On May 24th, I attended the first Gold Event in the CKGSB Knowledge Series at the new offices of White & Case. Dr. Xiang Bing, Founding Dean of CKGSB and Professor of China Business and Globalization, discussed China's Newly Dynamic Economy and the Rising Role of the Chinese Entrepreneur. FYI, CKGSB (Cheung Kong Graduate School of Business) is the Beijing-headquartered business school that Dr. Xiang established 12-years ago with the support of the Li Ka Shing Foundation. It was China’s first privately-owned business school, and these days perhaps the most well-known private Chinese institution outside the country.

Dr. Xiang says that most of his colleagues see China as a communist state. There remains a legacy Politburo (of the Communist Party of China) but, “Look underneath and there is heavy influence of Confucianism.”

  • A high percentage of China's best and brightest end up in government where “ruling by elite” is considered the highest honor.
  • There is an emphasis on experience.
  • Officials rise up through the ranks. In fact, China's top leadership have likely spent 5-10 years in the most remote, least developed areas of China.

China and U.S. More Similar Than Different

Dr. Xiang says that the United States and China have a lot in common. In fact, he says, “China and the US are the most capitalistic countries on earth.”

  • China has no Medicare or Social Security
  • The Chinese government provides compulsory education only through the ninth grade
  • China has no socialized medicine

Contrasting his travels to Moscow and Japan, Dr. Xiang says China is extremely entrepreneurial and enterprising.

“In Russia, everything moved slowly. I took the subway. There was no advertising in 2006. Today there is 3-5% advertising and a lack of commercialization. In China, time is money. People do everything quickly. Business people want to commercialize everything.”

“I went to the top restaurant in Kyoto. The owner is a lawyer who left law to take over his family's 9th-generation restaurant. The attention to detail was incredible. The owner exuded such pride in being the best restaurant possible, not the richest man. This is admirable. In China, they would have 5 venture capital investors discussing how to open 5 more units.”

Shifting from Imitation to Innovation

Dr. Xiang believes that in the past, innovation has not been a dominating strategy for Chinese companies, but this is changing. Whereas it did not pay to innovate before, many sectors in China are dropping the imitation strategy. From autos to internet companies, China is beginning to innovate. China is likely to be a key innovation center because that's where money is. Shenzhen can be compared to Silicon Valley in the USA. Watch for more companies in China to grow into global companies.

Risks to China's Economy

  • Geopolitical Risk
  • Anti-internationalism
  • Diminishing geographic mobility among citizens
  • Environment

Reasons to Be Optimistic

  • There are 20 sectors, even without innovation, that have reservoirs where the government may deregulate for growth.
  • China may no longer the center for low-cost manufacturing, but its rising middle class is viewed by global companies as a huge opportunity.
  • Overseas Chinese, especially wealthy business people who have emigrated and attended the finest schools, may prove to be valuable global connections to China, 10 to 20 years down the road.
  • Per capita GDP has a lot of room for growth.

Dr. Xiang admits that he has been among the most optimistic about China, historically. Yet, he adds that he has consistently underestimated the strength of the economy that repeatedly exceeds his expectations.

Links

Photo: CKGSB

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Do you view China as being more capitalistic or socialistic? Please leave a comment below.

By Andrew Wang