Today marks the 90th anniversary of the Communist Party of China, a landmark event reflected by Premier Wen Jaiboa's European visit.
China's previous export mentality of 'cheap and cheerful' low-order manufactured goods has been the heart of the country's growth dynamic over the last decade or so. Yet as is known, the lower cost-base foreign competition of surrounding Asian, ex-CIS & African EM+ countries forces those on China's eastern seaboard to climb the value-ladder, so as to offer better products, generate greater service-led industries, develop a broader more professional B2B framework and ultimately create an advanced internal economy.
That export-led growth has in turn delivered the 'consumption paradise' promised, the import of luxury and aspirational products eagerly snapped-up by the emergent entrepreneurial hoard which now constitutes the 'new millionaires club' aswell as their middle-class employees.
Complimenting the B2C sphere, the B2B arena has generated demand for additional commercial expertise, the rabid competitiveness between Chinese companies seeking Western and Japanese insight into gaining the competitive edge. Thus foreign professional services spanning from accountancy to strategic planning to advertising have been both bought-in and in certain cases absorbed; a typical model being that of Ricardo's creation of an special engineering outfit dedicated to the localised design development of Rover into Roewe, that UK-centric team providing a knowledge-base template for SAIC, its own engineers affiliated to the project-team and latterly the project-based company formally absorbed into SAIC and able to integrate the then MG acquisition from Nanjing Motor.
Since 1976, the end of China's decade-long 'Cultural Revolution' the country has been on a slow but steady course accepting capitalism - though it quite plainly does not view this ideology as mutually connected to the western idea / interpretation of democracy. That slow but steady attitude to fundamental economic and societal change is perhaps the most prevalent reflector of the PRC's desire to maximise its own benefit from the process by controlling the rate of change.
[NB A watershed was reached in 2010 when China overtook the USA in terms of number and value of IPO's launched. The China A share (only) numbering 345 deal value at $71,621m whilst USA had 170 deals valued at $44,487m. Note also that Hong Kong beat the US in value terms, though not number of deals].
In doing so the PRC leadership well recognise that it cannot 'miss a trick' that would either undermine its self-determination and gain. Thus China has known from well before 1976 that it must learn every dimension of modern capitalism's commercial model, from every angle and at every level, whilst also able to mimic for itself the cultural model into which the commercial model is entwined, indeed having taken the lead role of cultural creation for well over a century.
Much has undoubtedly been learnt since 1976, beyond obvious diplomatic fact-finding missions across the world, much was digested when China created its first automotive JVs with the western firms of Jeep, Volkswagen and Citroen. Thus 'global-world' lessons trickled-down from central government to state-run industries, later into the banking & finance arena and then into post-graduate homeland education.
However, it wasn't until the relaxation of student foreign study rules and later tourism freedoms that the ability to truly meaningfully absorb the world at large become a truly powerful route to Chinese learning.
Arguably, one much more advantageous than Japan's experience during its own export drive years since the outward-bound Chinese youth are far less insular than were their Japanese cousins, exposing themselves far more to external influences. In turn they have been veritable cultural and business method 'absorption sponges' of almost everything that comprises the West commercially and culturally - but critically inquisitive to know how those two spheres meet to form what is a hyper-consumeristic, hyper-differentiated and so hyper-sensitive socio-economic sphere.
To this end modern technology has aided enormously, the camera-phone and smart-phone acting as the primary enabling and storage devices to snap photos and video of the world at large. Those devices are now as much in-the-field research tools for Chinese visitors as they are pure communication tools for the average Briton.
All over central London and other major UK cities the many 20-something Chinese who have come to study 'snap-away' at popular cultural artifacts, less so in museums and galleries, more so on the street and particularly in book stores, where the much of the contemporary western world is laid-out pictorially for easy visual & graphic capture. The likes of David Bailey and Lord Litchfield do indeed have 21st century proteges, but instead of creating a photo-montage culture that essentially created the swinging 1960s, today that culture is being viewed and deconstructed for homeland learning and use.
Moreover, whilst not at college many of the Chinese students appear to have day-time, evening and weekend jobs, some working almost daily, and typically in culture-orientated retail outlets such as Starbucks and the like, where not only can they earn, but critically able to informally learn about the methods for running such an enterprise.
[NB whilst no doubt many are wholly legal in mixing their 'learning with earning' ambitions, maintaining visa standards this is an arena which the UK government should inspect to ensure that the conditions of entry are being wholly respected by both student employee and employing corporation, and also investigate any UK citizen employees that act as 'go-betweens'in arranging the said employment, knowingly flouting UK law].
Of course such cultural and commercial absorption has been intrinsic to the growth of global free-trade over the centuries, and so is well recognised. The primary difference is that in today's technologically enabled world, what was once general, informal knowledge accumulation over years has become a knowledge transfer process which although notionally informal on the surface could be argued as far more formalised - albeit subtly so - than ever before.
Hence a very powerful 'Sino-absorption' of outside western and global cultures is being played-out, its three primary forces those of:
1. a highly motivated attitude toward 'extra-curriculae' cultural learning by Chinese-foreign students
2. the ability to collect and transfer the 'DNA' of western popular and commercial culture.
3. an ability to collate and relay that information through formal and informal educational realms in China.
[NB This is the very driven, directed, personal and national attitude to broad-spectrum education that reach well beyond the concept of education in the West. This pro-activity toward understanding 'the real world' stands in stark juxtaposition to the emerging negative attitude toward the UK government's announced university reform. The objectors to this reform posit that higher education's role is as much about personal learning in the philosophical and humanitarian sense, as opposes to the economic imperative that moulds a student for role in working life. This is understandable, but better 'directed learning' inside British academia which couples to the national need is undoubtedly pertinent so as to assist the UK's future.
Greece's present economic woes could indeed be laid at the feet of such idealistic yet also 'head in the sand' thinking. TV news reports show Grecian workers able to explain their plight with rhetorical and poetic prowess, yet that does not create the structural foundations the country's economy requires].
[See postscript for further observation].
The last post mentioned the BBC television programme 'Made in Britain', presented by Evan Davis, highlighting the UK vs China (ie notionally 'developed' vs 'emerging' economies). In the second episode he visited China's “Thames-Town”, a Walt Disney-esque recreation of a notional British town incorporating various styles of period architecture. It sits 30 kilometres outside of Shanghai, as one of 9 satellite New Towns designed to partially resist Shanghai's urban sprawl.
The towns are 'themed': 1 as traditional Chines, 1 as an Eco-town but it is the remaining seven that are of real interest since they are 'themed' (simularcra) of foreign countries: Britain, the USA, Germany, Holland, Sweden, Italian & Spanish. The towns are reportedly near empty, mirroring stage-sets and as such used for wedding-photo backdrops and events. But investment-auto-motives believes that the PRC's leadership's ideology was not to simply create a bigger and better versions of DisneyWorld's EPCOT Centre or a Las Vegas style ''mini-national' entertainment complex, the possibilities go far deeper. Nor do they simply reflect a re-working of Ebenezer Howard's late 19th century new Garden City ideals with internationalist twist.
The belief of investment-auto-motives is that they were planned and created to familiarise the Shanghai populace with the various differing inner-cultures of the West, and as such operate as subtle 'conditioning spaces' or national development 'landing-stages' for Chinese visitors and residents. The towns then are 'half-way' houses to assist the Chinese populace in the foreign cultural absorption necessary to effective business dealing with Americans and Europeans. Equally, no doubt in time these towns will become the preferred new 'homesteads' into which foreign corporations can install their employees.
These towns then become blurred boundaries between China and the Western world, areas in which international business relationships may flourish. The large Volkswagen factory sign that looks over Antig (the German town) infers much.
Furthermore each town has seemingly been planned to reflect a sectorial mini-economy. Just as the German-esque 'Antig' has been devised as an 'Auto-Town' with initial plans for a BMW factory and an F1 track, so the other towns have parallel micro-economy themes, the Spanish version centred around organic agricultural produce. Why import Spanish produce when it can be locally grown and sold to the Chinese consumer as the exact replicant? Moreover, Like Las Vegas and its Little-Venice, it means that these towns can also act as replica tourist destinations; just as an American feels he/she need not actually go to Venice because they've virtually experienced Venice under a roof set in a desert town in the middle of Nevada. The sumulacra becomes the real for the masses; thus the Chinese have indeed absorbed the post-modern thinking of Jean Baudrillard et el.
'Thames Town' was largely built but not connected via rail or substantial road links, though necessarily situated on a major river; very probably so that it can be brought on-stream with a later phase of infrastructure build relative to the progress of the broader national economy and state 5-year plan agenda.
Importantly, investment-auto-motives believes that this international township exercise is part of the Chinese ambition to eventually integrate into the managing and leadership of what are today's Western multi-nationals, but potentially tomorrow's Sino multi-nationals
These illustrations provide the prime examples of the innate psychological and sociological differences that exist between China and the West. What can effectively be phrased as the 'ambition factor'.
That massive 'onward marching' ambition will only serve to reduce; level and tilt the competitive playing-field in China's (and other EM nation's) favour. The historical industrial and economic advantages enjoyed by the west which provided such social and personal comforts and a far more liberal outlook, now shows itself as an innate disadvantage relative to the still very 'hungry' Chinese. The Grecian example today of an unrealistic social attitude toward the power of global competition, could very well if not checked, be the broader Western failure tomorrow, especially so with the danger of 'recession fatigue'.
Western observers may argue that the cost-base of EM regions, especially China has risen markedly over the last decade, diminishing its historic cost advantage and hence the need to climb the value chain - very true. But the primary threat to the West comes from the EM sovereign-states' ability to deploy surplus foreign currency reserves toward deep and rapid expansion of its education sector with very close ties to both old and new industrial and service sectors.
Evan Davis also highlighting the ambition of China's Li-Ning sportswear brand. The company with global ambition has obviously performed a 'copy+' brand strategy that mimicked the logos and retail environments of well-known western counterparts.
Having done that for its domestic market, so seen as the 'Sino-Nike' or similar. The programme was unable to mention the fact that it has created JVs with lesser known French and Italian sports brands, Li-Ning's production facilities used for less-costly manufacture; this then a typical JV arrangement. But what Li-Ning has the potential to do is create premium slots in the Chinese market for its JV partner brands, which having reached a mass-momentum and massive Chinese earnings, could then be used to 'capture' the western markets so dominated by the likes of Nike, Adidas, Puma, Reebok et al.
As one Chinese marketing student here in the UK stated: "all it takes is enough marketing money". Having viewed the western commercial model of media bombardment, that conclusion may be blunt but has a certain truth. The case-study of RedBull / ToroRosso a prime example. It's sponsorship of youth and sporting events providing major brand profile uplift and maintenance, even if advertising directors bemoan the fact that their sophisticated commercial artform developed over decades has been undermined.
However, even though such a simplistic approach may work for a company that pioneered the hi-energy drink to grow and defend its global market share, this approach cannot ensure success in most other fields that have greater maturity, competition and brand nuance.
And the PRC leadership is not so naive as to try and re-play 20th century 'American Cultural Imperialism' for itself, the world is a very different place today. It knows it has the budget muscle to massively integrate, but understanding psychological and cultural nuance allows that monetary force to be directed with greater aplomb, aiding ROCE, ROI and ROE.
China in the 21st century will leverage its fiscal muscle by continuing to domestically import foreign goods whilst simultaneously acquiring the West's weaker, or less well placed and defended national brands, thereby absorbing these foreign 'cultural hearts' and adapt as necessary for domestic fit (eg Roewe, MG, Volvo).
The real question is its ability to commercially and culturally 'retune' these enterprises and their inevitably Chinese made products so as to provide a compelling 'return' value proposition to its foreign export markets.
These examples pertinently relate to cars and thus other consumer goods. But as seen by the desire to absorb and export service sector know-how (eg infrastructure services (eg energy, large IT systems, hi-speed railways etc) the 'paint-by-numbers' type of picture-building is being formed, and the willingness to conquer the English language aswell as advances in language recognition technology means that the Western-Sino cultural divide will be smashed and so carving the way for higher-value professional services offerings in the nominal corporate outsourcing sphere, far beyond the typical call-centre work India amassed.
Whether believable or not at present, the fact is that we are still in the tentative early stages of this Sino ambition, and it may indeed still be decades away. China's future ambition is not of course wholly reliant on western markets as was the case in the past, it's domestic market holds decades of self-propelled growth alone, and a re-run of its western sea-board development within the interior - effectively using Chinese capabilities nigh-on alone - will undoubtedly power the economy.
Yet we plainly see by Premiere Wen Jiaboa's visit to the UK, Germany & Hungary that the Sino ambition is to maintain access to world-class technology, financial centres, commercial learning and to Europe's own CEE 'production platform', China seeing itself as a growing contributor and operator 'behind the scenes' of respected brands headed by the likes of Volkswagen & Siemens, but also playing a similar role for lesser publicly known companies that have leading sector competence and reputations.
[As has been highlighted by the FT, the disparity between the Sino-German trade agreement valued at $15bn and the Sino-British agreement valued at $2.2bn].
To conclude:
investment-auto-motives has laid out the basic aspects of the socio-economic challenge facing Western nations, one in which the innate difference between the cultural mindsets will become evident, the already entrenched 'ambition disparity' now growing due to 'recession fatigue'. Also presented in a very simple explanation is what investment-auto-motives sees as the future commercial 'Sino-strategum' and challenge generated by the global but subtle 'Sino-infusion' which will emerge in the years to come.
This then sets an unavoidable task of 'attitudinal-renewal' for western producers, service providers, governments and indeed private citizens. One that meets the much changed 'New Norm' head-on, and endeavours to maintain the West's advantage in targeted spheres across broad-ranging sectors, thus able to effectively compete in an ever expanding globalised free-trade world.
Here in London last Sunday, Premier Wen Jiaboa and entourage stepped-out of the Mandarin Oriental hotel in Knightsbridge; directly outside stood a an early production model of the as yet unreleased new red coloured Range Rover Evoque.
The intent was to cordially highlight JLR's Chinese production plans and to grow further entente-cordial, yet the Mandarin Oriental's massive facade dwarfed the small premium cross-over, a visual metaphor no doubt very much intended by the PRC.
Whilst the City of London will well be able to meet the challenges of New York and Frankfurt, the UK's regions - and indeed other Western nations - must now try and 'fast-follow' Germany's impressive lead in technological development and Sino commercial exploitation.
In this degree, Land-Rover will provide a strong additional beach-head for JLR and the UK auto-sector, its span from the 'basic bolted' Defender to the 'terrain intelligent' upscale models thus offering the PRC both an alternative to the previously refuted Hummer acquisition deal and access to IPR that will assist its own domestic-brand technical prowess in years to come.
Given the amount of camera phones held by the Premier's supporters, it may come as no surprise if an Evoque clone wearing a Chinese manufacturer's badge appears at the next major domestic show.
For TATA, JLR and those companies that comprise the UK auto-sector an undoubted case of entering a 'Brave New World'; one where an corresponding 'Alpha-Plus' mentality will be unconditionally required.
That starts with Chinese acclimatisation via Confucious, one of its society's roots.
He begins with the ideal of the 'Superior-Man'...whilst Nietzche ended with the 'Super-Man'.
This then philosophical foundation that may well underpin German & Chinese socio-economic strength and their impressive commercial mutuality.
*Post Script
The observation regard the primary differences between Sino and Western attitudes to personal education, and its ultimate effect on national productivity, should be a 'wake-up' call to the West.
Peoples of EM nation's unsurprisingly put great store in learning, an incessant behavior to improve their future personal opportunities; recognising all to well the 'have' and 'have-not' chasm that exists in most EM countries. This then implores them to become 'plugged-into' the needs of the populous typically through local trade etc, but preferably and more formally through educational route toward assisting their nation's economic needs. The critical aspect is that learning is a constant 24/7 imperative throughout all rungs of the social ladder at across the age range. Critically areas of formal learning typically in accounting, engineering, scientific and business management fields is supported by informal learning that contextualises, such as absorbing obtained MBA material from family and friends, this again is contextualised in the real-world by constant observation and discussion relative to current affairs, the financial press and importantly through philosophical economic deconstruction and appraisal of the social and commercial world around them.
This means that EM nation people's tend to be much more inquisitive because they have much more to gain, either through professional advancement inside a corporation if of that ilk, or ideally from their own entrepreneurial efforts that offer potentially far greater personal satisfaction and financial reward.
This then contrasts with the near attitude to learning most western students and indeed professionals hold, learning seen as overtly formally scheduled and related to specific ages. This outcome results from the western belief in a 'work/life' or 'study/life' “balance”, whereas many in the EM populous do not make such a distinction, spare-time devoted to additional study. Furthermore, historically western academia confines to a 'subject narrowness' that provides expertise in a singular discipline – as part of an eased division of labour concept – only the fortunate few who have the resources or personally make the sacrifice to broaden learning later in life.
As a 21 year old Indian, Brazilian or Chinese person well knows they may be studying corporate and business accounting at college, but their social dynamic of friends and family also allow them to absorb a far broader field of learning. Where learning is not a mutually exclusive 9-5 activity, but always part of a desire to see the big-picture and where the personal appetite for a myriad of multi-cultural foreign forms is ravenous.
To summise: in the advanced world education tends to be a formalised 'serial process' of restricted breadth but depth, whilst in EM regions there is a tendency for the formal (western) process to be supplemented by an informal 'layered process' with far greater contextual overlap.
