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CHINA the race to market
Keywords Chapters 6-9 (excerpts)
Chapter One: China's Curse: To Live in Exciting Times
Chapter Two: China and the US: Ineluctable Partners or Rivals?
Chapter Three: The land of the rising dragon: China's Economic Growth
Chapter Four: Riding the Tiger: China's Economic Policy Reform
Chapter Five: Feeling the Stones as You Cross the River
Chapter Six: Applying the Dracula Principle: China joins the WTO
Chapter Seven: Keeping it in the Family: Corporate reform in China
Chapter Eight: Getting China Right: The multi-national experience
Chapter Nine: China in the Twenty-First Century
Tables, Figures and Abbreviations
Author's Biography and Photograph
Jacket Cover and selected Reviews
Chinese business links, Google, Yahoo, Author's Blog
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Chapters 6-9 (excerpts) >
Chapter Six: [Return to Top]
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Applying the Dracula Principle: China joins the WTO. In his speech to the National People's Congress on March 5,2002, Zhu Rongji, stated that the country was facing new difficulties and severe challenges. In a two hour speech ranging over the last four years, he ran through a long list of problems faced by China, from corruption, to unemployment and deep-seated difficulties in the economy. He also repeated what he had often said before, that WTO entry would pose a severe challenge to many of China's less competitive industries. Negotiating accession proved one of the Premier's prime achievements in four years in office, and one that created a good deal of anxiety in China and around the world. In China, pessimists fear that agriculture and industry will suffer from the competition, creating serious social strains. China, they claim, will play wrecker to the WTO. My interpretation begs to differ: China's entry to the WTO in 2002 helps underpin its reputation as a reliable partner, and embarks China on a process of regime change. That includes China's business system. What stretches ahead of the CCP is the introduction of norms, rules and standards elaborated by the rich countries of the West over the past half century. Let's start by looking at why China's request to join the world trade club took so long, the implications for the regime of joining an interdependent world, the caravan of forces which unblocked the talks in 1997-98, China's new trade regime, and why China is much more likely to become a pillar than a wrecker of international society. We'll visit China's business system in detail in the next chapter. The Long March to Respectability
Negotiations on China's accession opened in 1986, and dragged on interminably. As Premier Zhu Rongji quipped, My hairs have turned grey waiting for the outcome. Why did they last such a long time? Many factors contributed, such as the mechanics of the negotiation process, the expansion of membership, an ever more ambitious global trade agenda, and the demands for far greater policy transparency placed on candidates. The main was that China's communists were not salonfähig, as they say in polite Viennese society......
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Keeping it in the Family : Corporate reform in China The Communist party-state of China is like a chimaera-the fire-breathing giant of Greek saga, with the head of a lion, the middle body of a goat, and the tail of a snake or dragon. The party's head is still Marxist-Maoist-Leninist, its middle body is one large political market for preferences, and its tail is composed of gung-ho companies open to the full gale of global competition. It breathes fire through its ears, and exudes sweet capitalist sounds through its nostrils. It breaks wind from orifices located around its middle body, while its tail wags furiously twenty-four hours a day. Adapting Paul Valéry's lapidary statement on individuals, China is like other nations of the world which distinguish themselves by what they show, and are similar in what they hide. What makes them similar are their little secrets--the ambitions of individuals, the preferences of elites, the backroom deals or the legacies they confront. What makes them different is the front they present to the world. We'll start by introducing the concept of a business system; then present four key conditioning factors of corporate governance in China; proceed to corporate reform since 1998; and end on the development of China's capital markets. In the next chapter, we'll discuss the broader impact on foreign business prospects as China beds into the global system. China's business system
China, as much as any other country, has had to adapt its business system to the expansion of world financial markets, underpinned by the explosion in communications technologies. Developing countries have been encouraged to open up their financial markets and go on-line. Naturally, the promised benefits have been conditional on developing countries meeting the ever higher standards offered investors in the rich markets of industrialised countries. Many failed to do so. Currencies tanked as dodgy banking systems folded......
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Getting China Right: The multi-national experience. For many western business people, China is a mystery wrapped in an enigma, to paraphrase Winston Churchill on Soviet Russia. Unlike Japan, say the China bulls, the Chinese leadership has embraced reform with a vengeance. Their policies are laying the foundations for a shareholder culture, where both foreigners and Chinese can make money. Bears counter that investing in China is a sure way to lose money, as realistic as nineteenth century textile manufacturers' dreams of unlimited wealth acquired by lengthening the coat tales of all Chinese males by one inch. To Chinese nationalists, by contrast, western corporations are devouring Chinese enterprises, as China's industrial assets are absorbed into their global operations. Professor Lu Feng from Qinghua University begs to differ: Chinese enterprises, he says, are perfectly capable of developing their core competences, and beating the multi-nationals at their own game. Zhang Ruimin, CEO of Haier-the Chinese conglomerate-puts it more bluntly: Chinese enterprises must become wolves instead of sheep if they want to win in the competition for business after (China's) entry to the WTO. ..To become wolves, Chinese enterprises must learn how the market works…The key is meeting customer demands fast. In this chapter, I argue that the multi-nationals are learning how to operate in China, and to incorporate local partners into sharing their wealth. Let's look first at some facts about foreign investment in China, ask why China is so popular, discuss how corporations are learning fast, and show through examples how China's transformation directly effects the details of doing business there. China's Eldorado
At the very moment China began the open doors policy in 1978, the world economy decided to change shape. For fifty years, national governments had claimed the commanding heights of their economies, pulling a panoply of levers to promote growth, redistribute income, develop public services, guide trade, control finance and manage foreign exchange. The results were evident in the growth of public deficits, high inflation, and turbulent foreign exchange markets, alongside the expansion of global capital markets and of foreign investment by large industrial corporations and banks......
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China in the Twenty-First Century. Looking back from our vantage point in the winter of 2060, it is indeed the more serene judgements made at the turn of the millennium about China's chances over the longer term that have won out. China is the biggest dragon of them all. The many dangers facing it during its long transformation out of poverty and dictatorship have been surmounted or avoided. Far from being poised at the edge of another century of political disorder, China was a couple of decades short of a golden age of political stability, unprecedented prosperity and cultural achievement. The horrendous vision of the regime's sudden death at the hands of a peasants' revolt proved to be more of a residual nightmare from a vivid and recent past than a reasoned prediction of what happened. Paradoxically, it was this nightmarish vision of a turn of the historical wheel back towards civil war and chaos that helped the communist dynasty to escape its own shadow. Nothing focused the CCP's attention more than the prospect of sudden death at the hands of an angry peasantry waging class war against rulers so eager to forget where they came from. In fact, the CCP died without committing suicide by changing its inner nature while discarding its outer skin. The feat is one of the more remarkable in the annals of the past century. Here, after all in 1978 were Mao's political heirs putting class war on the backburner, and bringing development to the front. Thirty years later, when the Beijing Olympic Games were opened in 2008, China was embarked on the path to becoming a market democracy in a federal state. The key to success was the leadership's ability to learn fast from the unintended consequences of its own actions. No blueprints for us, they entoned. We learn from facts. We are Chinese Tories. We walk backwards in our tentative exploration of an uncertain future......