China’s job machine – the WTO column

(later also at Chinabiz)
Brussels – In the past week economic life in big parts of Europe came to a standstill as the major summer holidays too off. It offered reason enough to ask locals here and elsewhere in the world how they imagine their economies would survive against the competitive force of China. Amazingly enough they increasingly tend to look at China to offer ways out of their economic problems.

In a desperate move to find a new angle in the classic China story some of my colleagues are coming up with very creative solutions.
For any restructuring in the past years the five-letter word ‘China’ would offer any journalist an-easy-to write story. While sometimes a direct relation with China could be found, mostly the story was a bit complicated to tell audiences as countries with a less strong media presence abroad like Mexico and Lesotho would be hit much harder by the fallout of globalization than the US and Europe who have been complaining more loudly.
But the media are getting bored with the story, as I note every now and then stories popping up seeing in China a solution for their own economic problems. I would call it a variation on the ‘man-bites-dog’ articles that offered a welcome anti-dose for the all-too-boring ‘dog-bites-man’ stories. Chinese investors and Chinese management perhaps could offer them a way out, they suggest.
So, increasingly my local colleagues in the US find ‘prove’ for this reversed relationship as Chinese investors rush out to save their presumed doomed local industries. They all suggest that China has a kind of miraculous formula to save companies and move against conventional economic wisdom. Industries that have lost their struggle with time, as every industry does every now and then, hope they can survive with that magic Chinese medicine that seems to work in China itself.
I hate to set a hose on what is potentially a new and creative angle on viewing China, but after more than ten years in China I wonder whether this magic medicine to save companies does exist.
Chinese companies fail at least as often in China as foreign companies do. But since there are many more, the number of successes seems to dominate. Surviving in a competitive Chinese economy is indeed an achievement in itself. It is very hard to distill the right formula that makes a Chinese company successful at home, since there are so many differences between industries and cultures that make China look in real life more different than Europe.
While the murky relationship with different government departments is still key in many parts of China and a large number of industries that is an advantage hard to transplant abroad. The successful Huawei is still in many ways and extension of the People’s Liberation Army, a relationship that could be less helpful in the US and Europe. Otherwise it is the Chinese experience to deal with fast change, and especially to compete against lower prices that makes Chinese companies domestically successful.
What I admire especially in how Chinese conduct their business is they way how they are able to ignore all conventions and traditions when it is in their interest. I had some interesting but confidential talks with European companies in their dealings with China and the Chinese, as potential customers, employees and suppliers: the Chinese flexibility drives them crazy.
The six-week summer holiday started and, more than in the US, Europeans take their holidays very serious. Efforts by Chinese to ignore that kind of traditions tend to fail here, but that is what could give them a competitive edge. When I ask the Belgians whether they would like to become more competitive by giving up their holidays, and other privileges, they bluntly say ‘no’. Unless Chinese companies can force developed countries into accepting Chinese standards for labor relations, becoming competitive might be tough for American and European companies, even under Chinese management.

Fons Tuinstra