ChiMerica 3 14 July 2019.

In the late 1500s, Richard Hakluyt collected the stories and reports of the English mariners who had explored the Atlantic world.[1]  He wanted to celebrate these doughty adventurers, but also he hoped to encourage others to emulate them.[2]  Hakluyt’s basic approach became a staple of the reference shelves.

Now we have the equivalent for the entrepreneurs who have raised up China into the “second economy in the West.”[3]  Sort of.  A bunch of American business school professors interviewed Chinese executives to supplement their library research.

Deng Xiaoping’s reforms started everything, but Chinese entrepreneurs had to muscle through hordes of bureaucrats who failed to adjust their old thinking to new realities.  Thus, “If it were not from Deng Xiaoping’s reform and open door policy, none of us would be able to achieve much, regardless of how capable we are.”  At the same time, owing to deeply-ingrained anti-capitalist prejudice, “the lowest thing you could do in the early ‘80s, as a scientist, was to go into business.”  So, early Chinese entrepreneurs had to make it up as they went along.  Much like the industrialists of the American “Gilded Age.”  The Chinese adapted to prevailing conditions.

Some of them fell into error along the way, which is easy to do in China.  They over-promised and under-performed.  They aligned with the wrong factions and fell victim to Xi Jinping’s anti-corruption drives.  They just made bad decisions.

Chinese entrepreneurs take a long-term view.  Quarterly profits and share prices don’t mean much to them.  The pursue what some call a “lean architecture” that gives the companies nimbleness in responding to new situations.  American companies, in contrast, haven’t entirely reduced the massive bureaucratization of the 50s-70s.  However, Chinese government support for Chinese businesses in competition with American businesses plays an important role.  For example, Didi Chuxing Technologies, the Chinese Uber, spent like a drunken sailor in order to defeat the American Uber.  By 2016, Didi was drawing four times as many customers in China as was Uber.  This suggests that a.) Didi didn’t worry much about banks breathing down its neck, and b.) that the Trump administration may have to negotiate limits on non-tariff Chinese government support for industries.  Then, China’s systematized, even industrialized, theft of Western intellectual property play a large role in the success of Chinese industry.

One issue here is that systems reinforce what has worked in the past, rather than seeing each successive situation as new.  (That’s called a heuristic device.)  Will China’s previous success with state-sponsored business development lead the country to double-down in the future?  If so, then the potential for conflict between the United States and China will grow.

It is a little bit like many people didn’t want to “come out of the closet” about China’s abuse of its international trade relationships.  Now, that “that man in the White House” has done so, will more and more people fall into line?  Or will there be a counter-vailing swing in the next election cycle to return to the policies of yore?

[1] See: https://en.wikipedia.org/wiki/Richard_Hakluyt

[2] Extremely well educated, Hakluyt doubtless took as his model Plutarch’s Lives.

[3] Michael Useem, Harbir Singh, Liang Neng, and Peter Cappelli, Fortune Makers: The Leaders Creating China’s Great Global Companies (2017).

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