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Understanding the new and emerging China

February 24, 2012 Leave a comment Go to comments

I don’t profess to be an expert on China. I have, however, run the internal audit and risk functions at a number of companies with major operations there and so have some measure of insight.

Apple’s contract manufacturing partner in China, Foxconn, has been in the news a lot recently, including in this article in a business journal. What is never said in any of the major reports is that Foxconn is part of Hon Hai, a Taiwanese company! I will let you decide what to make of the news reports, the workers’ conditions, the labor laws in China, the governance culture in Taiwan, and the culture of this Tawianese company and its Chinese management.

Ethics and the ethical culture are another issue, described well in many places including in this Wall Street Journal piece. My experience includes investigating a fraud where the entire IT management of a new plant in China got together to set up a company to supply the plant with IT equipment and services. When I interviewed the head of IT (who was the CEO of the supplier), he defended his actions by saying that the setup ensured quality and low-cost procurement. He said that this was the way people did business in China, giving contracts to people they know. How fast this is changing, I don’t know.

What does seem to be changing is some of the traditional business culture in China. Just as India is benefiting from the return of many of its entrepreneurs from the US, so is China benefiting from its citizens who are returning after going to school and working in American companies.

A fascinating article in Fast Company talks about these returning executives, called ‘sea turtles’. The piece profiles three Chinese technology companies and their innovative ways to stimulate innovation, imagination, and creativity – by energizing and empowering their employees. Frankly, I suspect many Western companies could learn from their success!

While caution should be exercised in interpreting this as a major change in Chinese work culture, surely this augurs strong competition for Western companies and an opportunity for global companies to adopt similar methods in China.

What do you think?

By the way, I wrote about another Fast Company article on my IIA blog.

  1. February 24, 2012 at 2:14 PM

    It is difficult to make informed judgements from a distance, but this link suggests a different perspective on China’s reality and possible future from the inside.

    http://online.wsj.com/article/SB10001424052970203806504577181461401318988.html?mod=ITP_pageone_0

    Apple’s recent trade mark experience, and Google’s and Yahoo’s governance issues remind us that this is not a recent phenomenon. The fact that Foxconn is part of a Taiwanese company does not diminish the realities of China. Rather, it suggests that Taiwanese and US companies alike look to do in China what they could not readily do in their home countries. Further, all that I presume about the Chinese business culture from what I have read is what I learned of the Korean business culture from an experience in the mid eighties; and is not too far removed from what exists in the Japanese business culture in more subtle ways. What I believe distinguishes China from its Asian rivals is its level of aggressiveness in pursuit of intellectual property by any means.

    This is by no means to suggest that Asian cultures are more corrupt than ours. They simply have different operating mechanisms.

    As for the health of the Chinese economy, I think that we have become too impressed with its superficialities and have not effectively assessed its substantive accomplishments, and possibly cannot with the information available to us. I doubt that even the Chinese Central Committee can do that with any degree of reliability. China is a juggernaut. Admittedly, an impressive one. But we cannot confuse a couple of space shots, ghost cities built on wildly irresponsible speculation, a magnificent but apparently unsustainable show-piece of Olympic infrastructure, as compelling evidence of a sustainable and disciplined economy and management culture prepared for the long haul.

    China has without a doubt demonstrated its considerable and undeniable potential. But if our governmental and business discipline has so miserably failed us in the US with all the inherent benefits we have squandered, then what is the more reasonable assumption: that China has learned from our mistakes enough to avoid them, or has learned enough to repeat them?

    I don’t know.

  2. Chris Ryan-Peek
    February 27, 2012 at 5:57 PM

    I think people outside of the Asia-Pacific are curious and suspicious of the Chinese culture.
    I personally find the Chinese respectful and humble. The thing people forget about China is that it’s growing and evolving. The more its society and classes grow, the more socially conscious they are becoming.
    It’s taken years for the developed world to become accustomed to ethics and I think that China’s lifecycle with this regards is coming along at a reasonable pace.
    Ethics is a function, dare I say it of “the greater good” but this takes time and it’s a global responsibility to help nurture and pass on our wisdom.

  3. May 9, 2012 at 2:46 PM

    I agree, it is really difficult to say without actually being there, but yes it does look like a lot of other countries could adopt similar strategy.

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