Understanding the China story

Since my first visit to China as a student nearly two decades ago, I have had several opportunities to go back and observe the remarkable changes occurring within that country. Recently, I supervised an educational tour of student-participants to Shanghai, which is referred by some as 'New York on steroids'. The exercise was designed to expose future Indian business leaders to prescriptive and proscriptive lessons of the Chinese model of economic development and governance. There is a vast scope for complementarity in management education in China and India as local cultural norms governing interpersonal transactions and social networks play a determinative role in business operations in both countries. Given China's remarkable transformation in the past three decades from an impoverished nation to a hub of global capitalism, there is no better destination for Indian students of business and management who are seeking to immerse themselves in an alien environment.

The growing interest in Chinese business practices is primarily based on the staggering performance of firms in the international business sweepstakes. In the latest Fortune 500 rankings, a record 129 Chinese companies (including ten from Taiwan) found mention as compared to 121 from the USA. Three out of the top five were Chinese companies. Out of a total of 25 new entrants in this exclusive list, 13 are from China. The rapidly expanding domestic manufacturing output and the contribution of its indigenous science and technology sector in cutting-edge domains like Artificial Intelligence (AI) and robotics are key pillars of the Chinese success story. As income levels of the Chinese consumers have risen, major Western lifestyle brands have made a beeline for access to its market. The Seattle based coffee chain Star Bucks aims to open 600 new outlets per annum till 2022, a goal revised from 500 per annum. In other words, Starbucks is opening a new coffee shop every fifteen hours.

Every time you visit China, it surprises one with its transformation. My latest visit to China impressed upon me the scale of such dizzying changes and their consequences in three critical areas: environmental regulation, technological innovation, and corporate social responsibility. These domains are also symbolic of a fundamental shift in Chinese thought about the very goals of economic development. Earlier, the purpose was merely 'economic modernisation,' but the current focus is on exploiting the benefits of the same to redefine the goals of society. One would like to add that the experiences were mostly related to the Shanghai region, but the developments we saw are indicative of the trends at a national level as well.

China is making giant strides in combating pollution, which is one of the inevitable side-effects of rapid urbanisation and industrial development. The local environmental governance in Shanghai holds several lessons for other countries. More so in the context of the Global South which is undergoing similar problems associated with modernisation. As recently as 2013, this megalopolis was facing a seemingly insurmountable crisis due to the deterioration of its air quality. The response of the Shanghai local government has made it a star performer in devising and implementing environmental regulation. Since announcing ambitious targets to reduce air pollutants in 2017, the extraordinary measures taken by the local government have begun yielding promising results. Based on its current trajectory, its goal of turning Shanghai into an 'eco-friendly metropolis' and an 'excellent global city' by 2035 is highly likely to be achieved.

Declaring war on pollution in 2014, the 'Shanghai clean air action plan' was launched. The plan proved to be one of the most remarkable feats of environmental regulation anywhere in the world. The program imposed harsh personal penalties on polluting vehicles. Shanghai introduced 'China's strictest air protection law,' with maximum fines of 500,000 yuan. Company bosses faced individual penalties of up to 100,000 yuan under the law. Also, the Shanghai government has started providing subsidies to incentivise the purchase of 'green' cars that run on renewable energy. In July 2019, a waste management plan by the mayor of Shanghai, Ying Yong was announced. This plan included the introduction of a new garbage classification system; restricting business use of disposable items; spearheading the construction of ten renewable recycling centres in Shanghai by the end of 2019. In this case, the state has decided to lead by example: government and public institutions are to be subjected to tighter restrictions than others.

One of the significant areas of focus in Beijing's 'made in China 2025' is a sharp focus on AI. In 2017, China came out with its plans in a document titled "Next Generation Artificial Intelligence Development Plan". According to the program, China wants to keep pace with AI technology by 2020, achieve significant milestones by 2025 and establish itself as the world leader by 2030. China has also started engaging the larger world by organising events like the world AI Conference in Shanghai to boost AI co-operation and innovation globally. The theme for this year's conference was 'Intelligent Connectivity, Infinite Possibilities'. The idea is to engage the international community to develop new tools to address issues like environmental protection and addressing public health via AI.

The Chinese norms governing foreign and domestic business enterprises entail 'political responsibility'. Firms cannot deviate too far from the current Chinese definition of economic nationalism and value systems. The Chinese priority on quality control, especially in those sectors having a direct bearing on people's health, is a crucial feature of its domestic business regulation. The World Consumer Rights' day on March 15 each year is taken as an opportunity when errant business enterprises – often multinationals – are shamed by the China Global Television Network.

Major brand names have come under the Chinese official media scanner in this process: Apple was accused of providing inferior post-sales service to mainland customers, faulty gearboxes became the cause of problems facing Jaguar, Nike for its advertisements claiming 'zoom air' sole cushions and Volkswagen for engine defects in its Touareg SUV. Mercedes found itself in hot water for using a quotation from the Dalai Lama in its advertisements. A McDonalds TV commercial that depicted a Chinese man kneeling before an electronics salesman and begging for a discount also provoked much negative feedback. In fact, in the recent past companies, especially big MNCs, are investing a lot in their PR exercises to avoid such situations. In 2019, two Chinese companies also incurred the wrath of the authorities for turning medical wastes such as plastic syringes into toys and bags. Another one faced the music for violating consumer privacy with machines making up to 5,000 nuisance calls a day.

In China, the word 'political responsibility' means two things. For anyone doing business in China, domestic or foreign players, the nation comes first. Second, political responsibility also entails an unquestioned commitment to 'made in China' rules. This commitment amounts to refraining from engaging in any form of business practices which amounts to engaging in deceitful activities as regards its products and services when offered to the consumers. In the recent past, the government has been very hard on businesses which have compromised on quality standards. Companies are supposed to ensure that they do not foster relationships with careless suppliers. China has not hesitated to use official platforms and sentiments to punish companies for real or perceived transgressions leading to corporate apologies for 'hurting feelings of the Chinese people'.

In the last year or so, new dimensions have been added to 'political responsibility'. MNCs are required to accept the terms and conditions of 'one China'. The Sino-US trade war, the Hong Kong protests have broadened the scope of 'political responsibility'. To cite an example, one of Huawei's suppliers Menpad, a Shenzhen based LCD maker came up with a unique way of fulfilling its political responsibility. It decided to punish any employee that buys an Apple iPhone by firing them. Furthermore, it announced a 15 per cent subsidy for those who would buy a ZTE or Huawei phone. Menpad was inspired to show this solidarity with Huawei during the escalation of the trade war with the US. In September 2019, JP Morgan told its employees to ensure they don't refer to Hong Kong, Macau SARs, and Taiwan as separate countries. Cathay Pacific's CEO had to resign for refusing to share the names of employees who had participated in the Hong Kong protests.

During the one-week educational tour, what was striking that everyone has a very different take on China. Their insights were not only profound but very refreshing. Each of these perspectives highlighted the various dimensions of the China story. The idea is not to glorify or denigrate the Chinese way of doing things. Like any other story, there are strengths and there are shortcomings. The China story is no different in this regard. What is of immense relevance for us is a nuanced and informed understanding of each of these perspectives. This understanding is very critical for not only a country like India but any other developing country seeking 'economic modernisation'. Such an exercise will have a two-fold benefit. One, we can adopt some of the best practices in China and second, avoiding the pitfalls of speed and scale. Irrespective of what we learn from China, there is no escaping the effort to understand and critically examine the China story. For in comparing ourselves with them, we are bound to introspect and get inspired to draw from our strengths. Furthermore, we may reinforce our beliefs on what we do best and address our weaknesses.

(The author is Associate Professor at IIM, Indore. The views expressed are strictly personal)