heritage is immensely rich, and despite have been shattered during the Cultural Revolution in the 1960s and 1970s, it remains embedded in their way of life. All of this history is a vivid reminder that the world is not dealing with a new upstart economy - rather the world is just paying more attention to something that has long been an impressive force and that is emerging from post reform communism with increasing speed. China first traded with central Asia along the famous Silk Road in about 200BC and has been a major trading hub since. To put the countries history into starker contrast: China had a population of 57m people in AD2 when they complete the first census in China. This is a larger population that the population of South Africa in 2005 (about 45m) and predates us by two thousand years.
China's long history means that it has gone through many ups and downs over the centuries as dynasties have risen only to be toppled by revolutionary peasants or invading foreigners (the Mongols and Manchurians invaded and ruled China for centuries). The communist revolution, oppression, reform and recent economic growth are in many respects a part of a long cycle of change in China. This is easy to overlook since China is frequently portrayed as a communist country battling to catch up with the West; a relic of the Cold War. Don't fall into that same perception trap when thinking through your organisation's strategy.
China is many things but backward, bankrupt or decaying it is not. There seem to be worlds of difference between the rusty post communist Russia of 1990 and the industrial China of 2005. That being said, your analysis should look beyond Shanghai and Hong Kong as providing an understanding of China - just as New York is not typical of all of the United States. The cities beyond Shanghai, Hong Kong and Beijing are real industrial cities - grimy and dusty but fully functional: freeways, fast food, five star hotels, big brand high street shopping, enormous public infrastructure projects, and although China remains communist, the cities are full of private enterprise. The working people in cities appear to be well educated although English is not yet a common strong point, but since the Chinese show a great capacity for learning fast, it would be wise not to discount the threat to services that depend on English language skills. Given the large population, Chinese industry appears successfully to embrace manual and labour intensive processes rather than automate everything. It is very apparent that the Chinese population are incredibly hard working - possibly the result of a large population that makes the job market competitive and because it seems to be in their nature. Post communism there seems to be plenty of ambitions and hopes for future prosperity that is enormously tempered by realist expectations, perhaps as a result of unfulfilled dreams during the harshest communist years in the 1950s, 1960s and 1970s.
The paradigm shift that the future will require of organisational leaders was demonstrated vividly when I saw a map that looked vaguely familiar but at first glance wasn't recognisable. A closer inspection revealed it to be a map of the world, only with China at the centre of the map instead of the more traditional view with Europe and Africa in the centre. The need for a fresh world view in strategy has never been more evident.
Globalisation, as mentioned so many times before is a reality for South African organisations (and that includes Public Sector organisations). China is already having a profound influence on the modern world, and its influence will only grow in the years to come. All leaders in South Africa should be planning how they intend to lead their organisations in response, and identifying new opportunities where they could in fact take a competitive lead. This requires an understanding of China. The fact that language, culture, attitude and distance make understanding difficult should not be an excuse.
China - First impressions of the next global wave was published as Strategym #31 in October 2005
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