Montrose Journal Spring 05
THE CHINA GAP: OF CULTURE, RULES AND QUALITY CONTROL -MINZHE ZHAO, FORMER PROFESSOR, ENTREPRENEUR
a recent BBC radio discussion in which I took part, serious concerns
were expressed that a closer commercial relationship between Britain and China –increasingly known as the world ‘manufactory’ - might be harming the UK economy. Some of the reasons given were as follows:
With its extraordinary manufacturing capability, China will seize on British exports to China, copy the design, and manufacture them there, eventually hurting the UK economy.
To avoid products being copied, manufacturers simply have to shorten their products’ life cycles. Generally speaking, for sophisticated products, the Chinese competitors need one or two years to produce ‘mimics’ of the same quality. Even the best Chinese competitors cannot keep up with the pace, and a two-year life cycle should be reasonable for most products, especially electronic ones which are now upgraded or replaced within months. I would also suggest that Western manufacturers focus more on high-tech and patented products, in order to generate revenues from selling their technology and patents. For instance, Philips, Sony and another two companies collect their patent fees on China-made DVD players, with significant profit margins, while the Chinese manufacturers can also make profits as they take the advantage of cheap labour. However, neither Philips nor Sony can make any profit if they produce DVD players in Europe or Japan, given the high labour costs there.
A further reason for taking the Chinese market seriously, apart from its huge and well-educated labour force, is that China is increasingly becoming a huge consuming country. China is already one of the largest consumers for certain luxury goods such as French XO, Scotch Whisky and Swiss watches. I pray that China will not become a country full of drunkards drinking XO like mineral water, but there is no way of stopping people drinking XO or wearing Rolex watches if they have money and they wish to do so. What I mean here is that China is getting rich and becoming a consuming monster with a huge capacity to digest everything made, naturally and artificially, all over the world. In this situation, if UK companies are reluctant to go to China they risk being shut out totally from the market.
As to the intellectual property problem, from my experience and observation, the Chinese government and Chinese enterprises are making serious efforts to improve the situation. Most technology-oriented companies, like IBM, HP and Dell, have no serious law suits outstanding against Chinese competitors in terms of IP infringement. There may be more of a problem for low-end consumer goods, say shoes, where a manufacturer like Clarks does have to be careful, and prepare to take on possible faked Clarks.
At the same time as the West worries about the possible loss of its technological lead and its manufacturing capacity, Chinese enterprises are eager to catch up with the industrialised countries, and expect to bridge the gap quickly. A few months after my BBC programme - BBC Radio Wales’ Wales@Work programme - I was invited on to the Beijing Television (BTV) Zhongguancun Program. To tackle the question: “We Chinese often apply the same technology, follow the same standard and operational codes, deploying the same, sometimes even better hardware, but we cannot produce the same quality goods or achieve the same yields as our Western counterparts. Why?”
My answer is that there are many factors contributing to the gap between China and the West, such as skills, attitudes to work, and above all the question of the enterprise culture, which is in my view what hinders China from achieving the same quality or yield as the West in specific product ranges.
Generally speaking, enterprise cultures around the world vary according to a number of factors ranging from national traditions and culture, to management models, the types of business they do, and so forth. I strongly believe that a country’s tradition and culture plays the critical role, forming the common language for the enterprises in that county. For instance, discipline provides a common culture for German enterprises; loyalty for the Japanese; hard work for the Koreans. I would mention caution for the British. But what is the common culture for Chinese enterprises? I would say it is the spirit of compromise.
Compromise is a motto for most Chinese, originating in Confucianism which has been the de facto national religion in China for a thousand years. Compromise is deeply rooted in Chinese hearts, affecting their thinking and social behaviour. For example, if a Chinese visitor is a guest of a British family, and the hostess offers him a cup of ordinary ‘black’ tea, he will probably say: “No, thanks” the first time it is offered. However, if the hostess has the patience to offer it to him for a second time, he will most likely say: “Yes, please”. Many people might think that the Chinese visitor refuses the first offer out of politeness; actually he has been ready, from the very beginning, to accept the black tea offer. However, it is not totally the case as ‘black’ tea might not be his preference, he may prefer drinking ‘green’ tea or coffee. He agrees to drink the black tea simply because there is an obligation on him to ‘compromise’ with the hostess.
“Compromise is a motto for most Chinese...affecting their thinking and social behaviour”
This spirit of ‘compromise’ is the national culture in China, with its two important derivatives: ‘rapport’ and ‘face’. ‘Compromise’ between two people result in a good ‘rapport’, and a good ‘rapport’ means never injuring other people’s ‘face’. Very specifically for a commercial enterprise, ‘compromise’, ‘rapport’ and ‘face’ can be mapped on three levels: the organisation, the group and the individual, defining the basic rules for handling public and inter-personal relations, and forming the common language of Chinese enterprise culture. Here is how these rules apply within Chinese enterprises.
In conclusion, for the time being and even for the next five to ten years, a majority of Chinese enterprises will only be really good at manufacturing large quantity, low-end products. Western enterprises should still be able to take advantage of their cutting-edge technology and high-end products, enabling them to export to China a narrow but important range of goods from nuclear reactors to airbus planes and Bentley cars, in exchange for thousands upon thousands of electronic, textile and other labor-intensive goods. Looking ahead, this is bound to change. The fact that the British motor industry is looking to Shanghai for its future whilst the Chinese IT industry adopts IBM management strategies shows how important it will be for East and West to understand each other’s strengths and weaknesses.
Dr Zhao was an IT professor and he is currently an entrepreneur devoted to bridging the gap between East and West.