January 13, 2012 (Source: Stockpedia) —
It can feel like China has obtained ‘heaven’s entitlement’ to succeed as it relentlessly climbs up the League of Nations. In just twenty years China, without firing a shot, has gone from relative newcomer on the world’s commercial stage to the potential conqueror of all it purveys. How did it make this transition and why did the West concede so much so easily? The answers to these questions may lie in the nature of Chinese capitalism. This paper attempts to present evidence of China’s success and to delve into the psyche, the culture and the spirit of China’s version of capitalism.
China has spent the last twenty years building
for its factories, jobs and wealth. Its factories have given hundreds
of millions of Chinese citizen’s employment and in doing so released
them from the romantic honours of Mao’s socialist rural grind.
Accessing foreign markets and acquiring foreign exchange has internally
transformed China beyond all recognition. China’s prosperity has
delivered it to an elevated global status and greatly increased global
power and influence. The transformation from newcomer to leader remains
incomplete. Now, as we approach the end of the year 4710 on Chinese
calendar (the year of the dragon), China’s economic welfare as well as
it opaque political and military intentions are central to our world
views. China matters to us all.
This paper is written by a westerner, from the viewpoint of an outsider interpreting the available evidence, and may therefore not represent China as China prefers to present itself.
Many of the ideas presented are not original. It is hoped that the observations contained in the paper are sufficiently accurate to create construction discussion about this important subject.
Evidence of China’s economic success is not difficult to find. According to the US Census Bureau the US trade deficit with China has been growing as illustrated in Figure 1. (http://www.census.gov/foreign-trade/balance/c5700.html)
Figure 1- US Trade in Goods Exports, Imports, Deficits with China 1985 – 2011 ($B)
This chart shows that exports to the US have grown virtually every year since 1985. This chart also shows that Chinese imports from China have only been 20-25% of the value of imports. In 2011 I estimate that the goods trade deficit will be approximately $300b. These Chinese surpluses are offset by deficits that result from the import of commodities, in particular oil. The situation where Western nations become increasingly indebted to China as a result of its exports is clearly unsustainable.
It now seems that the strategies that have catapulted China into a position of economic dominance may need to change. The demand of European consumers for any goods, Chinese or otherwise, is being severely crimped by financial shortages at every level. Alternate strategies will be required if China wishes to continue to grow. If China has reached the pinnacle of external commercial success, will Chinese exports decline and what will it do to change course?
These trade imbalances have long been a source of contention and also remain an issue that China has vowed to correct. In November 2011, on the 10th anniversary of China’s entry into the World Trade Organisation (WTO), President Hu Jintao said: “The reform and opening-up, which propelled China’s rapid growth over more than three decades, will continue to underpin China’s future development.” Mr Hu said that China would implement a more proactive opening up strategy and open more areas to the world.
Mr Hu’s comments are welcome; however this is not the first time that China has uttered these sentiments. In the absence of firm actions the status quo will continue. Maintaining the trade status quo will mean more deficits and ever greater financial obligations by Western nations to China.
There are many areas where China could take immediate action to bring trade with the USA and Europe into greater alignment, but to date any efforts have been largely ineffective. They could, for instance, revalue their currency the renminbi and cut tariffs on imported goods.
The consequences of these imbalances on the West have not all been detrimental. Chinese production of massive volumes of goods at costs well below Western costs has given Western consumers access to quantities and varieties of goods that otherwise would not have been able to afford. While these benefits continue it will be difficult for Western politicians to take the tough actions that seem necessary if China is to alter its trade practices.
A little History
Some of the seeds of China’s transformation were laid in the period from the mid 1800’s to the mid 1900s. This period is known as the century of humiliation. It is not altogether clear that China actually suffered much actual humiliation during this period, however what is clear
er is that Chinese propagandists and historians characterise this period as a period of Chinese subjugation and suffering under the imperialism of both Japan and the West. China’s resurgence since then is in part the result of their determination to remove from the national character the stain of this humiliation and to aspire to sit atop of the League of Nations.
In order to put this sense of humiliation in perspective, I note that during the period of Mao Zedong’s leadership of China, in particular the period 1958-62, 45 million people died prematurely in China largely as a result of a politically induced famine. This catastrophe is not considered part of the century of humiliation.
Prior to China beginning its economic liberalisation in 1978, the Chinese government had adopted a primarily inwards looking approach to its commerce that emphasised self-reliance and economic independence. China started from a position of comparative economic weakness when it set out on its long path of reform. It adopted policies that would result in increasing its prestige, power and influence. It seems that internally China felt a sense of superiority compared to others, a characteristic that would serve it well in its ascent, and that by adopting the right strategies this sense would take tangible form.
The commerce of China changed with the passing of the Foreign-Joint Ventures Law in 1979. This law helped China refocus from being inwardly focussed to being outwardly focussed. This change may not have been generally evident to the outside world until the early 1990s when growth accelerated.
Given their history the Chinese were never simply going to ‘come in
from the cold’, take off their figurative hats and coats, sit down by
figurative fires and share cordial cups of tea with new friends. The
decision by China to come in from the cold was a decision to actively
engage with foreigners; it was a decision to move China up the League of
Nations, if possible to the top. This new force in international
commerce was to be a conquering one, never
ademure and hesitant.
After 100 year in self imposed isolation, China was determined to unburden itself of all sense of historical humiliation. It was always determined to unleash its pent up resources by surpassing all others. This was a form of capitalism that would target driven, flexible and robust. The form of capitalism that emerged was not the Western version, it was unique to China. This version of capitalism was a version of that derived from its unique past of Confucianism, Communism and culture. It was a form of capitalism that was destined to generate vast wealth and influence.
Why not China?
China, as a society, would develop into visionary entrepreneurs, the creators and managers of the world’s technologies and wealth. If they wanted it badly enough there was no earthly reason why they could not achieve everything they desired and more. By turning outwards and actively engaging all of the other nations of the world, they unleashed a force that could not be contained by incumbent players, conventional wisdom, existing technologies or existing commercial rules. They had little to fear from challenging the paradigms it encountered. China was facing its first chance in over 100 years for a complete internal and external renaissance and it was determined not to fail.
The rules of the commercial game would be progressively rewritten, rewritten in ways that were in China’s interests.
The renaissance of the new China is an ongoing phenomenon, like the spread of protestant capitalism which transformed the West. Today its influence is still transforming the global marketplace. To date we have seen mainly its benign and beneficial impacts. Going forward could this all change?
Cultural and Spiritual Drivers
As vital as it is for success for a State to use the financial and legislative levers at is disposal, so too are the cultural, behavioural and spiritual qualities of its people.
One vibrant personal characteristic in particular is embedded within Chinese capitalism, a ‘hungry spirit’. In his 2005 article “China’s Five Surprises” (http://www.strategy-business.com/article/05401) Edward Tse states that “The anarchic ‘hungry spirit’ of Chinese culture currently provides a supportive intellectual climate for invention, not constrained by the conventional wisdom of existing technological or market paradigms.”
This ‘hungry spirit’, felt by China’s entrepreneurs has made them
willing to make short term sacrifices in order to achieve longer term
goals. They have been willing to accept low wages because they believed
that if they stuck to their course of action their fortunes would rise
dramatically in the future. This type of attitude still gives Chinese
capitalism much of the edge and vitality it needs to successfully play
the long strategic game
, desired by its founders.
It is perhaps worth spending a moment to contrast this attitude with the mindset of complacency and even the self delusion of entitlement that has grow like a cancer in certain parts of Western society.
The concept of a ‘hungry spirit’ embodies need driven energy and a sense of triumph. It is outward not inwards looking. It embodies urgency and focus of purpose, once present, now lost in much of Western society. This hunger for success was also reflected in State-wide attainment of intellectual expertise, garnering of technical knowledge, the pursuit of inventions and the constant push for even more favourable commercial terms.
The ‘Soft’ Cutting Edge
The new outwardly focussed China adopted new strategies they believed would optimise their expansion. One of these strategies was the embrace of that highly flexible and adaptive invention: private companies. These enterprises, often partially owned or controlled by the State, comprised a significant portion of China’s visible economic cutting edge. These enterprises were designed to be energetic, adaptive, inventive and risk taking. They were what we in the West would consider to be entrepreneurial. They would seek out new relationships and new markets. They would learn, and in the beginning at least, they were prepared to fail. These semi-private Chinese were largely unconstrained by the centralised Government. In contrast, while this transformation was occurring on its outwards edge, internally much of China remained focused on retaining order and by retaining orderly Government control.
Initially China may have given the impression that it was tentative, did not care much about quality and were relatively unsophisticated. They may have sometimes seemed immature but they were learning. Decisions were needed even if they were sub-optimal. It would take some time before they optimised all aspects of design, quality, quantity and price. The new breed of Chinese mangers were aware, as all entrepreneurs are, that mistakes are necessary, that choices need to be made and that trade-offs between prices, costs and quality must be made if progress is to be made.
In the beginning of the government’s guided “going out” Chinese companies formed partnerships with foreign companies, not (just) to profit from them but importantly to learn from them. It was standard practice for Chinese companies to make acquisitions in order to gain management expertise. If the Chinese nation was to surpass all other nations, the first thing it had to do was catch up. It had to be patient.
For individuals who wanted to take on the challenges of the wider world, private companies were channels through which they could realise their personal ambitions for a better life while simultaneously benefiting China itself.
As progress continued foreign partnerships were joined by foreign acquisitions and private companies were joined by State companies. China is patient and the rewards of the deliberate build up can now clearly be seen in China’s increasing dominance across numerous sectors.
Behind this new soft and flexible exterior China was simultaneously developing massive commercially supportive infrastructures. Other than universities, which would year after year produce thousands upon thousands of world class graduates, individual Chinese enterprises developed sophisticated supply chains, brands, research labs and financial infrastructures.
Emphasis was also being placed on the need for strong management, management with the skills and capabilities to assimilate all available information; local customs and languages, technical and engineering advances. If something could potentially be useful it was acquired and assimilated. To do this China sought managers who were comfortable in both in China and overseas.
Acquisition of Expertise
Chinese international expansion has been partially enabled by the acquisition of skills and in particular technological expertise. The avenues exploited by Chinese firms to acquire expertise include partnering, purchasing, espionage (it is said) and education.
Regardless of which means were used by Chinese firms to acquire technical expertise the end result is that some Americans, in particular, feel aggrieved at what they regard as unfair treatment in respect of their intellectual property. In September 2011 US Treasury Secretary Timothy Geithner bluntly conveyed the views of many in the US when he said that China was holding to its decades-old strategy to steal American intellectual property. “They China have made possible systematic stealing of intellectual property of American companies and have not been very aggressive to put in place the basic protections for property rights that every serious economy needs over time.” and again “We’re seeing China continue to be very, very aggressive in a strategy they started several decades ago, which goes like this: you want to sell to our country, we want you to come produce here … if you want to come produce here, you need to transfer your technology to us.”
Geithner was correct in his observation that China had conducted a decades-old strategy to obtain American intellectual property. Obtain technological expertise from foreigners has been a base objective since it became outward looking. Geithner does however seem to be confused when it comes to the issue of the Chinese holders of (former) American intellectual property appropriately protecting it. Geithner is viewing China as a country in which the ownership of property is similar to that of the US. In China the State is ultimately the arbiter and arguably the owner of everything. Chinese companies, whether State or private, operate not only for their own benefit but for the benefit of State as a whole.
I have argued above that private companies were used by China to advance its interest because they were effective, not because China is ideologically committed to them. These companies exist because the government approves of them. Given this political oversight it is arguable that they are not entirely independent of and are therefore to a tangible extent all extensions of the State. This line of reasoning is something of a supposition on my part. Under this non-Western company paradigm, it is not possible for individuals or individual companies to truly place their personal interests above and beyond the interests of the State. Given this context it is not altogether surprising that intellectual property obtained by one private company may be shared with others within the State.
One of the key differences between Chinese capitalism and Western capitalism is that these two systems for conducting commerce operate in different morality paradigms.
Behind Western capitalism there is a general expectation that all participants will behave according to a moral code that roughly translates as; truth, honesty, straightforwardness, the respect of others and the rule of law. These characteristics, although not always evident in every aspect of the Western the commercial world, do all derive from Western capitalism’s origins in Judeo-Christian spirituality. Today, although largely diluted, they still moderate human behaviours. Chinese culture is primarily built on Confucianism and its values, values which do not always parallel Western morality. It should therefore not be surprising if Chinese businessmen operate according to a different code of behaviours to their western counterparts.
The drivers that underpin Chinese capitalism such as entrepreneurialism, experimentation, ambition, openness to outside ideas and the formation of alliances do not include reference to any of the items I listed above as core values of Western morality. They are principles that encourage flexible energetic adaptive behaviours, not necessarily what we might regard as moral ones. There is no requirement to deal honestly proportionately or openly. Nor are there any references in the list to observe the more tangible Western requirements of respecting intellectual property rights and the rule of law. Given that attitudinal drivers of Chinese capitalism are arguably amoral this means that each individual will tailor their behaviours as they see fit.
It has perhaps been a misapprehension in the West that Chinese managers would act in ways that Western managers would act. This misapprehension may account for the situation why, in some quarters, Chinese mangers have gained a reputation for morally ambiguous behaviours.
Confucianism and Filial Piety
Central China’s culture in the in the post-Mao Period is the widespread re-embrace of Confucianism.
With the main exception of the Mao Period, for 2500 years China has been a Confucian society. Confucianism although not technically a religion (there are no deities) is treated by most Chinese as if it was a religion. It is at a minimum a system of common beliefs affect most aspects of Chinese life. Its impacts are widespread, affecting everything from how children behave to how trade is conducted.
One of the corner stone values of Confucianism is the requirement for people to act with ‘filial piety’. ‘Filial piety’ is one of the virtues to be held above all else: it is a respect for parents and ancestors. Filial piety requires for example that sons will treat their fathers with great respect. By adopting a mindset approximating reverence towards their fathers sons are logically more likely to be submissive to their fathers than we are used to in western society.
This ‘power balance’ between father and son is not confined to the family home. There is also an expectation that similar respect/ power balances will occur for example between employees and employers and even more generally between the people and the State. Filial piety creates an expected ‘duty’ to respect superiors and that there will be strict limits on how much questioning of authorities will be tolerated. It also creates a situation where private individuals and corporations are expected to show through their actions appropriate respect to persons higher up the increasingly centralised pyramid of power. It is a concept that is central to both the design and functioning of the structures which society.
Crucially the concept of ‘filial piety’ does not require that individuals act with the same reverence to outsiders. Indeed, society acting with ‘filial piety’ is likely to show a high degree of internal cohesion while simultaneously, sometimes inadvertently, exhibit a set of barriers towards outsiders.
I asserted above that Chinese managers actively pursue outside ideas, form alliances and partnerships, pay attention to what the markets are saying and make personal sacrifices in order to attain longer term goals. Importantly, and perhaps invisibly from a Western point of view, their activities are strengthened by the culture of “Guanxi” (connecting).
In business the word “Guanxi” is understood as being a network of relationships/connections among parties that cooperate together. In its simplest form this boils down to exchanging favours, actions which are culturally expected to be done regularly and voluntarily. If you are part of a “Guanxi” (network) then you can expect to both give and receive favouritism, and patronage. “Guanxi” can take many forms, including gifts of money and exchanges of information. Having the right “Guanxi” will make a significant difference to the chances that a business or transaction will be successful. Without it organisations are likely to experience greater risks, frustrations, barriers and disappointments when doing business in China than those who have taken the time (years) to develop the right “Guanxi”. These connections and expectations of behaviours are not only useful for keeping benefits inside the network; they also make it difficult for outsiders to get in. Without the right “Guanxi” outsiders may face formidable difficulties and progress will be more difficult.
The concept of “Guanxi” is imbedded within the corporate culture. Chinese companies form networks with their suppliers, retailers, banks, and local and high ranking government officials. A universal characteristic of “Guanxi” is that Chinese people feel obligated to do business with their friends first. Given that “Guanxi” is vital to any successful business in China, it is perhaps not surprising that many western businesses feel that the deck has been stacked against them but may not understand exactly why.
Corralling/ Kettling of Trade
A disturbing new feature of Chinese commerce is a phenomenon I will call trade corralling, or kettling. Under this way of doing business, Chinese enterprises control the entire trade chain from production to consumption by only dealing with enterprises within the same corral. This practice removes trade from the global marketplace. This practice enables the overall monitor of the corral to obtain its commodities and supply its goods without the inconvenience of having to deal with competitors in the marketplace. Like a wall it keeps insider in and outsiders out. It is arguable that corralled trade is a hardened version of “Guanxi”.
Western capitalism is based on the idea that buyers and sellers exchange goods in a marketplace at negotiated prices. Corralled trade has its own dynamics. Everything about the trade can be controlled and dictated by someone other than the direct participants. The role of market prices becomes redundant.
In March 2011 China’s Industry Minister Miao Wei said that his country’s government would buy up foreign iron ore mines to better control iron prices and wean itself from the grip of the world’s major miners. Mr Deng Qilin, President of Wuhan Iron & Steel, told The Australian newspaper that his company is aiming to supply itself with ore, moving away from the “monopolies” of Australia-based BHP Billiton and Rio Tinto and Brazilian giant Vale. He set a target of three to five years to become self sufficient.
This practice is not limited to iron ore. For example corralling can occur where Chinese enterprises purchases foreign farms or coal mines and then export the commodities produced directly back to China.
The practice of trade corralling, should it become widespread, will have major implications for Western interests. Some of the possible implications are: 1. the global marketplace for sellers is reduced, 2. the global marketplace for buyers is reduced, and 3. pricing can be opaque
- The global marketplace for sellers is reduced
Currently ‘China’ is the major customer for BHP & Co. Should China expand the practice of buying up its own mines, BHP’s business would diminish. Given China’s ever proportion of world trade it would be increasingly difficult for BHP to find an equivalent replacement customer.
Alternatively, should Chinese enterprise establish retail outlets in Gambia, which only sell Chinese sourced products, then faced with a monopoly retailer Gambian and other producers would face a much more difficult struggle to sell their goods.
- The global marketplace for buyers is reduced
Should corralled enterprises, for example, purchase apple farms in Australia and then export the apples grown directly back to China, then it would prevent Australian consumers from purchasing those apples.
- Pricing may become opaque
If enterprises with a corral agree to transfer good between countries at prices that do not reflect market prices how should the profits on those transactions be taxed? For example, if a Chinese miner located in Peru is able to produce copper at 1 cent per pound and sells it to a smelter in China at 1.1 cents per pound (well below the global market price), how can the Peruvian government fairly tax the transaction?
The general effect of corralling trade is that it increases China’s commercial security while simultaneously diminishing opportunities for others. The practice gives China a much higher level of certainty over both the price and supply of commodities but less certainty to others.
It is difficult to estimate what the overall consequences will be if it becomes a central feature of world trade. However, that said, it is not difficult to imagine how by sideling some of the current major players remaining world markets will thin and prices and quantities will become much more volatile.
Just as China did not set out to deliberately enrich the rest of the world by trading with it, if China embraces corralling as its preferred trade strategy then the resulting invisible fences may enable China to continue to flourish while those outside become impoverished.
I note that the practice of trade corralling echoes the focus of China’s inward looking era when it strived for self-reliance and economic independence.
Rare earths production and manufacturing of products that require rare earth are industries where China currently has effective ‘corral’ control. China currently produces nearly 95 percent of the world’s rare earth materials.
In 2011 it increased its control over the industry by shutting down numerous operations in order to reduce pollution. By invoking environmental concerns, China is in effect established a defence against possible accusations that it is in breach of trade rules.
Practical control over the supply and global distribution of rare earths benefits China on many levels. Rare earths are vital for green-energy products such as wind turbines, hybrid cars and compact fluorescent bulbs. These products, which are championed by the green-lobby, are becoming increasingly expensive. By restricting supply China is not only obliging foreign companies to relocate their manufacturing operations within China they are also obliging foreigner consumers to pay more for environmentally friendly products China further accentuates existing trade imbalances.
Foreign Companies Operating within China
Chinese companies operating externally are generally able to acquire and independently run foreign enterprises, even those which are strategic. Does a similar situation exist with China? Can non-Chinese firms acquire and independently run Chinese enterprises, in particular those what are regarded as being strategic? The short answer is no.
The Chinese Government’s general guidance for foreign firms is that they will form joint ventures or work cooperatively with Chinese firms, rather than attempt to be independent. Over and above these soft guidelines there are State imposed limits on who can own what. Foreign participation in industries which are of national importance such as energy, telecommunications, financial services, and banking are significantly restricted. Greater degrees of private and foreign ownership are allowed of where industries operate in fields that are considered to not be of national interest.
As far as energy is concerned exceptions are permitted. Exceptions can occur for various reasons. An example would be where developing resources required expertise that China did not currently have. In December 2011 The NDRC (national Development and Reform Commission) issued new guidelines on where foreign investment was welcome. The new acceptable areas included the “exploration and development of unconventional resources like shale gas and deep-sea gas hydrates”. The preferred commercial vehicles for these activities are joint ventures or cooperation with Chinese companies.
Foreign Playing Fields
It is evident that China’s applies different rules to enterprises operating within China than it expects to contend with in foreign lands. As far as selling goods within China was concerned, there is an expectation that Chinese firms favour trade with other Chinese firms over foreign firms.
On the other hand they do not expect to be hampered by overt political measures abroad. They expect that abroad all Western companies, Asian multinationals and Chinese enterprises will commercially compete according to the rules of a dynamic marketplace. They expect to be able to compete on the basis of product, qualities, brands, sales and distribution channels as well as the effectiveness of management.
An example of these expectations is the attempted takeover of UNOCAL in 2005. ‘Private’ Chinese company, China National Offshore Oil Corporation (CNOOC) made an unsolicited bid for American UNOCAL. This bid failed as a result of it being indirectly blocked by an assortment of American law makers. The Chinese expressed their deep disappointment of these actions and argued that it was unfair political interference in what they said was a purely ‘corporate issue’. Their disappointment belied the fact that for China oil is not just a ‘corporate issue’, it was a strategic question. It remains and will remain an issue of which countries control and exploit the earth’s limited oil resources. It is really an issue of national security and economic security, not an issue that can be left to uncertainties of private companies. We can see that when it comes to China that there are circumstances when enterprises must be managed for the wider benefit of ‘The State’.
The challenge of attaining sufficient petrochemical resource remains the strategic for China. The only long term answers seem to be entering into long term exclusive contracts and the acquisition of foreign deposits of oil and gas. Sinopec, a Hong Kong listed company is three-quarters owned by the Chinese, state spent over $10b acquiring oil and gas assets in the second half of 2011. Although theoretically private, this company is bankrolled by the State. State controlled companies PetroChina are CNOOC also on the acquisition trail for reserves and technology.
Attitude towards Foreign Cultures and Influences
The Chinese Communist Party (CCP), the founding and ruling political party of the Peoples Republic of China likes to keep a tight control over what occurs across its jurisdiction(s). The enforcement of restrictions using a variety of hard and soft restrictions is a similar approach to that taken towards commerce.
What is China’s attitude to foreign cultures and in particular Western values? It is clear that Western behaviours, such as expressions of high level of dissent and ridicule of authorities are not welcome in China. But what about the less challenging aspects of foreign cultures, how are these regarded?
In January 2012 China’s President Hu Jianto spelled out his and perhaps China’s position on culture when he said: “We must clearly see that international hostile forces are intensifying the strategic plot of westernizing and dividing China, and ideological and cultural fields are the focal areas of their long-term infiltration.” It is clear that the Chinese leadership do not see culture as a neutral issue; they see it as threatening China’s uniqueness. He also said that “The overall strength of Chinese culture and its international influence is not commensurate with China’s international status.” What Mr Hu is saying is that rather than allowing China to be passively influenced by external cultures, he would like China to make more assertive efforts to export China’s culture and values to the world. China is currently trying to increase its influence abroad, by using the “soft power” of its own language and culture.
Non Western Impacts
China’s expansion has not solely been westwards. It has also played a central role in the commercial advancement of Africa and South America. Across these continents Chinese enterprises have expanded their interests in everything from mining to textiles, to telecommunications, hotels, tourism, retailing, construction and engineering. In doing so China has not only obtained access to supplies of commodities it lacks but it has also created for itself political influence. By being willing to being commercially pragmatic about how it deals with foreign countries, China has developed a presence in many countries that is now beyond the capacity of the West.
The deals that China has cut, and continues to cut, are resulting in the selective growth and industrialization of these nations. By striving to achieve economic benefits for itself the emerging global superpower has, perhaps unintentionally, also enhanced the physical welfare of others.
Chinese firms have made massive inroads into Africa. In 2011 there were around one million Chinese nationals living and working in Africa, a number that is growing exponentially. The bulk of these workers have moved to Africa at the request of their employers, Chinese companies. The gradual transformation of Africa by private and state owned Chinese businesses is having a profound effect upon traditional cultures it also affecting Europe’s relationships with Africa. Historically, Western nations have been the commercial and political colonialists of Africa and since their removal Western multinationals have assumed many of their roles. These companies have been the preferred suppliers to Africa. Africa is now become a battleground for economic and political influence, between the traditional incumbents and the new arrivals.
Across Africa Chinese companies are actively replacing Western multinationals as African’s preferred partners. This transformation, which is also being achieved in much of Asia and Latin America appears to be a longstanding Chinese goal.
The transformation of China is perhaps the greatest global phenomenon of the current era, surpassing even the importance the growth in the West’s indebtedness and the spread of ever more fundamental versions of Islam. In a mere twenty years it has succeeded and transformed China to the point where China is now central to global commerce. Chinese capitalism is unique to China, arising out of a combination of its unique past; Confucianism, Communism and political history.
The most salient features of Chinese capitalism are that it is energetic, expansionary, pragmatic and adaptable. China has been and remains hungry for success.
The system that is Chinese capitalism is self reinforcing and self defending. By preferring to deal with firms with whom it has existing networks it reinforces those networks while blocking the progress of outsiders. A hard extension of these behaviours is the phenomenon of ‘corralling’; a system of trading within a largely closed network, a system of trade that may ultimately threaten the working of the global marketplace we benefit from today.
The spirit of capitalism that has driven China’s economic development remains strong and robust. China’s development remains a work in progress. If they have achieved this much in the last twenty years, how much more will they achieve in the next twenty?
The Chinese year commencing January 23, 2012 will be another year of the dragon. The Chinese dragon is a symbol of power, superiority and rule. Perhaps the Chinese dragon has been omnipresent for the last twenty years and will remain with us well beyond 2012?