Regina
Abrami, Global Program Director, writes
Having spent nearly two weeks
immersing in the politics and history of the United States, including the role
of slavery in U.S. economic history and business of politics in Washington,
D.C., the group arrived to Beijing on June 15th. Over the next two weeks, students visited
with many organizations, including Minmetals, one of China’s leading iron ore importers,
Goldwind, a leading global wind turbine manufacturer, the Chinese Investment
Corporation, a top sovereign wealth fund, and completed fieldwork in Shanghai
on a range of leading issues. They also attended
lectures, and taught each other through peer-to-peer presentations. A remarkable group, with their China-based reflections
below,
Anirudh Rudrapatna Rajendraprasad, GP Class of 2015, making
the first contribution through the lens of the Beijing International
Airport, writes,
In 2008, the world stood mesmerized
as China dazzled with an Olympian show of strength, culture and history – the
Beijing Olympics. With the effusive praise however, came vociferous criticism
of the China model – communist autocracy, human rights violations and
environmental concerns. As an Indian looking through the Himalayan curtain, I
too watched with mixed emotions; I was in awe of the grandeur; envious of the
progress and perhaps pettily, gleeful of the criticisms. However, I wanted to
see firsthand how China matched up to the wary Indian and western viewpoints.
Little did I know that the very first outpost – Beijing International Airport –
would offer a microcosm exemplifying my entire experience with China over the
course of two weeks.
As our flight approached Beijing, I
craned my neck in hopes of identifying the features of the dragon-shaped
airport. Alas! The smog-filled visuals of Beijing were true and I discovered
our plane enveloped all the way to the gate. Despite this initial hiccup, the
engineer in me was still expecting to be wowed by the interiors that I had
hitherto only seen on screens. Unfortunately, I came away underwhelmed by the
airport. While undoubtedly an engineering marvel, its size was dwarfed by its
dark and dingy appearance – there was none of the glamor that surrounded the
airport’s inauguration. My disappointment was quelled by an unusual source –
the immigration officers – generally one of the most feared and reviled groups
at airports around the world. The officers here were not grumpy like the ones
in the United States, nor were they indifferent like the ones in Europe – they
were like a cup of green tea – warm and welcoming. I was mystified when I
discovered that there was an option to provide feedback at the touch of a
button. Was this the oft-maligned undemocratic China that purportedly abhors
opinions, both internal and external?
Roberto
Blum, GP Class of 2015, writes about the “invisible hand of
government,” a phenomenon that he sees in licensing protocols:
The most blatant
characteristic of the Chinese social contract is the presence of the state in
every level of the Chinese society. One
of the most interesting examples of government control is the commerce and
licensing of cars. From my experience in Beijing, I understood that the Chinese
licensing model has two main purposes: (i) registration and traffic management;
and (ii) social differentiation.
With the rise of the
middle class in Chine, most cities have experienced a boom in car sales,
resulting in a huge increase in the population of cars. Some cities like
Beijing and Shanghai saw the number of cars skyrocket from 2 to 5 million units
in a couple of years. This dramatic expansion of vehicle population is the
cause of several negatives effects such as pollution and traffic jams. In order
to cope with this problem, the Chinese government uses a complex system of
licensing in which cars are classified in several groups according to their
usage and social status of owners.
In Beijing, for instance,
license plates are composed of a Chinese character identifying the city,
followed by a Latin character and five numbers. The Latin character describes
the economic activity or status of the owner. “B” cars are taxis while “A” are
cars owned by government officials or state owned enterprise employees. Cars
owned by military officials are identified by two Latin letters and five numbers
and civil cars carry the letters C, E, F, H, J, K, L, M and Q.
In order to buy a car,
Chinese individuals have to apply for a license and wait for months (sometimes
years) for government approval. While
this system helps to control pollution and traffic in megacities, it also
maintains a system of privileges as it differentiates the most prestigious
groups in the Chinese society (state officials and army). A clear example of
this differentiation is the fact that only part of these groups are required to
respect certain traffic rules; traffic lights are only a suggestion for
government officials and military officers, I’m told.
A second example of
government control regards migration within China. During the 1950s, the hukou,
or household registration system (deriving from an earlier pre-communist system)
was implemented to prevent mass rural to urban migration. This system has been
viewed as a source of political stability, but it did so by controlling the distribution
of rationed food to one’s place of permanent residence. Today, its enforcement
has lessened, the hukou system nonetheless remains a mechanism to prevent mass
migration and maintain control within the country. Without a local hukou, for
example, a Chinese citizen cannot access the few benefits of the Chinese
welfare system such as elementary education or the opportunity to buy a house
with some financial penalty.
In a way, the two examples
cited above are just two points on an immense iceberg. If you visit China, you
will notice that only a few individuals clearly mention the government and most
of time they will do it evasively. But after a few interactions you come to ask
yourself just how big the government actually is. And the answer is huge.
Visiting China, I really felt that the government was hidden behind subtle
signals but present everywhere.
Claudia
Gutierrez, GP Class of 2015, writes about one of China’s most successful
state-owned corporations, nicely paralleling its development to that of the
country more generally. Her title for
this contribution says it all: “Minmetals Corporation: China’s Economic
Self-Reflection”
Minmetals
Corporation is a state-owned enterprise (SOE) focused primarily in metals and
mining. Beyond being one of the most powerful and successful SOE’s in China,
Minmetals is a reflection of the progress that China has made in the past half
century. Sitting on lectures about China’s economic history and policies, the
parallel with Minmetal’s own history was evident.
Starting
in 1949, the People’s Republic of China was founded and China Metal’s Corp.
(one of the predecessors of Minmetals) was established. In 1978, China started
moving towards a more open economy by establishing the “open door policy” to
encourage foreign direct investments and the development of a market economy.
At the same time, Minmetals, which had focused entirely on trade of ferrous
metals, started diversifying its business to target other competitive segments
that were relevant in the global economy, such as real estate and finance.
Between 1989 and 1996, China moved towards building its capital markets by
opening up the Shanghai and Shenzhen Stock Exchanges. At Minmetals, the change
in tide was reflected with the company raising capital on the international
bond market and listing on the Shanghai Stock Exchange. In 2001, China became a
member of the World Trade Organization (WTO) further opening up its economy to
international trade and investments. Meanwhile, Minmetals continued its
expansion and diversification by establishing joint ventures and partnerships
outside of China. Today, we see both China and Minmetals thriving. China is the
second largest economy in the world and Minmetals has made it to the Global Fortune
500.
Minmetals,
as one of China’s “national champions,, now embodies the type of progress that
China wants to see in its overall economy. Minmetals turned itself from a traditional
commerce and trade company into a multinational metals and mining corporation
with global prestige. As China continues it move away from light manufacturing to
more higher-value, innovative products, I’m sure that we’ll see Minmetals also
increase its investment on research & development. Innovation is one the way.
Regina
Abrami, Global Program Director writes,
Over the
past few years, the question of whether China can make the transition from a
low value-added production site to a high value-added goods base has been a
headline item. Global Program students
had a chance to reflect on this issue through visits to a nanotechnology hub
based in Suzhou and GE’s innovation center in Shanghai. As the two contributions below indicate, they
came to different conclusions.
Emilie
Esposito, GP Class of 2015, sees changes ahead starting with the
questions of whether “Made in China” will
become a synonym for high technological content? She writes,
The era of low-cost low-quality China is far behind
us. Already in the Medium and Long Term Development Plan issued in 2006, the
Chinese Government had clearly stated that China aimed at upgrading its economy
and focusing on high value-add sectors such as new generation IT, biotech,
clean energy and new materials. I was sceptical. How could China close such a
huge technological gap so as to compete with the Old World’s cutting edge
innovations? Our Suzhou trip – less than one hour from Shanghai with the high-speed
train – showed us that not only China could do it, but that it had a fast-track
action plan already partially implemented.
We met in
Suzhou with a team of young professionals – fluent in English – promoting the
Nanopolis project. The latter involves the building from scratch of a new city
within the Suzhou Industrial Park (SIP)1 dedicated to
nano-technologies. 100,000sqm have already been developed; the second part of
the 5-year US$1.5bn-worth project is expected to be completed by September
2013. The new city will host start-ups and offer cutting-edge labs and testing
capabilities. It will be surrounded by university campuses from 18 Chinese and
foreign universities (Renmin University, University of Liverpool, National
University of Singapore…). A massive Government program aimed at providing
funding and incentives for start-ups has been deployed. Should public funding
be insufficient, venture capitalists are present in Nanopolis as well (and
rather aggressive). And China is not short of Chinese currency to invest. Last
but not least, there is special – and very favourable – treatment for
foreigners willing to develop their technologies in Nanopolis.
Yet China starts from very limited expertise in the nanotechnology
field. So the question remains how long will it take to Nanopolis to attract
Western entrepreneurs and researchers, many of whom are struggling to find
funds in their own country to finalise their research and launch innovative
products? Would it be so unconceivable that a number of them could choose the
easy way sooner rather than later, especially when Nanopolis promises to
provide IP protection similar to Singapore?
It should be added that Suzhou is also the Chinese town with the highest
proportion of foreigners already.
One could bring a number of valid reasons to be much more pessimistic
about the future of China, and this post is not meant to be naïve. However, we
witnessed Nanopolis – or at least the part of it. We saw an entirely new
neighbourhood with modern buildings, which had grown up in a record time from
an empty land. And it is not a cathedral in the desert. Surrounding Nanopolis,
SIP hosts more than 3,000 foreign enterprises, including operations run by
one-fifth of the Fortune 500 top global companies.
Nanopolis may become in a handful of years away from emerging as a major
nano-technology hub – and one day, we may be willing to buy an antibiotic spray
for infants only if made in China!
1. An industrial park launched in 1994 by a Sino-Singaporean 51/49 JV
and spread over a 288km2 area.
Diego Rimoch, GP
Class of 2015, offers a different view.
He writes,
Prior to this trip, I had only
visited China once in 1997. A lot has happened since. At the time,
the press had yet to start harking
about the rise of China and the decline of the West. Much has changed in 16
years and the Chinese development miracle is truly impressive. But the two
weeks I spent in China have left me with a far more nuanced understanding of
where China is at in its development. My impressions are informed both by what
I saw and what I heard.
In several of the presentations we
attended, it was made quite clear that China is facing formidable challenges
and difficulties. The system’s obsession with political stability and
self-preservation comes at the expense of needed reforms that make it very hard
for the country to sustain the kind of growth it needs to reach new levels of
economic development. China has been quite successful at growing its economy
and becoming the world’s factory. But in order to go beyond that, it needs to
move into higher added value sectors such as R&D. The Chinese leadership is
aware of this and is putting a lot of effort and resources into achieving this.
We visited an R&D park in the
city of Suzhou called Nanopolis which focused on nanotechnology. The scale of
the project is breathtaking. The place is basically the size of a small town,
filled with brand new and modern buildings. But when I looked more closely, I
remained unconvinced. I like to look at the quality of construction and I have
to say that while things looked flashy from a bird’s eye view, the closer one
got, the less impressed I was with the actual finishes. Some of the “new”
buildings, built less than a year ago, felt like they were over 10 years old
already. There was also a small exhibit hall showcasing some of the projects
that had been worked on, but it too failed to wow me.
If I had to sum it up, I would say
it felt like a Hollywood Studio’s back lot.
It was great on screen but fake in reality. Does this mean that nothing
will come out of these efforts? I can’t say that. China has managed titanic
feats in the last 30 years. Only time will tell where Nanopolis, and China more
generally, goes.
Diego Rimoch, GP Class
of 2015, reflecting on innovation and business cultures, writes,
The day after our visit to Suzhou,
we visited GE’s R&D center in Shanghai and what a difference that was. In
contrast to Nanopolis, the GE buildings are actually over 10 years old but feel
quite new. Their exhibition hall is beautifully set up and has all kinds of
gadgets to touch and play with. Perhaps GE is better at putting on a show. Or
maybe the private sector is just a better agent when it comes to innovating. But
the presentation there was also a good one. I felt the presentation in Suzhou
had been quite formal although Regina told us that compared to most official
presentations, the Nanopolis team had actually been fairly unstructured and
relaxed. In any case, it was very general in the information it provided and
actual details felt scarce or vague. GE was dramatically different. We were
given a lot of information about wind turbines and the history of GE in China.
We were also able to ask pointed questions about why GE opened this center as
well as others in China.
We learned that GE, unlike other foreign
companies, chose to start significant R&D projects in China long before the
Chinese government started requesting as much of MNCs. In many ways, GE was
ahead of the curve. One of the rationales for this was that the company had to
bring its R&D efforts closer to its customers and given the size of the
Chinese market, it was only natural to set up R&D shops there. I think this
is very revealing and a lesson the Chinese government might want to pay closer
attention to. You can try and force companies to do R&D but they will look
for ways to drag their feet or do non-essential research that does not expose
their most valuable IPR to theft. Real and productive R&D will happen far
more easily if the companies actually see a market need for it like GE did. The Center has been a hotbed of innovation
geared to serve the needs of its Chinese customer base.
Regina Abrami, Global
Program Director, writes,
Food is culture, and perhaps there
is no better place to experience that fact than in China. The Global Program students made their way
from street foods to fancy pleasures in some of the best restaurants, but did
they really know much about where their food had originated, or what challenges
remain in the Chinese food system.
Stephenson Cherng, GP
Class of 2015, had a chance to understand a bit more about food supply
chains during our visit to Shanghai. He
writes,
As someone who learned about Chinese
culture from his family, I believe that Chinese food is one of the most
established and profound cuisines of the world. In fact, trying out various
dishes from different regions of China (noodles of the north, spicy food of the
west, etc) may be the most effective and delicious way of understanding the
country's diverse culture. Nowadays, however, it saddens me to see how food in
China has also come to represent risk due to food safety concerns.
As a fieldwork assignment, my fellow
classmate and I visited food institutions in Shanghai to gain a backstage
perspective on the subject. What we discovered, on our first stop, was
unsavory.
We first visited a food distribution
center, where ingredients (dead or alive) are prepared and delivered to
retailers, supermarkets, and other distribution centers in the region. The
center also included a "wet market," where raw meats were uncovered,
in the open, and a feast for flies. What's more, the butchers either handled
the meats in their bare hands or used a single pair of gloves for everything,
protecting themselves more than the meat. To say the least, we were not
surprised to hear that a poultry flu outbreak killing 30 people in March
originated from this center.
The only encouraging find came from
our local guide, who told us of alternative methods by which consumers now obtain
their food, and all the more so as they become more aware of food safety
issues. Our next two stops, a modern supermarket and a
Japanese restaurant, illustrated her point. The modern market was indoors, with
individually-wrapped vegetables that suggested cleanliness. In the meat
section, a national brand kept a video on loop to show its sanitary treatment
of animals. The Japanese restaurant made an effort to ease consumer concerns. It not only imported key ingredients from
overseas, but also displayed six different food licenses to indicate sanitary
food preparation methods were underway.
The most radical evolution that we saw
in China's food industry came by way of our final destination, Tony's Farm. This organic farm sold and delivered its
products direct to consumers and businesses throughout Shanghai and Beijing,
much as you might see in major U.S. cities.
We ended our day with some informal
conversations with local taxi drivers and restaurant staff members. Through these
exchanges we realized that Chinese nationals were well aware of food safety
problems in their country. According to
them, however, they lack trustworthy knowledge and resources to tackle the
problem. The restaurants that they can
afford, for example, often never list their licenses, so they eat at their own
risk. Foreign food restaurants and modern supermarkets also can cost up to
triple the price of traditional food supply venues and dining places. As a result, the majority of consumers in
China manage food safety issues by shopping at markets run by known acquaintances
or by eating at chain restaurants, both of which are presumed to be safer
bets. As China’s middle class continues
to grow, so too will demand for a safer food sector. This trend may just be the most delicious
business opportunity in China!
As the program’s two week visit to China came to an end, Anirudh Rudrapatna
Rajendraprasad, GP Class of 2015, reflected on his experience. He writes,
The tripartite nature of China –
massive infrastructure, barely obscured deficiencies and the warm people –
persisted throughout my stay. While it is easy to be taken in by the surreal
skyscrapers and the Audi-littered roads sneaking through them; it doesn’t take
much effort to discover the Hutongs (alleys) that are crowded, polluted and
need of urgent repair. While the poor and unattractive have been banished from
plain sight, they have not been culled as is often depicted.
The people that we interacted with
were not mousy individuals scurrying away from the wrath of the Communist
government. Instead, they were busy with their lives, happy with the
improvements and not afraid to criticize or support their country. The world
likes to believe that the banning of facebook and google automatically amounts
to restrictions on personal liberty. In my experience, however, I discovered
that people used Weibo or VPN or even personal conversations to voice their
opinions and even protest when required. The people didn’t seem bothered by the
big brother state and even justified the use of central command. At the end of
the day, one might argue that China is doing openly, what democratic countries
do in the dark of night (a.k.a Prism).
As a result, I came away from China with the same mixture of awe, envy
and glee. I was envious of the progress
they have made in eradicating poverty and urbanizing their population; awed by
the lack of complete authoritarianism and gleeful to have met wonderful genial
people who are aspiring to the same goal as the rest of us – a better life.
