I picked up Time and BusinessWeek in the mailbox yesterday and they both had unflattering China covers with words like lies and corruption. With our elections and their leadership transition coming up, Chen Guangcheng and Bo Xilai will be household names on both sides of the Pacific this summer. There are some entities – companies like Monsanto, and countries like China – that even the best PR firms cannot help much.
In all that negative talk, I was struck by this comment in the Fareed Zakaria column in Time:
A party whose history is tied to peasants, workers and soldiers is now the most elitist operation in the world. Its system of promotion favors engineers, economists and management experts over anyone with grassroots political skills. For two decades, China has been run like a company, not a country.
Blame the Chinese leadership for many things, but give them credit for the amazing technocracy that I researched for many parts of my new book
a) Why has Apple, so smart and ruthless in so many ways, put so many of its eggs in the China assembly basket (most components come from Japan, Korea, US etc) ? Largely because its contract manufacturer, Foxconn has delivered time and time, product after product, revised demand forecast after another. If any other outsourcer – IBM, Jabil, Accenture, Indian – is salivating about China’s image problems, this is an opportunity to step up and deliver to those cost, quality, time to market metrics. I highly doubt any of them can come anywhere close.
b) It goes beyond labor these days. BusinessWeek had a column on the growing SUV market in China. As Tony Prophet of HP is quoted in the book:
“We have been in China over two decades, and like other Western companies we could see the spiraling real estate costs, employee absenteeism, stretched infrastructure in the developed East and South. Starting in 2007 we started to evaluate alternatives like Vietnam and Malaysia. But the more we looked at Western China, the more we also saw the opportunity for the domestic market. If you draw
a circle out 750 miles from Chongqing, you are looking at about 300 million people—which by itself makes it one of the largest PC and other gadget markets in the world. So that is our first focus here in the west of the country—made in China, for China.”
c) It goes way beyond Apple and HP – way beyond them. The country’s regional niches described in my book show its breadth and the global business it has attracted:
“It could be to Juijang on the southern shores of the Yangtze River with visits to the solar photovoltaic manufacturer Sornid and the helicopter manufacturer Red Eagle. Another trip could be to Qingdao (better known to many in the West as Tsingtao—as in the beer), host to Haier Group, one of the world’s largest home appliance manufacturers, and GERB, which focuses on vibration control in heavy machinery, equipment, structures, and trackbeds. Perhaps it could be to Xiamen on the southeastern Chinese coast where Dell has a factory for the booming local China market as does Philips Lighting Electronics, which is focused on next gen LED and other lighting. Or it could be to Chengdu in western China, home to Intel assembly and testing facilities, and to Giant, the
largest bicycle manufacturer in the world.”
Time, BusinessWeek and plenty of others are right to point a bunch of challenges for China, but let’s not forget the manufacturing dynamo and massive market the Chinese leadership has built. It ain’t going away no matter what names we call the country.