Chinese multinationals and globalization: insights on global business and politics

Foreword

Fast-Moving China and Global Development

Professor William Ratliff

Hoover Fellow at Stanford University



Foreward of Book:

China and the New World Order:

How Entrepreneurship, Globalization and Borderless Business Are Reshaping China and the World

By George Zhibin Gu

Fultus, October 2006; 248 pages



China has traveled light years during the past three decades. After Mao Zedong died in 1976 and the Chinese people step by step became freer to cultivate their entrepreneurial inclinations to improve their lives, China has seemed to be a film spinning ahead in fast-forward. Images flash before the eyes, but before you can really focus they have been replaced by others and yet others.

Vast Changes in China

On his last visit to China in 2003, Cuba’s dictator Fidel Castro blinked and openly wondered where he had landed, things were so different from his previous trip several years earlier. But others too have found the images of the changing China a challenge to assimilate and interpret. Outsiders often look toward the Middle Kingdom and ask, what is going on? What does it all mean? Is all of this good for the Chinese people, and for the rest of us?

The China Deng Xiaoping took over in the late 1970s was staggering and moribund at home and a pariah worldwide in the wake of the nation-devouring recriminations and outrages of the Cultural Revolution. Whether from conviction or panic to preserve the discredited Communist Party, or both, Deng opened the door to some truly revolutionary economic change, and the spin-off over time has gone far beyond the economic field.

One critical step in his campaign occurred in 1980 when he created several Special Economic Zones (SEZs), which are geographically confined laboratory-cities for experimenting with market-oriented economic reforms as well as engagement with the outside world. The most important of these SEZs was down south, just across the border from the then-British-controlled Hong Kong, a place Nobel laureate economist Milton Friedman has often called the freest market in the world. The name of the overnight city that sprang up was Shenzhen.

No tiny region on earth has ever attracted so much foreign direct investment in such a short time as Shenzhen, over U.S. billion. Never has any city in so short a time attracted so many people who were not just fleeing hard times in rural regions but actually all fired up to succeed.

The city has grown an average of about 27% annually since it became a SEZ, and many of the 12 million who now live there have prospered. Many others, often in their teens and twenties, have worked very long hours under miserable conditions and barely survived, though they usually earned a little more than they ever had back home in their villages. Thus Shenzhen is China writ small, though conditions are at very different stages throughout the vast country.

George Zhibin Gu was one of over 12 million Chinese to move to Shenzhen, the epicenter of change. He was born in Xian, the heartland of vast expanses of Chinese history and governments, and got his university training in Nanjing and the United States. He proceeded to move into the most anti-Maoist of all professions, namely investment banking and business consulting.

A Unique Guide

No one I know of has come so close to capturing the spirit and meaning of an explosively changing China as Gu. When you read about Shenzhen and the other topics of this book, ranging from bank and stock market reform to new Chinese multinationals on the world stage to the need for a federation of the mainland and Taiwan, you are as good as parachuting into Chinese cities, businesses, sweatshops, and policy discussions. You become immersed in the tiny but persistent realities of individual and group successes and failures, in the battles over reform, money, and power, and you feel the elation and frustration of the Chinese people in their widely varying human conditions.

You also encounter the global issues raised by China’s rise that affect people worldwide almost as much as they do the Chinese themselves. Even people around the world who can hardly find China on the map know that the civilization has a very long history and ancient traditions. Many know that it has not done well in recent decades, even centuries, but that things are changing.

An old joke used to be that the only poor Chinese in the world were the Chinese who lived in China because there government repression sapped them of the will and opportunity to really better their lives and thus the conditions and prospects of the country. This is no longer true, though many remain poor. Today, upward mobility is becoming a reality inside the nation.

But the outside world has more direct experience with the overseas Chinese. Chinese who moved or escaped abroad, whether to Hong Kong or Singapore, to the United States or Panama, were often highly successful in small and large businesses and other professions demanding a dedication to education, hard work, and raising one’s status in life. Throughout the English-speaking world today, and in some respects this includes China itself, we find Chinese students working 18-hour days and excelling in every field they enter.

Key Challenges Ahead

Despite China’s astonishing and continuous progress from the end of the Mao era to today, major challenges remain. Gu often focuses on bureaucracies, which, as he asserts, essentially frame China’s politics, society, business, and economy.

China has relied on bureaucracies for millennia, and Mao picked up where the earlier emperors had left off. He created the largest bureaucracy in the history of humankind and one that took control of every aspect of every person’s life everywhere in the country. And though during the Cultural Revolution Mao and the Gang of Four killed hundreds of thousands and demolished much of what the Communist government up to then had created, the bureaucracy, in modified form, persists in power to this day.

Gu argues that even though government leaders have permitted great change, which originally flowed from the initiative of some peasants and others shortly after Mao’s death, this bureaucracy is the chief impediment to completing the revolution. It seeks to retain power, setting up one of the ironies of the Mao legacy.

The Great Helmsman used to urge people to strive tirelessly to overcome seemingly insurmountable odds by referring to the ancient Chinese fable of the Foolish Old Man Who Removed the Mountains.

Now the mountain that stands in the way of completing the current and real revolution in China, Gu argues, is above all the corrupt and self-serving bureaucracy. Though the government has allowed economic reforms, it still tries to be both “player” and “referee” in the marketplace.

Seen through the lenses of Chinese history, truly revolutionary change is indeed under way throughout the country, but it can be completed only through a drastic curtailment of the continuing power of the government over so many aspects of national and daily life. The change now must come through ever-greater individual private initiative, an increasingly open society, and international involvement.

Over the past quarter century China has awakened and, as Napoleon warned, it is and will continue shaking the world. But is this a good thing for China, and for the world?

Gu argues that this phenomenal growth of China, this awakening, is not something for the world to fear, but rather an opportunity and also a challenge. He argues that progress in the modern world is not patented by the currently developed countries, but available to all peoples who are willing and able to work hard for it. The developed world itself will benefit from the advancement of the late developers.

If you want to immerse yourself in the awakening of modern China, take George Gu with you as your guide. With him along you are not leaping dizzily into the frames of the fast-forwarding story, for you have an experienced and articulate guide who fills in facts and at least as importantly adds insights into what is happening, why it matters, and what it feels like to be there in the middle of it all.

I have traveled extensively in China for many years and I relive many things that I have seen and heard and felt over the decades in every page of Gu’s book. And I learn a lot that is new to me too.

William Ratliff

Fellow and Curator

Hoover Institution

Stanford University