For those of you who haven’t read it, James McGregor, chairman of JL McGregor, author of The Billion Customer Question and the former chairman of the American Chamber, has written a punchy piece in the latest issue of Time magazine.
The gist of it is that in the wake of Google’s threat to leave China, other foreign companies are suddenly waking up to the realisation that while they have been dutifully playing the game – investing in China and handing over their technology to their partners – China is now not interested in doing business with them.
One key pull-out quote is here:
Visiting CEOs’ banquet-table chatter is now dominated by swapping tales of arrogant and insolent Chinese bureaucrats and business partners. The litany includes purposefully inconsistent and nontransparent enforcement of regulations, rampant intellectual-property theft, state penetration of multinationals through union and Communist Party organizations, blatant market impediments through rigged product standards and testing, politicized courts and agencies that almost always favor local companies, creative and selective enforcement of WTO requirements … The list goes on.
Then comes news from Davos that the boss of a Chinese state-owned company has been lecturing Goldman Sachs’ chief operating officer and the chairman of Novartis, among others, on how to manage a boardroom.
Miao Gengshu, chairman of Sinotrans-CSC Group, enlightened his Western counterparts to the joy of, wait for it, non-executive directors. He added that Western boardrooms were guilty of "poor execution". Which is a bit rich coming from a state-owned company where the directors are not allowed to make any decisions anyway.
The Wall Street Journal comments acidly: "Through such incidents, there’s a disturbing feeling here at Davos that just because China pulled its economy out of a slump faster than anyone else, its model and even values are the ones to look up to now. It seems easy to forget that China did so by pumping in massive amounts of taxpayer money into infrastructure, leaving behind huge risks of industrial excesses and bad bank loans."
Nevertheless, China’s success in the wake of the financial crisis has led to some calls for the country to be more isolationist. I’ve spoken to a number of foreign executives who have complained at being railroaded out of their businesses by protectionist regulations or other measures. In general, it seems that China is desparate to promote its domestic businesses at any cost.
Which I think is understandable. The only way China will be able to move up the value chain is if its companies are given the chance to go out there and develop their own technologies. However, if we look forward a few years, I only see trouble. How are Chinese companies going to turn themselves into proper powerhouses and compete with their Western counterparts if they are unable to win a tender without government support, or fund their own research and development? Is China simply creating a new generation of paper tigers?