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October 2010
What China Sees When It Looks to the West
By Sam Frowine

Our country sits on the tail of a dragon.

     I recently spent time in China, immersing myself in the country’s business climate and seeking insights into its world view and long-term economic goals. Here’s my takeaway: The political leaders of China—who are also its economic architects—plan to be the world’s economic leader by 2020 by building on the power of enterprise and consumerism.

     How’s that for irony?

     The Chinese Communist party plans to overturn America’s position of world leadership by out-performing us at our own game of enterprise and innovation.

     The Chinese have an edge that’s rooted in history and in pain; they are hungry to prove something to the world. They have a leg up because they’ve seen our mistakes. And they have the benefit of party unity—some might call it control—with which to avoid our mistakes of runaway debt, consumer addiction and entitlement at the expense of self-responsibility.

     Imagine an economy that could avoid the twin monsters of debt and over-consumption. An economy where the currency is tightly controlled. An economy in which the government owns a share in every enterprise, and a majority share in all foreign enterprises that roll up on its shores. Imagine a government that holds the debt of its arch economic competitor, America.

     This is the strategic plan of China as I interpret it. Enterprise with controlled freedom (an interesting oxymoron). Purchasing power with controlled consumerism. News media slanted to breed collective confidence.

     Will it work? I don’t know.

     China is good at engineering society to achieve efficacy. Their greatest power lies in their ability to make unified decisions and move the ball forward. The trade-off is freedom.

     The U.S. is good at individual expression, which leads to creativity and innovation and wealth potential. The trade-offs are an undefined strategy for global competition and a fractured voice to the world.

     And China knows all this.

     How do we avoid being crushed by the tail of the dragon? I don’t know.

     What I do know is that it does no good to look for enemies to blame for the condition we’re in before we first look at ourselves. We may, indeed, be in an economic war, but it’s a war we can’t win by confrontation and intimidation. We cannot win with war-like rattles. We must gain strength through collaboration, relationship and deep introspection, with our eyes wide open.

     From “Made in China” to “Created in China

     China’s master plan for becoming the number one power economically and politically looks something like this:

• Own lower-skill manufacturing and production. (You can put a check there.)

• Become banker to the world’s debt. (Check.)

• Control enterprise within its own boundaries. (Check.)

• Control the supply chain for unobstructed economic growth. (Check.)

• Transform from a manufacturing hub to a leader in innovation by retooling its talent pool.

• Move from manufacturing to creating, inventing, innovating products and services.

• Establish worldwide recognition of the China brand.

• Become the world leader, not a follower.

 

 

What China Sees in Us

China’s confidence in its ability to win the economic battleground of the 21st century comes from its knowledge that the U.S. is immobilized with political infighting, which neuters us to respond to their aggression in the market.

 

By the Numbers

China now has the largest foreign exchange reserve in the world—$2.45 trillion as of June, 2010.

• Today, 470-plus of America’s Fortune 500 companies operate on Chinese soil; the Chinese government owns a controlling share in those companies.

• A key speaker in world affairs stated to a group of 28 world-wide consultants at IBM headquarters in Shanghai that China is targeting growth in the middle class of 30% by 2020, which represents 450-500 million potential new consumers.

China suffers from a major talent exchange deficit. Of its 1.62 million students who go abroad to study, mostly to the United States, only 30% return to China. Among highly qualified people—Ph.D. graduates in science and engineering, the rate of return is 8%. Part of China’s Human Talent strategy is to reverse this trend.

 

One Good Outcome

     A significant result of China’s economic strategy can be a better life for the tens of millions of Chinese people who live in poverty. As we rivet our eyes on the dragon, we may also focus on the greater good for these beautiful people.

 

Next Month

     Sam Frowine is off to New York for the 2010 World Business Forum (www.wbfny.com) and plans to share insights from national and international thought leaders in the November issue of Greater Charlotte Biz magazine.

     Content provided by Samuel E. Frowine III, founder, owner and president of The Performance Group, Ltd., a business consulting firm aligning enterprises with the ambition of owners. For more on Sam’s experiences in China, check out his blog at www.OwnershipSuccess.com; contact him at 704-597-5156 or visit www.theperformancegroupusa.com.

Founder, owner and President of The Performance Group, Ltd.
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